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Is It Too Late to Buy Vaxart Stock?

By Zhiyuan Sun - Jun 15, 2021 at 9:56AM

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The science looks fishy for this small-cap biotech.

On June 11, Vaxart (VXRT 4.57%) stock skyrocketed 22% after Piper Sandler analyst Yasmeen Rahimi initiated coverage of the company with a price target of $18. That represents an upside of 151% from that day's open.

In setting the price target, the analyst cited the validation of the company's novel adenoviral platform, Ad5, in 200 clinical studies. Vaxart is using the technology to develop a novel, pill-based oral coronavirus vaccine candidate. According to the analyst, five clinical datasets (not just for the coronavirus indication) involving 580 healthy volunteers support the safety and efficacy of Ad5, leading to "potent" and "safe" drug candidates with a "high chance of success." Is now the time to buy Vaxart? 

Doctor giving patient an oral coronavirus vaccine pill bottle.

Image source: Getty Images.

What happened?

The problem is that investing in Vaxart's technology is anything but safe. Back in February, Vaxart stock plunged nearly 70% in a single day after phase 1 study results revealed the company's oral coronavirus vaccine candidate did not induce neutralizing antibodies in volunteers after the first dose.

Seventy-five percent of participants did show a T-cell response after dosage. However, recent studies have shown that neutralizing antibodies are highly predictive of immune protection against the coronavirus, so it's safe to say that Vaxart's vaccine candidate doesn't really stand a chance. In a phase 1 update released last month, Vaxart said its vaccine candidate triggered antibodies in the mucosa (instead of in serum) after administration. What that actually means remains unknown. 

With no product revenue and $15.5 million per quarter in losses, Vaxart really needed a boost from that oral vaccine candidate. Unfortunately, the program was problematic from the beginning. Vaxart is currently under federal investigation for allegedly misrepresenting its role in Operation Warp Speed, the U.S. government's vaccine-development effort. A hedge fund with a sizable stake in the company cashed in after the company published glamorous press releases about its vaccine candidate that sent its stock soaring. The fund is now facing an insider trading lawsuit. 

Should investors trust Vaxart?

The potential for the company to develop an oral coronavirus vaccine has attracted somewhat of a cult following. I don't think it can end well.

First of all, new coronavirus variants highly resistant to antibodies have taken root in the country. This situation will likely render an already ineffective vaccine candidate even more inadequate. 

But the biggest issue Vaxart has is trial design. Daily coronavirus cases have fallen to a new low in the country, making it extremely difficult to enroll new patients into studies. Moreover, it would be pretty unethical to enroll patients into placebo cohorts when an effective coronavirus vaccine is widely available. So the company would likely have to conduct its phase 2/3 studies abroad, costing a great deal of time and money. 

What's the verdict?

Management is currently guiding for Vaxart's vaccine candidate to hit phase 2 within a few months. Keep in mind that the government has already ordered more than 800 million doses of various other coronavirus vaccines. With vaccination campaigns in full swing, it is unlikely that there will be a demand for what Vaxart has to offer. Overall, given the lack of efficacy data, corporate management issues, and plummeting vaccine demand, Vaxart is a biotech that investors should stay away from.

Zhiyuan Sun has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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