Vaxart’s 2,000% Rally on Vaccine Pill Leaves Bears on Edge

(Bloomberg) -- Vaxart Inc.’s more than 2,000% rally this year on the promise of an oral Covid-19 vaccine has left the bears betting against it in rough waters. And time will tell if short sellers get a reprieve with clinical data due next month on how well Vaxart’s pill works.

“Most of us associate vaccines with needles,” said Andrei Floroiu, the biotech company’s chief executive officer. “An oral vaccine would be the holy grail.”

However, some on Wall Street are getting increasingly skeptical about how runner-up vaccine candidates may take a piece of the market as Pfizer Inc. and partner BioNTech SE begin rolling out their own shot with Moderna Inc. likely to soon follow.

It has already been a rollercoaster ride for Vaxart’s stock, which hit a four-year high in mid-July, only later to be whiplashed after comments about the company’s involvement in Operation Warp Speed were scrutinized as potentially overstated, triggering a Justice Department investigation.

Over the summer, several vaccines -- including Vaxart’s -- were picked to be tested in monkeys under the auspices of the U.S. government. Vaxart has yet to see any data from the program, and Warp Speed hasn’t pressed forward with talks for supplies, Floroiu said.

So far, Vaxart has no government contracts but talks on strategic partnerships in places like India and Mexico picked up after the company kicked off its Phase 1 trial in October, Floroiu said. The company is targeting the start of a mid-stage study in the first quarter and plans to enroll patients inside and outside of the U.S.

“We’re obviously not going to be in the first wave of vaccines” but “not all Americans will get vaccinated in 2021,” he said.

“If the data look good, I don’t see why we wouldn’t be funded by our government, as well as other governments,” he said. Floroiu declined to comment on the ongoing probe.

Short Bets

For new short sellers looking to take a gamble against the company ahead of the results, the window is quickly closing, according to Ihor Dusaniwsky, managing director of analytics firm S3 Partners.

Bearish bets placed since July have yielded $60 million in mark-to-market profits, according to Dusaniwsky. But it’s a two-part story. Short bets from Jan. 1 to July 14 left the bears down $77 million.

“Shorts may be smiling right now, but due to lack of stock borrow availability there will not be much more short selling in the stock going forward,” Dusaniwsky said in an interview. “There are less than two million shares available to borrow on the Street at the moment, and the supply is getting thinner on a daily basis.”

Vaxart short bets stood at more than $230 million, or about 29% of the California-based company’s float, on Thursday. The borrow fee is 21% and may be about to go higher, according to Dusaniwsky.

“If short selling demand continues at this recent pace we can expect stock borrow rates to climb toward the 30% fee level, taking an even larger bite out of a short seller’s expected Alpha,” he said.

©2020 Bloomberg L.P.