Shares of obscure biotech firm Novavax soar 32% on coronavirus vaccine funding

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Investors rushed to embrace Novavax, a little known Maryland drug company, after the U.S. government awarded it $1.6 billion to produce 100 million doses of a covid vaccine.

Novamax shares closed closed near $105 on Tuesday, a 32% increase from their opening price. This latest rally caps a remarkable 2020 for the company, whose stock traded near $5 at the start of the year, and which had been dogged with rumors of an impending bankruptcy.

The government’s decision to grant Novavax such a large contract is remarkable given that Novavax has never brought a drug to market, and because other firms that received money under the same program—known as Operation Warp Speed—include drug industry titans like Johnson & Johnson and Astra Zeneca.

In a statement, Novavax said it will use part of the funding to pursue Stage 3 clinical trials on 30,000 volunteers with the aim of delivering the 100 million coronavirus vaccines as early as this year.

In an interview with Business Insider, Novavax’s CEO Stanley Erck said the government deal does not oblige the company to introduce any future price caps. Erck also stated that two-thirds of the funding will be used for clinical trials, which will include tests on children, while the rest will primarily be used to ramp up manufacturing.

The goal of the Operation Warp Speed program is to accelerate the time it takes to make a COVID vaccine widely available, in part by helping firms to begin manufacturing the vaccine even as clinical trials are ongoing.

The potential vaccine being pursued by Novavax, known as NVX‑CoV2373, is just one of several vaccines the U.S. government has deemed as promising. For now, it’s unclear if any of the drug candidates, including one developed by Moderna—an upstart biotech firm that has recently sparred with regulators—will be suitable as widespread vaccines. Last week, the FDA said any COVID vaccine must help at least 50% of those vaccinated to receive approval.

Tuesday’s pop in Novavax’s share price is part of a broader bull run among biotech stocks. The exchange traded biotech fund known as ETFMG Treatments, Testing and Advancements ETF was up 4% on Monday, boosted by its 6% holding of Novavax.

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