Is Vaxart Stock a Buy?

vaxart (NASDAQ: VXRT), a biotech company focused on developing oral vaccines, had a disappointing stock market performance in 2019, with its shares falling more than 80%. But largely thanks to the company’s efforts to develop a vaccine for COVID-19, the stock has soared more than 2,000% this year. And the company now sports a market cap of over $800 million after ending 2019 with a market cap of less than $20 million.

Vaxart’s stock could see even better days if it manages to develop a vaccine against COVID-19. Biotechnology also has at least one non-COVID-19 program worth mentioning. On the other hand, however, investors must consider the real possibility that its coronavirus vaccination efforts will fail, and the stock will lose much of its gains as a result. In this context, should investors jump on the Vaxart bandwagon, or is it better to avoid shares of the company?

Vaxart’s potential COVID-19 vaccine

At the end of March, Vaxart announced that it had developed five potential oral vaccines against COVID-19, and the company then launched preclinical trials for these candidates. These preclinical tests went well, with several of the candidate vaccines generating immune responses in “all animal models tested after a single dose,” the company said.

Image source: Getty Images.

In May, Vaxart selected the vaccine it said had the best chance of generating “the broadest immune response in humans” as its lead candidate. The company plans to launch a phase 1 clinical trial in the second half of the year, and possibly during the summer.

Two other important pieces of information are worth mentioning: firstly, the company has signed an agreement with Emerging BioSolutionswhich will help Vaxart accelerate the manufacturing of its investigational COVID-19 vaccine for the start of its Phase 1 study. Vaxart has signed a similar agreement with Related Bioscienceswhich will manufacture vaccine components for the company.

Second, the US government chose Vaxart to participate in Operation Warp Speed, an initiative that aims to accelerate the development, manufacturing and distribution of vaccines and therapies against COVID-19. Vaxart’s vaccine will participate in a non-human primate (NHP) challenge study, designed to evaluate the efficacy of several candidate vaccines.

A look at his other programs

Vaxart currently has a handful of candidates in its pipeline, most of which are still in preclinical testing. The company’s most advanced candidate is an oral flu vaccine. It reported positive results from a phase 2 study for this vaccine in January. According to the company, its oral vaccine was safe and well tolerated in the study, and its efficacy compared favorably to that of Fluozone, a leading influenza vaccine marketed by Sanofi. Although there is still a long way to go, Vaxart’s flu shot could prove a winner.

Worth the risk?

Before deciding to buy shares of Vaxart, it is crucial to understand the risks involved. First, while its COVID-19 and flu programs may continue to be successful, at this point there is no guarantee that they will. These vaccines could fail in future clinical studies, in which case the company’s stock would lose much of its gains. Furthermore, Vaxart faces fierce competition in these two markets. Specifically, some companies are currently conducting phase 1 or even phase 2 clinical trials for their candidate COVID-19 vaccines. These include Modern, Novavaxand Astra Zeneca.

Finally, Vaxart currently has no approved products on the market and generates little revenue. During the first quarter, the company recorded revenues of $2.9 million, operating expenses of $3.6 million and a net loss of $1.3 million. Vaxart had a cash and cash equivalent balance of $29.9 million at the end of this quarter. It raised $10 million (in gross proceeds) via a direct share offering registered in February, and the company may receive additional government funding given its involvement in Operation Warp Speed.

That said, I think Vaxart shares are too risky for most investors. Of course, the company’s race in the market could continue. But one misstep and the vaccine maker could find itself losing most of its year-to-date gains.

In my opinion, investors are better off selling Vaxart and buying a number of much more promising biotech stocks. Even for those willing to take the risk, it would be better to initiate a small position in Vaxart. If the company manages to get its COVID-19 or flu vaccine (or both) to market, that investment could prove lucrative.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

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