Vaxart shares plunge 60% on concern that lackluster antibody response will hinder effectiveness of oral Covid vaccine

• Vxart's Covid vaccine is in a small tablet and can be shipped and stored at room temperature, unlike Pfizer and Moderna's vaccines.
• Vaxart said the vaccine generated a type of T-cell responsible for destroying virus-infected cells in about 75% of volunteers who received a single low or high dose.
• However, neutralizing antibodies were not detected in volunteers after one dose, Vaxart said.

An experimental coronavirus vaccine taken by mouth showed promising results in an early-stage clinical trial of 35 healthy adults, South San Francisco-based Vaxart said Wednesday. Despite the results, Vaxart's stock plunged 60% in intraday trading.

Vaxart scientists divided volunteers between ages 18 and 54 into three groups. The first received two low doses of the vaccine – called VXA-CoV2-1 – 29 days apart, while the remaining groups received a single low or high dose.

The vaccine, which is in a small tablet, generated a type of T-cell responsible for destroying virus-infected cells in about 75% of volunteers who received a single low or high dose, the company said. It said the reported responses were higher than those seen in Moderna's and Pfizer's vaccines.

However, neutralizing antibodies were not detected in volunteers after a single dose, Vaxart said. Researchers believe the antibodies play an important role in defending cells against the virus. The company said it is now assessing antibody responses from second doses after antibodies were detected in nasal swab samples of two-dose volunteers.

Isaac Bogoch, an infectious disease specialist and professor at the University of Toronto, said the company's stock could be falling due to the lack of neutralizing antibodies after the first dose.

"The immune response is multifaceted," he said, adding that one aspect of the immune response is creating antibodies, in particular neutralizing antibodies. "While it's great to see that there appears to be a decent T-cell response, the lack of antibodies detected is problematic and may reduce the effectiveness of this as a vaccine."

The company said no severe adverse events were reported in the phase one trial, with side effects generally being mild. Volunteers reported common side effects such as headache and fatigue, and there was a "slight uptick" in the high-dose group of cases of loose stool, the company said.

The data will be presented Wednesday afternoon at the New York Academy of Sciences Symposium.

"The most exciting thing about the [phase one data] is we can get a very, very, strong T-cell response even after one dose," Vaxart chief scientific officer Sean Tucker told CNBC in a phone interview, adding that T-cells are probably "underappreciated" compared to antibodies in fighting the virus.

The biotech firm said the vaccine has the potential to be more protective against current and emerging strains of the virus than existing vaccines. Moderna, Johnson & Johnson and Novavax in recent days have said their vaccines may be less potent against B.1.351, highly contagious strain found in South Africa. U.S. officials have expressed concerns about Covid potentially mutating further and evading the protection of existing vaccines.

Vaxart's vaccine contains DNA instructions to make the spike protein, which enables the virus to enter human cells, as well as instructions to make the N protein, which is involved in other processes. Tucker said the inclusion of the N protein may make the vaccine retain its ability to work against emergent strains.

Many other vaccines under development chose the spike protein as a "major target," he said. "But the problem with the [spike] protein is it definitely mutates more over time. What we did is add in the N protein as well, which is much conserved in the virus."

Vaxart said its vaccine is the only oral tablet in the U.S. to be tested in humans. Similar technology is being used to develop vaccines for influenza and norovirus.

The company came under scrutiny and federal investigation late last year for allegedly exaggerating its involvement in Operation Warp Speed, former President Donald Trump's program for vaccines and treatments. It said in a press release in June that "Vaxart's Covid-19 Vaccine Selected for the US Government's Operation Warp Speed," sending its shares soaring.

But it turned out that the company had not received financial support from the federal government for vaccine doses and was only participating in preliminary U.S. studies to determine potential areas for possible Warp Speed partnership and support, according to The New York Times.

Tucker told CNBC the company is in talks with the U.S. and other governments to find potential opportunities to collaborate on its vaccine.

If Vaxart's vaccine makes it through other clinical trials and U.S. approval, it could provide advantages over needle-based vaccines.

Dr. Paul Offit, a member of the FDA's Vaccines and Related Biological Products Advisory Committee, said a vaccine taken by mouth may have better acceptance from those in the public who may be anxious about needles. Two Covid-19 vaccines authorized in the U.S. – from Pfizer and Moderna – are injected into the arm and require two shots about three to four weeks apart.

Vaxart said its vaccine is also stable at room temperature and does not require a freezer, meaning it can be "stockpiled and shipped to mass populations across the globe." By comparison, Pfizer's vaccine needs to be stored in ultra-cold freezers that keep it between negative 112 and negative 76 degrees Fahrenheit. Moderna's vaccine needs to be shipped at between negative 13 and 5 degrees Fahrenheit.

Vaxart said the vaccine also does not need special medical training to administer and can be taken at home. It said this will help with adhering to social distancing guidelines while reducing the burden on the health-care system.

The company said it is still determining if this will be a single or two-dose regimen.

A phase two study is expected "in the next couple of months," Tucker said. In its "most accelerated timeline," the company expects phase two and phase three studies to be completed by early 2022.

–CNBC's Hugh Son contributed to this report.

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