What happened

Novavax (NASDAQ:NVAX), a late-stage vaccine developer, is extending its recent winning streak today. The biotech's shares were up by 10% as of 12:40 p.m. EST on Thursday. As a result, Novavax's stock has exactly doubled in value since the start of 2020. 

What's lighting a fire underneath the biotech's shares in early 2020? There are two possibilities here:

  1. The coronavirus outbreak that originated in China but has since spread to dozens of countries has been a huge catalyst for several biotechs over the past six weeks. Novavax, for its part, has been one of the big winners in the coronavirus space, thanks to the company's push to develop a vaccine in record time.
  2. The second probable catalyst is the company's forthcoming late-stage NanoFlu data slated to hit the wires before the end of March.   
The word coronavirus displayed against a blue background, with two red balls with spikes that represent the virus set nearby.

Image source: Getty Images.

So what

The coronavirus threat, while serious, is likely to turn out to be a nonevent for developmental stage biotechs like Novavax. Most experts believe the current outbreak will ultimately peter out by summer. So even though Novavax and other vaccine specialists are striving to develop a vaccine as soon as possible, there's little chance that one will be available for testing before the threat is gone. In short, there's no reason to buy Novavax's stock in response to this viral outbreak.

The NanoFlu data, on the other hand, could be a significant market-moving event for the company. There's a clear need for better flu vaccines, and NanoFlu could fill this treatment gap. That's a big deal because the global flu vaccine market is currently worth upward of $2 billion a year. 

Now what

Novavax's stock is a high-risk, high-reward play. If NanoFlu turns out to be a major improvement over the currently available cohort of flu vaccines, there's a good chance that one or more suitors will emerge from the shadows. By contrast, another late-stage failure for the company's vaccine platform will surely spell disaster for its share price. As such, this small-cap vaccine stock is arguably only suited for investors with an extremely high tolerance for risk.  

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.