At the beginning of 2020, Novavax (NASDAQ:NVAX) had a valuation of $4 a share. Six months later, the company's stock sells for $47 a share. That's a dramatic shift in perception of value. What's the stock market seeing now that it didn't see in January?

In a word, COVID-19. More than 7 million people have caught the coronavirus, and more than 400,000 have died from it.

Novavax, like many biotech companies, is pursuing a COVID-19 vaccine. This involvement in the ongoing health scare has caused Wall Street to be far more optimistic about the company's future. Certainly, there's potential for Novavax to be far more valuable in 2025 than it is right now.

Medical glove holding vial that says COVID-19 vaccine

Image source: Getty Images.

The vaccine market will get a lot bigger

Vaccines are historically very important. Think of dangerous diseases like polio, smallpox, or measles. These viruses have largely been eradicated in the U.S., thanks to vaccination programs. 

In the U.S., we vaccinate our children early and often. According to the U.S. Centers for Disease Control and Prevention (CDC), right after birth, babies should be given a vaccine to protect against hepatitis B. That's followed by vaccines for tetanus, whooping cough, polio, influenza, measles, chickenpox -- and the list goes on and on.  

The worldwide market for vaccines was estimated at approximately $41 billion in 2019 and projected to reach $58 billion by 2024. Much of this estimated growth was due to the expansion of vaccination programs into third-world countries. That's because most of our vaccines are fighting diseases that have been around for a long time. For instance, in the U.S., we have largely succeeded in our fight against hepatitis B, thanks to our vaccination program. So the historic growth in the vaccine market came from convincing the rest of the world to follow our lead.

In 2020, all the predictive models for the vaccine market are now out the window. COVID-19 is a new disease that didn't exist before -- and it's a serious, worldwide threat. Novavax is preparing to manufacture up to a billion doses of its COVID-19 vaccine next year. That's an assumption that 1 out of 7 people in the world will need to be vaccinated, and that number might actually be too small.

The economic damage caused by COVID-19 and the world's quarantines in response to it has been astronomical. Back in March, a United Nations trade agency estimated that the global loss due to the lockdown might be $1 trillion in 2020. That turned out to be a serious underestimate: The federal government in the U.S. alone has already committed $2 trillion to combat the economic slowdown, and the Federal Reserve has pumped in another $4 trillion.

It's hard to put a price tag on a working COVID-19 vaccine, but it's clear the whole world is desperate for one. Given how much financial damage this disease has wrought, it's not unreasonable to think that the price of a working vaccine might be $100 or more. As Novavax is talking about manufacturing a billion doses, it's clear the company sees a vast market opportunity ahead. 

So scratch the $60 billion estimate for vaccines in 2025. It's entirely possible the vaccine market will be twice that size next year. Indeed, a working COVID-19 vaccine might be worth $60 billion (or more), all by itself. 

What about the competitive landscape?

There are multiple biotech companies and university labs seeking a vaccine for COVID-19, including ModernaSanofi (NASDAQ:SNY), Pfizer, Johnson & Johnson, and GlaxoSmithKline. Why is it that Novavax's stock has skyrocketed far higher than the others?

Part of the reason is that Novavax was so cheap at the beginning of the year. As a micro-cap, Novavax had more room to run. The company is now valued at $3 billion. But even that is still tiny compared to Moderna, which is valued at $24 billion, or Sanofi's $127 billion.  

Another major reason is that Novavax is actually one of the stronger companies in the vaccine space. After all, its flu vaccine has proven superior to the market leader (from Sanofi) in multiple clinical trials. Novavax will be filing for U.S. Food and Drug Administration (FDA) approval for that vaccine later this year.  

Influenza is a sizable market opportunity, roughly estimated at $6 billion a year. While it's unknown how much market share this biotech upstart can take from the European giant, the trial data certainly suggests there might be a shake-up. The CDC has reported that flu vaccines have not worked well over the past couple of years. The problem is that the flu mutates, and what works against one strain fails against others.

Novavax's flu vaccine is stronger against mutating viruses. That's how the company's drug beat Sanofi in head-to-head trials and why Novavax is bullish about its COVID-19 vaccine. Indeed, the nonprofit Coalition for Epidemic Preparedness Innovations (CEPI) was so impressed with Novavax's technology that it invested $388 million in the company's platform to help fund its COVID-19 research.

While nobody knows who will be first to market, one of the strengths of Novavax's drugs is that they help protect against virus mutation. If COVID-19 turns out to mutate like the flu, people will need to vaccinate against it every year; it's this mutating nature that makes the flu such a difficult disease to stop and such a valuable market opportunity for biotech companies.

The same may be true for COVID-19. We not only have to prevent the current strain of the disease but also future strains. Novavax's platform is designed to do just that.  

Over the next five years, we should see the market for vaccines dramatically increase because of COVID-19 and increased awareness of the importance of vaccination. Novavax, which should emerge as a market leader in flu vaccines, has a good chance to succeed with its COVID-19 vaccine, as well.

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.