COVID-19 stocks have been a hot commodity in 2020. Several companies with anti-coronavirus assets such as antibodies, diagnostics, and vaccines, in fact, have seen their share prices rise by more than 1,000% this year. Even though the outbreak is as strong as ever in countries like the United States, however, a fair number of these former red-hot stocks have pulled back in a big way from their 52-week highs.

This near nichewide correction appears to stem from a slew of factors including the recent approval of Eli Lilly's COVID-19 antibody drug bamlanivimab, the likely approval of Pfizer and BioNTech's mRNA COVID-19 vaccine in the coming weeks, and the lack of a second stimulus relief bill which may have provided additional funding for research and development. 

Red plastic balls with spikes representing a coronavirus set against a blue background.

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Novavax (NASDAQ:NVAX) and Sorrento Therapeutics (NASDAQ:SRNE) have both been hit especially hard by this reversion to the mean among COVID-19 stocks. Novavax's shares have lost 46% over their value since hitting an all-time high back in August. Sorrento's stock, on the other hand, is down by a whopping 66% from its 52-week high at the time of writing. Should bargain hunters pounce on these beaten-down COVID-19 stocks? Let's take a look at the core value proposition of each company to find out. 

Novavax: Is a rebound in the cards?

Novavax's COVID-19 product candidate is a recombinant protein based vaccine known as NVX-CoV2373. The biotech has an going late-stage trial for the vaccine in the U.K., along with another planned pivotal stage study set to kick off in the U.S. by the end of November.

Novavax has received financial support from the federal government's Operation Warp Speed to accelerate the vaccine's development, as well as regulatory support from the Food and Drug Administration via a Fast Track designation for NVX-CoV2373. The first interim data from the vaccine's late-stage program could become public knowledge within the first quarter of 2021.

What this all means is that Novavax has a good shot at bringing the third or perhaps fourth novel coronavirus vaccine to market within the Western Hemisphere. In anticipation of an accelerated approval, the biotech has also been bulking up its manufacturing capabilities through both acquisitions and third-party deals over the past few months. 

What's the risk? There are three key risks investors should consider with this mid-cap biotech. First, Novavax's vaccine may flat out fail in late-stage trials, despite encouraging preclinical and early stage data. Second, the company has never handled a regulatory application or a commercial launch. Third, Novavax's vaccine -- if approved -- may have a hard time competing in this jam-packed space, especially if the mRNA vaccine candidates from Pfizer/BioNTech and Moderna do indeed sport truly outstanding levels of efficacy. 

What's the key takeaway? There are far too many unknowns to draw any solid conclusions about the biotech's near-term prospects right now. As such, it might be best for aggressive investors to simply pencil in Novavax as a strong watchlist candidate for the time being. That's not to say that a turnaround isn't a real possibility, but the company definitely needs some luck on several key fronts to spark a rebound.      

Sorrento: Is an inflection point near?

Sorrento has quickly ratcheted up its research and development apparatus this year to become a one stop shop for all things COVID-19. Specifically, the biotech has a vaccine under development, neutralizing antibodies in the clinic, multiple molecular diagnostics in the pipeline, and a rescue therapy -- abivertinib -- in phase 2 development. Despite this flurry of clinical development, however, Sorrento isn't widely considered a leader in any of these therapeutic areas for the pandemic. 

Eli Lilly and Regeneron Pharmaceuticals will likely have their COVID-19 antibodies on the market several months ahead of Sorrento's candidates. The biopharma also doesn't appear to be a real contender in the vaccine space based on the current state of play -- at least from a commercial standpoint. 

As things stand now, Sorrento's biggest opportunity in COVID-19 appears to be in the realm of detection, with its COVI-Track and COVI-Trace product candidates. However, it's not altogether clear how big of a value proposition these product candidates actually represent. Wall Street once thought they were worth several hundred million in sales, but the field has matured significantly over the last few months. 

What's the bottom line? Sorrento clearly needs a regulatory win in the COVID-19 arena soon. The space is quickly filling up with competitors across the board, and the company is in real danger of being left behind. This beaten-down biotech stock, in turn, arguably isn't an attractive comeback play until management achieves this all-important operational goal. 


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.