# Vaxart, Inc.: Form 10-Q for the period ended Jun 30, 2020

- Company: [Vaxart, Inc.](/companies/vxrt.md) (CIK 72444)
- Form: 10-Q
- Filed: 2020-08-06
- Accepted by EDGAR: Aug 6, 2020, 16:08 ET
- Period: 2020-06-30
- Accession: 0001437749-20-016864
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/72444/000143774920016864/vxrt20200630b_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/72444/000143774920016864/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2020-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2020-04-01 to 2020-06-30 | $523.0k | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 6 months, 2020-01-01 to 2020-06-30 | $3.4m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Research and development | 3 months, 2020-04-01 to 2020-06-30 | $5.1m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2020-01-01 to 2020-06-30 | $6.7m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2020-04-01 to 2020-06-30 | −$8.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2020-01-01 to 2020-06-30 | −$9.2m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2020-04-01 to 2020-06-30 | $26.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2020-01-01 to 2020-06-30 | $179.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2020-04-01 to 2020-06-30 | −$9.0m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2020-01-01 to 2020-06-30 | −$10.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2020-04-01 to 2020-06-30 | −$0.12 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted EPS | 6 months, 2020-01-01 to 2020-06-30 | −$0.15 | us-gaap:EarningsPerShareBasicAndDiluted |
| Operating cash flow | 6 months, 2020-01-01 to 2020-06-30 | −$3.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2020-01-01 to 2020-06-30 | $13.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2020-06-30 | $44.4m | us-gaap:Cash |
| Current assets | at 2020-06-30 | $45.7m | us-gaap:AssetsCurrent |
| Total assets | at 2020-06-30 | $64.2m | us-gaap:Assets |
| Current liabilities | at 2020-06-30 | $11.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2020-06-30 | $24.0m | us-gaap:Liabilities |
| Shareholders' equity | at 2020-06-30 | $40.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 47,667 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K filed with the SEC on March 19, 2020. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “goal,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential” and similar expressions intended to identify forward-looking statements and reflect our beliefs and opinions on the relevant subject. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in “Risk Factors.” The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. These statements are based upon information available to us as of the filing date of this Quarterly Report on Form 10-Q , and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.*

### Company Overview and Background

We are a clinical-stage biotechnology company primarily focused on the development of oral recombinant vaccines based on our proprietary oral vaccine platform. Our oral vaccines are designed to generate broad and durable immune responses that may protect against a wide range of infectious diseases and may be useful for the treatment of chronic viral infections and cancer. Our vaccines are administered using a convenient room temperature-stable tablet, rather than by injection.

We are developing prophylactic vaccine candidates for several targets. These include SARS-CoV-2, a coronavirus currently causing an epidemic throughout the world; norovirus, a widespread cause of acute gastro-intestinal enteritis, for which three Phase 1 human studies have been completed, including a study with a bivalent norovirus vaccine which, as we announced in September, met its primary and secondary endpoints; seasonal influenza, for which our monovalent H1 influenza vaccine protected patients against H1 influenza infection in a recent Phase 2 challenge study; and respiratory syncytial virus, or RSV, a common cause of respiratory tract infections. In addition, we are developing our first therapeutic vaccine targeting cervical cancer and dysplasia caused by human papillomavirus, or HPV.

### Merger with Aviragen

Vaxart Biosciences, Inc. was originally incorporated in California in March 2004, under the name West Coast Biologicals, Inc. and changed its name to Vaxart, Inc., or Private Vaxart, in July 2007, and reincorporated in the state of Delaware. On February 13, 2018, Private Vaxart completed a reverse merger, or the Merger, with Aviragen Therapeutics, Inc., or Aviragen, pursuant to which Private Vaxart survived as a wholly owned subsidiary of Aviragen. Under the terms of the Merger, Aviragen changed its name to Vaxart, Inc. and Private Vaxart changed its name to Vaxart Biosciences, Inc.

### Business Update Regarding COVID-19

The current coronavirus disease 2019 (“COVID-19”) outbreak has presented a substantial public health and economic challenge around the world and is affecting our employees, patients, communities and business operations, as well as the U.S. economy and financial markets. The full extent to which the COVID-19 outbreak will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets.

To date, we have been able to continue our operations and do not anticipate any material interruptions, for the foreseeable future. However, we are continuing to assess the potential impact of the COVID-19 pandemic on our business and operations, including our expenses, supply chain and clinical trials. Our office-based employees have been mostly working from home since mid-March 2020 and will continue to do so for the foreseeable future. Our partners have mostly continued to operate their facilities at or near normal levels. While we currently do not anticipate any interruptions in our operations, it is possible that the COVID-19 pandemic and response efforts may have an impact in the future on our operations and/or the operations of our third-party suppliers and partners.

### Recent Developments

On July 13, 2020, we completed the sale of 12,503,806 shares of our common stock for gross proceeds of approximately $100 million from an at-the-market facility (the “ATM Program”) under a sales prospectus agreement dated July 8, 2020. After deducting sales commissions and expenses, net cash proceeds under the ATM Program were approximately $97 million.

Since June 30, 2020, the Company has issued 531,013 shares of common stock upon the exercise of warrants for cash proceeds totaling approximately $1.2 million.

### Our Product Pipeline

The following table outlines the status of our oral vaccine development programs:

1\. Bivalent GI.1 - GII.4 Norovirus vaccine generated IgA ASC response rates of 78 – 86% for GI.1 and 90 – 93% for GII.4. Program on hold pending partnering process.

2\. Monovalent H1 flu vaccine completed phase 2 Proof of Concept efficacy study. Quadrivalent flu Phase 1 on hold pending partnering process.

3\. Janssen collaboration. Janssen has an option to negotiate an exclusive license.

4\. RSV program to be partnered with new antigen partner, pending which the program is on hold.

5\. HPV therapeutic pre-IND feedback received. Program presently on hold.

We are developing the following tablet vaccine candidates, which are based on our proprietary platform:

- ***Coronavirus Vaccine.*** We are developing an oral tablet vaccine for coronavirus SARS-CoV-2. We generated multiple vaccine candidates based on the published genome of SARS-CoV-2 and have been evaluating them in preclinical models for their ability to generate both mucosal and systemic immune responses. One of these was chosen for GMP production and additional animal efficacy testing. We believe the logistical advantages of an oral vaccine that is administered using a convenient room temperature stable tablet could be of critical benefit when rolling out a major public health vaccination campaign.

According to the Center for Disease Control and Prevention, or CDC, in late 2019 an outbreak of COVID-19, caused by the virus SARS-CoV-2, began in Wuhan, China. The disease spread rapidly and person-to-person transmission has been widely documented. On March 6, 2020, President Trump signed an $8.3 billion emergency spending bill to confront the COVID-19 with the aim of ensuring rapid evaluation and care of patients, limitation of further transmission and the development of treatments. Stay-at-home orders or similar mandates were issued in all 50 states and on March 27, 2020, President Trump signed a $2.2 trillion coronavirus relief bill to mitigate the financial and economic damage caused, with a further $1 trillion relief bill expected to be signed in August. By August 5, 2020, more than 18 million COVID-19 cases had been identified in over 200 countries and territories worldwide, including the United States, where the CDC had reported over 4.7 million infections and 156,000 deaths.

On June 26, 2020, we announced that our oral COVID-19 vaccine was selected to participate in a non-human primate challenge study, organized and funded by Operation Warp Speed, a new national program aiming to provide substantial quantities of safe and effective vaccine for Americans by January 2021. The study is designed to test the efficacy of our oral COVID-19 vaccine candidate. Operation Warp Speed is a public-private partnership initiated by the federal government to facilitate, at an unprecedented pace, the development, manufacturing, and distribution of vaccines, therapeutics and other countermeasures to address the COVID-19 epidemic throughout the world. The rules and regulations governing Operation Warp Speed are uncertain and may rapidly evolve as the program progresses, including the procedures and analysis used to select participating companies that will receive federal funds through the program. Our oral COVID-19 vaccine candidate may not prove to be efficacious, and we may be unable to produce an effective vaccine that successfully immunizes humans against SARS-CoV-2 in a timely matter, if at all. In addition, we cannot assure you that Operation Warp Speed will have a positive impact on our financial results. See “Part II, Item 1A. Risks Factors — The regulatory regime governing Operation Warp Speed is uncertain, and new regulations or policies may materially adversely affect our business and the development of our COVID-19 vaccine candidate.”

- ***Norovirus Vaccine.*** We are developing an oral tablet vaccine for norovirus, a leading cause of acute gastroenteritis in the United States and Europe. Because norovirus infects the small intestine, we believe that our vaccine, which is designed to generate mucosal antibodies locally in the intestine in addition to systemic antibodies in the blood, will better protect against norovirus infection than an injectable vaccine. Clinical evidence that vaccines based on our platform technology can protect against infection is described under “Clinical Trial Update” in the “Seasonal Influenza Vaccine” section below. The program is currently on hold pending partnering discussions.

Norovirus is the leading cause of vomiting and diarrhea from acute gastroenteritis among people of all ages in the United States. Each year, on average, norovirus causes 19 to 21 million cases of acute gastroenteritis and contributes to 56,000 to 71,000 hospitalizations and 570 to 800 deaths, mostly among young children and older adults. Typical symptoms include dehydration, vomiting, diarrhea with abdominal cramps, and nausea. In a study by the CDC and Johns Hopkins University, published in 2016, the global economic impact of norovirus disease was estimated at $60 billion, $34 billion of which occurred in high income countries including the United States, Europe and Japan. An update by the lead authors estimated the burden in the U.S. alone to be $10.5 billion in 2018. Virtually all norovirus disease is caused by norovirus GI and GII genotypes, and we are developing a bivalent vaccine designed to protect against both. We anticipate the vaccine will be an annual, one-time administration ahead of the winter season when norovirus incidence is at its peak, similar to the influenza season.

*Clinical Trial Update*. In 2019, we completed the active phase of a Phase 1 clinical trial with our bivalent oral tablet vaccine for the GI.1 and GII.4 norovirus strains. Both the oral norovirus GI.1 and GII.4 vaccines were well tolerated, with no serious treatment-related adverse events reported. Most solicited and unsolicited adverse events were mild in severity, and there were no significant differences observed between the vaccine and placebo treatment groups.

Vaxart’s bivalent vaccine demonstrated robust immunogenicity, with an IgA ASC response rate of 78% for the GI.1 strain and 93% for the GII.4 strain for the bivalent cohort of the study, and 86% and 90%, respectively, for the two monovalent cohorts of the study. There was no interference observed in the bivalent arm of the study.

Following a review of the development strategy for norovirus, Vaxart has put all clinical development on hold pending a search for a partner to fund the program. If a partner is found, the next step in the clinical development program would most likely be a Phase 2 safety and dose confirmation study with Vaxart’s bivalent norovirus vaccine in subjects age 18 to 64. The study may be expanded to include subjects age 65 and over. A Phase 2 challenge study may also be considered, and could be conducted in parallel with, before or after the Phase 2 dose confirmation study. The Phase 2 dose confirmation study would be followed by a Phase 3 efficacy study in subjects age 18 and over, assuming FDA concurrence.

- ***Seasonal Influenza Vaccine.*** Influenza is a major cause of morbidity and mortality in the U.S. and worldwide and, according to the CDC, only 49% of eligible U.S. citizens were vaccinated in 2018/2019, with particularly low vaccination rates among adults between ages 18 and 49. We believe our oral tablet vaccine has the potential to improve the protective efficacy of currently available influenza vaccines and increase flu vaccination rates.

Influenza is one of the most common global infectious diseases, causing mild to life-threatening illness and even death. An estimated 350 million cases of seasonal influenza occur annually worldwide, of which three to five million cases are considered severe, causing 290,000 to 650,000 deaths per year globally. During the flu season of 2018/2019 there were 34,200 flu related deaths in the U.S. alone, according to the CDC. Very young children and the elderly are at the greatest risk. In the United States, between 5% and 20% of the population contracts influenza, 226,000 people are hospitalized with complications of influenza, and between 3,000 and 49,000 people die from influenza and its complications each year, with up to 90% of the influenza-related deaths occurring in adults older than 65. The total economic burden of seasonal influenza has been estimated to be $87.1 billion, including medical costs which average $10.4 billion annually, while lost earnings due to illness and loss of life amount to $16.3 billion annually.

We believe our tablet vaccine candidate has the potential to address many of the limitations of current injectable egg-based influenza vaccines, because: our tablet vaccine candidates are designed to create broad and durable immune responses, which may provide more effective immunity and protect against additional strain variants; our vaccine is delivered as a room temperature-stable tablet, which we believe would provide a more convenient method of administration to enhance patient acceptance, and should simplify distribution and administration; and, by using recombinant methods, we believe our tablet vaccine may be manufactured more rapidly than vaccines manufactured using egg-based methods and should eliminate the risk of allergic reactions to egg protein.

*Clinical Trial Update*. In September 2018, we completed a $15.7 million contract with the U.S. Government through the Department of Health and Human Services, Office of Biomedical Advanced Research and Development Authority, or HHS BARDA, under which a Phase 2 challenge study of our H1N1 flu vaccine candidate was conducted. Previously, we had announced that, in healthy volunteers immunized and then experimentally infected with H1 influenza, our H1 influenza oral tablet vaccine reduced clinical disease by 39% relative to placebo, a result that was superior to that of Fluzone, the market-leading injectable quadrivalent influenza vaccine, which reduced clinical disease by only 27%. Our tablet vaccine also showed a favorable safety profile, indistinguishable from placebo.

On October 4, 2018, we presented data from the study demonstrating that our vaccine elicited a significant expansion of mucosal homing receptor plasmablasts to approximately 60% of all activated B cells, while Fluzone only maintained baseline levels of 20%. We believe these mucosal plasmablasts are a key indicator of a protective mucosal immune response and a unique feature of our vaccines. This data also provided evidence that our vaccines protect through mucosal immunity, the first line of defense against mucosal infections such as flu, norovirus, RSV and others, a potential key advantage over injectable vaccines for these indications.

At this time, we aim to finance development and commercialization of our seasonal quadrivalent influenza oral tablet vaccine through third-party collaboration and licensing arrangements and/or non-dilutive funding. In the future, we may also consider equity offerings and/or debt financings to fund the program. Pending a licensing, partnering or collaboration agreement, the seasonal flu program is currently on hold.

In addition to our conventional seasonal flu vaccine, we entered into a research collaboration agreement with Janssen Vaccines & Prevention B.V., or Janssen, to evaluate our proprietary oral vaccine platform for the Janssen universal influenza vaccine program. Under the agreement, we produced non-GMP oral vaccine containing certain proprietary antigens from Janssen and tested the product in a preclinical challenge model. The study has been completed and we are compiling a report for Janssen. Janssen has an option to negotiate an exclusive worldwide license to our technology encompassing the Janssen antigens.

- ***RSV Vaccine.*** RSV is a major respiratory pathogen with a significant burden of disease in the very young and in the elderly.

Based on the positive results of our cotton rat study, we believe our proprietary oral vaccine platform is the optimal vaccine delivery system for RSV, offering significant advantages over injectable vaccines. We will seek to develop a tablet RSV vaccine by licensing one or more RSV protein antigens that have demonstrated protection against RSV infection in clinical studies, or by partnering with a third party with RSV antigens that can be delivered with our platform. Pending a licensing, partnering or collaboration agreement, the RSV program is currently on hold.

- ***HPV Therapeutic Vaccine.*** Our first therapeutic oral vaccine candidate targets HPV-16 and HPV-18, the two strains responsible for 70% of cervical cancers and precancerous cervical dysplasia.

Cervical cancer is the fourth most common cancer in women worldwide and in the United States with about 13,000 new cases diagnosed annually in the United States according to the National Cervical Cancer Coalition.

We have tested our HPV-16 vaccine candidate in two different HPV-16 solid tumor models in mice. The vaccine elicited T cell responses and promoted migration of the activated T cells into the tumors, leading to tumor cell killing. Mice that received our HPV-16 vaccine showed a significant reduction in volume of their established tumors.

In October 2018, we filed a pre-IND meeting request for our first therapeutic vaccine targeting HPV16 and HPV18 with the FDA, and we subsequently submitted a pre-IND briefing package. We received feedback from the FDA in January 2019. The program is currently on hold while the Company is focusing its efforts on the COVID-19 vaccine.

### Anti-Virals

- Through the Merger, we acquired two royalty earning products, Relenza and Inavir. We also acquired three Phase 2 clinical stage antiviral compounds, which we have discontinued.
- Relenza and Inavir are antivirals for the treatment of influenza that are marketed by GlaxoSmithKline, plc, or GSK, and Daiichi Sankyo Company, Limited, or Daiichi Sankyo, respectively. We have earned royalties on the net sales of Relenza and Inavir in Japan. The last patent for Relenza expired in July 2019 and the last patent for Inavir expires in December 2029. Sales of these antivirals vary significantly from quarter to quarter due to the seasonality of flu, and from one year to the next depending on the intensity of the flu season and competition from other antivirals such as Tamiflu. Importantly, on February 23, 2018, Xofluza, a new drug to treat influenza developed by Shionogi, was approved in Japan. The drug has gained significant market share, substantially reducing sales of Inavir.

### Financial Operations Overview

### Revenue

#### Revenue from Customer Service Contracts

We are earning revenue from a fixed price service contract, as amended, for a total of $617,000, which we expect to complete by September 30, 2020.

#### Royalty Revenue

We earn royalty revenue on sales of Inavir and, until the patent expired, Relenza, both treatments for influenza, from our licensees, Daiichi Sankyo and GSK, respectively, under royalty agreements with expiry dates in December 2029 and July 2019, respectively, based on fixed percentages of net sales of these drugs.

#### Non-Cash Royalty Revenue Related to the Sale of Future Royalties

In April 2016, Aviragen sold certain royalty rights related to Inavir in the Japanese market for $20.0 million to HealthCare Royalty Partners III, L.P., or HCRP. At the time of the Merger, the fair value of the estimated future benefit to HCRP was $15.9 million, which we recorded as a liability that we are amortizing using the effective interest method over the remaining estimated life of the arrangement. Even though we did not retain the related royalties under the transaction, as the amounts are remitted to HCRP, we will continue to record revenue related to these royalties until the amount of the associated liability and related interest is fully amortized.

### Research and Development Expenses

Research and development expenses represent costs incurred to conduct research, including the development of our tablet vaccine platform, and the manufacturing, preclinical and clinical development activities of our tablet vaccine candidates. We recognize all research and development costs as they are incurred. Research and development expenses consist primarily of the following:

- employee-related expenses, which include salaries, benefits and stock-based compensation;
- expenses incurred under agreements with contract research organizations, or CROs, that conduct clinical trials on our behalf;
- manufacturing materials, analytical and release testing services required for our production of vaccine candidates used primarily in clinical trials;
- process development expenses incurred internally and externally to improve the efficiency and yield of the bulk vaccine and tablet manufacturing activities;
- laboratory supplies and vendor expenses related to its preclinical research activities;
- consultant expenses for services supporting our clinical, regulatory and manufacturing activities; and
- facilities, depreciation and allocated overhead expenses.

Our preclinical research activities in the six months ended June 30, 2020, have related principally to COVID-19 and to our customer service contract, whereas in the six months ended June 30, 2019, they related principally to norovirus. Our clinical activities related almost exclusively to norovirus in both years and were not significant in the six months ended June 30, 2020.

We expect that research and development expenses will increase in the second half of 2020 as clinical trials for COVID-19 ramp up and manufacturing runs are completed. We expect that the total costs of research and development related to our product candidates will increase significantly over the next several years as we advance our tablet vaccine candidates into and through clinical trials, pursue regulatory approval of our tablet vaccine candidates and prepare for a possible commercial launch, all of which will also require a significant investment in manufacturing and inventory related costs. We are seeking potential partners and collaborators to bear a significant portion of such costs.

The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in achieving marketing approval for our tablet vaccine candidates. The probability of successful commercialization of our tablet vaccine candidates may be affected by numerous factors, including clinical data obtained in future trials, competition, manufacturing capability and commercial viability. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our tablet vaccine candidates.

### General and Administrative Expense

General and administrative expenses consist of personnel costs, allocated expenses and expenses for outside professional services, including legal, audit, accounting, public relations, market research and other consulting services. Personnel costs consist of salaries, benefits and stock-based compensation. Allocated expenses consist of rent, depreciation and other facilities related expenses.

### Results of Operations

The following table presents selected items in the condensed consolidated statements of operations and comprehensive loss for the three months ended June 30, 2020 and 2019:

*(in thousands)*

*(in thousands)*

| Revenue: | Three Months Ended June 30, 2020 | 2019 | Six Months Ended June 30, 2020 | 2019 |
| --- | ---: | ---: | ---: | ---: |
| Revenue from customer service contracts | $92 | $— | $191 | $— |
| Royalty revenue | 193 | 69 | 2,962 | 3,728 |
| Non-cash royalty revenue related to sale of future royalties | 238 | 16 | 272 | 1,764 |
| Total revenue | 523 | 85 | 3,425 | 5,492 |
| Operating expenses: |  |  |  |  |
| Research and development | 5,114 | 3,707 | 6,656 | 7,536 |
| General and administrative | 3,896 | 1,375 | 5,886 | 3,401 |
| Restructuring costs | 39 | — | 103 | — |
| Total operating expenses | 9,049 | 5,082 | 12,645 | 10,937 |
| Operating loss | (8,526) | (4,997) | (9,220) | (5,445) |
| Other income and (expenses): |  |  |  |  |
| Interest income | 23 | 34 | 64 | 39 |
| Interest expense | — | (97) | — | (204) |
| Non-cash interest expense related to sale of future royalties | (446) | (516) | (937) | (1,060) |
| Foreign exchange loss, net | (2) | (48) | (2) | (43) |
| Total other income and (expenses) | (425) | (627) | (875) | (1,268) |
| Net loss before income taxes | (8,951) | (5,624) | (10,095) | (6,713) |
| Provision for income taxes | 26 | 13 | 179 | 263 |
| Net loss | $(8,977) | $(5,637) | $(10,274) | $(6,976) |

#### Revenue from Customer Service Contracts

The following table presents our revenue from customer service contracts for the three and six months ended June 30, 2020 and 2019, respectively:

*(dollars in thousands)*

*(dollars in thousands)*

| Three Months Ended June 30, 2020 | 2019 | % Change | Six Months Ended June 30, 2020 | 2019 | % Change |
| ---: | ---: | --- | ---: | ---: | --- |
| $92 | $— | N/A | $191 | $— | N/A |

We earned revenue from customer service contracts of $92,000 and $191,000 in the three and six months ended June 30, 2020, respectively. This revenue was recognized from a fixed price contract executed in July 2019, as amended, for a total of $617,000, which we expect to be completed by September 30, 2020, enabling us to recognize the remaining $20,000 as revenue. There were no comparable contracts in the six months ended June 30, 2019.

#### Royalty Revenue

The following table presents our royalty revenue for the three and six months ended June 30, 2020 and 2019, respectively:

*(dollars in thousands)*

*(dollars in thousands)*

| Three Months Ended June 30, 2020 | 2019 | % Change | Six Months Ended June 30, 2020 | 2019 | % Change |
| ---: | ---: | ---: | ---: | ---: | ---: |
| $193 | $69 | 180% | $2,962 | $3,728 | (21)% |

For the three months ended June 30, 2020, royalty revenue increased by $124,000, or 180%, compared to the three months ended June 30, 2019. The increase in the three months ended June 30, 2020, is primarily due to a decrease in the reserve for Relenza sales returns. For the six months ended June 30, 2020, royalty revenue decreased by $766,000, or 21%, compared to the six months ended June 30, 2019. The decrease in 2020 is principally due to the absence of Relenza royalty revenue in the first quarter. Royalty revenue is earned on sales of Inavir and, until the patent expired in July 2019, Relenza, both treatments for influenza, which were acquired in the Merger and is based on fixed percentages of net sales of these drugs in the period.

#### Non-cash Royalty Revenue Related to Sale of Future Royalties

The following table presents our non-cash royalty revenue related to sale of future royalties for the three and six months ended June 30, 2020 and 2019, respectively:

*(dollars in thousands)*

*(dollars in thousands)*

| Three Months Ended June 30, 2020 | 2019 | % Change | Six Months Ended June 30, 2020 | 2019 | % Change |
| ---: | ---: | ---: | ---: | ---: | ---: |
| $238 | $16 | 1,388% | $272 | $1,764 | (85)% |

For the three months ended June 30, 2020, royalty revenue related to sale of future royalties was $238,000, compared to $16,000 in the three months ended June 30, 2019, due to revenue from Inavir sales in the 2019 period being abnormally low in a quarter in which sales of Inavir typically only represent about 3% of the annual total. For the six months ended June 30, 2020, royalty revenue related to sale of future royalties was $272,000, compared to $1.8 million in the six months ended June 30, 2019. The decrease is due to a ceiling of $3.3 million that may be earned in years ending on March 31, and we recorded almost all of this in the nine months ended December 31, 2019.

#### Research and Development

The following table presents our research and development expenses for the three and six months ended June 30, 2020 and 2019, respectively:

*(dollars in thousands)*

*(dollars in thousands)*

| Three Months Ended June 30, 2020 | 2019 | % Change | Six Months Ended June 30, 2020 | 2019 | % Change |
| ---: | ---: | ---: | ---: | ---: | ---: |
| $5,114 | $3,707 | 38% | $6,656 | $7,536 | (12)% |

For the three months ended June 30, 2020, research and development expenses increased by $1.4 million, or 38%, compared to the three months ended June 30, 2019. The increase is primarily due to manufacturing and preclinical expenses related to our COVID-19 vaccine candidate and higher stock-based compensation costs, partially offset by lower costs of clinical trials for our norovirus vaccine candidate, reduced personnel costs since we ceased internal manufacturing as part of our December 2019 restructuring and lower amortization expense.

For the six months ended June 30, 2020, research and development expenses decreased by $880,000, or 12%, compared to the six months ended June 30, 2019. The decrease in the 2020 period is principally due to lower costs of clinical trials for our norovirus vaccine candidate, reduced personnel costs, lower amortization expense and reduced facilities costs, partially offset by manufacturing and preclinical expenses related to our COVID-19 vaccine candidate, higher stock-based compensation costs and costs related to our customer service contract.

We expect that research and development expenses will be higher in 2020 than in 2019 as we expect significant expenditures on clinical trials, which will only be partially offset by the reduction in personnel costs since we ceased internal bulk product manufacturing as part of our restructuring in December 2019.

#### General and Administrative

The following table presents our general and administrative expenses for the three and six months ended June 30, 2020 and 2019, respectively:

*(dollars in thousands)*

*(dollars in thousands)*

| Three Months Ended June 30, 2020 | 2019 | % Change | Six Months Ended June 30, 2020 | 2019 | % Change |
| ---: | ---: | ---: | ---: | ---: | ---: |
| $3,896 | $1,375 | 183% | $5,886 | $3,401 | 73% |

For both the three and six months ended June 30, 2020, general and administrative expenses increased by $2.5 million compared to the corresponding period in 2019. The principal reasons for the increase are higher stock-based compensation costs, severance expenses for our former Chief Executive Officer and increased legal fees incurred in the three months ended June 30, 2020. We expect quarterly general and administrative costs will be lower in the second half of 2020 than in the three months ended June 30, 2020, as we expect stock-based compensation and severance costs to decline significantly, however they will be higher than in the corresponding periods in 2019 due to our growth from a Smaller Reporting Company to a Large Accelerated Filer, which means we will need to increase our headcount and upgrade accounting systems in order to comply with Section 404(b) of the Sarbanes-Oxley Act of 2002 before year-end.

#### Restructuring Costs

The following table presents our restructuring costs for the three and six months ended June 30, 2020 and 2019, respectively:

*(dollars in thousands)*

*(dollars in thousands)*

| Three Months Ended June 30, 2020 | 2019 | % Change | Six Months Ended June 30, 2020 | 2019 | % Change |
| ---: | ---: | --- | ---: | ---: | --- |
| $39 | $— | N/A | $103 | $— | N/A |

We approved a reduction-in-force during the year ended December 31, 2019, for which we accrued severance and benefits charges, the maximum amount potentially payable under a manufacturing work order which we suspended, impairment charges against property and equipment and right-of-use assets formerly used for manufacturing from which no future benefits will be derived, and incurred legal fees and accretion costs in connection with the restructuring. Our costs in the six months ended June 30, 2020, were for legal fees and for accretion related to the manufacturing premises while it remained unoccupied.

We expect to reverse part of the charge recorded in 2019 related to the suspension of our manufacturing work order following negotiations with the vendor.

#### Other Income and (Expenses)

The following table presents our non-operating income and expenses for the three and six months ended June 30, 2020 and 2019, respectively:

*(dollars in thousands)*

*(dollars in thousands)*

| Three Months Ended June 30, 2020 | 2019 | % Change | Six Months Ended June 30, 2020 | 2019 | % Change |
| ---: | ---: | ---: | ---: | ---: | ---: |
| $(425) | $(627) | (32)% | $(875) | $(1,268) | (31)% |

For the three months ended June 30, 2020, we recorded net non-operating expenses of $425,000, a 32% decrease from the $627,000 recorded in the three months ended June 30, 2019. For the six months ended June 30, 2020, we recorded net non-operating expenses of $875,000, a 31% decrease from the $1.3 million recorded in the six months ended June 30, 2019. The decrease in both periods was principally due to the absence of interest expense in 2020, principally due to the repayment of a loan from Oxford Finance LLC in November 2019, and the reduction in non-cash interest expense related to sale of future royalties due to a reduction in the related liability.

#### Provision for Income Taxes

The following table presents our provision for income taxes for the three and six months ended June 30, 2020 and 2019, respectively:

*(dollars in thousands)*

*(dollars in thousands)*

| Three Months Ended June 30, 2020 | 2019 | % Change | Six Months Ended June 30, 2020 | 2019 | % Change |
| ---: | ---: | ---: | ---: | ---: | ---: |
| $26 | $13 | 100% | $179 | $263 | (32)% |

The provision for income taxes comprises $26,000 and $13,000 in the three months ended June 30, 2020 and 2019, respectively. Of this charge, $12,000 in 2020 and $1,000 in 2019 represents withholding tax on royalty revenue earned on sales of Inavir in Japan, which is potentially recoverable as a foreign tax credit but expensed because we record a 100% valuation allowance against our deferred tax assets. The remainder of the charge in both years is principally due to foreign taxes payable on intercompany interest.

The provision for income taxes comprises $179,000 and $263,000 in the six months ended June 30, 2020 and 2019, respectively. The majority of the charge, $152,000 in 2020 and $237,000 in 2019, represents the Japanese withholding tax on royalty revenue. The decrease arose because Inavir royalties, including the portion that we pass through to HCRP, in the first six months fell from $4.7 million in 2019 to $3.0 million in 2020. The remainder of the charge, $27,000 in 2020 and $26,000 in 2019, relates primarily to foreign taxes payable on intercompany interest.

### Liquidity and Capital Resources

From its inception until the Merger, Private Vaxart’s operations were financed primarily by net proceeds of $38.9 million and $29.4 million from the sale of convertible preferred stock and the issuance of convertible promissory notes, respectively, all of which were converted into Aviragen common stock in the Merger, and $4.9 million from the issuance of secured promissory notes to Oxford Finance, of which the remaining balance of $2.5 million as of September 30, 2019, was repaid in full on November 4, 2019. Vaxart gained $25.5 million in cash from Aviragen in the Merger, of which $4.9 million was used to pay Aviragen’s Merger-related costs. Since the Merger, through June 30, 2020, we have received net proceeds of $53.6 million from the sale of common stock, pre-funded warrants and common stock warrants and the exercise of pre-funded warrants and common stock warrants from equity financings in March, April and September 2019 and March 2020.

As of June 30, 2020, we had $44.4 million of cash and cash equivalents. We believe our existing funds as of June, 30, 2020, in addition to our projected revenue and proceeds from the ATM Program in July 2020 and from the exercise of common stock warrants and options, are sufficient to fund us through 2021. To continue operations thereafter, we expect that we will need to raise further capital, through the sale of additional securities or otherwise. Our operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital expenditures. As of June 30, 2020, we had no commitments for capital expenditures. Our future capital requirements and the adequacy of our available funds will depend on many factors, most notably our ability to successfully commercialize our products and services.

We plan to fund a significant portion of our ongoing operations through partnering and collaboration agreements which, while reducing our risks and extending our cash runway, will also reduce our share of eventual revenues, if any, from our vaccine product candidates. We may be able to fund certain activities with assistance from government programs including HHS BARDA. We may also need fund our operations through equity and/or debt financing. The sale of additional equity would result in additional dilution to our stockholders. Incurring debt financing would result in debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. If we are unable to raise additional capital in sufficient amounts or on acceptable terms, we may be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market vaccine candidates that we would otherwise prefer to develop and market ourselves. Any of these actions could harm our business, results of operations and prospects.

Our future funding requirements will depend on many factors, including the following:

- the timing and costs of our planned preclinical studies for our product candidates;
- the timing and costs of our planned clinical trials of our product candidates;
- our manufacturing capabilities, including the availability of contract manufacturing organizations to supply our product candidates at reasonable cost;
- the amount and timing of royalties received on sales of Inavir;
- the number and characteristics of product candidates that we pursue;
- the outcome, timing and costs of seeking regulatory approvals;
- revenue received from commercial sales of our future products, which will be subject to receipt of regulatory approval;
- the terms and timing of any future collaborations, licensing, consulting or other arrangements that we may enter into;
- the amount and timing of any payments that may be required in connection with the licensing, filing, prosecution, maintenance, defense and enforcement of any patents or patent applications or other intellectual property rights; and
- the extent to which we in-license or acquire other products and technologies.

In addition, the COVID-19 pandemic may negatively impact our operations, including possible effects on our financial condition, ability to access the capital markets on attractive terms or at all, liquidity, operations, suppliers, industry, and workforce. The Company will continue to evaluate the impact that these events could have on the operations, financial position, and the results of operations and cash flows during fiscal year 2020 and beyond.

### Cash Flows

The following table summarizes our cash flows for the periods indicated:

*(in thousands)*

|  | Six Months Ended June 30, 2020 | 2019 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(3,729) | $(4,970) |
| Net cash used in investing activities | (10) | (711) |
| Net cash provided by financing activities | 34,601 | 10,433 |
| Net increase in cash and cash equivalents | $30,862 | $4,752 |

#### Net Cash Used in Operating Activities

Vaxart experienced negative cash flow from operating activities for the six months ended June 30, 2020 and 2019, in the amounts of $3.7 million and $5.0 million, respectively. The cash used in operating activities in the six months ended June 30, 2020, was due to cash used to fund a net loss of $10.3 million, partially offset by adjustments for net non-cash income related to depreciation and amortization, stock-based compensation, non-cash interest expense related to sale of future royalties and non-cash revenue related to sale of future royalties totaling $2.3 million and a decrease in working capital of $4.3 million. The cash used in operating activities in the six months ended June 30, 2019, was due to cash used to fund a net loss of $7.0 million, partially offset by adjustments for net non-cash expenses related to depreciation and amortization, stock-based compensation, non-cash interest expense, non-cash interest expense related to sale of future royalties and non-cash revenue related to sale of future royalties totaling $433,000 and a decrease in working capital of $1.6 million.

#### Net Cash Used in Investing Activities

We used $13,000 and $711,000 to purchase property and equipment in the six months ended June 30, 2020 and 2019, respectively. We received cash of $3,000 for the sale of equipment in the six months ended June 30, 2020.

#### Net Cash Provided by Financing Activities

We received $9.2 million from the sale of common stock and warrants in a registered direct offering, $24.8 million from the exercise of common stock warrants and stock options, and net proceeds of $652,000 from the disgorgement of related party short-swing profits in the six months ended June 30, 2020. We received $2.5 million from the sale of common stock in a registered direct offering, $8.1 million from the sale of common stock, pre-funded warrants and common stock warrants in an underwritten offering and $652,000 from the exercise of pre-funded warrants in the six months ended June 30, 2019, partially offset by the repayment of principal of $833,000 on the secured promissory note payable to Oxford Finance LLC.

### Critical Accounting Policies and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially from these estimates. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

#### Accrued Research and Development Expenses

We record accrued expenses for estimated costs of research and development activities conducted by third-party service providers, which include the conduct of clinical and contract formulation and contract manufacturing activities. We record the estimated costs of research and development activities based upon the estimated amount of services provided and include the costs incurred but not yet invoiced within accrued liabilities in the condensed consolidated balance sheets and within research and development expense in the condensed consolidated statement of operations and comprehensive loss. These costs can be a significant component our research and development expenses.

We estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services. We make significant judgments and estimates in determining the accrued balance in each reporting period. As actual costs become known, we adjust our accrued estimates.

#### Intangible Assets

Intangible assets acquired in the Merger were recorded at their estimated fair values of $20.3 million for developed technology related to Inavir which is being amortized on a straight-line basis over the estimated period of future royalties of 11.75 years and $1.8 million for the developed technology related to Relenza which was fully amortized over the remaining royalty period of 1.3 years. These valuations were prepared by an independent third party based on estimated discounted cash flows based on probability-weighted future development expenditures and revenue streams, which are highly subjective.

### Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements in the periods presented.

### Recent Accounting Pronouncements

See the “Recent Accounting Pronouncements” in Note 2 to the Condensed Consolidated Financial Statements in Part I, Item 1 for information related to the issuance of new accounting standards in the first six months of 2020, none of which had a material impact on our condensed consolidated financial statements.

## Controls and procedures

As filed, 1,734 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our President and Chief Executive Officer (who serves as our principal executive officer and principal financial officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our management has concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2020.

### Changes in Internal Control over Financial Reporting

There was no material change in our internal control over financial reporting that occurred during the quarter ended June 30, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

### Inherent Limitations on Effectiveness of Controls

Our management, including our President and Chief Executive Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Vaxart have been detected.

## Risk factors

As filed, 17,547 characters.

You should consider the risks and uncertainties described under Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, which we filed with the Securities and Exchange Commission on March 19, 2020, together with all other information contained or incorporated by reference in this Quarterly Report on Form 10-Q when evaluating our business and our prospects. Except as disclosed below, there are no material changes from the risk factors set forth in Part I, Item 1A, in our Annual Report on Form 10-K for the year ended December 31, 2019.

***Our development of a COVID-19 vaccine candidate is at an early stage. We may be unable to produce an effective vaccine that successfully immunizes humans against SARS-CoV-2 in a timely manner, if at all.***

We are in the business of developing oral vaccines that are administered by tablet rather than by injection. In response to the global outbreak of COVID-19, in January 2020, we announced that we had initiated a program to develop a coronavirus vaccine candidate based on Vector-Adjuvant-Antigen Standardized Technology Platform, our proprietary oral vaccine platform (“VAAST”). However, our development of the vaccine is in early stages, and we may be unable to produce an effective vaccine that successfully immunizes humans against SARS-CoV-2 in a timely manner, if at all.

Since that time, we entered into an agreement with Emergent BioSolutions Inc. (“Emergent”), whereby Emergent will deploy its molecule-to-market contract development and manufacturing (“CDMO”) services to help develop and manufacture our experimental oral COVID-19 vaccine. We also contracted with KindredBio to manufacture bulk vaccine under cGMP to complement the manufacturing capacity of partner Emergent. However, if we are unsuccessful in maintaining our relationships with these and other critical third parties, our ability to develop our oral COVID-19 vaccine candidate and consequently compete in the marketplace could be impaired, and our results of operations may suffer. Even if we are successful, we cannot assure you that these relationships will result in successful development and commercialization of our oral COVID-19 vaccine candidate.

In addition, in June 2020, we signed a Memorandum of Understanding with Attwill Medical Solutions Sterilflow, LP (“AMS”) affirming the parties’ intent to establish AMS as a resource for lyophilization development and large-scale manufacturing including tableting and enteric coating for our oral COVID-19 vaccine. AMS is expected to assign dedicated resources and equipment for the scale up and commercial production of the vaccine upon entering a definitive agreement. However, we have not yet entered into any such definitive agreement with AMS, and we may not be able to reach a definitive agreement with AMS on terms acceptable to us, if at all. Even if we are able to establish a definitive agreement with AMS, reliance on them entails additional risks, including (i) our reliance on AMS for regulatory compliance and quality assurance, a possible breach of the manufacturing agreement by AMS; (ii) the possible misappropriation of our proprietary information, including trade secrets and know-how; and (iii) the possible termination or nonrenewal of the agreement by AMS at a time that is costly or inconvenient for us.

AMS, or any other manufacturing partner, may not be able to comply with cGMP, regulations or similar regulatory requirements. Our failure, or the failure of such partners or potential partners, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our potential COVID-19 vaccine. In addition, manufacturers of tablets and vaccines often encounter difficulties in production, particularly in scaling up initial production. These problems include difficulties with production costs and yields, quality control, including stability of the product candidate and quality assurance testing, shortages of qualified personnel or key raw materials, and compliance with strictly enforced federal, state, and foreign regulations. Our contract manufacturers may not perform as agreed. If our manufacturers were to encounter these or other difficulties, our ability to provide product candidates to patients in our clinical trials could be jeopardized.

We are committing financial resources to the development of a COVID-19 vaccine, which may cause delays in or otherwise negatively impact our other development programs. In addition, our management and scientific teams have dedicated substantial efforts to our COVID-19 vaccine development. As of the date of this report, we have 16 full-time equivalent employees, which may make us more reliant on our individual employees and on outside contractors than companies with a greater number of employees. If we fail to attract and retain management and scientific personnel, we may be unable to successfully produce, develop and commercialize our vaccine candidates.

In addition, the positive preclinical results for our COVID-19 vaccine candidates may not be predictive of the results of later-stage human clinical trials, which could be one of a number of factors that may delay or prevent us from receiving regulatory approval of our vaccine candidate. We may not be successful in developing a vaccine, or another party may be successful in producing a more efficacious vaccine or other treatment for COVID-19, which may also lead to the diversion of governmental and quasi-governmental funding away from us and toward other companies.

***The regulatory regime governing Operation Warp Speed is uncertain, and new regulations or policies may materially adversely affect our business and the development of our COVID-19 vaccine candidate.***

On June 26, 2020, we announced that our oral COVID-19 vaccine has been selected to participate in a non-human primate challenge study, organized and funded by Operation Warp Speed. The study is designed to test the efficacy of our oral COVID-19 vaccine candidate.

Operation Warp Speed is a public-private partnership among the Department of Health and Human Services, including the Centers for Disease Control and Prevention, the U.S. Food and Drug Administration, the National Institutes of Health, and the Biomedical Advanced Research and Development Authority; the Department of Defense; and private companies and firms, to facilitate, at an unprecedented pace, the development, manufacturing, and distribution of vaccines, therapeutics and other countermeasures to address the COVID-19 epidemic throughout the world.

The rules and regulations governing Operation Warp Speed, including, without limitation, the rules and regulations governing the procedures for selecting which companies participating in Operation Warp Speed will receive federal funds through the program, are uncertain and may rapidly evolve as the program progresses. Such rules or regulations may negatively impact our plans to develop our COVID-19 vaccine candidate and failure by us to comply with any laws, rules and regulations, some of which may not exist yet or are subject to interpretation and may be subject to change, could result in a variety of adverse consequences, including civil penalties and fines. Efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. If we fail to comply with the policies, rules and regulations governing Operation Warp Speed, or do not ultimately receive funding or complete our planned non-human primate challenge study for any other reason, our business and operations would be materially and adversely impacted.

In addition, we cannot assure you that Operation Warp Speed will have a positive impact on our financial results.

***In light of the COVID-19 pandemic, it is possible that one or more government entities may take actions that directly or indirectly have the effect of abrogating some of our rights or opportunities. If we were to develop a COVID-19 vaccine, the economic value of such a vaccine to us could be limited.***

Various government entities, including the U.S. government, are offering incentives, grants and contracts to encourage additional investment by commercial organizations into preventative and therapeutic agents against coronavirus, which may have the effect of increasing the number of competitors and/or providing advantages to known competitors. Accordingly, there can be no assurance that we will be able to successfully establish a competitive market share for our COVID-19 vaccine, if any.

***The COVID-19 coronavirus could adversely impact our preclinical studies and clinical trials.***

Since the initial report of a novel strain of coronavirus, SARS-CoV-2, in China in December 2019, COVID-19 has spread to multiple countries, including the United States. We have active and planned preclinical studies and clinical trial sites in the United States. As COVID-19 continues to spread around the globe, we will likely experience disruptions that could severely impact our planned preclinical studies and clinical trials, including preclinical studies and manufacturing of our SARS-CoV-2 vaccine candidate and clinical trials of our vaccine candidate for the GI.1 and GII.4 norovirus strains. Effects on our preclinical studies and clinical trial programs include, but are not limited to:

- delays in procuring subjects in our preclinical studies;
- delays or difficulties in enrolling patients in our clinical trials;
- delays or difficulties in preclinical and clinical site initiation, including difficulties in establishing appropriate and safe social distancing and other safeguards at preclinical and clinical sites;
- diversion of healthcare resources away from the conduct of preclinical and clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;
- interruption of key preclinical study and clinical trial activities, such as preclinical and clinical trial site monitoring, due to limitations on freight and travel imposed or recommended by federal or state governments, employers and others;
- limitations in employee resources that would otherwise be focused on the conduct of our preclinical studies and clinical trials, including because of sickness of employees or their families, delays or difficulties in conducting site visits and other required travel, and the desire of employees to avoid contact with large groups of people; and
- delays in receiving approval from local regulatory authorities to initiate or continue our planned preclinical studies and clinical trials.

The global outbreak of COVID-19 continues to rapidly evolve. The extent to which COVID-19 may impact our preclinical studies and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

***An ownership change under Section 382 of the Code subjects Vaxart, Inc. and all of its subsidiaries to limitations on the use of U.S. net operating loss carryforwards and certain other tax attributes. In addition to the ownership changes that occurred in February 2018, April 2019 and September 2019, a further ownership change under Section 382 of the Code occurred in the second quarter of 2020, subjecting us to further limitations.***

If a corporation undergoes an “ownership change” within the meaning of Section 382 of the Code, the corporation’s U.S. net operating loss carryforwards and certain other tax attributes arising from before the ownership change are subject to limitations on use after the ownership change. In general, an ownership change occurs if there is a cumulative change in the corporation’s equity ownership by certain stockholders that exceeds 50% over a three-year period. Similar rules may apply under state and foreign tax laws. Ownership changes occurred for Vaxart, Inc. and all of its subsidiaries in February 2018, April 2019 and September 2019; accordingly, our U.S. net operating loss carryforwards and certain other tax attributes are subject to limitations on their use. The ownership change in September 2019 restricted annual usage to 1.89% of the combined organization’s value on September 30, 2019. A further change in ownership occurred in the second quarter of 2020, which may result in an additional restriction on usage of net operating loss carryforwards generated in the intervening period. Additional ownership changes in the future could result in further limitations on the combined organization’s net operating loss carryforwards. Consequently, even if we achieve profitability, we may not be able to utilize a material portion of our net operating loss carryforwards and other tax attributes, which could have a material adverse effect on our cash flow and results of operations.

***The price of our common stock has been volatile and fluctuates substantially, which could result in substantial losses for stockholders.***

Our stock price has been, and in the future may be, subject to substantial volatility. As a result of this volatility, our stockholders could incur substantial losses. The stock market in general, and the market for biopharmaceutical companies in particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above your initial purchase price.

The market price for our common stock may be influenced by many factors, including the results of clinical trials of our products or those of our competitors, regulatory or legal developments, developments, disputes, or other matters concerning patent applications, issued patents, or other proprietary rights, our ability to recruit and retain key personnel, public announcements by us or our strategic collaborators regarding the progress of our development candidates similar public announcements by our competitors, and other factors set forth in this quarterly report and our other reports filed with the SEC.

If our quarterly or annual results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore, any quarterly or annual fluctuations in our results may, in turn, cause the price of our stock to fluctuate substantially. We believe that period-to-period comparisons of our results are not necessarily meaningful and should not be relied upon as an indication of our future performance.

In addition, public statements by us, government agencies, the media or others relating to the coronavirus outbreak (including regarding efforts to develop a coronavirus vaccine) have in the past resulted, and may in the future result, in significant fluctuations in our stock price. Given the global focus on the coronavirus outbreak, any information in the public arena on this topic, whether or not accurate, could have an outsized impact (either positive or negative) on our stock price. Information related to our development, manufacturing and distribution efforts with respect to our vaccine candidates, or information regarding such efforts by competitors with respect to their potential vaccines, may also impact our stock price.

Our stock price is likely to continue to be volatile and subject to significant price and volume fluctuations in response to market and other factors, including the other factors discussed in our filings incorporated by reference herein or in future periodic reports; variations in our quarterly operating results from our expectations or those of securities analysts or investors; downward revisions in securities analysts’ estimates; and announcement by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments.

***We may be subject to legal proceedings, which may divert management’s attention and have a material adverse effect on our business, financial condition and results of operations.***

From time to time, we may be involved in legal proceedings. Due to the inherent uncertainties in legal proceedings, we cannot accurately predict the ultimate outcome of any such proceedings. Our stock price has been extremely volatile, and we may become involved in securities class action lawsuits in the future. Any current or future dispute resolution or legal proceeding, regardless of the merits of any such proceeding, could result in substantial costs and a diversion of management’s attention and resources that are needed to successfully run our business, and could have a material adverse impact on our business, financial condition and results of operations.

Filed Aug 6, 2020.
Source: SEC EDGAR, the filing index for accession 0001437749-20-016864. Last ingested by Listed: Nov 5, 2026, 18:48 ET. No prices; not investment advice.