What happened

Novavax (NVAX -2.61%) shares surged 71.7% in July, according to data provided by S&P Global Market Intelligence, after the U.S. government offered the company $1.6 billion to support the development of its coronavirus vaccine.

Operation Warp Speed has given biotech and big pharmaceutical companies billions of dollars as part of its effort to help bring a vaccine to market by January. Novavax's award, at the time it was granted, was Operation Warp Speed's biggest yet. Since, Operation Warp Speed has offered Sanofi (SNY -0.77%) and GlaxoSmithKline (GSK 0.09%) as much as $2.1 billion for the development, manufacturing, and delivery of 100 million doses of a coronavirus vaccine.

A researcher holds up a vial labelled as a coronavirus vaccine.

Image source: Getty Images.

So what

The government's investment in Novavax's program is a sign of confidence in this clinical-stage company's coronavirus vaccine program. It's especially significant since Novavax remains behind leaders in terms of timeline. Moderna (MRNA -3.45%) and AstraZeneca (AZN -0.70%), for example, have already entered phase 3 trials. Novavax's program is still in the phase 1/2 stage, and at the time of the award, Novavax hadn't yet reported trial data.

Operation Warp Speed funding also reassured investors about Novavax's financial ability to develop the vaccine. The award covers clinical development through regulatory approval, a manufacturing ramp up, and the production of 100 million vaccine doses.

Now what

On Aug. 4, Novavax announced positive results for the phase 1 portion of its trial in 131 volunteers ages 18 to 59. Novavax's coronavirus vaccine led to neutralizing antibody production in all participants. Neutralizing antibodies block infection, so they are seen as a key element in the development of a successful vaccine. The company said antibody responses were higher than those seen in recovered coronavirus patients. Novavax's vaccine was generally safe and well tolerated.

Following that news, the shares climbed more than 15% in pre-market trading.

Now, investors will turn their attention to the phase 2 portion of the trial. While phase 1 was conducted in Australia only, phase 2 will take place in several countries including the U.S. It will study safety and immune response in a wider age range. Novavax's shares have increased more than 39-fold since the start of the year. Future trial data and funding news likely will determine if shares of this biotech company climb even higher in the months ahead.