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Bireme Capital: “Vaxart, Inc. (VXRT) is Exhibiting Classic Pretender Signals”

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Jose Karlo Mari Tottoc
·5 min read
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Bireme Capital, an investment management firm, published its fourth-quarter 2020 Investor Letter – a copy of which can be downloaded here. A net return of 47.1% was recorded by the fund for the year end 2020, outperforming its S&P500 benchmark that delivered an 18.3% return. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Bireme Capital, in their Q4 2020 investor letter, said that they find it nearly inconceivable that Vaxart, Inc. (NASDAQ: VXRT) will develop a commercially successful coronavirus vaccine, which it desperately needs to justify it’s valuation. Bireme Capital identifies Vaxart, Inc. as one of the companies they treat as great pretenders. Vaxart, Inc. is a biotech company that specializes on the development of oral recombinant vaccines. The company currently has a $697.2 million market capitalization. Since the beginning of the year, VXRT jumped 3.68%, increasing its 12-month gains to 131.25%. As of March 4, the stock closed at $5.92 per share.

Here is what Bireme Capital has to say about Vaxart, Inc. in their Q4 2020 investor letter:

"Vaxart (VXRT) was a biotech penny stock until COVID-19 hit, when it released a series of announcements about the progress of its oral tablet coronavirus vaccine. In late June, VXRT claimed to have been selected for the federal government’s Operation Warp Speed vaccine development program despite having only 15 employees. The stock traded more than 60x higher than where it started the year.

This announcement was profitably timed for insiders. In early June, just weeks before the Operation Warp Speed announcement, the CEO was awarded stock options worth $4m, and a hedge fund renegotiated accelerated warrants. By the end of the month, the CEO’s options were worth $28m and the hedge fund had exercised the warrants and sold the shares for a profit of nearly $200m. Oh, and the claim that VXRT was selected for Operation Warp Speed turned out to be false and misleading. The company is currently under investigation for fraud.

VXRT is still exhibiting classic pretender signals. In a vaccine progress roundup from January, Science commented that they could find “no updates at all about its clinical progress -- just excited talk about its prospects as an investment.” Numerous press releases talked up its partnerships, like a manufacturing agreement with KindredBio -- a tiny company with less than $5m in revenue, selfdescribed as “focused on saving and improving the lives of pets.”

Since then, VXRT has released their Phase I trial results. The press release is titled “Positive Preliminary Data,” but near the bottom it revealed that no neutralizing antibodies were found. The stock price tumbled.

There are now a handful of vaccines approved, with several more likely to be approved shortly. And there are dozens more in development, all from larger and more sophisticated companies than VXRT. Each incremental vaccine will find it harder and harder to make it through the grueling approval process as competitors cross the finish line first and coronavirus prevalence declines. Even vaccine developers with highly promising candidates may not be able to recruit tens of thousands of Phase 3 trial participants given the increasing supply of approved and highly eective COVID-19 vaccines.

We find it nearly inconceivable that VXRT will develop a commercially successful coronavirus vaccine, which it desperately needs to justify it’s valuation. VXRT’s Q3 revenues were under $300,000. Nevertheless, it sports a market cap of over $800m, because “vaccines.”"

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Our calculations show that Vaxart, Inc. (NASDAQ: VXRT) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Vaxart, Inc. was in 9 hedge fund portfolios, compared to 12 funds in the third quarter. VXRT delivered a -24.10% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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Disclosure: None. This article is originally published at Insider Monkey.