Vaxart (NASDAQ:VXRT), a biotech company focused on the development of oral vaccines, had an underwhelming performance in the stock market in 2019 with its shares dropping by more than 80%. But largely thanks to the company's efforts to develop a vaccine for COVID-19, the stock has soared by more than 2,000% this year. And the company now sports a market cap of more than $800 million after ending 2019 with a market cap of less than $20 million. 

Vaxart's stock could see even better days ahead if it manages to develop a vaccine for COVID-19. The biotech also has at least one non-COVID-19 program worth mentioning. On the flip side, though, investors have to consider the genuine possibility that its coronavirus vaccine efforts will flop, and the stock will lose much of its gains as a result. With this backdrop in mind, should investors be jumping on the Vaxart bandwagon, or is it best to avoid the company's shares?

Vaxart's potential COVID-19 vaccine

In late March, Vaxart announced that it had developed five potential oral COVID-19 vaccines, and the company went on to initiate pre-clinical trials for these candidates. These pre-clinical tests went well, with several of the vaccine candidates generating immune responses in "all tested animal models after a single dose," the company said.

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In May, Vaxart selected the vaccine that it said had the best chance of generating "the broadest immune response in humans" as its lead candidate. The company plans on initiating a phase 1 clinical trial during the second half of the year, and possibly during the summer. 

Two more important pieces of information worth mentioning: First, the company has signed an agreement with Emergent BioSolutions, which will help Vaxart ramp up the manufacturing of its investigational COVID-19 vaccine for the start of its phase 1 study. Vaxart signed a similar agreement with Kindred Biosciences, which will manufacture vaccine components for the company.

Second, the U.S. government selected Vaxart to take part in Operation Warp Speed, an initiative that seeks to accelerate the development, manufacturing, and distribution of vaccines and therapies for COVID-19. Vaxart's vaccine will participate in a non-human primate (NHP) challenge study, designed to assess the efficacy of several vaccine candidates.

A look at its other programs 

Vaxart currently has a handful of candidates in its pipeline, most of which are still undergoing pre-clinical testing. The company's most advanced candidate is an oral influenza vaccine. It reported positive results from a phase 2 study for this vaccine back in January. According to the company, its oral vaccine was safe and well tolerated in the study, and its efficacy compared favorably to that of Fluozone, a leading flu vaccine marketed by Sanofi. While there's still a long road ahead, Vaxart's influenza vaccine could turn out to be a winner. 

Worth the risk?

Before deciding to buy shares of Vaxart, it is crucial to understand the risks involved. First, while its COVID-19 and flu programs could go on to be successful, at this point there's no guarantee that they will. These vaccines could fail in future clinical studies, in which case the company's stock will lose much of its gains. Also, Vaxart faces stiff competition in both of these markets. In particular, some companies are currently running phase 1 or even phase 2 clinical trials for their investigational COVID-19 vaccines. These include Moderna, Novavax, and AstraZeneca.

Lastly, Vaxart currently has no approved products on the market and generates little revenue. During the first quarter, the company reported revenue of $2.9 million, operating expenses of $3.6 million, and a net loss of $1.3 million. Vaxart had a cash and cash equivalents balance of $29.9 million at the end of this quarter. It raised $10 million (in gross proceeds) via a registered direct stock offering back in February, and the company could receive additional funding from the government given its involvement in Operation Warp Speed. 

With all that said, I think Vaxart's stock is too risky for most investors. Sure, the company's run in the market could continue. But one wrong move and the vaccine maker could find itself losing most of its year-to-date gains.

In my view, investors had better sell Vaxart and buy any number of much more promising biotech stocks. Even for those willing to take on the risk, it would be best to initiate a small position in Vaxart. If the company manages to launch its COVID-19 or influenza vaccine (or both) on the market, this investment may turn out to be lucrative.