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Concerns around COVID-19 are diminishing but they are not going away entirely. New variants are emerging and case numbers have been climbing.

One company that continues to work on developing an updated COVID vaccine is Novavax (NASDAQ: NVAX). Last week, the biotech announced that its latest vaccine was effective against new variants, leading to a bump in its share price. Could the momentum last? Let’s see.

Approval for the vaccine could be coming soon

The Food and Drug Administration (FDA) hasn’t approved any updated COVID vaccines yet, but the expectation is that they will become available by the end of September. That means the vaccines could obtain approval within weeks. Novavax may once again be competing for a chunk of the market along with rivals Pfizer and Moderna, which have also been working on updated shots.

On Aug. 22, Novavax said that its updated XBB COVID vaccine was effective in inducing a neutralizing response against new COVID variants EG.5.1 and XBB.1.16.6, which are subvariants of XBB. The healthcare company says it is working with regulatory bodies so that its vaccine can be available during the fall, when there may be an uptick in cases.

Hospitalizations on the rise

Ongoing mutations present a moving target for COVID vaccine makers because while case numbers may stabilize, there’s always the potential for a new variant to be more problematic than others. Hospitalizations due to COVID have been rising in recent weeks, and the Centers for Disease Control and Prevention expects that they will accelerate in September.

Complicating the situation even further is that there is a highly mutated variant, BA.2.86, which health officials are rushing to study as it spreads across the globe.

With an updated protein-based vaccine that is effective in helping to prevent infections, Novavax could see high demand, particularly among people who may not want mRNA vaccines. Health officials believe that even against BA.2.86, updated COVID vaccines could be effective in reducing the risk of hospitalization.

Could the new shot give the company a new lifeline?

Novavax has previously said that it may not be able to survive, citing financial risks and uncertainty in funding and how much it may generate in future revenue. Through the first six months of the year, the company has generated more than $505 million in revenue, with its losses on that totaling just under $236 million.

The challenge for the company has been that even as it has been generating revenue from its vaccine, it hasn’t been enough to make the business profitable or for Novavax to stop the cash burn in recent quarters.

NVAX Cash from Operations (Quarterly) data by YCharts

Approval of an updated vaccine will help ensure Novavax continues generating revenue, but it may still fall well short of where it needs to be for the business to get out of the red and for it to generate positive cash flow.

Should you buy Novavax’s stock?

The FDA will likely approve Novavax’s updated vaccine. And the stock may end up surging in value as that happens. But the long-term problem with the company remains. This is still a business that’s largely dependent on COVID-related revenue, which can be difficult to forecast. Without a strategy that goes beyond COVID and even its potential flu vaccine, there isn’t a strong reason to invest in Novavax.

The company’s cash burn is likely to continue and losses may also persist, even with approval of a new COVID vaccine. Although the stock has been rallying lately, Novavax remains a highly risky and volatile investment to own, and it’s one that investors shouldn’t feel tempted to add to their portfolios despite its rising value.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Moderna. The Motley Fool has a disclosure policy.

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