Novavax Inc (NVAX) 2016 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Novavax Third Quarter Financial Results and Investor and Analyst Update Conference Call. (Operator Instructions) As reminder, this conference is being recorded.

I would now like to introduce your host for today's conference, Ms. Andrea Flynn, Associate Director of Investor Relations. Ms. Flynn, you may begin.

Thank you, operator. Good afternoon. This is Andrea Flynn, Associate Director of Investor Relations at Novavax.

I would like to thank everyone for joining today's call to discuss our third quarter 2016 financial results and to provide an investor and analyst update. A press release about earnings is currently available on our website at novavax.com, and an audio archive of this conference call will be available on our website later today.

Joining me on today's call is Novavax' President and CEO, Stan Erck; together with our President of Research and Development, Dr. Greg Glenn; Chief Medical Officer, Dr. Lou Fries; Senior Director of Clinical Development, Dr. James Cummings; and Chief Financial Officer, Buck Phillips.

Before we begin our prepared remarks, I need to remind you that we will be making forward-looking statements during this teleconference that could include financial, clinical or commercial projections. Statements relating to future financial or business performance, conditions or strategies and other financial and business-related matters, including expectations regarding revenue, operating expenses, cash usage and clinical developments and anticipated milestones are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Novavax cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time.

We have a slightly different agenda for today's call. Buck will start with a quick review of the third quarter financial results. Following that, we will begin the investor and analyst portion of the call with Stan. I'll now turn the call over to Buck.

Thank you, Andrea. Good evening, everyone, and thank you for joining today's call. Today, we announced financial results for the third quarter ended September 30, 2016. Summary financial statements can be found in today's earnings press release.

For the third quarter of 2016, we recorded a net loss of $66.3 million or $0.24 per share. This compares to a net loss of $33.1 million or $0.12 per share in the prior year period. The increase in net loss in the third quarter of 2016 is primarily the result of increased R&D expenses related to the clinical trials and development activities for our RSV F Vaccine candidate along with higher employee-related costs relative to the same period last year.

Revenue for the quarter was $3.2 million compared to $6.5 million for the same period in 2015. This 50% decrease in revenue in the 2016 period over the 2015 period was driven primarily by a higher level of BARDA-related activities in the third quarter of 2015. The decline in BARDA revenue in Q3 of '16 is partially offset by $2.6 million in revenue recorded under the Bill & Melinda Gates Foundation grant of $89 million. The Bill & Melinda Gates Foundation revenue is directly related to the Prepare trial, our Phase 3 trial of the RSV F Vaccine to protect infants via maternal immunization. As we have previously discussed, we expect an increase in Bill & Melinda Gates Foundation revenue in 2016, correlating to the cost incurred in the Prepare trial.

R&D expenses increased 73% to $53 million in the quarter compared to $30.7 million in the same period in 2015. The increase in R&D expenses was primarily due to the increase in activities in our ongoing RSV F Vaccine clinical trials and related development activities, along with higher employee-related expenses, which includes an increase in noncash stock compensation expense.

G&A expenses increased 50% to $13.6 million in the quarter compared to $9.1 million in the same period in 2015. This increase is primarily due to an increase in employee-related expenses, which also includes increases in noncash stock compensation expense as well as an increase in pre-commercialization expenses.

As of September 30, 2016, the company had $300.3 million in cash, cash equivalents and investments on the balance sheet.

I will provide some detail regarding future expectations for both expenses and cash burn in my section of the investor and analyst portion of this call. This concludes my financial review of the third quarter of 2016.

I'll now turn the call over to Stan to begin the investor and analyst presentation.

Thanks. Thanks all for taking the time to dial into our presentation today. As a reminder, this is being webcast and we do have a slide presentation. So please join us on our website to access those slides. I expect from this crowd that's on the phone to get a lot of credit for the following, I'm not going to make any reference to the presidential campaign and election results today. So with that, we've got a lot of material to cover. So let me get started.

On Slide 3, I'll briefly review our agenda for this call. Starting out, I'll provide an overview of the pipeline and path forward. And then I'll introduce you to Dr. James Cummings. You've not met James Cummings before, and he's got quite a background. So I'll spend a minute doing it. He's our Senior Director of Clinical Development, who will provide an update on our Zika program.

Prior to joining Novavax, he enjoyed a 26-year career in the U.S. Army with a proven track record in vaccine, drug and diagnostics development. He was most recently the Director of the Department of Defense Global Emerging Infectious Disease Surveillance and Response team, where he led biosurveillance for the DoD with laboratories and partners in 71 countries and served as a consultant to the Surgeon General for all medical research and development. He received his M.D. in Internal Medicine at Georgetown University and completed an Infectious Disease Fellowship at Walter Reed and the National Capital Consortium. So our Zika program is in very experienced hands.

Next, Dr. Lou Fries, whom you know, will review our older adults Phase 3 trial results and provide information on our next steps in that program. As you'll imagine, we spent the last eight weeks poring over the data from our older adult Phase 3 trial in an effort to understand the effects of our vaccine in this trial. I will tell you now that this is still a work in progress, but we've identified a path forward for the program.

Lou will go through what we know, what we don't fully understand yet and what we are doing to better understand the impact of our product on the older adult population. He will also walk you through some of the details of our path forward. Dr. Greg Glenn will then provide an update on our Phase 3 program for infants via maternal immunization. And finally, Buck will review our finance and operations, and then I'll open it up to Q&A.

Moving to Slide 4. Overall, for the company, we have a plan going forward that will build on programs that we believe have high market value, are highly differentiated and have a high likelihood of success. We continue to believe that there is a multibillion-dollar opportunity for the RSV F Vaccine franchise.

And as shown on Slide 5, we will expect to enjoy the advantage of being the first RSV F Vaccine to market. We have a strong balance sheet and support from the Gates Foundation from an $89 million grant for our lead program, the Phase 3 trial for infants via maternal immunization. If you can step out from under the cloud of the older adult Phase 3 study results, I think I can convince you that we have a profile going forward that is an attractive investment thesis.

So where do we go from here? Moving to Slide 6. I'll review our pipeline and our work on the following four programs. First, we have a Phase 3 maternal RSV program underway, which will be our lead program for several reasons. It addresses a serious global unmet medical need for which there is no vaccine or drug. We believe that it has a high likelihood to protect newborns and their mothers from RSV infection, as has been shown in the animal and clinical trials, respectively. It has a very attractive market, and we have the capital to allow us to fund this program to important milestones. This program will be our primary focus.

Second, with respect to older adults, we still believe that this is a very attractive opportunity, but we're going to take a look at alternative vaccine formulations in the trial that we expect to start in the first quarter of 2017 that will give us a lot of useful information regarding both the quantity and the quality of antibody responses that we can achieve.

We're going to look at randomized, observer-blinded, multi-arm, dose-ranging Phase 2 clinical trial in one dose, in prime boost regimens, both with and without adjuvants, and see what the results tell us. When we have that information, we'll evaluate the appropriate pathway forward. That pathway will be largely determined by what we learn over the next six months or so in parallel with that trial. The learnings will be from both the data we get from the dose and formulation study and from the continuing analysis of all the data from our prior Phase 2 and Phase 3 trials.

These data should be fully mined by the time our new Phase 2 study data are out in the third quarter of 2017. Greg will walk you through recent analyses that we may use to evaluate our new Phase 2 study. It could be that we determine that we want to move back into a pivotal Phase 3 trial, or it could be a more targeted initial approach, for example, in a high-risk population, such as COPD.

In addition to these two programs, we have two other vaccine programs that are being developed at earlier stages and that fit very well with our platform. We believe that our recombinant nanoparticle vaccine technology offers a solution for both the Zika vaccine and a seasonal nanoparticle flu vaccine that will differentiate us in this large market.

In particular, we have exciting preclinical data from our new Zika program. These preclinical data suggest that we stimulate, perhaps uniquely, broadly neutralizing the antibodies and have led us to initiate a nonhuman primary challenge study with our colleagues at Harvard. Data from this trial will be available in January with the expectation that we initiate a Phase 1 clinical trial in the first half of 2017. We don't have details about the clinical path forward beyond Phase 1, but we'll work that out within our own clinical regulatory group in consultation with public health officials.

Our current view is that we could initiate a Phase 2 trial in the second half of 2017, but that will in part be determined by the epidemiology of the disease at the time and, secondly, the availability of external financing for this program. The commercial opportunity is speculative but potentially very large. One can imagine offering the vaccine to all men and women of childbearing age, much like HPV, and also to travelers. An additional economic benefit is the potential to receive a priority review voucher under the FDA's program. In recent years, these vouchers have turned out to be worth hundreds of millions of dollars.

Matrix-M has consistently demonstrated dramatically improved immune responses both preclinically and in human trials with both pandemic influenza and Ebola. We're also using Matrix-M in our Zika nonhuman primate challenge study and in our planned Phase 1 Zika trial early next year. Regarding flu, as you know, we have been working on recombinant nanoparticle version of our flu vaccine. This construct should have a number of advantages over our previous VLP format, including, we believe, the ability to stimulate broadly neutralizing antibodies. We are targeting new product profile that would be adjuvanted with our own Matrix-M adjuvant and would compete with Sanofi's high-dose vaccine in the elderly market.

We believe we have a strong mix of programs. Our process have been to identify the best combination of programs that have the following attributes, a high commercial value, as shown on Slide 7. I will remind you that the market for RSV vaccines can be very large, with the economic burden of disease in the U.S. alone exceeding $30 billion. All of our programs fit nicely within our technology platform. They enjoy a reasonable risk profile, and they will give us either a differentiated product or a first-to-market advantage or both.

Moving to Slide 8. Before I turn the call over to the team, let me reflect on the restructuring that took place this morning. Our history, over the last several years, has been one of growth as we aggressively kept up with the demands of taking not one but multiple products through Phase 1 and Phase 2 and 3.

With the surprise that we got from our older adult Phase 3 program, we recognized the need to regroup and develop a path forward. The first step was develop a plan for each of the programs going forward. We've done that. We then had to determine how to appropriately size the company to accomplish that plan and, in parallel, to extend our cash runway. We've done that as well. We announced today that we are reducing the size of our workforce by a substantial amount, and Buck will provide more details in his financial and operational update.

This is a great group of people that have allowed us to take two programs into Phase 3 at the same time. It's a very unusual accomplishment. However, we feel that the remaining group is capable of advancing our lead program, which is well into a global Phase 3 maternal immunization trial and the slate of preclinical and clinical programs that I've just articulated. We will miss our colleagues who have helped us to get this far and thank them for all of their enormous contributions. With hard work and a bit of good fortune, we hope to welcome them back in the future.

I will now turn the call over to James.

Thanks, Stan. Good afternoon. I'm Dr. James Cummings, the Senor Director of Clinical Development here at Novavax. Tonight, I'll review the Novavax Zika vaccine program with a background on Zika virus infection and disease, the Novavax Zika vaccine construct, and address study strategy and rationale formulation with a look at key external data followed by concluding remarks.

Zika virus is a flavivirus transmitted by Aedes mosquitoes. It's also sexually spread. 80% of those infected by Zika virus remain free of symptoms. Some common clinical symptoms of those remaining symptomatic 20% are fever, rash, joint pain and conjunctivitis. The less frequent but more severe outcomes include microcephaly and other fetal abnormalities when pregnant women are infected by Zika virus; and Guillain-Barre syndrome that ranges from generalized muscle weakness to complete paralysis, requiring mechanical ventilation. Of note, Zika was added to the priority review voucher program list in April of this year.

This map represents the geographic areas of active Zika virus transmission, as reported in November from the U.S. Centers for Disease Control.

Slide. This is a breakdown, the Zika case counts in the United States and its territories. In the U.S., we have over 4,000 total cases of Zika infection, with 139 of those acquired locally by mosquito transmission and an additional 32 cases transmitted sexually in the U.S. states. There are currently 1,005 cases of Zika reported in pregnant women, with 25 live-born infants with birth defects, including microcephaly, and five pregnancy losses with birth defects as well.

In the U.S. territories, there are over 30,000 locally acquired Zika cases, with 100 travel-associated cases reported. Guillain-Barre syndrome has been reported in 45 of these Zika cases. There are over 2,200 cases of pregnant women with known Zika virus infection in the U.S. territories. Even though transmission of Zika is expected to be reduced in winter months and the dry season, Zika is expected to be an issue for the USA and others for years to come.

Slide. This graphic information comes from the PLOS Neglected Tropical Diseases article of 25 August 2016. The World Health Organization estimates there is a $10 million lifetime care cost for infants born with microcephaly. If one looks at its projected birthrates and rates of Zika infection in Puerto Rico, that's projected to be 7,500 cases of Zika-related microcephaly in Puerto Rico during the 2017, 2018 season alone, with the cost outcome of $75 billion for their total lifetime care cost.

And now onto our Zika vaccine formulation and partner development program. This cartoon shows the Zika virus structure. I would call your attention to the envelope protein, which has special relevance regarding our vaccine construct that we make as a homodimer.

Flaviviruses have been difficult targets for vaccine production for many years. There have been decades of research on dengue alone, with only a few vaccine constructs to show for this intense effort. Novavax's Sf9/baculovirus platform technology is a responsive, agile system for developing vaccines based on the genomic sequence of emerging infectious diseases. These constructs are then down-selected in a number of ways, binding assays using the SPR Biacore system are employed; using human virus receptors and monoclonal antibodies to confirm that the vaccine target is presented properly; human convalescent sera from a patient with prior infection is also used, demonstrating that our vaccine is recognized, or bound by those same antibodies that recognize the disease in humans and prevent infection. Animal models are then employed to demonstrate the production of neutralizing antibodies from our vaccine. And when available, a challenge model is used to demonstrate protection from disease.

This cartoon is our Zika virus nanoparticle vaccine, which involves the envelope dimers at about 7 nanometers in size. Zika virus envelope dimer vaccine with Matrix-M adjuvant is highly immunogenic and induces protective levels of neutralizing antibodies in preclinical models.

Supporting the selection of our Zika virus envelope dimer vaccine was the SPR Biacore analysis, which demonstrated that our Zika virus envelope dimer binds to the human Zika virus receptors, AXL and DC-SIGN. On the right side of this graphic, the comparator of the Zika E80 construct shows a negative result, another reason that the E80 construct was not selected.

Slide. In just the last few months, there's been new information demonstrating a quaternary epitope conserved among flaviviruses on the virus envelope protein. The antibodies to this quaternary epitope provide potent cross neutralization and is further evidence that we have selected an excellent vaccine target that should be present despite the potential change of this virus with time. This quaternary epitope has been reported in Nature, Science and from the American Society of Microbiology.

Leveraging this new information, this cartoon demonstrates our virus envelope dimer vaccine target in blue as well as the envelope dimer epitope that has shown cross neutralization, seen in green, in both Zika and dengue virus. This is a demonstration of the quaternary Zika virus epitope.

Slide. Thanks to Dr. Ralph Baric at UNC for the monoclonal antibodies against this quaternary epitope, we were able to use them in our SPR Biacore system. Using the SPR binding affinity assay with envelope dimer epitope monoclonal antibodies, or EDE1 in the graphic, we demonstrate that these broadly neutralizing monoclonal antibodies bind to our Zika vaccine antigen envelope dimer with very high affinity. A demonstration of a negative result is seen in the lower portion of this slide. The EDE1 monoclonal antibody does not bind to the E80 or refolded construct.

Slide. In this slide, we demonstrate that our vaccine has produced Zika virus neutralizing antibodies in our preclinical animal model, well above the reported levels required for protection.

So in terms of our preclinical development pathway, we've selected our lead Zika vaccine candidate, the Zika virus envelope dimer homodimers that forms 7-nanometer nanoparticles. We are underway with a nonhuman primate study at Harvard under the direction of Dr. Dan Barouch, the Director of Harvard Center for Virology and Vaccine Research, and should have Zika challenge results in late January 2017. A Phase 1 safety and dose-ranging study to be conducted in the United States is expected in the first half of 2017.

In recent New England Journal articles, the considerations for developing a Zika virus vaccine were published as a whole of government response. In these two listed opinion articles from the September 29, 2016 issue, both demonstrate there is a clear pathway for licensure and development of a Zika vaccine, a pathway that we at Novavax are well underway.

We've updated this slide that comes to us from HHS, ASPR, and it's a look at the Zika vaccine development landscape to show that Novavax is currently in preclinical development of a Zika virus vaccine.

The Zika vaccine addresses a significant market opportunity. Sexual transmission of Zika distinguishes it from other recent pandemic threats like dengue and chikungunya and indicates it can't be managed by containment alone.

A strong case is made for vaccinating all men and women of childbearing age as well as travelers. Our proprietary nanotechnology uniquely enables rapid development of immunogenic vaccines. We've identified a very promising vaccine target in the envelope dimer, validated by our preclinical data and external findings that I have just reviewed for you. We have a promising track record of obtaining Fast Track designation from the FDA, and we have the infrastructure in place to seek partnerships to further support the development of this vaccine program.

With that, I thank you, and I turn you over to Dr. Lou Fries, our CMO.

Thank you, James. I would like to shift the focus now to our RSV F Vaccine candidate and, in particular, our activities over the last year with regard to the older adult target population.

And so if you could advance to Slide 31. I'd like to just take a moment to step back and remind you we're now speaking of our baculovirus-Sf9 insect cell-derived recombinant RSV F nanoparticle. That vaccine has previously been shown to induce broadly neutralizing antibody specific for Sites 1, 2 and 4 on the RSV F protein in both animals and, much more importantly, in humans. It's been shown to induce protection against challenge in several animal models, including cotton rats, which have been predictive in previous clinical programs addressing RSV, as well as baboons.

The vaccine has shown efficacy in a Phase 2 trial in older adults that we'll discuss momentarily. It's shown the capacity to reduce serologic evidence of RSV infection in women of childbearing age by approximately 50% in two trials, the results of which confirmed each other; and is currently in active investigation in Phase 3 in pregnant women, where we've already shown efficient transplacental transfer in our Phase 2 studies.

I'd like to remind you briefly of the details of our preceding Phase 2 trial in the older adult population. We did a Phase 2 trial E-201 in 1,600 older adults, 60 years of age and older in the 2014, '15 season. That was a randomized, observer-blind, placebo-controlled trial, which used 135 microgram unadjuvanted dose of the RSV F Vaccine. Those subjects were followed for a year for safety, immunogenicity and efficacy end points.

In brief, the study showed a very well-tolerated vaccine with a benign safety profile. It induced roughly fivefold increases in palivizumab-competitive antibodies and anti-F antibodies in this older adult population. There was a 1.8% placebo attack rate of RSV moderate to severe lower respiratory tract disease that I'll call msLRTD. Subsequently, 4.9% placebo group attack rate for all acute respiratory disease due to RSV or RSV-ARD. We showed a vaccine efficacy of 41% against RSV-ARD, which was a pre-specified endpoint in that trial, and a 64% efficacy against RSV msLRTD, which was a post hoc analysis. Based on that data, we embarked on the Phase 3 trial.

On the next slide, Slide 32, I'll just remind you of the Kaplan-Meier curves in that preceding Phase 2 trial, which showed a quite convincing separation, with the first case recorded on October 31, 2014, and persistent and widening protection against RSV-ARD that was observable all the way through our last case on April 15, 2015, and gave a significant result in this analysis with a p-value of 0.039.

So armed with that information, we proceeded to Phase 3, and let's go right now to Slide 34. The E-301 design included the same target population, older adults, at least 60 years old. And again, it was a randomized, observer-blind, placebo-controlled trial that was expanded to 60 U.S. sites from 10 sites in the E-201 trial. The design was simple. It was 1:1 randomization. Subjects received either the active vaccine at the same 135 microgram unadjuvanted dose, or the formulation buffer as a placebo. Those subjects who had not had the 2015, '16 influenza vaccine, or IIV, and that made up about 45% of the population, were offered co-administration on day zero, and about three quarters of them accepted that.

Randomization was stratified on whether the subjects had previously had influenza vaccine, whether they had congestive heart failure and/or chronic obstructive pulmonary disease or COPD; their place of residence, whether they lived in the community independently or whether they lived in some form of congregate facility; and their age, whether they were less than or greater than 75 years of age.

They had a standard safety follow-up through a year, serology samples taken at multiple time points and, most importantly, had active and passive surveillance for acute respiratory disease through May 1 of 2016. They were followed to detect RSV-ARD or all acute respiratory disease due to RSV. That was any one symptom with RSV detected by a reverse transcriptase polymerase chain reaction or RSV msLRTD, which required at least three of five lower respiratory tract symptoms and, again, RSV detection by RT-PCR.

Enrollment spanned the November 9 to December 12, 2015, and the last day 182 visit occurred on June 13, 2016.

Moving to Slide 35. We see the demographics of the study population, and we see that the two treatment groups were very well balanced. The mean age in both groups was just a hair under 70 years. About three quarters of the population was 60 to 75 years old, and 23.5% was over 75. Our target for the over 75 group was actually 25%, so we hit that very close. 42% were males, 57%, 58% females, and the population was roughly 88% white, roughly 10% black. About 7.5% had either congestive heart failure or COPD or both. 98% -- rather, 99.9% of the population were independently living in the community. Only 0.1% to 0.2% were either in assisted living or long-term care. As we said, about 55% of subjects that had flu vaccine before they entered the trial, 45% have not had flu vaccine, and of that 45%, three quarters or about 36% got flu vaccine on day zero along with the RSV F Vaccine.

On the next slide, Slide 36, we review the top line safety data. I'm not going to discuss safety in any detail because the vaccine was profoundly benign. You can see in this case that the -- there was less than 2% difference in the incidence of all adverse events across the population. The only difference that rose above 2% was in local solicited adverse events, so a little bit of soreness or pain at the injection site, perhaps a little swelling at the injection site that was typically mild and occurred about 3% more often in the vaccinees than placebos. All the other categories are essentially comparable between the placebo and the vaccine group. So this is a very benign safety profile.

On the next slide, Slide 37, we come to the primary endpoint, which was RSV-msLRTD, and look at the evaluation of efficacy. In the upper panel, the per-protocol efficacy is described, and you can see that there were 26 cases in the placebo group and 28 in the vaccine group giving an actual efficacy estimate of negative 7.9%. That was essentially no different than zero. You can see the p-value is very large. And the confidence limits around the efficacy estimate span minus 84% to plus 37%, so not distinguishable from zero.

We look at the efficacy in some of the randomization straight or below and see none of these are significant. None of them are differentiable from zero. The very large negative percentage in the group with COPD or CHF is conditioned by the fact that you have a very small number of cases there. So that huge negative efficacy is really not very meaningful.

I would direct your attention to the two rows that outline subjects who received influenza vaccine or IIV on day zero versus those who did not. And I would point out that you can see a negative impact. Although neither of these results were significant, there's an obvious negative impact on efficacy against RSV-msLRTD in subjects who did receive influenza vaccine on day zero.

Looking down to the next panel down, you see the intention to treat analysis, and you'll note that it's -- that the numbers there are virtually identical with the per-protocol analysis. There's only a 47-subject difference between the intention to treat per-protocol population, and the numbers are essentially identical, in contrast with the E-201 data where we saw 64% efficacy with this endpoint.

I will ask you to note two things though. First of all, look at the breadth of the confidence interval around the Phase 2 estimate. It spans 1% to 87%, and that broadly overlaps the efficacy estimate confidence interval for the current study, 301. The other thing I'd point out is that the rate of this endpoint in the placebo group in E-201 was 1.75%, whereas in both the ITT and per-protocol populations in 301, it was very much smaller, fourfold smaller at 0.44%.

Let's move to Slide 38 now and this examines the secondary endpoint, all RSV acute respiratory disease. Again, looking at the per-protocol data, here, you can see the picture is a little brighter. We actually have 12.5% -- 12.6% point estimate of efficacy. However, that is not significantly different from zero, and you can see that the confidence bounds broadly overlap zero from minus 14% to 33%.

A similar pattern when you look at some of the substrate of the population, again, a negative impact of concurrent receipt of influenza vaccine on day zero. Again, no difference in the analysis between the per-protocol-efficacy population and the intent-to-treat-efficacy population. And again, the same difference or the same relationship to the E-201 results, lower efficacy but broadly overlapping confidence intervals around the estimate for efficacy and notably a 2.5, almost threefold reduction in the rate of endpoint in the placebo group, 4.9% in E-201 versus [1.98%] in the 301 trial.

Next slide. Slide 39 looks at a number of health care utilization endpoints that we prospectively studied in this trial. These look at medically attended events that were related to RSV acute respiratory disease. And you note that there is an impact on these events not surprisingly because they're correlated with RSV acute respiratory disease, but with the exception of emergency room visits, you see a reduction in the frequency of physician call, physician office visits, urgent care visits, any outpatient intervention or hospitalization for RSV acute respiratory disease.

The next slide, Slide 40, you see some further explorations in this direction. One of the problems that we've noted in carrying out these studies is that, often, when subjects present to the -- elderly subjects present to the hospital with acute disease that may be RSV disease, they present to another hospital not one that's affiliated with a particular clinical site. And at that point, they pass out of the jurisdiction of the IRB that's approved the trial and into the jurisdiction of another IRB. So we can't send site personnel into that hospital and get a swab. So we can't confirm RSV-associated hospitalizations in many cases, and therefore, there's only two here observed in this very large trial. But both are in the placebo group.

So we stepped back, and we examined all-cause hospitalizations, either for any cardiorespiratory diagnosis or more specifically, any respiratory diagnosis and then looked at any hospitalization. And from the least specific of these any hospitalization, where there's a 3.6% impact of vaccination, if you step to a more specific category, any cardiorespiratory hospitalization, you see a 10.8% impact and with any respiratory hospitalization, a 22.5% impact, so very similar to the magnitude of impact we've seen on RSV acute respiratory disease.

Very interesting and something that we discovered post hoc, actually, when we were examining in detail the impact of this vaccine on safety events, is the incidence rate of all-cause serious adverse events due to COPD exacerbations. These are patients with preexisting chronic obstructive pulmonary disease who got transiently hospitalized because their disease gets worse. And they may have hypoxemia. They may have lots of sputum production, increased wheezing, increased difficulty breathing, which require them to be hospitalized briefly. And those subjects -- and those events were actually fairly markedly reduced in the vaccine group. Now, I think we have to view that with some caution because it's a post hoc observation, but it's certainly tantalizing, especially because RSV is known to be associated with deteriorations in chronic obstructive pulmonary disease.

The next slide, Slide 41, is the first slide that looks at immunogenicity. This is preliminary data for anti-F and for palivizumab-competitive antibodies drawn from a representative subset of subjects. As you can imagine, this is a 12,000-subject trial with all those serologic endpoints I pointed out, so the testing here will go on for quite a long while. There are scores of thousands of tests to be done.

However, what we can see is that the RSV F Vaccine, in this case, caused about a 6.1-fold increase in the geometric me an, at least, the units for anti-F IgG and for palivizumab-competitive antibody, about a 4.47-fold increase in the concentration of palivizumab-competitive antibodies. And if you'll think back, I described the increases in E-201 as approximately fivefold in both those parameters, so the vaccine is behaving about the same with regard to these measurements. And in the placebo group, you see fold rises of essentially one, so this confirms that this is a vaccine-specific event.

On the next slide, Slide 42, we look at microneutralization titers. These are a complete set from the study population. Again, you see basically nothing happening for either RSV/A or RSV/B microneutralization in the placebo group, whereas in the RSV F Vaccine group, you see 1.6-fold rises in geometric mean titer for RSV/A and 1.88-fold rise for RSV/B. These are again very close to the values that we observed in E-201.

So the next slide, 43, to summarize, we had a safety profile that was consistent with Phase 2. We had attack rates of both all acute respiratory disease due to RSV and moderate to severe lower respiratory tract disease that were markedly lower than expected.

In terms of efficacy, we did, of course, fail to show the efficacy that we set out to demonstrate. We did find a trend suggesting efficacy against acute respiratory disease, and that was supported by a number of observations in terms of health care utilization and respiratory hospitalization.

We did notice that efficacy against both moderate to severe lower respiratory tract disease and acute respiratory disease was improved in the absence of influenza vaccine administration, and that is perhaps not too surprising. Influenza vaccine often plays the bully on the block with other vaccines when they're administered concurrently, and so that could be a coherent picture.

Our immunogenicity results were broadly consistent with Phase 2. The microneutralization increases were modest, but there were fairly robust PCA and anti-F responses. We have ongoing analyses to look and see if any of these measures provide a correlative risk. And just a couple days ago, we got our first encouraging results from that, that PCA, in particular, may correlate with the reduction of risk. The curves were shallow, and the work is ongoing to understand that. But it's a tempting bit of data.

Let's move on now to the E-202 results in the next slide. In the next slide, please. As you will recall, E-202 was a so-called rollover trial that was designed to examine both the need and the potential benefit of annual re-immunization. We did that by enrolling older adult subjects who had graduated from E-201 and provided kind of a unique opportunity to evaluate our ability to enhance the vaccine response a year after initial dosing, to look at the duration of vaccine efficacy and the ability to maintain and recover efficacy one year after the initial dose and the safety of repeated dosing, which we always have to keep in mind.

We enrolled 1,329 of the original Phase 2 participants, and we randomized them into four different cohorts. Otherwise, the trial design was similar to the Phase 2 and 3 trials. So as you recall, in E-201, we had a vaccine in the placebo group of equal size, and we split them again randomly 1:1 to receive vaccine or placebo. So in E-202, we had a group that had received vaccine twice. We had a group that received vaccine in the first year but not the second, and so we can look at residual protection. We had a group that had received placebo in the first year and vaccine in the second, and so this would essentially be a confirmatory check on E-301. And then we had a placebo and placebo group to serve as a control.

Moving to the next slide, Slide 46. We found in terms of safety that there was a minor increase in mild injection site pain in people who received second active dose, so were being boosted in the second year. But otherwise, there were no obvious differences in safety. Our surveillance data in E-202 demonstrated that the rates of all acute respiratory disease, which were 2.4% and msLRTD, which was 0.3%, were low in 2015, '16, so those basically confirmed the performance in E-301.

And then in terms of efficacy, we saw, really, no evidence of residual protection of an initial dose when you look to the second year. That didn't terribly surprise us. In older adults, antibody responses do decline fairly rapidly. We saw no efficacy of a single dose in the second year, so that was a confirmation of the E-301 results.

But tantalizingly, we saw the group that received vaccine in both years had 75% and 100% efficacy against ARD and msLRTD, respectively. They weren't statistically significant. The numbers are small, but they do stick out and catch your eye. There is clearly different efficacy in the individuals who had received two doses.

The immunogenicity analyses of that study are ongoing. They're going to be complicated. The performance of the first dose appears to confirm E-301. The second dose actually quantitatively looks less, but we may have tools to understand that a bit better. And Dr. Glenn will speak to those subsequently.

So let's move on now to Slide 48. Obviously, we were disappointed with the E-301 results, and we wanted to understand what appeared to be a fairly striking divergence with E-201. We looked at the trial design differences, and there were some based on our increasing experience in time with doing efficacy trials in this population but nothing that we could think of that would explain the divergences. So we came up with a couple of hypotheses. We wanted to know if the conduct of E-301 was flawed. Did we mess up in some way?

Obviously, we made it a much larger trial, went from 1,600 to 12,000 subjects. And was there flawed conduct on that basis? We wanted to know if there were differences between the test articles. There had been some maturation of the process, and we wanted to know when the test articles in E-301 and E-201 [what] differs. And the last thing we wanted to think about was the impact of the unusually low attack rate that we saw in E-301.

So on Slide 49, we first looked at the performance of the individual sites. Were subjects reporting? Were illnesses that were reported being swabbed? And were they being swabbed in a timely manner? And in point of fact, they were. We found that 83% of all reported illnesses received swabs, and more than 98% of those were within the five-day time limit group carrying out the swabbing.

I should note that this is -- when doing large studies like this in older adult population, this kind of performance is really good. This is industry standard. It reflect back on, for example, the older adult trials that Sanofi carried out for their high-dose flu vaccine. They were able to recover swabs, diagnostics swabs on 79% of their older adult population, similarly, somewhat lower numbers in GSK's older adult trials. So in point of fact, this is very -- this is quite satisfactory performance in terms of diagnostic testing of the subjects.

We also looked at both the ascertainment of illnesses overall and the ability to recover swabs in both the 50 newly trained sites and contrasted them with the 10 experienced sites from E-201 and found no -- very minor differences, certainly nothing to explain the difference in attack rate that we saw in the study.

So then we turned our focus to the RT-PCR lab, and we had actually anticipated that we'd want to know this data. So we carried out, on several occasions, a blind -- first of all, we had carried out an extensive validation protocol of the lab before starting this study. That was a protocol that was provided to the FDA, and we adopted every comment that they had on it. So we carried out an extensive validation. And then several times during the course of the trial, we administered externally prepared blinded proficiency panels, including RSV and other viruses, at the beginning and the end of the study. And the lab performed 100% in terms of sensitivity and specificity on those panels even when the RSV was spiked in at the very limited detection of the assay. So we're very satisfied with the performance of the lab, and that was validated because the lab detected whole bunches of other viruses, coronaviruses, rhinoviruses and captured influenza at rates and at times that exactly reflected national surveillance.

So the lab was performing well. We looked at the integrity of randomization. We validated that against pharmacy dispensing records at the site and also by looking at the post-vaccination antibody responses. We found a very, very low rate of randomization error, 0.4%, that could not have explained the result. So the study appears to have been performed well.

We also looked at manufacturing changes, and we reviewed an extensive data package that we've generated and submitted to FDA. That established comparability between the two processes. We looked at comparative animal immunogenicity at limiting doses, and we looked at post-vaccination immune responses. And all of these were consistent with the Phase 2 trial. So there was no obvious evidence of trial misconduct and product issues to explain the divergence, certainly nothing that's occurred to date. We continue to examine the product to make sure there are no issues.

On the next slide, Slide 50, we also looked at the potential influence of low attack rate. And the influence of low attack rate, really, there's no history to understand the influence of low attack rate in RSV F trials in adults, or RSV vaccine trials in adults because there simply are no large RSV vaccine trials in adults other than this one. But the influenza literature does give us some guidance there. And in the influenza literature, the modulation of detectable efficacy by attack rate is very well recognized in the history of influenza clinical trials. And there are multiple instances of studies using the same vaccine products, the same investigators, the same trial methods and the same study populations that can show 40% to 50% decrements in observed efficacy in sequential years when the attack rates are low.

Interest, to that effect or, say, influenza strain changes, but that effect is independent of influenza strain match. And you can see the effect of low attack rates depressing observed efficacy even when a strain match in the low attack rate year is better than in the high attack rate year. This effect has been recognized and analyzed in the epidemiologic literature, and there's a quote that I won't read from a paper by Struchiner and Halloran, but basically, that recognizes the fact that efficacy estimates simply may not be comparable unless there is an explicit control and similarity in baseline transmission.

We know that in 2015, '16, it was a relatively low-transmission year in adults. That's validated not only in our dataset but in datasets by other groups who have been doing either systematic surveillance in adults or, indeed, just by anecdote in people who are RSV-interested clinicians, who have been following transmission in adults.

Our trials of RSV vaccines in older adults are really the only other non-influenza large-scale trials in older adults that address an annually recurring respiratory virus for which prior infection modifies but doesn't eliminate the susceptibility of the host. So we think there's a good chance that the low attack rate in '15, '16 may have modulated our ability to find efficacy possibly because the background resistance in the population was high. We're still trying to understand that. It's an area of new understanding for RSV, but there is an influenza precedent.

The next slide, Slide 51. So that brings us really to whether we can establish a unified view from 201 and 301 and 202. This is a hypothesis, but it's become our way of looking at these data.

In the Phase 2 trial in older adults, E-201, we saw significant efficacy against ARD, but with wide confidence intervals, the trial was not really powered to detect that level of efficacy. The original power design was targeting, say, 70%. So the wide confidence interval is not terribly surprising. We also saw a 64% efficacy against msLRTD. It was noted post hoc. The circumstances, the RSV attack rate was relatively strong, almost 5%, right in the middle of the historical range published, for example, in the studies by Ann Falsey in Rochester. Retrospectively, we saw an impact of influenza vaccine co-administration there as well.

Moving to the Phase 3. We had -- next, no, go back. Thank you. We had a valid trial, it shows efficacy that's not significantly different from zero for both ARD and msLRTD but again, broad confidence bounds because of the low attack rate really. And in fact, those confidence bounds, on retrospective examination, pretty broadly overlap by 50%, 60% the confidence bounds in E-201. The conditioning circumstances, again, low attack rate and repetition of the IIV effect.

Last but not least, there is the Phase 2 rollover trial in older adults, where the suggestion of efficacy that kind of sticks out in people who got two sequential doses. True, they were separate by a year, but we did something different to the immune system in those people perhaps than we did in E-201 or E-301.

So our synthesis of this data is as follows: We believe the 201 and the 301 results may be driven by the same underlying efficacy. That is they're really drawn from the same statistical distribution of results. We got lucky in 201. In 301, we were facing the low attack rate year, and we got unlucky.

If that's true, then the weighted average estimate of efficacy might be 19%, 20% against ARD. We know that co-administration of IIV and a low RSV attack rate in 301 both conspire to make success difficult to achieve.

So we believe the vaccine can have efficacy, and we think it's shown its efficacy, but it needs enhancement of the immune response in older result -- adults. And one of the things that we can take away from E-202 is that it may suggest a way to achieve this. We may have to hit them twice in a regimen that's designed to make that palatable for use in the real world. Alternatively, adjuvants may help us and my colleague, Dr. Glenn, is going to present some suggestive data later that indicates we may have a path forward.

In the meantime, in the next -- so next slide. So going forward, we're going to continue development of RSV F. We know that immunogenicity is more vigorous in younger adult populations, including pregnant women and especially children and adults with low baseline titers coming in. We do believe there are several avenues for enhanced efficacy and immunogenicity that we can explore in older adults, and we're going to do that. We do have some concern that our current suite of immunologic endpoints may not adequately capture protective responses, and we have work underway that, again, Dr. Glenn is going to speak about to enhance our analytical tools. So returning to older adults though, we're looking at dosing and formulation approaches that can overcome the heterogeneity and background immunity per attack rate.

So on the next slide, as you've heard, we are going back to Phase 2 in the older adult population with a trial that we call E-205. We anticipate starting that trial in the first quarter of 2017 and having top line data in Q3. That will be done in the southern hemisphere to avoid the confounding of the RSV season. We want to ascertain whether adjuvantation or a two-dose primary regimen can alter both the quantity and importantly, the quality of immune response in older adults. And we also want to obviously evaluate the safety of those revised regimens to see that they're still suitable for use.

So our endpoints will be safety, but also RSV-specific immune responses by microneuts, by anti-F IgG, by palivizumab-competitive antibodies, but also crucially looking at antibody avidity assessments especially for the Site 2 target peptide and perhaps others and also to look at T cell responses. That will be a trial in 300 healthy older adults, a randomized, observer-blind design with both one- and two-dose regimens with and without aluminum phosphate and with and without our proprietary Matrix-M adjuvant.

And at that point, I'll conclude and hand the presentation over to our President of Research and Development, Dr. Glenn.

Thank you, Lou. So what I'm going to do is cover some familiar ground on our vaccine for protection of infants via maternal immunization and talk about our progress and some new data.

So if you go to the next slide, so I'll review the competitive landscape briefly; look at some of the key preclinical data which has undergirded this program to remind you why we have confidence in what we're doing; and look at the Phase 2 data, again, remind us all of some of the key safety and immunogenicity results; look at the Phase 3 study design; and then we're going to address some of the support for continuance of the maternal trial and the lessons learned.

So the next slide, as you can see here, is a -- I will just touch on this briefly. This is the competitive landscape for RSV vaccines, and you can see I think the highlight here is that we remain the only product that is in the Phase 3 trial stage of development and of course, it's our global trial Prepare for the evaluation of the maternal vaccine -- maternal immunization vaccine.

So if you go to the next slide, just reminding you of some of the data that we generated that we think is important. This is data in cotton rats. Cotton rats were used as a -- as the predictive model for the development of the monoclonal antibody palivizumab and the

follow-up product, motavizumab, and the use of the monoclonal and the challenge with RSV virus and looking at titers of the virus in the lung. Those assays knows data were predictive for the subsequent trials in which there were five randomized clinical trials showing these antibodies work.

And as a reminder, they bind to Site 2 on the F protein, which we know is contained on our vaccine. What you see on the left is the immunogenicity, and you can see the measures are anti-F IgG, palivizumab and neutralizing antibodies. And the trial was designed to evaluate a range of doses from 0.003 micrograms up to 3 micrograms, and you can see a very nice dose response by all the immune measures. And then on the right, in the setting of challenge of the cotton rats and then looking at the lungs for viral titers, they typically would demonstrate about five log10 pfu per gram of tissue in the lungs.

And you can see with our vaccine, we achieved sterilizing immunity, which is really quite good, and you can see on the right, compares well with palivizumab. And the axis below this should reflect the same axis you see on the far left, so you can see the dose response of the vaccine as well as palivizumab. So very strong immunity. We see the immune measures that we've taken in the clinic look like they're meaningfully predicting the RSV protection and in fact, it can achieve sterilizing immunity with our vaccine at very low doses.

Now if you go to the next slide, just to remind you, we published some data in guinea pigs showing transfer of antibodies. This presented an opportunity to look at the relationship between these measures, in particular, looking at RSV A microneuts, which is generally considered to be a functional assay in palivizumab, and there's quite a close relationship with a nice correlation between these two important immune measures.

And then finally, just pointing out the next slide, we have done -- modeled the maternal immunization setting in baboons. Here, we immunized pregnant baboons and then the baboons after birth are challenged with RSV and we looked for increased respiratory distress. And you can see what this graph is measuring on the left, the control with palivizumab, showing a very nice effect of palivizumab on keeping the infants from going into respiratory distress. You can see the placebo line has a higher fold rise, and you see the same data reflected in those infants born to vaccinated mothers, again, decreasing the respiratory distress by the induction of antibodies in the mother, the placental transfer of those antibodies to the infant and thus protection in the lungs of infants with the vaccine-induced antibodies.

So if you go to the next slide, just also want to touch on a couple elements that are relevant to the end of my presentation. We did a number of studies to select the formulation for the women of childbearing age application and they're illustrative. What you can see on the left is an analysis of our study where we were comparing alum, no alum. And this is the post immunization microneut titers. As fold rises on the Y axis and on the X axis, we sorted the population by their preexisting, that is their day zero microneutralizing titers. And going from log 2, 7, 8, 9, 10 and so on, you can see in green those subjects who received the aluminum phosphate-adjuvanted vaccine really had quite dramatic effects on the fold rise of microneutralization, especially in those subjects who have the lowest titers. And we would contend that that's a key population to induce a strong immune response and those are likely the infants that will be born -- the infants will be born in these mothers would be likely at the highest risk for RSV disease.

And then on the right, and I won't go into much detail, we did a number of studies slighting the adjuvant dose itself and showing that we could induce with a single-dose regimen, an immune response that was comparable to the 2-dose regimen, which has made that a much more suitable regimen for immunizing women during their third trimester of pregnancy.

So if you go to the next slide, we're going to review now the Phase 2 data. So in September of 2014, we did a Phase 2 clinical trial in healthy pregnant women 18 to 40 years of age. The trial was a randomized, observer -- placebo-controlled trial and there is -- in 50 women -- pregnant women at eight sites in the U.S. and it was during the 2014 RSV season. They received the selected dose based on the earlier studies where we used 120-microgram of our RSV F Vaccine and 0.4-milligram dose of aluminum phosphate, and all these subjects were immunized between 33 and 35 weeks gestational age.

So if you go to the next slide, just very quickly, of course, safety was the primary concern here, to demonstrate the vaccine was safe as we've seen in the previous studies in women of childbearing age, healthy adults in our preclinical package. And again, I'd say that the prominent feature was a local transient injection site pain. This would be sort of expected with this vaccine as mostly predominantly mild to moderate and transient and we think acceptable. There are no SAEs. The infant and -- infant safety and labor delivery events were also, we felt, were certainly acceptable for moving forward into the further trials.

So if you go to the next slide, this again -- this summarizes the immunogenicity we observed in this setting. And the way we can look at this is the left -- far left column has the different immune measures we described earlier, anti-F IgG antibodies, palivizumab-competing antibodies where we take palivizumab and we measure the competition for binding to the Site 2 on RSV F protein versus the palivizumab to measure palivizumab-like antibodies and then microneutralization assays measuring both microneutralizing titers against the RSV A virus or the RSV B virus.

Now in the second column, you can see what we have there is cord blood, which would represent the antibody titers in the infants, those in the mothers and the ratio -- the transfer ratio, which represents essentially the antibodies of the infants over the mother as a ratio. And the expected ratio, frankly, from the literature for maternally transferred antibodies would be somewhere north of 1% up to 20% to 30% greater antibody titers being detected in the infant and the mothers.

And what you can see if you look at the all column first, we detected overall in this population an antibody transfer rate -- first of all, quite robust antibody transfer, but a rate a little -- hovering around 1.0. But if you look at the palivizumab-competing antibodies, for example, these are quite robust titers, reaching into the 200 range and microneutralizing titers, again, are quite robust. And what we learned from this is if we sorted these patients by the interval between which they are immunized and the infant was -- in which the infants were born, using 30 days as a cutoff, we can see a fairly dramatic difference between those immunized greater than 30 days before the birth of the child and those less than 30 days.

And you can see in the middle column what we were expecting the results to look like with ratios of 1.2, 1.1. So we saw relative antibody concentration in the placental transfer and all these immune measures, and that was an important lesson and again, met our expectations. So the lesson learned from a clinical trial standpoint was to ensure in our analysis population that we look at infants who are born 30 days after the immunization so they had sufficient time to develop an equilibrium in the concentration of those antibodies. But what we see here, very robust antibodies, good transfer and functional transfer, meeting our expectations of about a 20% increase in the overall antibody titer in the infants.

And then finally, we did look at the half-life. And you could see PCA was around 40 days and then microneuts were around 35 days, and that would bode well for our antibodies being present out to 4 to 5 months and suggest that we could expect protection at least out to that time period.

So if you go to the next slide. The other analysis we did, as we discussed earlier, we know there are several broad neutralizing antibody sites that are historically defined, and two of them at least went into clinical evaluations, and we would highlight Site 2 or the palivizumab-competing site where we measure the antibody.

So this is the competitive ELISA. You're looking at antibodies that are in the mother and to the cord, therefore the infant. And again, you can see we compare the placebo, which represents what we see at day zero.

So if you look in the far left, monoclonal antibody [112] Site 1, you can see the placebo -- there's many subjects who have no detectable antibody, some from -- that have been derived from infection, have some Site 1 antibody. But after immunization, we have a uniform increase in the population and a reflection of those antibodies being passed from mother to the infant.

And you can see site -- there are two Site 1 antibodies we evaluated, a Site 2 antibody and a Site 4 antibody. All these antibodies may be expected to contribute to the overall protection of the infants independently, although we're focused on Site 2 as there's a robust set of clinical data demonstrating that these antibodies should be protective.

So if you go to the next slide, just in summary of our Phase 2 trial. The vaccine was well tolerated. We saw a response to the vaccine in pregnant women that reflected very much the experience we saw in non-pregnant women. We saw the antibody peak quite quickly post vaccination. There was anti-F, PCA and neutralizing antibody that did transfer. We did decide strategically that there was a balance of this vigorous early antibody response, and the level of transplacental transfer in women and greater than 30 days interval between immunization and delivery would provide a more ideal transfer.

We have an observed half-life of 41 days for PCA through the first 60 days post delivery. And again, this suggests at least 90 days in which we should have levels that we think would exceed those needed for protection and maybe up to four to five months where we should have detectable antibodies and we could expect effects after 90 days.

So if you go to the next slide, so now I'm going to talk to you about the Phase 3 study design very quickly. The study design had a primary objective to determine the efficacy of maternal immunization with the RSV F vaccine against symptomatic RSV lower respiratory tract infection with hypoxemia in infants through a minimum of the first 90 days of life. And just to remind you, this is a randomized, observer-blind, placebo-controlled trial. It's a group sequential trial and as you know, that allows us to collect data over several seasons and make our analysis based on events.

The trial could be up to 8,000 over four years. We have started the trial -- we finished year one in the U.S., South Africa, Australia, New Zealand and Chile. And then we are adding to those countries -- sites in Argentina, Spain, Italy and Philippines in this current year. We'll follow the maternal participants for nine months and the infants for one year, and this is a single injection given between 28 and 36 weeks of estimated gestational age.

So looking at the next slide. We also looked at some key secondary objectives of this trial, and this would include determining the efficacy of maternal immunization in reducing the incidence of RSV low respiratory tract infection with severe hypoxemia as measured by pulse oximetry less than 92% and/or the need for a high flow nasal cannula or mechanical ventilation. We also looked for RSV LRTI leading to hospitalization, if it results in death and then all RSV low respiratory tract infection.

So if you go to the next slide, we do have a very important feature in this trial. This trial is being observed by Data Safety Monitoring Board, and it's unblinded. The primary mandate is to look at evolving safety -- aggregate safety data. They review it in a completely unblinded fashion and on a monthly basis during enrollment. It's composed of both pediatric and obstetrical experts. It's supported by an independent, unblinded statistician who has full access to the clinical data base and the treatment assignments.

And to date -- this group has met many times and to date, the formal recommendations made by the DSMB after review of the unblinded data at each meeting has been to continue the trial execution without alteration. And there have been no apparent safety concerns and no advisements to modify or halt the trial.

If you go to the next slide, so now I want to just diverge briefly into the basis for our confidence in this program and just to touch on a few items that are supported data for the RSV vaccine for this program. So as I mentioned at the beginning of this talk, we have protection that's demonstrated in relevant animal models, cotton rats and baboons, and this is quite unique for a novel vaccine to have data like that, that has been connected to clinical trials. We do induce broadly neutralizing antibodies to these various sites. Site 2-specific antibodies are of particular interest because they relate to palivizumab and motavizumab, which have demonstrated efficacy in a passive transfer setting, which is precisely the kind of -- the way we're providing antibodies to the infants through maternal immunization. So the infants receive high titer palivizumab competing and microneutralizing antibodies via passive transfer after maternal immunization.

And I'm going to show this data in a minute. We have demonstrated high-affinity antibody responses in women of childbearing age who received aluminum-adjuvanted vaccine, which we think is very important and I'll elaborate that, as I mentioned. We have also seen that in the Phase 2 setting with women of childbearing age as they pass through a season, we are able to detect serologic conversion indicating that they had RSV infection. And in the vaccinees, we saw a 50% reduction in infection, which is quite a high bar and as you may know, we published this data. We had a second follow-up trial. We've discussed this publicly, showing -- confirming the same result over two seasons.

And then -- so as we think about some of the risks that we have in our Phase 3 trial that we believe derisk the program, it is an event driven, global, multi-season trial, which allows us to adapt the size of the attack rate. And of course, in infants, which have been studied -- long studied for the RSV infection, the epidemiology is quite well defined. And of course, we're bringing to this program an aluminum-adjuvanted vaccine formulation.

So let's go to the next slide and talk a little bit about recent lessons learned, and as Dr. Fries mentioned, we're quite interested in whether we can refine our immune measures. So one of the directions this has taken is to look at affinity. So in general, high-affinity antibodies targeting broadly neutralizing epitopes are considered the most desirable for protection in almost any setting, both from a natural infection and from vaccines.

And one of the hallmarks of palivizumab and motavizumab is the fact they're characterized by high affinity binding of Site 2 on the F protein, and we mentioned now that this clinical efficacy has been demonstrated and indicates that Site 2 antibodies are protective. And what I think has come out of those studies, motavizumab was developed on the basis of its higher affinity. In fact, it had approximately 100 fold greater affinity than palivizumab. And when the clinical evaluation was done in head-to-head trials, motavizumab performed notably better than palivizumab, again, reinforcing the importance of affinity.

So we've looked at the -- we begin to look at the affinity of our vaccine-induced antibodies. And affinity, just to -- it's a little bit of a simplification of the principle, but it measures the strength of binding of the antibodies to our vaccine target, to an epitope or to a pathogen, and this was probed with a surface plasmon resonance and compared with PCA.

So if you go to the next slide, this is a bit of a busy diagram, but it shows an overview of B cell immunity. I think it's important for us to dwell on this for a few minutes before we explain our data. So this is an overview of B cell immunity in healthy adults, and it's important as B cells compose the arm responsible for the protection of antibodies.

This system is programmed to recognize antigens, such as those on pathogens -- found on pathogens and vaccines and to produce high-affinity antibodies. So what are high-affinity antibodies, and why do they matter? As I mentioned, affinity is the measure of the strength of the binding of an antibody to its target, such as Site 2 in the F protein. And it's generally accepted that high-affinity antibodies lead to better immune effector events and thus, better efficacy. So this diagram, you can see the various points at which B cell stimulation can result in antibody production and how the system is really programmed to -- finally to induce high-affinity antibodies.

So on the upper left, you can see naive B cell. And this -- when they encounter a pathogen or a vaccine, they divide and mature into cells known as plasma cells in the lower -- you can see them in the lower tier, and those plasma cells are -- produce antibodies. They also divide and mature into cells that eventually become memory B cells. So flowing from left to right, you can see we arrive at the IgG memory B cell. In the case of an RSV infection, these can be specific for Site 2, so they're very epitope-specific memory B cells.

So in older adults -- so this is the healthy immune system and you can see, if you gave a vaccine to naive subjects, frankly, they'll make IgM, they'll make IgG. And the first level of production of plasma cells happens from naive B cells and the affinity of the antibody produced in this setting depends on the strength of the initial immune stimulation and adjuvants are very good at taking naive B cells and actually producing fairly high affinity antibodies. But they also push the IgG memory cells, and so in older adults -- or sorry, in young adults and older adults that had multiple exposures to RSV, so they have a very robust population typically of RSV-positive IgG memory cells and specifically, Site 2 IgG memory cells.

So vaccine, whether or not it's adjuvanted, that is where the memory B cells encounter this, produce very rapidly high titer -- high level of high-affinity IgG antibodies and they further undergo the development, which is called somatic hypermutation, which leads to affinity maturation and clonal selection so you get another clone of memory B cells that have even higher antibody affinity. So you can see the B cell system is biased to produce high-affinity antibodies, again, further evidence that they are important for vaccine efficacy.

Now if you go to the next slide, here's what happens in older adults. So the hallmark of immunosenescence is to lose these memory B cells and it essentially creates the inability to produce high-affinity antibodies readily, as you might see.

So older adults have a mixed population. Some older adults really have quite intact immune systems. Some adults have this depletion that's gone on, and you can see by the red crosses through those cells, those cells have been knocked off. And there are various mechanisms by which this happen. For example, chronic CMV infection is known to deplete memory B cells. So you can imagine, you have an RSV-positive, some very specific B cell population that recognizes in Site 2. You have a CMV infection and they're taken out. And now that subject is simply like a naive human and you need to start over from the very beginning to generate high-affinity antibodies.

So if you look in the far left here, if you use a vaccine without adjuvant, the signal is not very strong and you can result in these plasma cells that have low affinity to the Site 2. So this is something we've learned.

And now if you go to the next slide, what I'm going to show you here is we believe we developed some immunoassay that will allow us to interpret these effects in the sera of immunized subjects. So using the combination of a competing assay where we measure antibodies that compete with palivizumab, as I mentioned, that bind to Site 2 on the F protein and by a second assay, surface plasmon resonance, which measures the affinity of binding to a specific Site 2 peptide, we believe we can better understand in a clinically relevant manner the immune responses that we're observing in these trials.

So initially, we've done this with sera from M201, which is one of our dose-finding studies in healthy women of childbearing age that you see here, and I'll show you a second slide derived from the sera from the Phase 1 trial in older adults. What you see here now is the way this assay works is you take a peptide, you pass the antibodies over, they bind to the peptide and then you can measure how long they bind to the peptide. So the longer they stay on, the higher the affinity. And the way this works is this off-rate is an inverse, so the lower number is actually a higher affinity. So you can see on the left there, the arrow indicates low affinity to high affinity, and you have placebo. You have day zero and day 56. You have placebo, vaccine in 90 micrograms without aluminum phosphate and vastly with aluminum phosphate.

And at the top level, you can see the collection of dots there indicating that most of these subjects are immune-naive. They -- in fact, we know they have very little PCA and we -- very little or no PCA and we're measuring very low affinity and essentially no affinity, no measurable affinity here.

So if you slide over to the -- go back to the slide. You go to the second column, you can see the effect of the unadjuvanted antigen and you move -- at day 56, you move a very significant number of the population to have high-affinity antibodies. And for reference, you can see palivizumab on the far right, 10 to the minus 2. And so these are a little better than palivizumab with a geometric mean. However, I circled there for you the subjects who are not moving, who are not producing Site 2 antibodies that are high affinity. Now I'll show you what that population looks like in just a minute.

By contrast, if you give the population the adjuvant at 90 microgram vaccine, you can see the full population moves down. There's no non-responders, so empty circle above there. And frankly, these are 100 fold greater than palivizumab, reflecting an antibody affinity that's very much like motavizumab so very desirable outcome in that -- all the subjects' sera have after vaccination are indicating that we've produced high affinity palivizumab to be the antibodies.

Now if you go to the next slide, in contrast, older adults, again, you see on the top there, the absence of affinity in most measures at day zero. And then if you move to the 90 microgram, no alum adjuvant, which reflects the formulation we have had in our Phase 2 and Phase 3 trial, we're moving the antibody affinity in a very modest way. And we have many people that are in the circle there that have not responded. When we have the aluminum phosphate adjuvant, we -- again, we create a population of what looks like young adults, but again, there are subjects there who have low affinity antibodies at the top.

So again, just flip back to previous slide. You can contrast in the far right what we have in maternal immunization, which is very, very encouraging for us. And then if you go to the next slide, on the far right, you can contrast in the middle, frankly, the minimal affinity we're able to induce in our older adults.

So if you go to the next slide, this pie chart and this illustrates the populations of antibodies we're detecting in this -- in those studies I just showed you. And the legend is that in the gray, you have palivizumab -- completely palivizumab-negative subjects and they have no measurable binding. But what surprises, as we find this population of subjects that do have some measurable PCA, but their antibody affinity is essentially very, very low, we can't measure, it's below the limit of quantitation in our assay. And you can see how we measure high affinity antibody.

You saw on the left the women of childbearing age our formulation at the very bottom, the vaccine with aluminum phosphate is extremely good at inducing in all the population high affinity palivizumab Site 2 competing antibodies.

By contrast, you can see in the middle, on the right with older adults, we're moving that population. And if you combine the blue and the orange, this would have reflected a palivizumab competing antibody positive population. And you know we saw around 80% to 90% of the subjects with palivizumab competing antibodies. And we took that to be sufficient for protection. And that -- and we saw in the Phase 2 study we did see protection, so we were comfortable with this. But I think on further analysis, we can see that blue population and the gray population frankly that has not changed after vaccination will not be desirable for producing protection. And you can see the adjuvant corrects that. We have no longer immune naive subjects. They are all prime to palivizumab. We still have subjects in this trial and this is the Phase 1 trial. This is with flu immunization that have antibodies that we think might be low affinity.

And so as we go forward, as we do the trial, Lou discussed, where we'll use adjuvant and/or multiple dose, we'll use Matrix-M, we'll use aluminum phosphate, we'll use one and two doses, we think this evaluation of the antibody quality will allow us to differentiate between our vaccine formulations and choose the best formulation to give us the highest affinity palivizumab competing Site 2 antibodies.

So if you go to the next slide, I think the implications here are quite important, just to show you again the women of childbearing age subjects and private subjects have intact RSV immunity to Site 2 single-dose of adjuvant vaccine results in very high affinity antibodies. The antibodies we see have affinity that are greater than palivizumab. And aluminum, increases both the affinity and the amount we know from our previous work, the amount of high affinity antibody, which we all very much have probably seen this for success in our Phase 3 Prepare trial, which is used this formulation.

In older adults, where we've learned here that some have intact RSV immunity to Site 2. But others need us to convert there naive B cells to produce high affinity antibodies and these primed low affinity B memory cells produce high affinity antibodies, which is our target.

So and if needed, we may need to use the second dose, which would further convert these post vaccinated population we see that are prime but still producing low affinity antibodies. So this is a very powerful assay, it's something that has provide us some new insights. And this now may also allow us to define the correlate of protection and risk. It helps us, as I mentioned, we believe this will help us interpret our older adult formulation studies and select amongst the adjuvants and decide if the two dose regimen is beneficial.

So we have learned some important lessons in summary. I think we have immune measures that are going to help us. I think with that, I'll end my talk and turn it over to Buck.

Thank you very much, Greg. To this point, Stan, Jim, Lou and Greg have done a great job laying out our corporate objectives and the scientific rationale and development plans that will be the focus of our R&D activities through the end of 2017. I'd like to take the next few minutes to translate those activities into our financial and operating plan.

Next slide. Before we look ahead, it's important for us to review our 2016 operating plan and the related financials.

In 2016, our operating plan was built around activities supporting RSV, influenza and new product development. As we can see here on Slide 82, our primary focus was for the -- was on the RSV F Vaccine, executing both our Phase 3 older adults Resolve trial and our Phase 3 infants via maternal trial called Prepare. In addition, we have the Phase 2 older adults rollover study and a series of other activities that were ongoing to support the next steps in the development, and ultimately, our view of the commercialization of the RSV F vaccine in older adults.

We continued our work in influenza, which consisted of managing the BARDA contract to its maturity in September of 2016 as well as the important work to transition our seasonal influenza vaccine to the nanoparticle platform from the VLP platform.

And as is always our conduct here at Novavax, we are always looking for new product opportunities. These operating plans are inherently tied to the financial forecast, and ultimately, the reported financials we put forth in front of you. Financial plans are simply an economic measure of the operating plan.

Next slide. So to do that translation, we're looking at a slide here, Slide number 83, that contains three key pieces of financial information, a simplified income statement, cash used in operations and ending cash and investments for both Q1, Q2 and Q3 of 2016. Together, this information helps explain the financials for the first nine months of 2016 and provides the foundation for a discussion of our 2017 financials and operating plan.

Next slide. Let's focus on three key components of the financials. Expenses, cash used in operations and ending cash and equivalents.

With regard to expenses, in R&D, the key driver to expenses in 2016 was the Phase 3 older adults RSV trial and the Phase 2 older adults RSV trial. As shown in footnote -- as shown in footnote A, R&D expenses were $68.9 million, $64.9 million and $52.9 million in Q1, Q2 and Q3 respectively. Per our guidance throughout the year, we guided that R&D expenses would decline dramatically in the third quarter of 2016 as those RSV older adults trials wound down.

With regard to G&A, as highlighted in footnote B, expenses were $10.5 million, $14.1 million and $13.6 million respectively in Q1, Q2 and Q3 for 2016. The primary driver to the increase in G&A expenses in Q2 and Q3 were pre-commercialization activities and, to a smaller degree, an increase in headcount. Those pre-commercialization activities were discontinued in late Q3.

With regard to cash used in operations, we see the cash in -- where we can see the cash impact of these operating activities, net of noncash expenses in the statement of cash flow, specifically cash used in operations.

If we look specifically at the line item, we see cash used in operations were $69.8 million, $62 million and again $62.4 million in Q1, Q2 and Q3, respectively. Importantly, cash used in Q3 of $62.4 million includes $6 million in convertible notes semiannual interest payments. Therefore, the actual cash used by our operating activities, net of those interest payments, was $56 million. This gives us more clarity on the reduction in R&D cash expenses as the Prepare Phase 3 older adults trial and the Phase 2 older adult trial wound down in that period.

The third quarter trends in R&D and G&A expense, cash used in operations and the restructuring plan announced today, provide insight into our 2017 financials.

Let's go to the next slide, please. With an understanding of the expenses in cash flows in 2016, we can now discuss the 2017 operational priorities and financials. As shown on Slide 85, we can see that the discussion today will focus our R&D activities on the RSV vaccine, primarily the Prepare trial, which is our Phase 3 trial and infancy and maternal immunization, a new Phase 2 trial in older adults that will explore regimen and adjuvants, and finally, our newly announced Zika program, where we will continue our ongoing Phase 1 enabling work, which includes nonhuman primate challenge studies as well as the goal of entering a Phase 2 immunogenicity and safety study in the new year. We will continue our preclinical work in nanoparticle influenza and our new product development work.

Next slide. Let me speak about corporate restructuring. The corporate restructuring announced today was based on the 2017 operating plan I've just reviewed and an analysis of the resources necessary to execute on that plan. As stated in the press release and earlier in today's comments, the plan was based on three key objectives. The first was to prioritize development activities to achieve clinical data events in 2017. The second was to reduce cash burn, extend the financial horizon and minimize near-term dilution. And finally, we wanted to maintain our core operational competencies in order to execute on these development plans and others in the future.

There are a number of key components of this restructuring. First, as announced, is an approximate 30% reduction in full-time employees. In addition, there were significant other expense reductions that we have implemented here in the company, including R&D expense reductions, both project and non-project-related expense reductions, G&A expense reductions, specifically pre-commercialization activities and others and property, plant and equipment forecasted investments in 2017 will reduce relative to 2016. The combination of all of these items lead Novavax to estimate that we will have a reduction in cash burn of between $70 million and $100 million in 2017 relative to 2016.

Next slide, please. With that, let's talk specifically about our financial outlook. For 2016 fourth quarter relative to Q1 through Q3 of 2016, we expect an increase in revenue under the Bill & Melinda Gates Foundation grant, resulting from an increased enrollment in the Prepare trial. We expect consistent R&D expenses with Q3 due to the final visit for all participants in the Resolve trial. And finally, we expect a decrease in G&A expenses as pre-commercialization activities are discontinued. The fourth quarter will also include severance costs related to the headcount reduction of between $3 million to $4 million.

In 2017 relative to 2016, again, we expect a revenue increase under the Bill and Melinda Gates Foundation grant related to the ongoing Prepare trial. We do expect R&D expenses to be substantially lower due to lower project, employee and other expenses. And G&A expenses will be substantially lower due to pre-commercialization, employee and other expense reductions.

In summary, we have the liquidity to fund this operating plan as described today into 2018.

The 2017 financial and operating plan supports Novavax's aim to discover, develop and commercialize groundbreaking nanoparticle vaccines. We now have a company with the resources to execute on the development plan discussed today with over $300 million in cash on the balance sheet and the support of our partners at Bill & Melinda Gates Foundation through their $89 million grant. We have a high value portfolio of products, which include the RSV vaccine in both maternal immunization settings as well as settings in older adults and pediatrics. And finally, we are introducing an exciting new program in the Zika vaccine, which we expect to have in Phase 1 next year.

All of this provides us with an operating plan with 2017 valuation milestones, a potential Phase 3 Prepare trial interim data, pending our discussions with the FDA; a Phase 2 older adults trial data; and finally, data from our Zika trial.

With that, let me turn the call back over to Stan.

Thanks, Buck. So you've now heard from the whole team. And I think you've heard a lot of excitement about where we are. It's a lot better place than where we were 60 days ago when we were surprised by elderly data. I think we've got a lot of insight and a lot of work. We have a lot of insight into what we think the fix is for that. And plus, we haven't skipped a beat on our Phase 3 maternal program. So we are excited. We are in good place. We're looking for a good 2017. And with that, I will turn it over to you guys, if you guys are still hanging around.

(Operator Instructions) Our first question comes from the line of Joel Beatty with Citi.

My question is regarding the focus on the need for higher immunological response rates and higher affinity immunological responses. Were you able to go back and look at the data from the Phase 3 trial and assess the immunological responses in those patients, or at least the patients that had events?

Joel, Greg here. So yes, that's, I think, what we're at now as we've developed what we think is an important assay, and we're beginning to start that work. So the idea here is we'll have several months and by the time we have the sera from the E205 trial, I think we'll have a very good idea whether or not we'll have immune correlate and whether these immune measures are going to provide an extra window into the analysis.

I will say and Lou alluded to it, we also have some of the analysis being done on the PCA itself. And I think again we'll be able to share that information in the coming few months. Our goal is to have a definitive picture of the importance of the immunogenicity and time to interpret and use these assays for the E205 trial where again, we are looking at ways to improve both the quality and the quantity of antibody with adjuvants or with one or two dose regimens.

Okay, great. And then if I could ask one other question. How's the enrollment in the Prepare trial going? Are you able to give a timeline on when you expect [my] readout?

There's two questions there. As you know, we're not usually -- we don't give guidance on enrollment. I think just I can say in general the trial is going quite well. And we are in discussion with FDA on the [interwinding] -- unwinding and we're thinking towards the end of this year, second half next year. Sorry into next year. Yes, next year -- into next year that we could have that result.

Our next question comes from the line of Jessica Fye with JPMorgan. Your line is open.

This is Ryan on for Jess. Maybe, Buck, can you help us understand a little bit more about the cost-cutting? This cost savings of $70 million to $100 million seems like a pretty wide range, so could you give us a little bit more color on sort of what factors would put you either at the high end or the lower end of that range?

Yes, Ryan, thank you for the question. I think just to start out, we have spent a lot of time evaluating the operating plan, the consequences of the investments under that plan. And we do believe that, that range on the call today is an appropriate range to provide guidance for everyone through the end of 2017. Obviously, we'll help to tighten up some of that range as we get further into the year.

I think there are a lot of impacts to the estimates that we put together to get to that number. Frankly, one of the key components would be timing of investments in some of these clinical trials and when they occur as well as other investments that would be made alongside the company to build out.

So as Greg mentioned today, sometimes in our explorations to understand the outcomes of these trials, we've developed a new assay. We have new learnings and new understandings. Those can be impacts to our costs as we go forward, and we need to be able to explore those. So it's a very high level response, but I'll leave that with you at this point in time.

At the high level, I mean, at the high-end of that range, does that include some contemplation of starting another Phase 3 study in older adults if you were able to do it next fall?

I think the guidance I've given you today includes the operating plan that we've discussed. So there is not a Phase 3 trial in that guidance.

Okay, great. Thank you.

In older adults, yes. We continue with the Prepare maternal immunization trial.

Our next question comes from the line of Ted Tenthoff with Piper Jaffray. Your line is open.

So we'll have the Phase 2 data from the elderly patients. When do you think we could get that data? And I appreciate all -- how this is all stitched together with respect to the financial guidance changing going forward. What is the most recent guidance in terms of when we should expect data from Prepare?

It's Stan. I think what we've told you is we're projecting second half of '17. And that's based upon two things. It's based upon the case rate that we get from now until mid '17. And number two, successful discussions with the FDA, which we've already initiated. So I don't think I can get it closer to you than some time in the second half.

I might not have heard that during the presentation earlier, so that's helpful. And then with respect to Prepare?

That was with respect to Prepare. That was maternal immunization.

So maternal immunization will get an update in the second half of 2017, you said? I'm sorry.

And we are hoping that will be an efficacy viewing to what the [efficacy of that product].

And in terms of the Phase 2, the new Phase 2 for elderly, sorry?

Sorry, I'm sorry. Yes, okay, so that, I think at the latest, that will be the third quarter.

Our next question comes from the line of Kevin DeGeeter with Ladenburg.

I guess two from me. Just your current thoughts about potential path forward that would include a potential combination for influenza and in light of the data that Lou described earlier in this call, describing in the Phase 3 what appears to be a reduction in the potential efficacy benefit of the vaccine in patients co-administered.

Sure. I think that you have to understand that this is an instance where influenza vaccine, another manufacturer's influenza vaccine with the variety of components that relatively crude and activated influenza vaccine contains is given simultaneously and in another injection site in a subject receiving RSV F. For our programs going forward, we would take a much different approach. We would use a specifically engineered nanoparticle flu vaccine, which had characteristics or formulation characteristics not unlike the RSV F Vaccine, could be combined with it directly, and we would anticipate most likely would be delivered in concert with an adjuvant that would allow both to have strong immunogenicity.

But I think in the case of -- the key take home is that in a combination -- in a Novavax combination vaccine, we would engineer the doses and the adjuvant combination to make sure that we got strong responses to both. I think we can probably, in that instance, overcome the interference of the flu component and we would design the vaccine specifically to do that.

Okay, great, that's really helpful. And then maybe one more from me and then I'll get back in the queue. This one's probably for Greg. Greg, one of things we've been trying to just get our mind around is just how to think about the clinical relevance of the PCA assay in the context of this elderly population. The assay has been used and clinically validated primarily in neonates and pediatric populations. Are you doing any work to kind of characterize whether or not this is really the right surrogate to be thinking about in the elderly? And does the Phase 3 data sort of allow for any analysis along those lines?

This is what in part I was alluding to, maybe I can expand on it a little bit. So this look at the antibody affinity, we think is quite important. And what it's revealed to us is we have what looks like a population of folks that have RSV Sites 2 specific community and then those that don't. And in those that don't, we think that we -- when we induce immunity, the PCA measure is not lining up with what we had expected. So in young, healthy immune systems, when we measure PCA, it was high affinity PCA. So in the older adults, as I was showing you, we have -- we were surprised to observe that we could measure PCA in some of the vaccinees, but it had very low affinity. So we think that, that's a very important window into what we need to achieve with our immunization. And as Joel asked a little earlier, so now we can reflect back with this new measure and look at our E-201, our E-202 and our E-301 sera and see if it meaningfully predicts our ability to indicate a protective immune response.

Now I think it's quite likely, since affinity is a known factor for eliciting good protection that, that could be a meaningful window in which to look for an immune correlate -- a correlate of risk and interpret our formulation data. So we're quite excited about using this assay, and that's why it felt like we wanted to share it with you tonight. We will be looking through, we've got a lot of archive sera, of course. We have a very unique clinical data set in PCR positive subjects, so it's going to be very interesting over the next few months for us to go through this and do that very analysis.

I think, to answer your question, I think high affinity PCA is very meaningful. That's what we induce in animals. That seems what we are inducing in our Prepare study. And I think what threw us a curveball is the fact that there's the hallmark of immunosenescence in older adults has manifested itself as an absence of what looks like RSV-specific immunity. So we assumed that the many, many years of exposure, the older adult population would prime everybody but what we didn't really calculate for was the fact that some of those, in fact, that memory would be knocked off as maybe with CMV infection through the loss of B cells. So the assay provides -- has provided a window in the population we're in. I think it provides a window and provides us real confidence that our immunization in maternal is very, very good. And I think it's going to give us guidance as we select our formulation going forward for older adults.

I agree and then just one small clarification on that. I really appreciate the thorough answer. With regard to validating that assay, you're going to do that against sera from an adult population or from --

Yes. We can take our efficacy trials now. We have sera. We know the attack rate. We know who got RSV. So we have a set of windows to evaluate the meaning of this assay against the observed efficacy in these three trials. So we're quite -- we're very eager. We're beginning to get into that analysis, and we'll look forward to sharing with you the results in the near future.

Anything to add there, Lou?

No, I think that the data that we have in hand and the array of samples that we have in hand, as Greg said, is quite unique. One of the interesting issues is about understanding, especially in an elderly population, who are affected by what in some years, for example, as in the Phase 3 years, relatively infrequent disease is that you don't know in a person who's not sick whether they were exposed or whether they were exposed -- not exposed or whether they were exposed and resistant to exposure.

So here we have the opportunity of looking at the people who got sick and essentially trying to establish a correlative failure, if you will. And then contrasting those with matched individuals who are like them in every other way but did not get sick. So that's one of the directions that we're going to be exploring that will take quite a lot of assay work, but we think it's going to be illuminating at the end of the day.

(Operator Instructions) Our next question comes from the line of George Zavoico with JonesTrading. Your line is open.

A couple of quick questions about Zika. First, recently, Sanofi received, I think, a $40-plus-million BARDA grant. Florida provided $25 million from its own profit, I think, to study or give out the Zika vaccine. Can you tap into any of these external sources for funding?

Thanks for that question. This is James. So certainly, we're looking at multiple lines of external funding from other government sources as well as from BARDA. And at this time, I believe that the BARDA fundings for last fiscal had been determined but we're looking forward to exploring other opportunities, especially when we have the nonhuman primate data in hand in January of 2017.

Okay. So if it doesn't work out you might get it perhaps in 2018 then, given the length of time for the review?

Yes, we're going to work on it. I mean, this is -- we think the U.S. government is recognizing that this is an important pathogen and we know that there's funding activity going on. So I think we'll be poised to start to try to obtain that funding in the coming year.

And then -- sorry.

Fiscal 2018, which starts in October.

Yes. Okay. And then for RSV again, the Phase 2 study that you're going to be starting next year, this is strictly immunogenicity study, so there's -- you don't have to worry about what the attack rate is for next year, right? But will you also be doing a secondary endpoint -- secondary efficacy endpoint like you did with the primary for the first Phase 2 trial?

Well, we can observe to see whether there's a significant attack rate or not, but remember we'll be studying multiple formulations in a relatively small trial. Now the trial will eventually span the RSV season in the Southern Hemisphere. And so, yes, we can be opportunistic and characterize any respiratory infections that can occur.

But I think, George, the key here is when we get these data, we will be using different tools to measure this with some really cool analysis and we'll know a lot more about the type of immune response each of the arms of the trial gives than we would ordinarily have.

I think that's true and the other thing is the trial will be of a size that we wouldn't be able to make, draw efficacy conclusions anyway but we can monitor rates.

But given the lack of history of attack rates from year-to-year, this is going to be an interesting endpoint to really figure out to see how frequently you might get an outlier data like you did for your Phase 3.

Yes, we're not really -- we recognize the importance of that. We're not really incorporating that. We've scaled back to Phase 2. We want to establish an immune response that we think is predictive of protection and as we mentioned, I think we have an archive of information from these three trials that are very, very rich that we think we can learn from before we go back into an efficacy study.

We also know -- I just would also point out that the ACIP has an interest in adult RCV surveillance, and they began to fund some centers to do older adult surveillance, which is new and represents our interest in the disease burden in addition to the pediatric surveillance that's going on.

So I think we did present our data at ACIP, and they have a continued interest in RSV and they recognize that their surveillance system has to improved. So we hope we can take advantage of some of that information that's going to be generated this year and in the coming year.

Okay. And you were also at one point talking about doing a peds trial, moving into Phase 2 in peds sometime in the near future. It sounds -- you didn't talk too much about that on this call. Is that still on the planning stages prospective?

No. It's in our checklist, we've -- it's in our checklist, George. We just haven't put it on the calendar yet. We are anxious to start the Phase 2 ped trial, and we could start one next year. We just haven't put it on the calendar, so we're not talking about it yet.

Okay. And with regard -- back to ZIKV, you mentioned the cross reactivity. Is this -- it sounds to me you could apply this, with conservative approach, you can apply this to dengue. Are you considering dengue as a new opportunity? Because you did have new opportunity as one of your financial goals.

So I think the important thing to note about that quaternary episode -- epitope and the fact that it's been served across those flaviviruses is the fact that it is unlikely to change. So as we look at time and the effects of Zika presenting themselves along with the change in Zika virus, we feel that our target is more of a static target in terms of being around for a long time. Coupling that with Matrix, we're going to have an outstanding effect against that particular virus. And that's I think the importance of the quaternary epitope.

Again, Zika, but would you be able to apply it to dengue?

Yes, it's possible but that's not our first target right now. It's --

Yes, of course, just speculating. Now, last question on Zika and then I'll get back into the queue. I was listening to vaccinologist speak about Zika and even in Brazil, some of the people there are saying that they do not expect a second wave of widespread Zika infection similarly like they had last year. So in terms of epidemiology, do you expect this, kind of, peak to sort of flatten out over time? And this person actually said that maybe by the end of this year, by the end of next year, everybody in Puerto Rico, for example, would be exposed. In which case, if you do a trial, would you have to preselect those who were exposed and have the antibodies already and those -- or have some antibodies already versus those that have not been exposed? [This] will complicate your planning.

Yes. I think that's more of a complex question. When one looks at the transmission of Zika virus, there are many models out there. Very recently, this past Sunday on 60 Minutes, we heard Dr. Fauci speak to that and the concern of Zika being of prominence within the United States and other areas for the foreseeable future. So although there's many different models out there, I don't think that we're looking at Zika as not being an issue for the United States for the next several years.

In terms of the population of Brazil or other areas of high transmission, there is historically some evidence that prior flavivirus infection might protect an individual for a period of time after exposure to that flavivirus. But for a virus that's been discovered since 1947, we really have a dearth of information about Zika virus. So more to follow as our [Epi] gets better, but many experts in the field project the Zika virus to be ongoing for the next several years.

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Stan Erck for any further remarks.

Thanks, everybody, for both being patient with us by -- when we moved the Analyst Day for a month. It turns out in retrospect, I'm really glad we did it. We have learned a lot of stuff that we could be a lot more articulate about on this call, and now we've got a plan that we're excited about going forward. So thanks a lot. We look forward to seeing you at various investor meetings in the coming months and reporting data throughout 2017. And with that, I will sign off without one political comment.

Thanks for that, Stan.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program, and you may now disconnect. Everyone, have a great day.