Vaxart (VXRT 20.20%) and Moderna (MRNA -0.74%) have a lot in common. Both companies are working on coronavirus vaccines, and both claim to have an advanced technology platform that'll enable them to open new frontiers in medicine and public health.
Whereas Moderna's time in the spotlight has only just begun, Vaxart's time hasn't started yet -- assuming it ever does. And that means there might be an opportunity to profit by investing in it now. But what would its path to explode in value even look like? And could its market cap of $650 million ever grow enough to approach the size of Moderna's at $72 billion? Let's start by approaching the first question.
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For biotechs, it's all about commercialization
As you may have heard, Moderna's approach to making medicines centers around messenger RNA (mRNA), a multi-functional biological molecule that encodes certain genetic information.
Using that approach entails several important benefits, including quick pre-clinical development, the ability to rapidly update existing vaccines for new threats from viral variants, and flexible manufacturing processes. Likewise, mRNA medicines could eventually be used to treat a wide variety of conditions ranging from coronaviral infections to cancers.
So the biotech's potential, addressable market is incredibly large. Moderna's sole product on the market now, Spikevax, brought in $18.5 billion last year, which isn't half bad, to say the least. Developing and commercializing Spikevax during the start of the pandemic sent its stock into the stratosphere.
Vaxart's approach is a bit different, so its potential success story can't look exactly the same as Moderna's.
Though it is also developing a coronavirus vaccine, its candidate is only now entering its phase 2 clinical trials. What's more, Vaxart's vaccine isn't a jab like Moderna's but rather a pill. And whereas Moderna's future prospects are staked on the idea that mRNA medicines are broadly applicable, Vaxart's rest on its ability to use its technology platform to turn a bunch of different vaccines into pill form.
The company's oral vaccine technology also has a few unique benefits. In particular, its pills appear to be able to generate immunity in the tissues of the mouth and nose. That means they might be more effective than the jabs on the market at actually preventing coronaviral infection, which initially occurs at those anatomical sites. Furthermore, the tablets are shelf-stable, require no staff to administer, and don't require clinical goods like gloves, bandages, swabs, needles, or syringes.
Plus, it's easier to convince someone to swallow a pill than it is to convince them to get poked in the arm, so the pill might be able to access some of the untapped vaccine market.
Of course, all that's still hypothetical. The company has no medicines approved for sale currently.
For Vaxart to become the next Moderna, it'll need to prove that all of these potential benefits are real. The way to do that will be to successfully finish developing its coronavirus candidate and then proceed with commercialization. That would doubtlessly make its stock soar, if it actually happens.
And would that realistically result in something like Moderna's run-up of more than 843% over the last three years?
A long shot but worthwhile investment
In my view, Vaxart's stock won't be able to grow as much as Moderna's did even if it succeeds with commercializing its pill.
First, the hype surrounding coronavirus vaccine stocks is long past, and there's no indications that it's going to return. As a result, the smaller biotech's stock will have a lot more trouble riding the waves upward as its project inches toward commercialization.
Second, the scope of the company's ambitions is much smaller. It wants to be the vaccine pill company, which means that it won't be going into therapeutics without a major pivot. Thus, its total addressable market is by definition much smaller than Moderna's, thereby capping the upper boundaries of its maximum revenue at a much lower level.
Third, even if its pill is approved for sale, the business will face a much more contested market than Moderna did. Along with Pfizer and to a much lesser extent Johnson & Johnson, Moderna has cornered the U.S. coronavirus jab market. While Vaxart might indeed succeed with its goal of picking up some of the remaining unserved demand from jab-reluctant people, it'll likely struggle to get widespread adoption, and sales may be low.
Nonetheless, investors should keep in mind that Vaxart had less than $1 million in revenue over the past 12 months. Practically any increase would therefore amount to a massive amount of growth, which would likely be reflected in a sharply rising stock price.
In closing, I wouldn't write this stock off or avoid buying it just because it isn't likely to be the next Moderna. People who invest in it now could still potentially see a parabolic gain.
Just don't forget that it's a highly risky, pre-product biotech company if you do choose to buy it; a whiffed clinical trial would be devastating for its shares in the short term.
