Ocugen (OCGN -1.69%) practically came out of nowhere to become a huge winner. Its shares are up more than 500% year to date. The biotech quickly vaulted into the top 100 most popular stocks among Robinhood investors. 

All of this enthusiasm is based on Ocugen's deal with Bharat Biotech to market COVID-19 vaccine Covaxin in the U.S. Make no mistake about it: Bharat's vaccine is the real deal. It's already authorized for use in India. Last week, Bharat reported results from the second interim analysis of a phase 3 study of Covaxin that showed the vaccine achieved an overall efficacy of 78% and a 100% efficacy against severe COVID-19. 

But while the exuberance about Covaxin continues, Ocugen still faces several key hurdles. Here's the biggest risk with buying Ocugen stock right now.

COVID-19 vaccine vials in a row with a light shining on one vial tipping over.

Image source: Getty Images.

Late-mover disadvantage

You've likely heard about the first-mover advantage. The idea is that companies that are first in a given market can shore up their position before others enter the market. When a first-mover advantage exists, it automatically means that there's a late-mover disadvantage. There's both a first-mover advantage and a late-mover disadvantage in the U.S. COVID-19 vaccine market right now.

Pfizer (PFE 0.66%) and Moderna (MRNA 1.58%) each have deals with the U.S. government to supply 300 million doses of their respective COVID-19 vaccines. Johnson & Johnson secured a supply agreement with the U.S. for 200 million doses. The combined total is more than enough for the U.S. to vaccinate every American this year.

And that doesn't include deals the U.S. has with AstraZeneca and Novavax, both of which could be in a position to soon win Emergency Use Authorization (EUA). The U.S. government is even shipping some of its doses of AstraZeneca's vaccine to India, where Ocugen's partner Bharat is headquartered.

Ocugen hopes to win EUA for Covaxin based on Bharat's encouraging results from its phase 3 study. The U.S. Food and Drug Administration (FDA) could require the company to conduct another study in the U.S. Let's assume that it doesn't, though, and grants EUA to Covaxin.

What are the chances that Ocugen will be able to sell doses of Covaxin to the U.S. government this year when it already has more vaccine supply than it needs? Slim to none. That's a late-mover disadvantage at work.

Wait 'til next year?

Ocugen has a better shot at winning a deal in the U.S. for 2022. However, the clock is ticking on this front as well.

The European Union is already close to finalizing a supply agreement with Pfizer and its partner BioNTech for up to 1.8 billion doses. That's enough to fully vaccinate every citizen of the EU for the next two years. 

It's a pretty good bet that the Biden administration is already thinking ahead as well. Put yourself in its shoes. You want to make sure Americans are protected against the coronavirus. You know that vaccines from Pfizer and Moderna have demonstrated efficacy levels of over 90%. Neither vaccine has had any significant safety issues. Both companies have been able to deliver on their commitments for shipments. Would you choose to place a major order with Pfizer and/or Moderna or go with a less well-known player?

Don't overlook the political ties, either. Pfizer has long-established relations with government officials and members of both major political parties. The National Institutes of Health teamed up with Moderna to develop its COVID-19 vaccine. Neither Ocugen nor Bharat has those kinds of political connections in the U.S.

Maybe Ocugen could try to get its foot in the door with a really low price. However, until all worries about the pandemic are in the rearview mirror, it seems likely that the U.S. government will place a higher priority on successful track records than it will on price.

Another angle for Ocugen could be to position Covaxin as more effective against emerging coronavirus variants than the current leaders in the U.S. market. However, to make that argument could require additional analysis -- and, as mentioned already, the clock is ticking.

Risks and rewards

Ocugen stands to receive 45% of the U.S. profits that Covaxin makes. To make those profits, the company must win EUA for the vaccine and secure a significant supply deal with the U.S. Is that possible? Yes.

However, it's important to note that the current price of the biotech stock has these expectations largely baked in. Since Ocugen announced that it was partnering with Bharat on Dec. 22, 2020, the company's market cap has soared by more than $2 billion. It's fair to say that all of that increase is due to investors' expectations about the potential for Covaxin.

With any stock, investors should be aware of both the potential rewards and the potential risks. Ocugen might still become a major player in the U.S. COVID-19 vaccine market. There's a real risk, though, that the company could be too late to the party.