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Can This 1 Thing Hurt Vaxart?

Motley Fool - Mon May 16, 5:00AM CDT

Vaxart(NASDAQ: VXRT) has been involved in the coronavirus vaccine race since the beginning. It's developing what could be a game-changing option: a vaccine in pill form. That's why this biotech player has been one to watch.

That potential product is now involved in phase 2 studies. That's as rivals Pfizer and Moderna have gained dominance in the market worldwide. And latecomer Novavax even reported its first quarterly profit recently -- after just one quarter of selling its vaccine.

All of this means there is one big problem for Vaxart right now. The question is: Could it hurt the company's prospects over the long term? Let's find out.

A person holds up a pill and a glass of water.

Image source: Getty Images.

News from the first quarter

Vaxart's biggest problem is the time it's taking the company to bring its candidate through development to commercialization. And during the first-quarter earnings report this week, the market didn't like hearing that Vaxart now expects to report data from its phase 2 trial later than predicted. The company now aims to deliver that data in the third quarter instead of the first half of this year. The stock fell 25% in the following two trading sessions.

Of course, that delay could represent a short period of time -- even just a few weeks. But investors may be getting tired of waiting. And they might see any delay as a decrease in the amount of revenue Vaxart could eventually generate from a coronavirus vaccine.

Right now, this is hurting the shares. Until Vaxart reports data, this is likely to continue. So, yes, in the near term, this one thing is weighing on share performance.

But here's the good news: If Vaxart reports positive data from this trial -- and eventually from others to follow -- the company's status as a latecomer shouldn't be too much of a problem. Of course, ideally, a company would have entered the market in the early or mid-part of the pandemic, when everyone was rushing out to get vaccinated. And governments have already ordered enough doses for entire populations.

The future opportunity

That said, I don't expect opportunity to evaporate down the road. Experts predict that SARS-CoV-2 will stick around, and that means people will need protection. Even if only the most at-risk individuals go for a booster, that could provide a decent market. Moderna CEO Stéphane Bancel, in his company's recent earnings call, said he considers the high-risk population to be about 1.7 billion people globally.

Another plus for Vaxart: Data has shown that mixing and matching vaccine brands results in strong protection. So Vaxart could play a role in an annual booster market.

Finally, the biggest plus of all for Vaxart may be the type of vaccine it's developing. As mentioned earlier, it's an oral formulation. This is an advantage for individuals getting the vaccine -- they avoid a needle stick. And it's an advantage for those transporting and storing the product. That's both because it's stable at room temperature, and because pills are small in size.

What does all of this mean for you as an investor?

Importantly, Vaxart's cash holdings are close to their highest level in more than a decade. Due to the development of its vaccine candidate, though, research and development costs are on the rise:

VXRT Cash and Equivalents (Quarterly) Chart

VXRT Cash and Equivalents (Quarterly) data by YCharts.

So in the first quarter, for example, the company's net loss widened to $25.1 million from $16 million in the year-earlier period. And Vaxart has no other commercialized products right now. That means a lot is riding on its coronavirus vaccine program.

Vaxart's share price of less than $3 looks cheap if the company is successful with its vaccine candidate. The problem is, it's still too early to bet on the candidate making it to commercialization. Today, for an aggressive investor looking to get in on a potential game changer, Vaxart may be a good option. But the stock will remain high-risk until the vaccine candidate moves closer to the finish line. So, for most other investors, it's probably best to wait for that potential green light before considering this biotech stock.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool recommends Moderna. The Motley Fool has a disclosure policy.