They say hindsight is 20/20, and in hindsight, buying shares of Novavax (NASDAQ:NVAX) at the beginning of the year would have been a great move. After all, the company's stock is now up by more than 2,500% year to date. Still, it may not be too late to buy shares of Novavax, as there are good reasons to believe this biotech stock can keep climbing. Here's one such reason to consider: The U.S. government recently awarded $1.6 billion in funding to Novavax as part of Operation Warp Speed. Novavax's shares jumped by more than 30% on this news. But could this lead to even more substantial gains for the company? 

A vote of confidence

The goal of Operation Warp Speed is to accelerate the development and manufacture of vaccines and therapies for COVID-19. The aim is to have these products available for use by January 2021. The U.S. government initially selected 14 out of the more than 100 coronavirus vaccine candidates as part of this program, deeming these the most likely candidates to go on to earn regulatory approval. Novavax's potential vaccine, NVX-CoV2373, is one of them. 

Doctor wearing a lab coat and holding a piggy bank with one hand.

Image source: Getty Images.

The $1.6 billion the company received will help it fund a phase 3 clinical trial for NVX-CoV2373, which will enroll up to 30,000 participants and should start this fall. The company will also use the capital it received from Uncle Sam to ramp up the manufacturing of NVX-CoV2373. Novavax said it intends to deliver 100 million doses of the vaccine (pending regulatory approval) as early as late 2020.

Tempering our expectations

Before deciding to purchase shares of Novavax, it's essential to put a little more context around what's going on with the company. Here are two crucial things to consider. First, many other companies are partaking in Operation Warp Speed, and even beyond this select group, many others are racing to develop vaccines for COVID-19. In all likelihood, multiple vaccines will end up earning regulatory approval, and several companies will have to share this market. In other words, developing a vaccine for the novel coronavirus may not turn out to be a particularly lucrative opportunity for Novavax. That is even if NVX-CoV2373 manages to make it through the clinical trial process, which, at this point, is far from certain. 

Second, the U.S. Food and Drug Administration (FDA) recently released an update regarding the standards it will follow when reviewing potential COVID-19 vaccine candidates. The health industry regulator does not plan on cutting corners just because of the urgency of the situation, and the criteria it outlined make it unlikely that any company will earn regulatory approval by year-end. For instance, to ensure the safety of a vaccine candidate, the FDA will require that companies monitor participants for at least six months after they have received the vaccine in question. With Novavax still a couple of months away (at best) from starting a phase 3 clinical trial, the company's goal to deliver 100 million doses of its vaccine by late 2020 seems optimistic. 

Should you buy?

Novavax has a lot of momentum going for it at the moment, and this momentum could continue to drive its stock price higher. In particular, if the company reports positive results for its ongoing phase 1/2 clinical trial, its stock will likely jump again. Novavax expects these results to come in by the end of July. On the flip side, negative results from a COVID-19-related clinical trial could sink the company's stock. Novavax does have another promising pipeline candidate, NanoFlu, a potential flu vaccine for people 65 and older.

Novavax reported positive results from a phase 3 study for NanoFlu earlier this year, and this vaccine could go on to be a winner. But even with this caveat, Novavax seems a bit too risky. The company has yet to start a phase 3 study for NVX-CoV2373, not to mention the fact that the COVID-19 vaccine field is crowded. As such, only investors comfortable with the risk should consider initiating a small position in this biotech stock