Ocugen (NASDAQ:OCGN) has ranked as one of the hottest stocks on the market recently. The drugmaker received a lot of attention from investors after it announced a deal with Bharat Biotech to co-develop COVID-19 vaccine Covaxin for the U.S. market. In this Motley Fool Live video recorded on Feb. 17, 2021, Fool.com contributors Keith Speights and Brian Orelli discuss one big problem that Ocugen could face that many investors might be overlooking.

Keith Speights: Let's talk for a few minutes about Ocugen. Ocugen, the ticker there is OCGN yet that Brian just sent it out, great. So Ocugen has received a lot of attention from investors lately. The shares have skyrocketed, just absolutely skyrocketed well over 500% at least as of earlier this week. I haven't looked at the stock this morning. The company partnered with an India-based company called Bharat Biotech and they are planning to co-develop and potentially co-market Bharat's COVID-19 vaccine, Covaxin, in the U.S. So Brian, what do you think Ocugen's prospects are with this vaccine?

Brian Orelli: Yeah, I mean, it's a really small company -- $2 billion market gap. So we were talking about Moderna earlier is $70 billion market gap. You can see the potential upside even after the 500% increase is still quite large and they can develop COVID-19 Vaccine plus get a decent size pipeline like Moderna has.

Covaxin has received emergency use authorization in India. It's an activated virus so that's completely different than Moderna's or Pfizer's was your mRNA-based, or Johnson & Johnson's, which is DNA based, so this the actual coronavirus which has been inactivated. It can be stored in a refrigerator, which is also a plus, doesn't have to be frozen.

They haven't done any clinical studies so far in the United States, Ocugen, while they were in talks to license it, started discussions with the FDA about potential path to authorization and approval. But as far as I know, I didn't see any actual details there. So I don't really know exactly what the FDA would require.

I think it's probably a long-term play if this is a multi-year issue and which seems likely with the variants. I think you can definitely see an opportunity for Ocugen to run a clinical trial in the U.S., which I think is probably what the FDA would require and then be able to sell it in a year, maybe more.

I think the issue there is going to be just with running clinical trials. It's going to get a lot harder to run them because one, you're going to competing against the actual vaccine. So do you want to go into a clinical trial that when you have a 50% chance or even a 30% chance that they do a 2-to-1 ratio of people who get the vaccine versus people who get the placebo.

Plus, you don't even know whether the vaccine works or do you want to go get a vaccine that you know you can get a hold of right now. So to test it on older people is going to be really difficult right now because older people are eligible and then as we go along, more and more younger people are going to be able to get the vaccine and so it's going to be harder and harder to get the clinical trials.

Then on top of all of that, top of getting the recruiting, then once you get it all recruited, now the infection rate will hopefully go down because so many people have the vaccine. So now because they are event-driven and you need a certain number of events in the placebo group and then hopefully less, 50% or less in the vaccine group. Now you have to wait a much longer time to get, to accumulate all those events in the placebo group because the infection rates are so much lower.

Speights: Brian, you have hit on an important issue that many investors might not be thinking about. The first movers -- the Pfizer, Moderna, Johnson & Johnson, AstraZeneca, Novavax -- they've already either pretty much completed their studies, or are very close to doing so. They didn't have the same kind of problems that companies like Ocugen and some of these second or maybe third-tier companies will have. It's going to be a much steeper climb for companies that are coming behind the first movers. I don't think we should underestimate the difficulty in challenges there.

Orelli: You see this a lot in orphan drug indications too where the first orphan drug then has a huge advantage over the other one -- over a second-generation orphan disease drugs -- because of there's so few patients and so that cuts out a lot of discussions want to take the drug and so then sometimes companies have to compare their drug to the standard of care. So that way people know they're either going to standard of care or there given the new drugs, which may or may not be better. So then that will help bring in some of the cases spread.

I'm not sure that that's really a reasonable strategy for COVID-19 vaccines because if you're comparing to vaccine, then you don't know how, what the rate of potential to get COVID-19 is. So I don't think that's really possible, maybe you can do like three ratio redo, some people get placebo and few people get the vaccine. There's three cohorts. One gets a new vaccine, one gets old vaccine and one gets placebo. But even then I'm not sure how that really would help you enroll the study and get it completed in quicker time.

Speights: Brian, the other thing to remember with Ocugen is that they do split the sales or split the profits with Bharat Biotech. I think Ocugen will get 45% versus 55% for Bharat. So even if all goes well, they're not going to make all of the money assuming there are sales in the US going forward. So something for investors to keep in mind as well.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.