Ocugen (NASDAQ:OCGN) stock has surged by over 2,600% in the last year. This rally is not surprising, since Ocugen and Bharat Biotech have signed a deal to co-develop a novel-coronavirus vaccine candidate, Covaxin. However, it’s also worth noting that OCGN stock is well below its recent high of $18.80.

The concept image of a vaccine passport with a needle and map.

Source: Shutterstock

After a deep correction, the shares currently trade at $8.50. As a matter of fact, the stock has struggled to trend higher after its initial rally.

After looking at the company’s positive catalysts and concerns, I consider OCGN stock to be a speculative bet. At its current levels, however, some exposure to the stock can be considered.

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It is also important to mention at the onset that the fight against Covid-19 is far from over. With different virus variants, there is room for new shots.

Covaxin Has Been Effective Against Covid-19 Variants

Covaxin has been developed in India by Bharat Biotech. Using an inactivated whole Covid-19 virus, the vaccine has demonstrated 78% overall efficacy against the coronavirus and 100% efficacy against severe COVID-19 disease.

The vaccine however is primarily being used in India. It’s still not on the World Health Organization’s “emergency use list.” But I don’t see that as a concern. Also important to note is that Ocugen will receive 45% of any profits that Covaxin generates only within the U.S.

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In May 2021, the WHO said that the Indian Covid-19 variant was a global concern. According to WHO, the variant has already spread to 30 countries.

That is an important point to mention because Bharat Biotech has claimed that the vaccine effectively neutralizes the U.K., Brazil and Indian variants of Covid-19. Dr. Anthony Fauci has also endorsed Covaxin as one of the vaccines that effectively neutralizes the Indian virus variant.

Ocugen and Bharat Biotech have already submitted a master file for the vaccine to the U.S.FDA. Given the fact that the vaccine has neutralized several variants of the coronavirus, an approval is likely to be announced in the coming quarters, possibly causing OCGN stock to climb.

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Another positive point for the shares is that Ocugen and Bharat Biotech are seeking to vaccinate people 12 years of age and older. There has been a spike in Covid-19 cases among children in India. The FDA has already permitted the use of Pfizer’s (NYSE:PFE) vaccine for kids between 12 and 15 years old. If Covaxin is approved for use in children in the U.S., its addressable market will be bigger than if the jab is just approved for adults.

Competition Will Limit Ocugen’s Revenue Potential

Data from the Centers for Disease Control and Prevention shows that “half of US states have fully vaccinated at least 50% of adults.” The U.S. seems to be well on course to have 70% to 80% of its population vaccinated within the next two quarters.

Further, it’s also known that the jabs of Pfizer and AstraZeneca (NASDAQ:AZN) jabs are working well against the Indian Covid-19 variant. Even if Covaxin is approved by the FDA, its revenue potential in the U.S. is likely to be restricted by competition. That may be one reason why OCGN stock has been weak recently.

Of course, since U.S. teenagers have not yet been vaccinated, Ocugen could generate revenue from that demographic. Additionally, Bharat’s jab could be used as a booster shot in the U.S. Further, there is a study underway in the UK that is seeking to determine if one dose each of two different types of vaccines can be effective. These factors all could help boost OCGN stock.

On the other hand, multiple other vaccine makers around the world are making progress on their jabs. As an example, CureVac (NASDAQ:CVAC) has commenced a pre-clinical study on its second-generation Covid-19 vaccine. Its initial analysis “shows high immunogenicity against virus mutations.”

The Bottom Line on OCGN Stock

The recent weakness of OCGN stock indicates that Ocugen’s revenue potential will be limited even if the FDA approves Bharat’s vaccine.

However, if the jab is found to safely protect teenagers from the coronavirus, the stock is likely to trend higher.

Since a meaningful number of the shares of OCGN stock are being sold short, the stock can be lifted by a short squeeze. For now, however, investors can consider buying the shares as a speculative bet.

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

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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