Novavax Inc (NVAX) 2017 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Novavax Fourth Quarter Financial Results Conference Call.

(Operator Instructions) As a reminder, this conference may be recorded.

I would now like to turn the conference over to Mr. John Herrmann, Senior Vice President and General Counsel of Novavax.

Sir, you may begin.

Thank you.

Good afternoon, everyone.

This is John Herrmann, General Counsel of Novavax.

I'd like to thank everyone for joining us on today's call to discuss our fourth quarter and full year 2017 clinical highlights and financial results.

A press release with additional information on our fourth quarter and full year 2017 clinical highlights and financial results 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 are Novavax' President and CEO, Stan Erck; our President of Research and Development, Dr. Greg Glenn; our newly announced Chief Business Officer and Chief Financial Officer, John Trizzino; and our Vice President of Finance, Chris Dunne.

Dr. Lou Fries, our Chief Medical Officer, is also available for responses to questions.

Before we begin, I need to remind you that today's call contains forward-looking statements.

As much as I would love to read the full safe harbor statement found on Slide 2, I will resist that temptation, and invite you to study it at your leisure.

And with that, I'll turn the call over to Stan.

Thanks, John, and thanks, everybody, for joining.

Welcome to our fourth quarter and full year 2017 earnings call.

As you can see, we are doing this earnings call as a webcast with a slide deck.

We're busy -- we're using the slide deck because we wanted to ensure that we spent some time on recent news regarding our lead programs.

But before we go any further, I wanted to also talk about a second press release that went out this afternoon.

John Trizzino, who we all know is our Senior Vice President of Commercial Operations, has agreed to take an expanded role as Chief Business Officer and Chief Financial Officer.

Since John came back to Novavax in 2014, he has demonstrated himself as a strong executive leader with a deep background in commercial and business development, and also corporate financial operations.

These traits will serve Novavax well as we focus on our immediate goals, which is bringing our RSV F Vaccine towards commercialization and continuing development of our NanoFlu vaccine.

John joined Novavax back in 2009, and have built up an extensive background in the vaccine market.

Beginning in 2011, he was CEO of Immunovaccine before returning to us in 2014.

As Chief Business Officer at Novavax, John will be responsible for pre-commercial and commercial launch strategy and execution as well as public relations.

And as CFO, he is responsible for financial reporting, corporate funding, banking and investor relations.

So back to our slide deck.

The agenda for our call is on Slide 3. I'll start with a few opening remarks, primarily focused on where the company stands in March 2018.

I'll then turn to the 2017, '18 flu season problem, and Greg will take us through the reported top line, NanoFlu results and our next steps.

Following that, Greg will provide an update on our RSV maternal immunization program, and then John Trizzino will provide a review of the market RSV opportunity, particularly relevant since we anticipate filing a BLA in 2019.

Chris will then report on the year-end financials, after which we'll open up the line for Q&A.

Moving to Slide 4, I'm thrilled to say that this is the -- that this last quarter has been the most significant in Novavax corporate history.

We have now collected important clinical results from our 2 lead vaccine programs.

These are results that advance both programs in their respective clinical trials, and create momentum for our execution during the remainder of 2018 and beyond.

Now let's switch to an update on our NanoFlu program.

As reported in our press release a couple of weeks ago, we demonstrated that our vaccine stimulated a significantly more robust and broader immune response when compared directly to the leading commercial flu vaccine for the older adult market.

In the press release, and in the slides we are presenting today, we note key data points from the trial.

As we noted then, given the strength of our trial data, Novavax has submitted detailed results for publication in a peer-reviewed medical journal.

I'm now pleased to report that we will be presenting this data at the World Vaccine Congress meeting on April 4.

Before we move on, I'd like to remind you why we designed the trials we did.

It's a clinical trial comparing our NanoFlu vaccine against the leading licensed flu vaccine in the older adult population.

The comparator vaccine is an egg-based, high-dose vaccine that has captured roughly 2/3 of that market in the U.S., and has been a big commercial success in a premium price market.

That vaccine got to where it is today because the manufacturer was the first to show improved immune responses and superior efficacy when compared to their own best-selling standard dose vaccine.

And even so, experts rightly are calling for an improved vaccine with better vaccine effectiveness.

We thought we could do better.

Our team constructed a new vaccine, a vaccine based on recombinant nanoparticles using adjuvants no longer tied to the outdated egg-based influenza vaccine manufacturing process.

We chose to demonstrate the advantages of an adjuvanted recombinant nanoparticle, or NanoFlu, in the older adult population because they represent the largest unmet medical need.

To remind you, using the same comparator vaccine in an animal model, we published data last summer from our study in ferrets in which our NanoFlu vaccine has superior protection from flu when the animals were challenged with contemporary and historic H3N2 strains.

Our goal was to show that NanoFlu could generate better immune responses to flu than the egg-based, high-dose comparator in a clinical trial.

So moving to Slide 6, as you all know from the current flu season, the efficacy achieved using current market flu vaccines have been disappointing.

Flu vaccines contain 3 to 4 strains each year.

The seasonal influenza vaccine contains 2 A strains, H3N2 and H1N1, along with 1 or 2 B strains.

In recent years, the greatest burden of disease has been associated with the H3N2 strains.

And here, the licensed vaccines have performed poorly.

This flu season, through February, vaccine effectiveness against the H3N2 strains is estimated by the CDC at only 17% in older adults.

This is not a new problem.

H3N2 vaccine effectiveness has been estimated to be only 14% over the last 5 years.

And during the current season, roughly 75% of flu-related hospitalizations in the U.S. are associated with H3N2 viruses.

Moving to the next slide.

Low flu vaccine efficacy this season highlights the need for a better, more effective flu vaccine.

Poor vaccine effectiveness is a result of a mismatch between the vaccine and current circulating viruses.

When you have a mismatch, the immune response stimulated by vaccines may not be protective against the actual viruses that infect us.

Why do we have a mismatch?

There are 2 main classes: antigenic evolution and egg adaptation that happens in the manufacturing process that is used to grow viruses with chicken eggs.

First, let's talk about the issue of antigenic evolution and drift.

A first principle is that when we talk about a strain of influenza, we're not talking about one distinct virus, but a family of genetically distinct viruses that are related to each other.

Viruses, and in particular H3N2 viruses, are constantly changing and evolving.

The ones that end up abating the existing human immune responses are the ones that cause significant disease.

An example of this happened in Australia during that country's most recent flu season.

The H3N2 strain identified as A/Hong Kong was recommended for their vaccine.

As it turns out, the strain that drifted away from A/Hong Kong called A/Singapore was the predominant circulated strain last year and caused the most illness.

As a result, vaccine effectiveness last year was estimated at only 10% in Australia.

The next slide shows the evolution of H3N2 over the last several years on what was called a phylogenetic tree.

Each colored dot represents a number of mutations that each strain has acquired within important epitopes.

The redder the color of the circle indicates how many mutations have occurred, and how far the virus has evolved from the parent strain.

If you start with A/Perth on the lower left, it is the strain used in the vaccine in 2010.

You can see how this strain evolved into A/Victoria, A/Texas, A/Switzerland and A/Hong Kong.

In the upper right-hand corner of the next slide, you see A/Singapore, which is the strain that I just mentioned, and was a prevalent circulating strain in Australia last year.

This strain caused the most trouble because the strain contained in the vaccine, in contrast, was A/Hong Kong, not A/Singapore.

But as you can see from the red box in the next slide, there are many groups of H3N2-related viruses that are circulating the U.S. this season.

Ideally, a better flu vaccine could protect us against all of these circulating strains.

We'll come back to this slide after Greg's discussion.

But as a preview, he's going to show you data that suggests our vaccine would be effective against all of 2017 circulating H3N2 strains.

The next slide brings us to the issue of egg adaptation, perhaps the biggest culprit in this season's poor vaccine efficacy.

87% of commercial flu vaccines in the U.S. are manufactured by growing flu viruses in eggs.

It's essentially the same process that's been used for over 50 years.

Manufacturing process starts by identifying the viruses that are infecting humans and then growing them up in chicken eggs.

The problem is that viruses that successfully infect humans don't grow well in eggs and have to be modified either intentionally or through changes made when passaging these viruses in eggs.

These viruses are passaged many, many times until they find the virus with best growth characteristics.

Then the best growing virus is used to scale up the process into millions of eggs.

These changes can result in a mismatch between the strain used in the manufacturing process and the strain that is actually circulating in the wild.

A New England Journal of Medicine article co-authored by Dr. Tony Fauci, Head of the National Institute for Allergy and Infectious Diseases, states the fact that egg-propagated vaccine viruses acquire changes that altered antigenicity lends credibility to the hypothesis that egg-adapted changes contribute to poor influenza vaccine effectiveness.

The next slide highlights why our NanoFlu vaccine is different, and why it can be more effective against both sources of mismatch.

First, NanoFlu is recombinant and allows us to make a vaccine, from a genetic standpoint, exactly matches the virus sequence of the CDC's recommended flu strains.

It's not an egg-based manufacturing process.

It doesn't require adaptation to growing eggs.

And second, it is formulated with an adjuvant to further stimulate a protective immune response.

In combination of our recombinant protein with an adjuvant stimulates a broader immune response and broad protection that addresses mismatch.

With that, I'll turn the call over to Greg to describe results from our Phase 1/2 interim analysis.

Thanks, Dan, and good afternoon, everyone.

I'm pleased to discuss our positive results from the Phase 1/2 trial of NanoFlu vaccine with you all today.

In the next few slides, I'll walk you through the data that showed that NanoFlu vaccine has demonstrated improved immune responses compared to the market-leading, egg-based, high-dose flu vaccine for older adults.

On Slide 16, we have a brief description of the design of our Phase 1/2 trial.

This study was U.S.-based, randomized, observer-blinded, active comparator-controlled trial to evaluate the safety and immunogenicity of NanoFlu versus Fluzone High-Dose in 330 clinically stable adults aged 60 years and over.

Participants in each of the 3 treatment groups received a single intramuscular dose of test vaccine on day 0 as follows.

The first 3 treatment groups included lower and higher doses of NanoFlu at 15 micrograms or 60 micrograms of HA per strain, respectively.

The third treatment group consisted of Fluzone High-Dose, a licensed, unadjuvant, egg-based, high-dose, trivalent inactivated vaccine with 60 micrograms of HA per strain.

All 3 test vaccines included the same WHO-recommended 2016, '17 Northern Hemisphere trivalent strains, which were A/Michigan, H1N1, A/Hong Kong, H3N2 strain, and B/Brisbane.

The primary and secondary objectives of the trial were to evaluate the safety and immunogenicity of NanoFlu vaccine versus Fluzone High-Dose through Day 21, with immunogenicity characterized by both hemagglutination inhibition, or HAI, antibody titers and by neutralizing the antibody titers.

Now let's turn to Slide 17 for a summary of the key findings.

First, let's consider the vaccine homologous strain HAI results.

These are the HAI responses against influenza strains that were selected by the CDC to be in the vaccine for the 2017, '18 flu season.

Remember, these strains were detected in people with influenza illnesses.

The recombinant vaccine contains the exact protein found in wild-type viruses.

The egg-based vaccine does not.

It was selected for its ability to grow well in eggs.

When we tested the serum from volunteers immunized with the NanoFlu, we saw that it induced significantly higher hemagglutinin inhibition antibody responses, again, for wild-type reagents from the H1N1 and H3N2 strains and comparable response to get the B/Brisbane when compared to the egg-based, high-dose Fluzone vaccine.

These results underscore the improved immune responses induced by the NanoFlu vaccine relative to the comparator, where we're using reagents with the same sequence as the circulating viruses.

This addresses the issue of egg adaptation mismatch.

Now to review the antigenic drift results.

We will focus on the HAI results for H3N2, viruses that have important genetic and antigenic differences from the vaccine strains that are -- and are known to be circulating in the U.S. this year.

We observed significantly greater HAI responses against the older strain, A/Switzerland, and perhaps, more importantly, forward-drifted H3N2 strain, A/Singapore.

This latter virus is at the heart of the vaccine failure in Australia in 2017 and is currently circulating the U.S. Its public health importance is highlighted by the fact that it will be recommended by the CDC to be in next season's Northern Hemisphere flu vaccine.

In all, we found that NanoFlu induced significantly higher HAI antibody responses against both older and newer antigenically mismatched wild-type H3N2 virus strains, thereby, addressing the issue of antigenic drift.

When the immune serum were used in various neutralization tests, we found responses that correlate with and reinforce the HAI results or the H3N2 strains.

So moving to Slide 18, and summarize the comparison of HAI responses against the H3N2 viruses.

To put the results into context, recall that in the separate trial by Sanofi, the Fluzone High-Dose was compared to Fluzone standard dose.

There was an 80% improvement in the ratio of the day 28 geometric mean HAI titers for the H3N2 component of the vaccine, which in turn translated into a 23% better relative vaccine efficacy against H3N2 strains.

In our trial, we were able to demonstrate statistically significant increases in the ratio of day 21 geometric mean titers for the higher-dose NanoFlu versus Fluzone High-Dose against 3 H3N2 strains as follows: For the vaccine homologous H3N2 strain, A/Hong Kong, NanoFlu demonstrated a 47% higher HAI response.

For the forward-drifted H3N2 strain, A/Singapore, NanoFlu demonstrated a 64% higher HAI response.

Against the historic drifted H3N2 strain, A/Switzerland, NanoFlu demonstrated a 54% higher HAI response.

We've now shown that NanoFlu induced significantly better immune responses over and above what Fluzone High-Dose evoked.

With significantly better immunogenicity than the market leader Fluzone High-Dose, we believe that NanoFlu will be able to demonstrate important and meaningfully -- clinically meaningful improvements in efficacy above and over -- over and above that of Fluzone High-Dose.

Slide 19, again, illustrates the evolution or drift of H3N2 in a phylogenetic tree format.

On Slide 20, we illustrate how the NanoFlu vaccine has potential to provide broader protection against H3N2 antigenic drift, as indicated by the blue-shaded area.

Our data today suggests we might expect a meaningful improvement and protection against flu via greater and broader immune response, where egg adaptation and antigenic drift play a role in low vaccine efficacy.

So where do we go from here?

In Slide 21, in the next trial, we want to switch to a quadrivalent version of the vaccine.

This trial will likely be early in the fall of this coming year.

Both before the trial and in the Phase II meeting, we'll discuss our plans with the FDA and determine what a relevant Phase III trial would look like.

Today, we estimate that we will conduct a Phase III trial study in August or September of 2019.

Our discussions with the FDA will determine whether that trial is based on an accelerated approval using an immunogenicity endpoint or whether it will be a full efficacy trial.

So with that, I'd like to turn to RSV program update.

In Slide 23, I'd like to review the positive results from our recent informational analysis for RSV vaccine for infants via maternal immunization.

As a reminder, our Phase III Prepare trial is a randomized, observer-blinded, placebo-controlled trial.

This trial includes an injection -- a single injection given to a mother between 28 and 36 weeks of estimated gestational age.

The primary objective of the Prepare trial is to determine the efficacy of maternal immunization with the RSV F vaccine against symptomatic RSV lower respiratory tract infection through a minimum of the first 90 days of life.

We're using the following metrics that we have previously described for our primary endpoint in our Prepare trial.

We use RT-PCR to detect the presence of RSV during illness.

We also require at least one clinical manifestation of a lower respiratory tract illness.

Last week, we have characterized medically significant RSV illness by one of the following: hypoxemia, as measured by a pulse oximetry reading, showing oxygen saturation less than 95%; or tachypnea fast -- or fast breathing appropriate for the age of the infant.

So moving on to Slide 24, we are currently enrolling in our fourth global year.

Participants are being recruited and vaccinated at global clinical sites based on the timing of each region's RSV season.

Prepare's global footprint has grown to over 80 sites in 11 countries in 2018.

We have now enrolled more than 4,000 participants worldwide, and we are on target to reach 4,600 in the second quarter of 2018.

On Slide 25, I'd like to move to the informational analysis.

And I am pleased to point out that our Prepare trial was significantly derisked by success in this analysis, as we previously described.

This analysis included approximately 1,307 infants and used a target threshold against the primary endpoint of 40% -- of greater than 40% efficacy.

Data from the analysis indicate an observed vaccine efficacy in the range between 45% and 100%, assuming a 2:1 randomization.

Let me emphasize the importance of this point in time.

We are nearing the opportunity to view the efficacy analysis of our Phase III program, the interim analysis, based on 4,600 infants.

We appear to be on target to see Phase III efficacy results in less than 12 months.

Based on the informational analysis, we believe we have derisked this program, and are now looking forward to this seminal event with confidence.

On Slide 26, where we move through the analysis here.

And based on success in recruitment, it shows that we are on schedule to begin an interim analysis in approximately 4,600 infants by the second quarter of 2018.

If enrollment continues as planned, we expect to complete our interim analysis, which is conducted by the Data Safety Monitoring Board statistician in the first quarter of 2019, followed by a Biological License Application (sic) [Biologics License Application], or BLA filing, in the fourth quarter of 2019 or the first quarter of 2020.

So with that, I'll turn it over to John Trizzino, who will review the market opportunity for our maternal RSV vaccine.

Great.

Thanks, Greg.

Beginning with Slide 27, I want to take you through a few slides that address RSV disease burden, and then size the potential market for this vaccine.

First, it is important to highlight that RSV in infants is a significant unmet medical need, with 70% of all infants being infected in the first year of life.

This slide highlights the addressable population in these 9 key markets, which is the population of pregnant women we would expect to vaccinate.

As you can see, in the U.S., EU5 and Asia3, the addressable population is approximately 8.4 million, and in the U.S., greater than 3.7 million pregnant women.

Moving on to Slide 28, we will look at the greater than $1.8 billion of annual direct cost burden associated with RSV in the first 6 months of life.

Again, looking at the 9 major markets, this $1.8 billion of direct cost burden is associated with doctor office visits, emergency room visits, hospitalizations and the most serious cases intensive care unit stay.

In addition, if we also include indirect costs, such things as lost earnings and potentially death, the result is over $5.6 billion of direct and indirect costs associated with RSV disease in these newborns.

I'm now on Slide 29.

Based upon our analysis of published literature, the addressable market, economic disease burden and policy considerations, we have determined that global peak revenue has the potential to be well in excess of $1.5 billion in major markets before we even consider the potential in middle-income markets and the benefit to low-income countries.

While we have done the same analysis for each of the 9 major markets, let me take you through the details related to the U.S.

We know that there are about 3.9 million births per year in the U.S. and that about 95% of those infants are born after the mother is vaccinated between 28 and 36 weeks gestational age.

We know, based upon what we already understand about the pediatric vaccine rates for ACIP-recommended vaccines, that, conservatively, 80% to 90% of these pregnant women will be vaccinated.

Lastly, if we consider roughly the range of typical vaccine pricing of recently launched vaccines, we can estimate peak revenues in the U.S. to be in excess of $750 million as part of global peak revenue of $1.5 billion.

Now on to Slide 30.

Policy and physician key opinion leader support are foundational pieces to our pre-commercialization activities.

Our RSV vaccine for infants via maternal immunization will be administered to pregnant women in their third trimester.

And so the OB-GYN physicians must understand the benefits of these vaccines for their patients.

Novavax is already working with ACOG, the American College of Obstetricians and Gynecologists, to support educational programs for RSV and maternal immunization.

Next, Novavax was instrumental in advancing legislation in the 21st Century Cures Act that now allows the vaccine injury compensation program to cover both mom and baby under its no-fault insurance program.

Next, ACIP, the Advisory Committee on Immunization Practices, supported recommendation for the use of this vaccine is critical to its adoption.

We have been working closely with the CDC and collaboratively sharing information about RSV and our program.

RSV working groups have already been informed, and this is an important first step in this process.

Lastly, Novavax is very active across the many RSV groups and activities in support of gathering information about epidemiology, surveillance and economic burden.

RESCEU, as noted at the bottom of the slide, is just one example of our active participation.

I'll now turn the call over to Chris, our VP of Finance, who will discuss our fourth quarter and full year financial results.

Thank you, John.

Today, we announced financial results for the fourth quarter and 12 months ended December 31, 2017.

A summary of our financial statements can be found in today's press release.

We recorded a net loss of $50.8 million or $0.16 per share for the fourth quarter of 2017.

This compares to a net loss of $57.1 million or $0.21 per share in the prior year period.

Revenue for the fourth quarter of 2017 was $10.4 million compared to $5.4 million in the 2016 period.

This increase of 93% was driven by higher revenue recorded under the Bill & Melinda Gates Foundation grant of $89 million.

As you know, the Gates Foundation revenue is directly related to the operating activity in the Prepare trial, our Phase III trial of the RSV F vaccine to protect infants via maternal immunization.

We continue to expect an increase in the Gates Foundation revenue in 2018 relative to 2017, which relates to the continued ramp in enrollment and increased level of activities as the Prepare trial continues in its third global season of enrollment.

R&D expenses decreased 3% to $49.7 million in the quarter compared to $51.1 million in the same period in 2016.

The decrease was primarily due to reduced development activities of our RSV F vaccine for older adults, partially offset by increased development activities of our RSV F vaccine for infants via maternal immunization.

G&A expenses were essentially flat at $8.5 million in the quarter compared to $8.3 million in the same period in 2016.

As of December 31, 2017, the company had $157.3 million in cash, cash equivalents and marketable securities on the balance sheet.

This includes approximately $17 million in net proceeds raised through the ATM during the quarter.

This compares to $235.5 million on the balance sheet at December 31, 2016.

This concludes my financial review.

I'll now turn the call back over to Stan.

Thanks, Chris, and thanks, too, to Greg and John.

Now you can see why this has been such an important quarter in Novavax' history.

As I said earlier, we are committed to carry this momentum during the remainder of 2018 as we update you on our progress in both programs, and continue to execute against all of our strategic objectives.

We will wrap up here and open up to Q&A.

Operator?

(Operator Instructions) And the first question will come from the line of Joel Beatty with Citi.

The first one is on the flu vaccine.

Could you discuss what's typically required by FDA for approval on the path you plan to take?

And compare that with the recent flu data you have, help give us a sense of what you've already established and compared to what FDA might expect, and what still remains to be shown in the remaining Phase II and Phase III trial.

That's a big question, but I'll let Lou handle that one.

There are several pathways available for the approval of flu vaccines, and they fall broadly into pathways that are dependent on immunogenicity data and pathways that are dependent on efficacy data.

For -- to use immunogenicity as a pathway to approval, one has to have a product that offers a significant benefit in dealing with an important public health need.

And we believe that our product has that.

That's being illustrated this year by the difficulties in limited efficacy and effectiveness of the current flu vaccines.

We believe that we can demonstrate superiority to the existing vaccines on a number -- on our immunogenicity against a number of strains, including, most importantly, the significant H3N2 viruses, certainly the H1N1 viruses as well.

And we can be at least competitive with regard to B virus responses.

We would note, again, the breadth of the responses that we're showing against H3N2 viruses, such that we could potentially touch all of those 5 or 6 different genetic groups that are currently circulating in the U.S. population.

And so our goal would be to show superiority against those and against the H1N1 viruses, and at least the equivalents against the B viruses in terms of responses.

So that's the immunogenicity pathway, and it's the one we hope to propose to FDA, which would give us access to accelerated approval by contrast with Fluzone HD, which is a licensed comparator with efficacy data.

There is a potential that the FDA will want efficacy data, and the second route is traditional approval via a direct progress to an efficacy trial, which we would project also going into in 2019 if we need to go that route.

Okay, great.

And then another question on the RSV program.

Could you discuss the possible scenarios for the interim analysis in early 2019?

And I guess, of those scenarios, I'd be particularly interested to hear about what happens if the data just misses the lower bound of 40%?

Is there a scenario where you could still see that data even though it's interim analysis or even potentially file that data?

Okay.

Stan, I'll take it.

So we are able to look at it.

It will be completely unblinded for the first 90 days to show whether we meet our primary endpoints.

If we do -- scenario A, is we do, and the lower bound's above 40%, we're done.

We are very busy putting together a BLA.

But we've met our endpoints, and we go forward.

And the goal would be to submit a BLA sometime in 2019; would be an aggressive goal.

But -- did I say 40% or 30%?

I'm sorry.

Louis, correct me, the lower bound is from 30%, not 40%.

It is -- you're asking whether it would meet the primary endpoint, 39% or 40% or something of efficacy, but I answered a different question.

So scenario A is we open up the envelope.

We lower bounds above 30%, and we finish the trial and finish -- claim the data and filing BLA.

The second scenario would be is we don't make the lower bound of 30%, but everything that we see points to -- and including the informational analysis, points to our having a good vaccine.

And we have option B, which is simply to unblind the trial completely, and then see what we got.

And if we have a vaccine that's efficacious with lower bound is above 0, and somewhere in between 0% and 30%, I think it's likely that we would look at it and file a BLA at that point.

So remember that the lower bounds above 0, that's adequate for a European filing, an EMA filing.

So we're -- we feel very confident that's going to happen.

I don't know of any data that would come along that would convince us to do otherwise.

And one last question, if I could.

And Stan, could you provide any information on what midpoint you would expect would be needed to support having a lower bound above what's necessary?

And is the event rate on track to support what you -- goes into those assumptions?

The answer to the second question is the endpoint analysis we think is going in the way we want it to be.

If the vaccine midpoint efficacy is in the range of 58%, your lower bound's going to be above 30%.

And the question will come from the line of Jessica Fye with JPMorgan.

This is Yuko on the call for Jessica.

Could you speak to the next Phase II trial design for NanoFlu program?

And specifically, what are your current thoughts on the duration size and efficacy metrics assessed in that study?

And what will be the comparator in that trial?

Yes.

So this is Stan again.

So we did a trial this year with the trivalent vaccine because the comparator was a trivalent high-dose Fluzone.

So we're expecting that to shift to a quadrivalent.

And before we want to go into a Phase III, we want to show that formulating our vaccines to quadrivalent is -- and compare it to Fluzone's quadrivalent vaccines.

So that's the main reason.

But there's also we want to make sure that in the last trial, we did not show the adjuvant effect against no adjuvant, and we want to show the difference between an adjuvant.

So we've got a couple of things to look at in the Phase II.

The timing of that is probably the same time we did last year.

We vaccinate the groups in August or September.

You show the data -- you draw the blood 21 days later, and with the analysis we expect to complete sometime in the December, January time frame.

And the next question will come from the line of Ted Tenthoff with Piper Jaffray.

Can you hear me okay?

We can.

I want to go back to the maternal RSV program.

I'm definitely looking forward to that data later this year.

What do we need to see to get -- what is the primary -- what's the goal on the primary endpoint that we need to see to be statistically significant?

Just remind us.

Well, I think if you see an efficacy -- a point estimate of efficacy above the standard that we -- the threshold that we said in the informational analysis, which is 40%, you've got a vaccine, I think.

And I think from a commercial point of view that there's a lot of reasons, I think, that, that would be very successful, and particularly given that there's no vaccine or adequate treatment for RSV.

So our expectations are it will be well above 40%.

And right now, as Greg mentioned, the analysis or probability statements says it's somewhere between 45% and 100%.

All of those numbers are good vaccines.

And then, obviously, safety is very important here, but what other secondary endpoints should we be focused on?

Lou, you want to walk through...

Sure.

As you know, as Greg's outlined, our primary endpoint involves RSV lower respiratory tract infection associated with either hypoxemia or rapid breathing tachypnea.

We're looking at a number of secondary endpoints that are really important for the health care system.

One of them is to simply -- and the leading one is to look at lower respiratory tract infection associated with RSV that is associated with a slight lower threshold of rapid breathing, the threshold for rapid breathing that's designated by the WHO as meaning a child has significant illness.

And so that will be one of our first secondary endpoints because those are children that absorb a lot of medical care even if they're not hospitalized.

Our secondary endpoint will be hospitalization associated with RSV lower respiratory tract illness.

We will then look at...

Severe.

Yes, severe hypoxemia or children with oxygen saturations less than 92%.

And finally, we'll look at the impact of RSV on episodes of wheezing over the course of the first year of life.

Independently of that, we're also going to look for the impact of RSV -- of the RSV F vaccine on symptomatic RSV infections in the mothers.

And there are several reasons to be concerned about that.

One, mothers can pass RSV to their infants.

Two, RSV infections in mothers are being increasingly recognized as a potential source of morbidity late in pregnancy.

And last, but not least, there's even a suggestion in 1 or 2 papers that RSV can be transmitted vertically from mothers to infants transplacentally.

And so for all those reasons, preventing illness in mothers may also be important.

So we have a series of important secondary endpoints to look at.

And the next question will come from the line of Kevin DeGeeter with Ladenburg Thalmann.

A few for me.

Stan, is it reasonable expect that the publication for the flu data would be out prior to the presentation April 4?

Kevin, we can't predict that right now.

It's in, it's being reviewed, and predicting publication dates is really hard.

Sure.

No, fair enough.

And just a clarification on a prior question, and I apologize if I missed the answer.

But the comparator for the Phase II auto-rail and flu vaccine, what's the best comparator for that study?

It'll be the Fluzone High-Dose.

The same.

With a quadrivalent formulation.

I think that's 70 -- yes, 70% market share is a good one to compare to right now.

Terrific.

And then just I really appreciate the additional perspective with regard to the development challenges and opportunities for endpoints of vaccine.

And specifically, in the context of egg adaptation mismatch, perhaps you can just provide us a little bit more context here as to sort of what's new in the thinking and appreciation of the impact of that mismatch in clinical care?

I mean, we've been making vaccine from egg for a long time, but it seems that the mismatch has become, if anything, more pronounced in recent years.

What's -- how much of this is evolving appreciation of from a vaccine development standpoint of the limitation of egg?

And how much of this is sort of somewhat more legacy technical issues that Novavax has a unique perspective on?

Greg, go ahead.

Yes.

Kevin, Greg here.

So I think that what seems to be in play are both the factors that Stan described at the beginning of the call.

Egg adaptation, again, remember, these viruses are first isolated from humans, which are mammals.

And then they are selected for their ability to grow in eggs, which is avian.

And the -- especially at the receptor binding domain, this year, we know there have been point mutations that have profound effects on the ability for antibodies to block these receptor binding activities.

So as you put in eggs, adapts to birds, becomes a bird virus, you immunize people with this virus, and you get antibodies that may or may not protect humans against the receptor binding domain down on the human-circulating viruses.

It's a big problem, and it's become more and more evident.

And clearly, in some cases, it's driving poor vaccine efficacy.

We don't know yet this year.

The other thing, of course, that's in play, and I think it's well illustrated by that CDC phylogenetic tree, is how rapidly the H3N2 viruses are evolving.

You can see it's explosive.

In fact, if you listen to some of the CDC webcast, every time there's a replication cycle of the virus, there are mutations.

So these mutations are drifting away, as Stan mentioned, in a way such that the human immune responses are no longer recognize them, and they become completely immune to the past immunity or the vaccine immunity.

So those -- both those factors are in play, and clearly having a recombinant vaccine allows us to address the egg adaptation.

So we have a precise match between what's in our vaccine and what the CDC has selected through their surveillance mechanisms as the relevant strain for vaccines.

The other may be more subtle message, and really, I think, quite a dramatic finding, is by using an adjuvant and using a nanoparticle, we are broadening immune response to epitopes that are on the HA that allow you to have much broader neutralization of viruses away from the strain to you have actually in the vaccine.

We demonstrated that in our pre-clinical paper last fall.

And now we've replicated that in humans, in older adults in particular, which, as you appreciate, are very challenging in terms of their poor levels of immune response.

And so this is a dramatic finding.

The breadth of response, we think, is driven by having the nanoparticle and having an adjuvant.

And it's clearly providing immune responses that are broadening, both backward, that would be strains that differ just historically from what is in the vaccine; and then I think maybe even more significantly, what happens in a forward-drift, where the virus evolves.

And we have this unique opportunity this year where there was a Hong Kong sequence in the vaccine.

The virus had evolved.

You can see, as we illustrated in that phylogenetic tree, that A/Singapore is a forward-drift future strain.

And theoretically, our vaccine would have covered that certainly in the way that we suggest we'd be better than Fluzone High-Dose.

So the forward drift is addressed by the broadening of immune response based on the nanoparticle and use of adjuvant.

I think it's important to recognize that over the course of egg manufacture of flu vaccines, there have been seasons in which vaccine efficacy has not been what would be expected based on the "apparent match" of the vaccine to the virus.

But now we have the technical ability really over the past decade or so to analyze the sequences of the viruses that are grown in eggs and compare them to the sequences of the viruses that are circulating.

And we know, for sure, over the last, say, 6 years, that there have been 2 instances in which egg adaption, egg adaptation changes in the vaccine virus sequence have had significant impacts on the immune response to those viruses, such that the antibodies that they induced were not optimal to interact with the strains that were circulating in humans.

So it may not be entirely a new problem, but it's one that we have the technical ability to detect now.

Ladies and gentlemen, this does conclude our question-and-answer session today.

I would now like to turn the conference back over to Mr. Stan Erck for further remarks.

Okay.

So I think we've covered a lot of ground today.

We have 2 programs, 2 lead programs, for which we have great data in clinical trials.

And we're advancing the RSV is just such a major breakthrough, and that we're advancing toward the ability to file a BLA is huge.

And so there's no other product anywhere near us, and we're looking forward to having the first RSV vaccine.

And flu, as you can see, the flu season was nothing better than a great indication that we need a non-egg-based vaccine like ours.

And I think the -- we will have no trouble getting people in the health care system, CDC and FDA, to agree with our approach.

So with that, we'll let everybody go, and thanks for listening.

Bye.

Ladies and gentlemen, thank you for participating in today's conference.

This does conclude your program.

You may all disconnect.

Everyone, have a great day.