Small-cap vaccine manufacturers have been some of the most volatile stocks on the market. As demand for a COVID-19 vaccine continues to grow, many companies working on potential treatments have seen their shares double or triple since the start of 2020.

Novavax (NASDAQ:NVAX) is one of those companies -- its stock has almost quadrupled over the past three months. While this sounds fantastic, it's easy to forget that Novavax has been publicly listed on the NASDAQ since 1995. Considering that the stock used to trade as high as $300 per share and now trades for about $17, it's not surprising that some investors have lingering doubts and disappointments about this company.

However, Novavax also has quite a few things going for it now that it didn't have all those years ago. So what's the verdict on this small-cap biotech stock? Will it make investors a fortune with its upcoming candidates, or should you give this company a pass?

COVID-19 test tube and pipette against a stock chart background.

Image source: Getty Images.

A superior flu vaccine

If you look at the company's pipeline, you'll find just a handful of candidates. Despite what some investors would expect, Novavax's biggest opportunity has little to do with its much-hyped COVID-19 vaccine. Instead, the company's nanoparticle flu vaccine, NanoFlu, is the real blockbuster opportunity.

While there might have been a bit of skepticism surrounding NanoFlu, new late-stage clinical results published in March proved overwhelmingly positive. Besides meeting all primary and secondary endpoints for efficacy and safety, the flu vaccine managed to outperform a competing vaccine developed by Sanofi, Fluzone.

When you consider just how large the flu vaccine market is, this is a big deal. For Sanofi, influenza vaccines (including Fluzone) brought in $1.04 billion in revenue for Q4 2019. With NanoFlu seeming to be a superior flu vaccine, it wouldn't be surprising if Novavax ends up siphoning away a lot of the market share from already established industry giants in this area.

Some Wall Street analysts have gone on to say that NanoFlu could bring in at least $550 million in annual sales should the drug receive Food and Drug Administration (FDA) approval. That's a big deal, considering Novavax only reported $18.7 million in revenue for 2019.

Understanding its COVID-19 vaccine

While the company's COVID-19 program has given Novavax plenty of mainstream attention, it's not clear whether this treatment, known as NVX-CoV2373, will turn out to be a success.

First of all, Novavax will have to compete with other COVID-19 vaccines that are currently in development. This includes INO-4800 from Inovio Pharmaceuticals, as well as Moderna's mRNA-1273, two potential treatments that have already begun testing in humans..

These two companies are already ahead of the pack when it comes to developing a COVID-19 vaccine. In comparison, Novavax is set to begin early-stage clinical trials in humans for its own vaccine in May.

Whether this late start will be a significant disadvantage is up for debate. What's clear, however, is that Novavax is facing more than its fair share of competition in this field, an area in which it doesn't necessarily have a clear advantage.

That's not to say that its COVID-19 treatment won't find at least some success. However, investors shouldn't place too much emphasis on whether this particular vaccine will succeed.

Medical scientist dripping a liquid into a test tube.

Image source: Getty Images.

Is there anything holding the stock back?

For one, the company's history. Despite being founded in 1987 and going public in 1995, Novavax hasn't had any home runs yet. For longtime shareholders who remember when the company traded for about $300 per share, Novavax has been a pretty big disappointment.

Instead, Novavax has had some notable failures. Recently, this would include the company's respiratory syncytial virus (RSV) vaccine candidate, which has failed multiple clinical trials. RSV is a relatively common virus that typically causes cold-like symptoms in patients, and there are still no vaccines for it. Despite the clinical setbacks, Novavax hasn't given up on its own vaccine just yet, although many investors have by now already written off this particular candidate.

As for NanoFlu, there's always the chance that the FDA could end up rejecting the drug, although this seems unlikely given the strength of  its recent clinical trial results. If this does happen, Novavax would see its shares tumble significantly on such a major unexpected setback.

A quick look at the financials

Depending on whether you're comfortable with investing in small-cap biotechs, Novavax's financial figures could be a bit worrying. The company reported only $8.8 million in Q4 2019 revenue, while net losses for the quarter came in at $31.8 million. This is an improvement from the $6.1 million in revenue reported in Q4 2018, while net losses have improved from the $49.3 million reported a year ago.

Although Novavax isn't profitable, that's par for the course when it comes to clinical-stage biotech stocks. What's most important is that a company has enough cash on its balance sheet to last until its leading candidate (in this case, NanoFlu) gets approved.

Novavax's $78.8 million in cash and cash equivalents is enough to last the company more than two years. For a company whose market cap jumped from about $300 million to about $900 million in just a handful of months, that's still a sizable amount of cash compared with the overall size of the business.

Will Novavax make you wealthy?

While it's easy for investors to think they've missed the boat with Novavax given the stock price's steep increase since the start of 2020, the best may be yet to come for this little biotech stock.

The real tipping point, at least in my opinion, is NanoFlu's recently announced clinical trial results. With Novavax's flagship candidate managing to beat out other well-known flu vaccines on the market (in this case, Sanofi's), it seems likely that Novavax will finally hit a much-needed home run after a 30-year-plus history.

If all goes well with regulatory approval for its flu vaccine, I wouldn't be surprised if shares of Novavax at least double over the next 12 months. With a market cap of about $900 million and only $18.7 million in annual revenue, it's anyone's guess how much higher Novavax will be valued once its flu vaccine starts bringing in hundreds of millions of dollars of annual revenue. That by itself should be enough to make investors excited about this company's future.