The COVID-19 pandemic has affected daily life in a number of ways, and a vaccine for the disease is probably our best hope for a return to normal. Thankfully, well over a dozen companies are working to develop a vaccine for the novel coronavirus at an incredible pace; one of these, Novavax (NVAX -1.94%), has been a leader in this race over the past six months, and investors have taken notice.

But while its stock soared by nearly 4,500% during the first half of the year, it has fallen sharply over the past couple of months. As of this writing, shares are up by 2,230% in 2020. That still compares very favorably to the S&P 500, which has gained 3.4% since the year started. The next four months will be critical for Novavax as it continues to advance its COVID-19 programs. Should investors get on board and buy its shares right now? 

NVAX Chart

NVAX data by YCharts

The progress of Novavax's COVID-19 program

Novavax's COVID-19 candidate is called NVX-CoV2373, and the company kicked off a phase 1/2 clinical trial for it in late May. The phase 1 portion of the study took place in Australia and enrolled approximately 130 healthy participants. The goal of this trial was to test the safety and immunogenicity (the ability to trigger an immune response in the body) of NVX-CoV2373. Novavax reported positive results from this portion in early August.

According to the biotech, the vaccine generated "robust antibody responses." Antibodies are proteins that defend healthy cells from pathogens. Also, NVX-CoV2373 had a favorable safety profile, with most adverse reactions experienced during the trial being mild. Following this win, Novavax started the phase 2 portion of the trial on Aug. 24. This trial will enroll about 1,500 participants and will also test the safety and immunogenicity of the vaccine.

Novavax expects interim data from this trial in the fourth quarter. There seems to be quite a bit of enthusiasm surrounding the company's vaccine. The U.S. government awarded Novavax $1.6 billion as part of Operation Warp Speed to advance the manufacturing of NVX-CoV2373 and produce as many as 100 million doses starting later this year (pending regulatory approval).

Nurse holding a test tube filled with blood for coronavirus testing.

Image source: Getty Images.

Also, Novavax reached an agreement with the U.K. government, which will collaborate with the company on a phase 3 clinical trial starting in the third quarter and has agreed to purchase 60 million doses of the vaccine. Lastly, Novavax entered into an in-principle agreement with the government of Canada to supply the country with up to 76 million doses.

Looking forward 

Novavax may not have any products on the market at the moment, but thanks to the funding it has received recently, the company is unlikely to run out of cash anytime soon. As of June 30, the biotech had nearly $610 million in cash and cash equivalents -- and that was before landing the Operation Warp Speed contract worth $1.6 billion. The company has received about $2 billion in funding from various sources in its quest to develop a vaccine for COVID-19.

It's always important to check whether a clinical-stage biotech has enough money to fund its operations without having to resort to dilutive forms of financing. Novavax seems more than capable of doing so at the moment. Further, the company has another promising program in NanoFlu, its potential flu vaccine for adults aged 65 and older. This candidate recently went head to head against the current leader in this market, Fluzone, which is marketed by Sanofi.

In a phase 3 clinical trial, NanoFlu demonstrated non-inferior immunogenicity and also had a safety profile comparable to that of Fluzone. The FDA granted the fast-track designation, which helps expedite the review of a candidate, to NanoFlu back in January. Novavax has yet to submit this vaccine to the health industry regulator, but given the results of its phase 3 clinical trial, it looks very likely to earn approval.

The company estimates the market opportunity for NanoFlu to be north of $2 billion in the U.S. alone. Even considering its promising flu vaccine and its promising coronavirus candidate, its market cap of $5.7 billion seems a bit high for a clinical-stage biotech company. The success of its leading programs is, to some extent, already baked into its stock price.

If all goes well for Novavax, the company's stock will skyrocket further. But if it encounters headwinds, particularly for its COVID-19 vaccine, its shares will plunge. I think Novavax is in good standing on both fronts, and in my view, its stock is worth serious consideration -- especially because it's gotten cheaper over the past couple of months. Investors willing to pull the trigger may want to initiate a small position in this biotech stock while paying close attention to the events that unfold over the next four months.