Other than a massive trading spike in Feb. 2020 to $24.90, Vaxart (NASDAQ:VXRT) has gone nowhere. A mid-June upgrade from Piper Sandler to an “overweight” rating temporarily lifted VXRT stock, but its price remains low.
When vaccines are making headlines every day, why are Vaxart shares underperforming? And why are investors not buying them now? While their approach to a Covid-19 vaccine is unique compared to existing options, doubts about the company’s product are impacting VXRT stock.
Clinical Trial Delay Hurt VXRT Stock
In May, Vaxart posted poor first-quarter results. First of all, its Phase II trial for its oral Covid-19 vaccine candidate was delayed. Second, it posted a Q1 cash balance of $177.3 million. Ongoing clinical studies suggest the company will need to tap public markets to raise cash.
Vaxart’s CEO said, “as many as 19 million more Americans would decide to get vaccinated against Covid-19 if the vaccine was administered as a pill instead of a needle injection.” The bad news is that Altimmune (NASDAQ:ALT) already worked on a nasal spray vaccine. Clinical results were so poor that Altimmune decided to end its Covid vaccine developments.
Vaxart’s oral pill is a great alternative to an injected vaccine. In a Phase I study, the company said its vaccine induced higher CD8 T-Cell responses than the Moderna (NASDAQ:MRNA) or Pfizer (NYSE:PFE) vaccines. Chief scientific officer Dr. Sean Tucker said, “The strength of T-cell responses against both S and N proteins, which we targeted, leads us to believe that VXA-CoV2-1 offers a promising solution to variants.”
Such a strong response should have caused VXRT stock to trend higher — and in early May, shares did briefly trade above $10. But within a day, investors sold the stock. CSO Tucker’s speculation about its vaccine’s performance against variants is not good enough. Vaxart must back that statement with clinical results.
The Risks of VXRT Stock
Investors are concerned that Vaxart will not have a vaccine out fast enough. Moderna and Pfizer already dominate the Covid-19 vaccine market. Johnson & Johnson (NYSE:JNJ) has a single-dose vaccine that works well against variants. Novavax (NASDAQ:NVAX) is awaiting approval for its vaccine, but its stock’s performance suggests that could come sooner rather than later.
The crowded vaccine market will limit Vaxart’s potential market size. By the time their candidate is approved, few unvaccinated people will care about how the vaccine is administered. That is, a needle is unlikely to deter those who want to be vaccinated from doing so. The delta Covid variant is more potent and more easily transmissible — people cannot wait for a pill version when the risks of infection is getting worse.
Chart courtesy of Stock Rover
According to Stock Rover, VXRT stock scores a 79/100 on value. Conversely, its growth and quality scores are poor. Until the company has a product on the market, speculators are opening themselves up to considerable risk. In general, biotech investing is a binary event. If regulators approve a product, the stock scores. But if Vaxart ends its study or does not get approval, the stock will fall hard.
Vaxart Needs Vaccine Progress to Boost Stock
Vaxart does not have a clear path to launch a successful Covid-19 oral vaccine. Investors who missed out on Moderna or Novavax cannot buy VXRT shares as a substitute. Besides, three analysts offer a 12-month price target of only $13.33 per TipRanks.
VXRT stock shares could fall hard on any bad news, just as ALT stock did. Still, investors who are used to the uncertainties of biotech investing may consider Vaxart stock. Its latest clinical report is showing promise. Another positive report could lead to a profitable upside for shareholders.
On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns.
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