Novavax (NVAX 1.16%) soared to stardom last year as investors bet on the prospects of its coronavirus vaccine candidate. As a result, the stock surged 2,700% in 2020.

Novavax shares have increased this year, but a lot less -- about 80%. Why? Investors lost patience with the company. Manufacturing and raw materials issues have delayed Novavax's submission for Emergency Use Authorization to the Food and Drug Administration. Now a new issue is arising. This week, investors started worrying about the post-pandemic outlook for vaccine sales. Novavax stock lost 20% in four trading sessions. Should you flee the stock -- or should you buy on the dip?

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Image source: Getty Images.

The coronavirus picture

First, let's take a look at the overall coronavirus picture. The delta variant fueled an increase in coronavirus cases in the U.S. this summer. Most of the severe cases were among the unvaccinated. The country has enough doses for everyone -- but the U.S. hasn't been able to convince everyone to go for a jab. As of now, the U.S. has fully vaccinated about 55% of the population.

Still, in recent weeks, coronavirus cases have started to decline. Moderna CEO Stéphane Bancel told Swiss newspaper Neue Zuercher Zeitung things might be back to normal a year from now.

Now, let's consider the Novavax situation. The biotech company was a favorite since the start of the vaccine race. Novavax has proven its vaccine expertise. It's brought a flu candidate -- NanoFlu -- successfully through trials. The next step is regulatory authorization. The U.S. government last year invested a whopping $1.6 billion in Novavax's nascent COVID-19 vaccine program.

And Novavax followed up on those wins with strong clinical trial data from the vaccine candidate. In the U.S. phase 3 trial, the vaccine candidate was 90.4% effective in preventing mild, moderate, and severe disease. It showed 100% efficacy against moderate and severe disease.

So why isn't this potential product on the market right now? When companies apply for vaccine authorization, they must submit manufacturing information. They have to show they can actually produce doses at scale. Novavax has built a supply chain network spanning 10 countries. But the company has struggled with raw material shortages and related manufacturing issues. This has held up its progress toward an EUA.

What may happen next

If Novavax sticks to its most recent goal of a regulatory submission before the end of the year, the near-term situation looks bright. Many countries still are in need of vaccine doses. Novavax even recently signed a supply agreement with the European Union for 200 million doses. The U.S. Food and Drug Administration so far has rapidly handled COVID vaccine EUAs. So, a decision could come a few weeks following Novavax's submission.

This is a positive catalyst for Novavax's shares, especially considering their price level at the moment. The stock is trading close to Wall Street's very lowest 12-month share price estimate.

But what if Novavax announces another delay and doesn't make it to market this winter? That's the biggest risk right now. This would be problematic for a few reasons. First, it would delay vaccine revenue. Second, it puts Novavax in danger of missing the EUA window. Once the pandemic is over, the FDA won't evaluate vaccine candidates for rapid authorization. This process only exists during public health emergencies. After the pandemic, the FDA would review applicants for full approval. That usually takes six to 10 months. And third, another delay would further damage investors' confidence in Novavax's ability to actually produce its vaccine for a global population. So, if a delay happens, I would expect the shares to extend declines.

The need for vaccines

But even in this negative scenario, all isn't lost for Novavax. In a post-pandemic world, countries will need coronavirus vaccines. Experts predict the virus will stick around -- much like the flu. Even if it takes longer to get to the finish line, Novavax still may generate billions of dollars in revenue. Next, Novavax likely will see NanoFlu come to market. And finally, further down the road -- the company is aiming for 2025 -- Novavax is hoping to bring a combined flu/coronavirus vaccine to market.

Moderna also is working on such a project. But Novavax has the upper hand. That's because Novavax already has brought the two main ingredients -- a flu candidate and a COVID candidate -- successfully through phase 3 trials. Moderna has just started clinical development of a flu candidate.

So, what does all of this mean for investors? Should you buy on the dip? If you're comfortable with some risk, this is an opportunity. The COVID and flu candidates should produce revenue at some point in the future. And that's likely to equal share performance. If Novavax completes its EUA submission this year, we may see near-term share increases, too.

But if you're a cautious investor, this probably isn't the best time to pick up Novavax stock. If bumps in the road continue, the stock's troubles may continue for a while, too. So, you might have plenty of time to add them to your portfolio -- once we have more visibility on the timeline for potential products and revenue.