What happened

Shares of Novavax (NASDAQ:NVAX) jumped over 20% last month, according to data provided by S&P Global Market Intelligence. The catalyst was a bullish note from J.P. Morgan, which thinks the company's vaccine for respiratory syncytial virus (RSV) will deliver positive results in early 2019. Investors appear to agree; the stock has now more than doubled in the last year as the date for the initial data readout approaches. That included a 12% gain in the first few days of October.

So what

While vaccines are not typically considered by biopharma investors, who tend to be more interested in cancer immunotherapies and novel treatments for diabetes and liver diseases, the company's ResVax could be a blockbuster (a product with annual revenue of $1 billion or more). That's because RSV is the second-leading cause of death among children under 1 year old, and affects up to 5 million children every year in the United States.

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Image source: Getty Images.

Therefore, investors are understandably excited to learn how ResVax will fare in its ongoing phase 3 trial. The study includes 3,000 pregnant women receiving the vaccine during their third trimester, with the goal of preventing RSV once children are born. Although the data readout in early 2019 will only be an interim report (the trial will continue after that), Novavax has confirmed that the U.S. Food and Drug Administration will allow the company to file for regulatory approval based on the interim data.

In other words, if all goes well, then Novavax could have a product on the market in a lucrative application as early as 2020.

Now what

As with many small-cap biopharmas without commercial products, Novavax stock is a binary bet. ResVax has struggled in past clinical trials for other indications, and didn't exactly hit a home run in midstage trials for the current indication of preventing RSV in children when administered to pregnant women. The FDA is willing to consider the vaccine for approval pending early 2019 interim results, but that has more to do with the unmet clinical need in treating and preventing RSV than with the drug candidate's potential as a breakthrough therapy. In other words, this is still a risky stock, but it could do well if ResVax delivers.

Maxx Chatsko 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.