What happened 

Shares of Ocugen (OCGN 2.56%) skyrocketed on Tuesday after the biopharmaceutical company announced a deal with India-based vaccine developer Bharat Biotech to commercialize Covaxin, a COVID-19 vaccine candidate, in the U.S.

By the close of trading, Ocugen's stock price was up a stunning 80%.

So what

On Dec. 22, 2020, Ocugen signed a letter of intent to co-develop Covaxin with Bharat Biotech. Today, Ocugen specified the terms of the now definitive agreement.

Ocugen will have U.S. rights to Covaxin. It will be responsible for conducting clinical trials and -- if the studies are successful -- seeking regulatory approval. If authorized, Ocugen will commercialize Covaxin in the U.S. and receive a 45% share of the profits, with Bharat Biotech receiving the remaining share.

A person is pointing to an upwardly sloping line.

Ocugen's stock price surged on Tuesday. Image source: Getty Images.

The Central Licensing Authority in India has allowed Covaxin to be distributed for emergency use in the country, despite the fact that clinical trials remain under way.

"Covaxin has generated excellent safety data with robust immune responses to multiple viral proteins that persist," Bharat Biotech chairman Krishna Ella said in a press release. "With the recent progression of Covaxin use under EUA in India, I am confident that we will be able to work with Ocugen to develop a plan to bring Covaxin to the U.S. market."

Now what

Clinical trials can be expensive, and with only $19.3 million in cash reserves remaining on its balance sheet as of Sept. 30, 2020, Ocugen will likely need to sell stock to raise the capital it needs to further Covaxin's development in the United States. Investors, therefore, should expect to see their share of the company diluted in the coming weeks.