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Is Vaxart Stock a Buy?

By Zhiyuan Sun - Jan 30, 2021 at 5:15AM

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A little-known biotech is trying its hand at developing a coronavirus vaccine. Can it succeed?

Last January, Vaxart (VXRT 2.44%) was just a micro cap, investigating a series of oral-tablet vaccines to treat viral infections. Its stock was trading for as little as $0.70. However, over the past year, Vaxart stock has soared over 1,250% because of its spot in the lucrative coronavirus vaccine race. Its stock performance even outpaced those of biotechs that have already brought their coronavirus vaccines to market, such as Moderna (MRNA 0.70%) and BioNTech (BNTX 1.32%).

Perhaps unsurprisingly, the company has its fair share of skeptics. In fact, over 30% of Vaxart stock has been sold short. Many are convinced that Vaxart is a vaccine underdog with a way-too-ambitious candidate and a fair share of administrative problems. Should you give the stock a chance?

VXRT Chart

VXRT data by YCharts

Can Vaxart successfully develop a coronavirus vaccine? 

Vaxart claims to have created an experimental coronavirus vaccine in the form of an oral tablet. One could potentially self-administer the vaccine pill, which is stable at room temperature. This would allow patients to order the vaccine online and have it delivered for at-home use.

That sure sounds amazing, but it might be too good to be true. At the moment, Vaxart's experimental coronavirus vaccine is only in phase 1 clinical trials, with a new data readout expected by next week. Previously, the potential pill vaccine reduced lung viral load and mitigated lung inflammation in hamsters infected with COVID-19. That's a far cry from showing efficacy in humans.

Unfortunately, it's impossible to conclude how the experimental vaccine will work on humans from animal models. Hence, the candidate's phase 1 data release will likely be a make-or-break moment for Vaxart. The odds though, I think, are leaning slightly towards success given Vaxart's track record in vaccine development.

In phase 2 clinical trials, Vaxart's experimental orally administered influenza vaccine beat the efficacy of Sanofi's (SNY 5.95%) Fluzone by 8%. Additionally, the company has successfully developed two influenza vaccines in the past with the aid of collaborative partners.

On the other hand, the company's critics would point out that it never made much money, in terms of royalties, from its two influenza vaccines on the market. What's more, Vaxart is under investigation by both the U.S. Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) for insider trading and inaccurate statements regarding its role in Operation Warp Speed (OWS).

Even though Vaxart has more than $133 million in cash and equivalents with no debt whatsoever, that's not nearly enough to move forward. Right now, it could cost billions of dollars to run a potential coronavirus vaccine through clinical trials involving tens of thousands of participants. The company will likely sell more stock to pay for its research and development (R&D) expenses or apply for grant funding -- just to stay afloat.

Woman taking a pill.

Image source: Getty Images.

What's the verdict? 

Vaxart is far riskier than the other coronavirus vaccine drugmakers out there. Its corporate conduct is under federal investigation, and its vaccine candidate is in far too early a stage to draw any definitive conclusions about. 

With a market cap just south of $1 billion, it will undoubtedly become a very undervalued stock if it can bring a coronavirus vaccine to market. Moderna, which has done so, projects $11.7 billion in revenue from its mRNA-1273 vaccine alone. However, the probability of Vaxart achieving anything remotely similar is up for debate.

Short-sellers and passionate bulls will be arguing over the stock for the next year. If you believe in Vaxart's science and have the stomach for a roller-coaster ride, then go for it. Otherwise, play it safe and check out these fantastic biotechs instead. 

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Stocks Mentioned

Vaxart, Inc. Stock Quote
Vaxart, Inc.
$3.78 (2.44%) $0.09
Sanofi Stock Quote
$53.42 (5.95%) $3.00
Moderna, Inc. Stock Quote
Moderna, Inc.
$144.27 (0.70%) $1.01
BioNTech SE Stock Quote
BioNTech SE
$134.04 (1.32%) $1.75

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