Shares of biotech Vaxart (VXRT -3.16%) soared back in 2020 following enthusiasm that the company would eventually become a leader in the COVID-19 vaccine market. But things haven't worked out that way. Vaxart has yet to market its product, while many competitors are currently generating millions of dollars -- and in some cases, billions -- from their respective vaccines. It's no surprise, then, that the market has abandoned Vaxart.
The company's shares have been southbound for the better part of one year. But the pandemic has yet to be over. There is a new variant of the coronavirus in the U.S., and this development highlights (once again) the importance of having as many effective vaccines as possible to fight the disease. With that as a backdrop, let's see what's going on with Vaxart and decide whether it is worth investing in the company today.
VXRT data by YCharts.
Reasons to be optimistic
Vaxart's vaccine is currently in phase 2 studies. It still has some distance to go before hitting the market -- that is, of course, if it proves safe and effective. There are three reasons to be optimistic about this candidate.
First, it is an oral vaccine. Vaxart prides itself on developing vaccines taken orally, which could help it attract a decent share of the market. After all, it's much easier (and less painful) to take a tablet than a shot. Also, tablets are a much easier logistical challenge than traditional vaccines, which typically need to be kept at certain temperatures.
Second, there is evidence that Vaxart's candidate produces antibodies where it matters most: in the nose and other mucosal sites where the infection happens. This matters a great deal since other vaccines currently on the market seem unable to do the same.
Image source: Getty Images.
Third, according to a recent poll commissioned by Ocugen and conducted by The Harris Poll, 73% of Americans would welcome vaccines developed using "traditional" methods. While Vaxart's candidate is administered orally, the way it functions fits the more traditional approach. It uses an adenovirus delivery system -- a non-infectious virus that contains the gene coding for the SARS-CoV-2 virus that causes COVID-19 -- which triggers the patient's immune system to make antibodies against it for protection against the actual virus.
That's very much how traditional vaccines work, and they differ from mRNA-based vaccines, which are currently among the leaders in the coronavirus market. These three factors could make Vaxart's vaccine an instant hit if it earns approval from regulatory authorities.
Beware of these risks
While Vaxart's COVID candidate looks promising, investors should remember that this is a clinical-stage biotech that currently has no products on the market, does not generate much revenue, and is consistently unprofitable.
Last year, the company generated $892,000 in royalty revenue, down from the $4 million it reported in 2020. Vaxart's net loss for the year came in at $70.5 million, worse than the net loss of about $32.2 million reported in 2020.
And none of the company's programs have made it to phase 3 clinical trials yet. That makes Vaxart pretty risky, more so than most investors can handle. The biotech expects data from its ongoing phase 2 study of its potential coronavirus vaccine to come in during the first half of the year. If the results are positive, Vaxart's shares will rise. But negative results will likely send its stock crashing. The company could also run into clinical or regulatory roadblocks related to its handful of other candidates.
Funding could become an issue, too, especially as Vaxart ramps up development efforts for its current pipeline programs. The company may need to resort to dilutive forms of financing. That is sometimes a necessary evil for clinical-stage biotechs, but it isn't good news for investors when the value of their existing shares is diluted. What does all this mean for investors?
An investment in Vaxart today might leave you holding practically worthless shares in a few months if the company's phase 2 data fails to impress, but the potential upside is enticing provided things go according to plan. With that said, the company is unlikely to reproduce the performance it pulled off back in 2020, at least in my view.
That's why I think it is too late to buy shares of this company. Investors can find plenty of better biotech stocks on the market today.
