Short-sellers gained a lot of attention in recent days as they rushed to cover positions in rapidly rising stocks such as GameStop (GME -0.38%). In this case, they lost their bets on the stock's decline -- and their money. But in some cases, the shorted stock does fall. And short-sellers come out on top. That happened last week with a high-flying coronavirus vaccine stock.

Vaxart (VXRT 1.91%) sank 58% in one trading session after data from its phase 1 clinical trial disappointed. Short positions make up more than 39% of the biotech company's float -- or the shares available to the public for trading. A lot of short-sellers probably closed out their positions with a win. As long-term investors, we may wonder whether short-sellers are right about Vaxart -- or was this just a one-time victory?

An investor counts out his $100 bills.

Image source: Getty Images.

First, a quick refresher on short selling: Investors borrow a stock to sell at the current market price. They eventually have to repurchase shares to return to the lender. Their hope is the stock price will have fallen. That way, they make a profit on the operation. If, instead, the stock starts rising, short-sellers quickly repurchase shares to stem losses. Because the more the stock climbs, the more money they lose.

Phase 1 trial results

Now, back to Vaxart. The company called results from the phase 1 trial "positive" because the coronavirus vaccine candidate produced CD8+ T-cell responses. Also known as "killer T-cells," they kill cells infected with virus. The T-cells recognized the spike protein -- the protein responsible for infecting cells -- as well as a viral protein involved in replication. That does sound encouraging.

But what disappointed investors is the investigational vaccine didn't stimulate the production of neutralizing antibodies. These antibodies are known for blocking infection. So, they are seen as key in the development of an effective coronavirus vaccine.

Today's commercialized vaccines -- developed by Pfizer (PFE 0.67%) and Moderna (MRNA 0.91%) -- produce neutralizing antibodies. And so do vaccine candidates in phase 3 development such as the one created by Novavax (NVAX 0.56%). So, it's difficult to imagine a vaccine candidate succeeding without this important element. Vaxart still may move along to a phase 2 study in people who haven't had COVID-19.

The scenario is looking pretty grim, right? Well, maybe not completely. Here's why: Vaxart also may study its investigational candidate as a booster in individuals who have already been exposed to COVID-19 or had a vaccination. The Vaxart candidate would be used to strengthen immune response.

This could be particularly interesting because Vaxart's investigational vaccine is delivered in pill form. That, along with the fact that its room temperature stable, make it easy and inexpensive to transport, store, and administer. It could become an integral part of a vaccination program -- especially in areas where it isn't easy to transport and store vaccines requiring low temperatures. And the T-cell responses, targeting more than just the spike protein, mean it might be useful against new viral strains.

What does this mean for investors?

Short-sellers were right -- this time. But next time may be a different story. Though Vaxart remains risky, there still may be opportunities for victory on the horizon. Vaxart isn't completely out of the game. A pill booster for the coronavirus could be a great product -- and represent billions of dollars in revenue if put into widespread use. Vaxart also has five other programs in the pipeline -- and they might bear fruit in the future.

That said, shares of this biotech company remain very risky. Will the coronavirus booster idea work? Would regulators authorize its use with vaccines from another company? Or could the investigational vaccine find its place in the market even if neutralizing antibodies aren't part of the picture?

We'll need a few clues to at least partially address those questions before we should consider buying Vaxart shares. So, let's keep it on the watch list and stay tuned for data from any future trials.