Every time that I’m asked to write about Ocugen (NASDAQ:OCGN) I must remind myself that OCGN stock was caught up in the meme-stock craze earlier this year. And with short interest in the stock still above 20%, I suppose there are several traders who have little choice other than to hold on and hope for the best.  

I wish those investors luck. Analysts provide them with little reason to be optimistic on Ocugen. They have an average 12-month price target of $7.66 on OCGN stock, versus its current level of around $8.50.  

Meanwhile, the stock is only likely to climb a great deal above its current levels if the world’s future proves to be quite bleak.  

In that future, the current vaccines will either prove to be woefully ineffective against the Delta variant of the novel coronavirus or the virus will continue to mutate while we make the perfect the enemy of the good. 

What Is Ocugen’s Connection to Covid-19?

 

There may be some investors who only know Ocugen as a small biotech firm that develops gene therapy treatments for retinal disorders. But the company threw its hat in the Covid-19 vaccine race when it partnered with India’s Bharat Biotech. Specifically, Ocugen agreed to oversee the approval process, the manufacturing and the distribution of Bharat’s coronavirus vaccine, Covaxin, in the United States and Canada. In exchange, Ocugen is slated to get 45% of any profits that Covaxin generates in both countries.  

So for Ocugen to make any money from Covaxin, the shot has to play a significant role in the U.S. and/or Canada. Now for its part, Ocugen is taking all the necessary steps: It has selected Washington state-based Jubilant Hollisterstier as its manufacturing partner.  

But  it seems that Covaxin will have to wait in line for FDA approval, perhaps until 2023.  

The Bulls’ Arguments 

I’ve been paying attention to what retail investors have to say about the outlook of OCGN stock. The thinking of some of them seems to be that the currently available vaccines from Pfizer (NYSE:PFE) and Moderna (NYSE:MRNA) are completely ineffective. Others say that the shots currently being used in the U.S. and Canada may be effective against the prior variants, but they won’t be effective against the Delta variant. And, they say, if the current vaccines are effective against the Delta variant, they won’t be effective against another variant. 

None of the arguments is necessarily invalid. But the evidence as of yet is not on the side of this group. So far, the vaccines have been effective, even against the Delta variant. As for new variants,  introducing a new vaccine is not necessarily the best way to avoid them.  

Effective Doesn’t Mean Perfect 

One of the key objections to the mRNA vaccines, or any vaccine for that matter, is that they aren’t perfect. Like the flu vaccine, they do not guarantee that individuals won’t get the virus they’re meant to protect them from. And sadly, there is ample evidence to show that some of the inoculated have even passed away from this unpredictable virus.  

But effective doesn’t mean perfect. Here’s something else to consider. Covaxin is an inactivated viral vaccine. It contains inactivated viruses that cannot infect a person, but can teach the immune system to prepare a response to the virus. And  this approach to vaccines is currently used in the flu vaccines, while in phase 3 trials, Covaxin was shown to be 81% effective. 

But effective doesn’t mean perfect. Yet effective, not perfect, has been the standard for FDA approval for years. We should judge the vaccines of Pfizer and Moderna by that criteria. 

OCGN Stock Faces Long Odds 

Retail investors are still committed to the stock. On the other hand,  institutional investors are staying far away from the name. The latest data showed that only 12% of the stock was owned by institutional investors.  

Of course, that just means OCGN stock will be more volatile, which may be just the way retail investors want it. But for the shares to justify their present valuation, Covaxin will have to generate a significant amount of sales. First of all, that means that Covaxin has to get approved by the U.S. and/or Canada (which is no guarantee) and second, there would have to be meaningful demand for it in one or both of those nations.  

That’s not a future that I want. But it’s the only immediate path for OCGN stock. For the shares to climb meaningfully, though, a lot has to go right for Covaxin.  And if that doesn’t happen,  the stock has a long way to fall.  

On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.  

Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.