The pandemic has put the spotlight on many previously obscure companies. Some of the biggest winners so far this year are small-cap vaccine developers that decided to make a play in the novel coronavirus scene. One of these is Vaxart (VXRT 20.20%). This small company has seen its shares soar by over 2,500% since the start of the year.
Despite this, Vaxart still has a market cap of just $1 billion, well within the realm of a small-cap company. What should investors think? Is there more room for this company to grow, or should they stay clear for the time being?
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Why the excitement?
Vaxart is a little different from most other vaccine developers in that it's one of the only companies working on creating oral vaccines. The patient can just ingest a tablet to accomplish the same result as an injection.
Vaxart has just five vaccine candidates in development, all either undergoing preclinical testing or beginning phase 1/2 trials. This includes a norovirus, influenza, human papillomavirus, a respiratory syncytial virus, and a coronavirus vaccine.
Despite the company's small size, its COVID-19 treatment has garnered a lot of attention for itself. Vaxart initially announced in March that it had produced five potential COVID-19 candidates. These were later narrowed down to one primary oral vaccine that the company thought had the best chances.
The biggest piece of news for the company came when the U.S. government picked Vaxart's candidate to be part of Operation Warp Speed. This public-private partnership is meant to help accelerate the development of promising coronavirus vaccines by working alongside some of the top companies in this area. Vaxart was included with the likes of Moderna, Johnson & Johnson, and AstraZeneca.
As you can imagine, Vaxart's inclusion in this group was a major vote of confidence for the company.
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What else should you know?
Besides its coronavirus candidate, Vaxart's second-most promising treatment is its oral flu vaccine. Investors saw some encouraging results back in January, when a phase 2 study found Vaxart's flu candidate to be just as effective as Sanofi's Fluzone. That's a big deal, since Fluzone is one of the top flu vaccines on the market right now.
Besides this, investors should also keep in mind the company's finances. Vaxart has little to no revenue to speak of, having brought in just $523,000 in the second quarter. In comparison, net losses were around $9 million, while Vaxart's cash position is at $44.4 million.
Although far from profitable, the good news is that Vaxart isn't at risk of running out of money in the short term. While the company definitely has the financial profile of an early stage biotech company, Vaxart's involvement in Operation Warp Speed gives it a degree of stability that otherwise wouldn't be possible in a company like itself.
Is Vaxart a Buy?
While the premise behind Vaxart is pretty interesting, it's far too early to tell how its candidates will work out. The cruel reality of drug development is that the majority of treatments that enter clinical trials end up as failures. That's not to say that Vaxart's candidates will flop, but it's definitely a possibility.
Without its coronavirus vaccine, it's quite possible that Vaxart would have stayed as a micro-cap company. As such, if its coronavirus candidate doesn't succeed, it wouldn't be surprising to see the company's stock quickly collapse in a massive sell-off.
Buying Vaxart right now seems more like a speculative exercise than actual smart investing. You'd be better off picking any number of other vaccine developers right now. After all, there's no shortage of hot coronavirus stocks to choose from. Vaxart just seems a bit too risky for your average investor at the moment.
