Why Ocugen Stock Zoomed 12% Higher Today

Key Points

• The company signed a licensing agreement with South Korea's Kawngdong Pharmaceutical.

• This is one of the top pharma companies in the prosperous Asian country.

• 10 stocks we like better than Ocugen ›

On Monday, investors clearly saw excellent value in the stock of Ocugen (NASDAQ: OCGN), a biotech that concentrates on treatments for eye disorders. They traded the company's shares up by more than 12%, on the back of a fresh licensing agreement signed with a peer in Asia. That 12% absolutely trounced the 0.5% rise of the S&P 500 index today.

A licensing deal with a major Asian pharma

Ocugen announced that it has signed a licensing deal with Kwangdong Pharmaceutical in South Korea. Under the terms of the arrangement, Kwangdong will own the exclusive rights throughout South Korea for OCU400, an investigational drug targeting retinitis pigmentosa (RP). This is a disorder of the retina that causes progressive loss of vision.

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Image source: Getty Images.

For the license, Ocugen is to be paid up-front fees and near-term development milestones amounting to as much as $7.5 million. The healthcare company can also earn milestones of $1.5 million for each $15 million of sales through Kwangdong. Ocugen said that if and when commercialized, OCU400 could hit sales of at least $180 million in the first 10 years of being on that market.

Lastly, the American company stands to earn royalty payments of 25% of the net sales of the drug in South Korea.

The start of something big?

Ocugen's hopes for the drug seem quite realistic, given that -- according to its research -- roughly 7,000 people in South Korea suffer from RP. And that's the potential in only one country; if the drug is successfully brought to market elsewhere, this might be only the tip of the iceberg.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.