Few stocks have delivered returns as impressive as Vaxart (NASDAQ:VXRT) so far in 2020. The vaccine maker's shares skyrocketed more than 2,400% year to date by early July. And the stock is still up around 1,900%.
Vaxart's successful performance stems primarily from investors' interest in its oral coronavirus vaccine candidate. But the company lags far behind several other drugmakers in the vaccine development race. What's the outlook for Vaxart stock?
It's (nearly) all about the pipeline
What happens next for the biotech stock depends nearly entirely on its pipeline candidates. Vaxart's pipeline includes two clinical-stage vaccine candidates and five programs in preclinical testing.
The company's COVID-19 vaccine program arguably ranks as the most important in how the stock performs over the next year. Vaxart filed earlier this month for Food and Drug Administration approval to begin a phase 1 clinical study of its coronavirus vaccine candidate. If the biotech receives a green light to move forward, it could provide another positive catalyst for the stock.
Operation Warp Speed, the U.S. government program to accelerate COVID-19 vaccine development, selected Vaxart's oral coronavirus vaccine to be part of a nonhuman primate (NHP) challenge study. It's uncertain when results from this preclinical trial will be announced. However, you can bet that investors will cheer good news for Vaxart from the test, as it just might lead to federal funding for the company's COVID-19 program.
Vaxart should soon have more important news. A report is being compiled for Johnson & Johnson detailing the results from a preclinical study collaboration of Vaxart's universal influenza vaccine candidate. J&J has an option to negotiate a license for this vaccine.
What about Vaxart's clinical-stage vaccines? The biotech reported positive results in September 2019 from a phase 1b study of its oral norovirus vaccine candidate. It also had encouraging results from a phase 2 proof-of-concept study of its experimental monovalent H1 flu vaccine. But with limited financial resources, Vaxart is focusing mainly on its COVID-19 vaccine program right now. The company is seeking partners to advance the development of its other pipeline candidates.
Cash is important, too
While Vaxart's stock performance hinges primarily on pipeline progress, the company's cash position is very important, too. If Vaxart has to raise additional cash through a secondary stock offering, its shares will almost certainly decline. The main drawback to stock offerings is that they dilute the value of existing shares.
That's what happened in July. Vaxart announced on Jul. 13, 2020, that it had generated gross proceeds of around $90 million through an at-the-market facility. Its share price soon began to fall.
The good news, though, is that Vaxart is in a better financial position thanks to the stock sale. It ended the second quarter with cash and cash equivalents of $44.4 million. The additional money raised in July should enable Vaxart to fund operations well into the future, although its costs will increase as its pipeline candidates advance.
So what's the outlook for Vaxart stock? Perhaps the best magic eight ball answer is, "Ask again later."
If the company's oral COVID-19 vaccine candidate moves into a phase 1 clinical study and achieves positive results, I wouldn't be surprised if Vaxart's shares double or more within the next several months. The problem, of course, is that there's no way to know at this point whether the experimental vaccine will be successful or not.
Buying Vaxart shares right now is more like gambling than investing. There are simply too many unknowns for the biotech. Gambling bets can sometimes pay off big-time, and they can sometimes lose big-time. But the more progress Vaxart makes with its pipeline candidates, the better the stock can be evaluated as a long-term investment.