Vaxxinity Has a Rough Public Debut

Vaxxinity (VAXX 2.87%), a clinical-stage biotech, recently IPOed for a price lower than the previously announced range. In this Motley Fool Live video recorded on Nov. 15, Motley Fool contributors Keith Speights and Brian Orelli discuss the prospects for the company's experimental COVID-19 vaccine and its Alzheimer's disease therapy.

Given how late Vaxxinity is to the COVID-19 vaccine enterprise, the history of failures in developing therapies for Alzheimer's disease, and the fact that the company's most advanced programs are phase 2 clinical studies, it's not surprising that there isn't as much investor interest as initially hoped for.

Brian Orelli: Vaxxinity -- the ticker there's VAXX -- IPOed on Thursday priced lower than the announced range, but then closed above the range on the first day and then below the range on Friday, the day after it IPOed, although it was above the initial IPO price. What do you make of the pricing and what do you think of the company and its prospects?

Keith Speights: I'll start off just talking about Vaxxinity as a company for a minute. This is a clinical-stage biotech. It has two programs that are in phase 2 clinical studies: there's an experimental COVID-19 vaccine; there's also a vaccine that's targeting Alzheimer's disease. Vaxxinity also has a phase 1 candidate that's targeting Parkinson's disease and some other neurodegenerative disorders. The company initially planned to IPO between $14 and $16 per share. The upper end of that range would have pegged the company's market cap at nearly $1.8 billion, just shy of that figure. The lower end would have put the company's valuation at around $1.56 billion. But Vaxxinity later actually set its IPO price at $13 per share, and that translated to a market cap of around $1.45 billion. When you see this happen, it often means that there's just not as much investor interest as a company or its financial team hoped. I think that's what happened here.

I personally find it difficult to peg a valuation to a clinical-stage biotech, especially one that doesn't have any programs beyond phase 2 clinical studies. It's just hard. That's why sometimes you'll see valuations all over the map when a company goes public like that. In Vaxxinity's case, one of its phase 2 candidates targets COVID-19. I think it's going to be difficult for the company to top the messenger RNA vaccines in terms of efficacy. I'm just not sure how great the opportunity is going to be on that front. Vaxxinity is definitely late to the party here; it's only in phase 2. It's going to take a while before it even has a shot, no pun intended, at getting to market. I don't know what the real opportunity is there. Maybe I'm wrong, but I just don't see it. Then the other phase 2 candidate targets Alzheimer's disease. You and I, Brian, we've talked quite a bit about this -- this indication where the landscape is literally littered with pipeline failures. It's just a tough disease to go after. I think the company could be successful; I think it has a tough climb. This just isn't a stock that I personally would be interested in at this point.

Orelli: These are vaccines, but they are really actually treatments -- well, not the COVID-19 one. The COVID-19 one is actually a vaccine, but the other ones, they're putting in something to create antibodies that will then go after the proteins that cause Alzheimer's disease.

Speights: The company refers to them all as vaccines, but you're exactly right.

Orelli: I mean that, I guess, technically they are vaccines. They're not vaccines in the way we [usually] think.

Speights: They technically are, but they are not traditional vaccines.

Orelli: Right, they're more like cancer vaccines. Cancer vaccines aren't keeping you from getting cancer, they're treating your cancer by developing antibodies that will go and attack the tumor -- or in this case for Alzheimer's disease, they're trying to develop antibodies that will go on and attack the protein that they hope is causing Alzheimer's disease.

Speights: I will say this -- there are other biotechs that go public that have pipelines that are along the lines in terms of advancements as Vaxxinity's, and end up having a market cap around what Vaxxinity [has]. It's not unusual for the company to be worth, right now, around $1.5 billion. I think there's just too many questions for this company.