Novavax (NASDAQ:NVAX) stock is up around 3,500% so far this year. And that's after a significant recent decline. Earlier this month, shares of Novavax were up nearly 4,400% year to date.
These jaw-dropping gains might make you wish you had bought shares of Novavax back when the biotech went public. If the stock has skyrocketed so much this year, the returns for investors who got in on the ground floor must be truly staggering, right? Not really. If you invested $1,000 in Novavax's initial public offering (IPO), this is how much money you'd have now.
An unremarkable return
The quick answer to the question is that you wouldn't have made or lost any money investing $1,000 in Novavax's IPO. Why? Novavax never conducted an IPO. The biotech actually went public through a reverse triangular merger in 1995 with Lipovax and MPS Acquisition Subsidiary, a subsidiary of Novavax created solely for the acquisition of Lipovax.
But let's assume that you were able to buy Novavax at the market open on Dec. 5, 1995 -- the first day that the biotech stock traded publicly. An initial investment of $1,000 would have enabled you to scoop up 14 shares. You would have had $55 left over since in those days you couldn't buy partial shares.
Fast forward to today. Those 14 shares would now be worth around $2,050 as of this writing. That translates to a compound annual growth rate (CAGR) of a little under 3%. You would have been much better off investing in the S&P 500 Index.
What if you had managed to sell at Novavax's peak on Oct. 11, 2001? Your 14 shares would have been worth nearly $4,066. That's a much more impressive return, but it would have required perfect timing -- something no investor has, at least not on a consistent basis.
A wild ride
The reality is that Novavax has taken investors on a wild ride since it went public in late 1995. This year's huge gains are nothing new for the stock. Neither are huge downswings.
Novavax has made tantalizing progress through the years with its development of drug, vaccine, and adjuvant candidates. It even won FDA approval in 2002 for an estrogen replacement product, Estrasorb, that the company licensed to King Pharmaceuticals.
In 2008, Novavax began the development of a vaccine candidate targeting respiratory syncytial virus (RSV). This program became the biotech's primary focus in subsequent years. But in 2016, Novavax reported the first of several clinical setbacks for its RSV vaccine candidate.
By late 2019, an initial $1,000 in Novavax would have been worth less than $56. However, the company's nanoparticle influenza vaccine NanoFlu had shown some promise by that point. Novavax quickly advanced the vaccine candidate through phase 1 and phase 2 studies then moved it into a pivotal phase 3 study in October 2019.
Novavax's next chapter
NanoFlu seems likely to be an important player in the next chapter of Novavax's story. The company reported impressive results in March from the late-stage study of the investigational vaccine in treating older adults. Its next step is to file for regulatory approval. If approved, NanoFlu could potentially generate sales of well over $1 billion.
But NanoFlu has stood in the shadow of another pipeline candidate throughout much of 2020. In February, Novavax announced its plans to develop a vaccine to protect against infection by the novel coronavirus that causes COVID-19. Earlier this month, the company announced positive results from a phase 1 study of its vaccine candidate, NVX‑CoV2373.
Along the way, Novavax racked up funding commitments topping $2 billion for its COVID-19 vaccine program. This total included a $1.6 billion deal with the U.S. government.
Novavax could continue to be highly volatile over the next few months, just as it's been throughout much of the past 25 years. However, if NanoFlu and NVX‑CoV2373 win regulatory approvals, it seems likely that a $1,000 investment in Novavax today will pay off in a much greater way than has a similar investment in the stock when it first went public.