Oral Vaccine Platform And Norovirus Opportunity Will Drive Long Term Upside Potential

Catalysts

About Vaxart

Vaxart develops oral tablet vaccines designed to generate both systemic and mucosal immunity against infectious diseases.

What are the underlying business or industry changes driving this perspective?

• The exclusive global partnership with Dynavax for the oral COVID-19 program introduces up to $700 million in milestones and tiered royalties. This creates a path for substantial nondilutive revenue growth and may accelerate earnings leverage as development costs shift to the partner.
• Growing recognition that COVID-19 will remain endemic, combined with ongoing infections and hospitalizations, supports a durable, recurring market for convenient booster options. This positions Vaxart’s oral tablet format to capture share and expand long term revenue.
• Advances in the second-generation norovirus candidate, including markedly stronger fecal IgA responses and a lack of approved competitors in a multibillion dollar disease area, create an opportunity for a future first in class product that can meaningfully increase revenue and improve margins as scale builds.
• The company’s ability to rapidly manufacture updated strains, demonstrated by producing both XBB and KP.2 constructs in house, aligns with global demand for agile vaccine platforms and can shorten time to market for new variants. This supports higher sales and improved asset productivity.
• Validation of the oral vaccine platform by a commercial stage partner and rising external interest in using Vaxart’s delivery system with third party antigens open additional partnership and licensing avenues, which could diversify revenue streams and improve earnings visibility over time.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Vaxart's revenue will decrease by 35.0% annually over the next 3 years.
• Analysts are not forecasting that Vaxart will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Vaxart's profit margin will increase from -34.2% to the average US Biotechs industry of 16.0% in 3 years.
• If Vaxart's profit margin were to converge on the industry average, you could expect earnings to reach $6.5 million (and earnings per share of $0.02) by about December 2028, up from $-50.7 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 177.4x on those 2028 earnings, up from -1.7x today. This future PE is greater than the current PE for the US Biotechs industry at 19.0x.
• Analysts expect the number of shares outstanding to grow by 5.32% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.42%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The long time line and dependence on external funding for the next norovirus trial, which is now pushed to 2026 and contingent on securing a partner, could delay or derail commercialization of a key long term growth driver and weigh on future revenue and earnings.
• Vaxart is heavily reliant on government and partner funding, such as BARDA contracts and the Dynavax agreement. Any reduction in public health spending, contract cancellations or partner decisions not to advance programs could sharply reduce revenue and worsen net margins.
• The COVID-19 program remains subject to significant clinical and regulatory risk, including the BARDA stop work order on trial enrollment and the double blinded Phase IIb outcomes. Any failure to show sufficient efficacy or safety could eliminate a major anticipated royalty stream and impair long term earnings potential.
• The COVID-19 booster market may continue to shrink as fewer people seek vaccination and competition from established injectable and other next generation vaccines intensifies. This could limit uptake of an oral product and cap revenue and margin expansion even if approved.
• Despite a strong third quarter revenue figure driven by BARDA, Vaxart still operates with a modest cash balance and finite runway only into the second quarter of 2027. If additional nondilutive capital or partnerships do not materialize, future equity raises or cost cuts could dilute shareholders and constrain investments needed to grow earnings and improve net margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $3.33 for Vaxart based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $4.0, and the most bearish reporting a price target of just $2.0.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be $40.7 million, earnings will come to $6.5 million, and it would be trading on a PE ratio of 177.4x, assuming you use a discount rate of 7.4%.
  
• Given the current share price of $0.37, the analyst price target of $3.33 is 88.9% higher. Despite analysts expecting the underlying business to decline, they seem to believe it's more valuable than what the market thinks.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.