If you had bought Novavax's (NVAX -2.91%) shares at the beginning of 2020, you'd be sitting on solid gains. The stock skyrocketed soon after the pandemic started as Novavax raced to develop a vaccine for the novel coronavirus. Even though it has given up most of these gains, it remains well in the green for those who got in early enough.

But it was impossible to predict Novavax's success at the time. Other smaller biotechs that tried to make waves in this market failed and have now become irrelevant. As for whether Novavax is still worth owning, we have much more data. Let's look at what's going on with Novavax to figure that out.

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Some background information

Novavax focuses on developing vaccines for infectious diseases. Before the pandemic, the company appeared to be on the verge of marketing a novel influenza vaccine. Now, the company's candidates target malaria in addition to COVID-19 and influenza. Its pipeline also features a combined COVID/flu vaccine. Novavax might only have a handful of ongoing programs, but that's all the company needs.

The vaccine maker's market cap is just $700 million at recent prices. The last thing it wants is for its resources to be spread thin while it pursues a dozen potential opportunities. So investors should welcome the company's laser focus on COVID-19 and, to a lesser extent, the flu. Still, none of that will matter unless Novavax can generate consistent revenue and profits in the COVID-19 market.

While its shares could soar if it manages to do that -- as it would also open the door for the company to push its other programs forward -- Novavax has very little room for error. Here is why. The company's management has already disappointed investors due to its inability to launch its COVID-19 vaccine on the market fast enough. The company's plans were derailed due to internal manufacturing issues.

Further, Novavax has had financial problems, although it has sought to alleviate those by cutting down expenses. The company's inability to carve out a niche for itself moving forward in the commercial COVID-19 vaccine market might be the final nail in its coffin. 

Uncertainty makes for a risky pick

In the second quarter, Novavax generated $424.4 million in revenue and earnings per share of $0.58. That looks decent for a company with a market cap well below $1 billion, especially since its financial results increased substantially compared to the second quarter of last year, when its top line came in at $185.9 million, and it reported a net loss per share of $6.53.

But these numbers don't tell the whole story. So far, Novavax and other leaders in the coronavirus vaccine market have relied mostly on agreements with governments, to which they sold tens of millions of doses. The timing of these agreements and subsequent deliveries weren't always evenly divided throughout the four quarters of the fiscal year.

A better gauge of how Novavax is doing would be to compare its projected revenue of between $1.3 billion and $1.5 billion this year to the $2 billion it reported in 2022. But perhaps Novavax will do better next year. The company's updated vaccine recently received authorization from the U.S. Food and Drug Administration and a vote of confidence from the U.S. Centers for Disease Control and Prevention, which added it to its list of recommended vaccines.

Here is where things get complicated. This list also includes the vaccines marketed by Moderna and the one from the team of Pfizer and BioNTech. Maybe that's not too big a problem; three can share this space. However, it isn't easy to know how large this market will be. One poll found that among U.S. adults, nearly half said they would probably or definitely get an updated COVID-19 vaccine, while the other half said the opposite.

People don't always do what they say they will do in polls. Novavax found that out the hard way when a poll claimed that 73% of the adult population in the U.S. would welcome a coronavirus vaccine developed using more traditional methods, like the company's protein-based product. But that has largely failed to materialize in terms of sales, be it in the U.S. or elsewhere.

Further, these numbers could change depending on several factors, such as a new surge of COVID-19 cases or new variants of the virus and how contagious they are. Between the fluctuating nature of this market and the fact that the two other vaccines approved in the U.S. have generally been vastly more successful than Novavax's, betting on the company to succeed in this space from here on out seems somewhat unwarranted.

Perhaps that wouldn't be a problem if the company had other candidates close to approval, but it doesn't. All in all, Novavax doesn't look like an attractive biotech stock right now. Investors should stay on the sidelines for this one.