When I first wrote about Vaxart (NASDAQ:VXRT) stock on Aug. 10, I was completely enamored by the clinical-stage biotech company’s attempts to bring an oral Covid-19 vaccine to the market.
Unfortunately, as excited as I was about its product in development, I wasn’t prepared to recommend VXRT stock to anyone but the most speculative of investors.
At the time, VXRT was trading around $9.26, egged on by the Food and Drug Administration’s go-ahead for Phase II clinical trials for its S-only oral tablet SARS-CoV-2 vaccine candidate.
I finished by recommending that if you must buy, keep some money on the side to buy some more should it fall back a dollar or two in the weeks ahead. It did just that, falling to $7.72 on Aug. 19. VXRT stock has since rebounded back above $9.
Nothing has happened to change the narrative. Its Phase II trial is supposed to start at some point before the end of 2021. In its Aug. 5 business update, Vaxart stated Phase 2 would start soon. However, the company has yet to announce a specific start date.
And so, investors wait.
The question to answer at this point is a simple one: Does VXRT stock move to double digits in the next few weeks in anticipation of the announcement, or does it slowly lose momentum and fall back into the $7s or lower?
Nobody knows the answer to that.
What we do know is that Covid-19 is not going away anytime soon. In fact, it’s more likely that the virus has replaced the flu as the virus most likely to infect Americans over the long haul.
So, should you buy here? I’ll look at both sides of the argument.
VXRT Stock Is a $10+ Value
Vaxart had $199 million in cash on its balance sheet at the end of June, up from $177 million at the end of March and $127 million at the end of December. Based on 120.93 million shares outstanding, it has $1.65 in cash per share on its books.
So, at current prices, it’s trading at a little more than 5.3x cash. Let’s consider some of its Covid-19 peers, both the companies with some form of an approved vaccine and others awaiting approval or undergoing clinical trials such as Vaxart.
|Johnson & Johnson (NYSE:JNJ)||18.6x|
If you take out the highest (Moderna) and lowest P/C valuation (VXRT), you get an average of 12.5x cash. From that perspective, Vaxart is trading for considerably less than all of its peers.
In fact, if you take the average of Novavax and Occugen (9.8x) and apply that to Vaxart, it should be trading at $16.17 [$1.65 in cash multiplied by 9.8], 85% higher than its current share price.
Now that’s what I call upside potential.
What Are the Odds of Threading the Needle?
As a kid, I played a game called Strat-o-Matic Baseball. The company still exists today. You had cards of real players with their previous year’s statistics. Then, you would roll dice to determine a sequence of events as if you were playing a real-life nine-inning game.
It was all based on odds and algorithms. Today, Strat-o-Matic not only has board games but also digital games as well.
My point is that the odds of a World Series team losing to a sad-sack team in a Strat-o-Matic baseball game aren’t much different from an actual game’s results. In other words, the odds would be quite low. That’s because numbers rarely lie.
However, in the case of investing, companies like Pfizer and Moderna are getting P/C multiples near 20x because they’re actually producing the goods, something investors look for in potential investments.
Pfizer expects Covid-19 sales in 2021 of more than $33.5 billion. Moderna expects more moderate sales of $20 billion in 2021. However, $20 billion to Moderna likely means far more to its future than $33.5 billion to Pfizer. It’s all relative.
As InvestorPlace’s Stavros Georgiadis recently stated, Vaxart is very early in a nine-inning game.
“The percentage of medications that get FDA approval is rather small. Additionally, the process can often take years — not months — to get any approval,” Georgiadis stated on Aug. 18. “With other Covid-19 vaccines already on the market, by the time Vaxart’s pill is approved, the moment may have already passed.”
To use another sports example, it’s one thing to bet on a golfer in second place, two strokes back of the lead entering the final round of The Masters. It’s another to bet on a golfer five strokes back of the lead and entering the final round in 14th place. With so many players to pass to get to the lead, the former’s a much more difficult feat than the latter.
The same is true for Vaxart.
The Bottom Line
While I continue to believe Vaxart makes an excellent speculative bet, I don’t think it’s a bet that most InvestorPlace readers should make. That’s because it has too many companies to pass to get to the promised land.
If you lower your expectations and focus on the fact Vaxart has six vaccines in its pipeline, you might get lucky with one of them. However, to make a large bet based on the company threading the Covid-19 needle with an oral version of a vaccine isn’t managing your expectations very well.
If you can afford to lose it all, betting on Vaxart isn’t the worst investment you can make. However, if you want a greater margin of safety, buying it around $7 or lower is the smarter option.
It’s already proven in 2021 that its momentum can stall. So be patient, and you will be rewarded.
On the date of publication, Will Ashworth 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.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.