You may not have heard of Novavax (NASDAQ: NVAX) about six months ago. Shares of the biotech company were trading at less than $5 a share, and the coronavirus hadn't yet embarked on its deadly trip throughout the world. Since then, the stock has increased nearly 34-fold, and Novavax has secured its spot among leaders in the race to develop a coronavirus vaccine.

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Some rivals are a few steps ahead from a timeline perspective. Moderna (NASDAQ: MRNA) and Inovio Pharmaceuticals (NASDAQ: INO), for example, have already reported interim phase 1 data and are moving on to later-stage studies. Novavax plans to release initial data from its human trial later this month. Yet these days, everyone seems to be talking about Novavax.

What's going on? Let's take a look.

A researcher holds up a dose of COVID-19 vaccine.

Image source: Getty Images.

Novavax began enrolling participants in the phase 1 part of a phase 1/2 trial in May. The phase 2 portion will begin following phase 1 results on safety and immune response. Phase 1 is testing the vaccine on about 130 participants ages 18 to 59 in Australia. The second part of the trial will expand to more countries, including the U.S., and broaden the age range of volunteers.

Protecting against future infection

So how does the vaccine work? Novavax, using its recombinant nanoparticle technology and the genetic sequence of SARS‑CoV‑2 (the virus that causes COVID-19), produces antigen from the coronavirus spike protein. A spike protein binds to human cells, opening the door to infection. The idea is, if the body is exposed to antigen through the vaccine, it will produce antibodies that will protect against future infection. The vaccine also includes Novavax's patented adjuvant, designed to increase immune response and neutralizing antibodies, which can block infection.

A small side note on Novavax's technology: The company doesn't yet have products on the market, but it has proven the power of its vaccine development capabilities. Earlier this year, Novavax reported that its investigational flu vaccine candidate, NanoFlu, met all primary endpoints in a phase 3 trial. The company plans to submit the product to the U.S. Food and Drug Administration for review.

As for its coronavirus program, in May, Novavax acquired Praha Vaccines in Czech Republic to produce more than 1 billion doses of vaccine as of next year. So, if all goes well in trials, we know the company has the necessary manufacturing capabilities.

The biggest award yet

All of that sounds positive. But what really sent Novavax shares into the stratosphere recently -- and put the company on everyone's radar screen -- has to do with funding. Operation Warp Speed, the White House's effort to bring a vaccine to market by January, awarded Novavax $1.6 billion in funding from the Department of Health and Human Services to advance its coronavirus vaccine. That's Operation Warp Speed's biggest award yet. Novavax said the award supports development through FDA approval and the production of 100 million vaccine doses as soon as the end of this year.

Since that announcement on July 7, Novavax stock has climbed 34%. So now, as we await data from Novavax's coronavirus vaccine trial, we may wonder if the shares can continue to move higher. Though the price gains have been both rapid and steep, it's likely positive trial data will push them even higher. That said, investors might demand details. When rival Inovio reported interim phase 1 data, the shares slipped. Some investors had hoped for more specifics on neutralizing antibody production. It seems like Novavax might be on the right path in the communication department. In a virtual presentation this week, the company indicated trial results would include details on T-cell response and antibodies, Evaluate reported.

Overall, as long as trial results are encouraging, the government's huge investment in Novavax may continue to drive investor optimism. Now the question is whether, at these levels, Novavax is a buy. I think NanoFlu's prospects are great. I like the company's pipeline, and the coronavirus program is a plus. But I worry that the stock has become too sensitive to coronavirus vaccine news these days. For the moment, this news has pushed the shares higher.

But if a competitor makes it to the finish line first, or Novavax's data disappoints, this biotech stock may take a serious tumble. Even though rewards may be high, so is the potential risk. Aggressive investors with risk tolerance may consider taking a position in Novavax, but others might be better off opting for a safer COVID-19 vaccine bet or a diversified basket of the stocks involved in the coronavirus vaccine race.

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Adria Cimino 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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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