What happened

Shares of Vir Biotechnology (VIR 1.89%) jumped 74.6% in February, according to data provided by S&P Global Market Intelligence. In fact, the entire year has been fantastic for this stock. Vir is up a startling 264% since Jan. 2, compared to an almost 10% loss for the S&P 500.  

Why the dominant outperformance? Vir is one of a handful of virus specialists whose stocks have shot up like a rocket this year. The market is rewarding the biotech for its coronavirus program, in the hopes that Vir will find a vaccine or treatment for COVID-19.

Of course it's way too early for trial data, and it will likely be years before any drug is approved by the Food and Drug Administration (FDA). Nonetheless, in a COVID-19 meltdown, small-cap stocks focused on finding a solution are market darlings. 

A virus cell.

Image source: Getty Images.

So what

Vir's market cap is $4.5 billion dollars now. That is very expensive for a company that has no profits, and only had $10 million in revenue last year. Vir's most advanced molecule is its hepatitis B treatment, Vir-2218, in phase 2 trials. If it works, Vir-2218 will be a billion-dollar molecule for sure. So for long-term investors, progress on its hepatitis B drug is far and away the most important thing about this biotech. 

Driving the incredible gains in the share price in the short term, of course, is its COVID-19 program. And it's not like the market is bullish about good news from a clinical trial. The company has yet to start any human trials at all. Indeed, just announcing that you are starting a COVID-19 program is enough to send a stock price soaring. It's the flip side of all the panic-selling that is happening in the rest of the market. Traders are buying Vir, and similar names, as a hedge against coronavirus.  

Now what

All of these COVID-19 biotech names are highly volatile, and many of them can have big up and down moves in a single day. It's an emotional market driven by a lot of fear right now. For investors holding the stock, Vir has been a wonderful bit of good news in a dismal market. It's been mostly up, with a few sharp declines.

Of course, if Vir's treatment for COVID-19 ultimately does not work, then the stock will tank. It might be a year before we see any phase 1 data. Clearly a lot of companies are trying to rush their vaccines and cures into human trials as quickly as possible. But drug approval is not a quick process.  

On the positive side, Congress has just approved $8.3 billion in emergency funding for a response to COVID-19. $3 billion of that money is going toward research and development for the disease.