Novavax, Inc. (NVAX) Q3 2014 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Novavax Third Quarter 2014 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over to Mr. Buck Phillips, CFO. You may begin.

Thank you. Good afternoon. This is Buck Phillips, Chief Financial Officer of Novavax, and I would like to thank everyone for joining today's call to discuss our third quarter 2014 financial results. Today's earnings release is currently available on our website at Novavax.com, and an audio archive of this conference call will be available on our website later this evening. Joining me on today's call is Novavax's President and CEO, Stan Erck; along with Dr. Greg Glenn, our Senior Vice President of Research and Development; and other members of our executive team. 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 will change over time. I will now turn the call over to Stan Erck, President and CEO.

Thanks, Buck, and the good afternoon, everyone. The third quarter was another busy and productive period for Novavax. We delivered on a number of important clinical and corporate achievements and have the company well positioned for the remainder of 2014 and into 2015. We demonstrated significant progress in both of our key vaccine development programs in the third quarter of 2014 and into the fourth quarter. The third quarter was a very busy time for our R&D group. So I'll ask Greg Glenn to review our recent clinical and scientific accomplishments. I will then provide some detail on the September extension of our contract with HHS BARDA, as well as expected events in the fourth quarter of the year. Then we'll finish the call with a financial overview by Buck and open the line to take questions. With that agenda, let me hand the call over to Greg.

Thanks, Stan, and good afternoon. We announced a number of clinical and preclinical accomplishments in the third quarter that speak to the pace of our development programs, the focus of our team and execution, all together that build the foundation for moving these programs into the later stages of their development. So I'll start with a review of the RSV accomplishments in the last few months. We recently presented data at the 8th International Society of Vaccine Congress in Philadelphia, Pennsylvania. That conference highlighted new findings from our first Phase II clinical trials, known as M201, in 330 women of child-bearing age. In this trial, all the vaccinations were completed by day 56. And from day 56 to day 112, subjects passed through what approximates an RSV season from December to March. During this period, 27 of the placebo recipients had evidence of new RSV infection compared to only 10% in immunized participants, representing a 50% reduction in infection rate. From our perspective, this is an important finding. Although the trial is not designed to observe efficacy, it was an opportunity to look post hoc at infection rate using Western blot, a classic tool for diagnosing infections using subject sera. The observed reduction in infection rates in vaccinees compared to placebo indicates that the vaccine has potential to provide protection against RSV disease. I would note that the vaccine trial's prevention of infection is a higher hurdle compared to the prevention of disease or prevention of more severe disease. If one of us was influenced [ph] in the influenza or rotovirus trials, for example, vaccine efficacy is always greater as the influenza becomes more severe. Thus, a reduction in infection should translate to a greater rate of reduction of disease in subjects that have more severe disease. The additional barriers that may also come from the [indiscernible], a progression of RSV in the respiratory tract and the nodes to the lower respiratory tract in the lungs where it causes disease. The data also suggest that we may observe prevention of RSV infection and disease in pregnant women in our future trials. And thus, the vaccine will benefit both the infant and the mother, which would be in line with licensed vaccines such as influenza toxics [ph] that are used currently for maternal immunization. Now building on our maternal immunization strategy, we presented preclinical data at the 54th Interscience Conference on Antimicrobial Agents and Chemotherapy, also known as ICAAC, showing that immunization of pregnant nonhuman primates with the RSV vaccine in their trimester of pregnancy generates anti-F antibodies [indiscernible] antibodies to neutralize antibodies that are transferred to the newborn infants. And, more significantly, that those infants were protected against RSV challenge. Data on these studies further support our maternal immunization strategy, though a key step forward in this strategy was the mid-September initiation for a Phase II clinical trial in healthy women in the third trimester of pregnancy. In addition to evaluating the safety, immunogenicity of the RSV vaccine, the trial will also assess the impact of maternal immunization in infant safety in RSV-specific antibodies through 1 year and 6 months of life. This is -- this study is a randomized blind placebo control Phase II study that will enroll 50 healthy women in their third trimester. Enrolled maternal subjects will be randomized to receive placebo or 120 micrograms of the RSV F vaccine with aluminum as adjuvants. Maternal subjects will be followed through pregnancy, delivery and for an additional 80-day post partum to assess the safety and immunogenicity as measured by serum RSV F IgG antibody concentration, palivizumab-competing antibody and their neutralization titers. Upon delivery, cord blood samples will be used to determine concentration of these same antibodies, the RSV F IgG, palivizumab-competing, and microneutralizing antibody. Additional serum samples from different subjects will be [indiscernible] under the following 6-month period, will provide a preliminary understanding of the half-life of maternal antibodies in the infants. Infant subjects will be followed for 1 year post [indiscernible] to assess the safety of the RSV F vaccine in the maternal immunization study. Next, in mid-October, we initiated a Phase II clinical trial of our RSV F vaccine in healthy elderly subjects. This trial is also a randomized observer-blinded placebo-controlled study. It's scheduled to enroll 1,600 subjects greater than 60 years of age at 10 sites in the United States. The trial will evaluate the incidence of all respiratory illness due to RSV, including medically attended respiratory illness, hospitalization, and illness in community living elderly adults who have been treated with placebo. The study will evaluate the safety and immunogenicity of the vaccine. It will also estimate the efficacy of the RSV vaccine in reducing the incidence of respiratory illness due to RSV. We note there are approximately 57 million individuals over the age of 60 in New York. This suggests that the elderly market for this may be the largest value driver in our RSV franchise. RSV is increasingly recognized by the medical and scientific community as a pathogen of great importance in this population. Now moving to our influenza program. The highlight this quarter was the positive top line data from our Phase I/II clinical trial of the H7N9 Avian Influenza VLP vaccine candidate with our proprietary adjuvant Matrix M. I'm now going to provide significant details we discussed at length in our analyst and investor meetings in September. This trial enrolled 610 subjects, healthy subjects, to evaluate safety, immunogenicity, responses to the vaccine and the adjuvant. This trial evaluated 3 different dose levels of the antigen and 2 dose levels in the adjuvant. Overall, Matrix M adjuvant formulations demonstrated clear immunogenicity benefits relative to unadjuvanted antigens and the dose response within the adjuvanted groups. Antigen dose-sparing was shown and inhibition [ph]antibody titers after 2 vaccine doses were comparable to those reported in prior studies with another saponin-based adjuvant. We believe this trial will reach a dose confirmation trial in healthy elderly adults followed by a Phase III immunogenicity trial. Recently, we were pleased to receive word that the FDA -- from the FDA that the H7N9 VLP vaccine was granted FDA fast-track designation. We believe this designation underscores the FDA's recognition of the risk of H7N9 influenza for lack of any approved vaccine for the H7N9 vaccine -- influenza, and the strength of our H7N9 VLP. Lastly, we reported on our Ebola glycoprotein recombinant nanoparticle vaccine candidate, which is based on the 2014 Guinea Ebola strain that is responsible for the current Ebola disease passing from human to human in West Africa. We are developing our recombinant Ebola vaccine using the same platform we used to develop vaccine candidates against several pathogens, including RSV, seasonal and pandemic influenza and MERS, Middle Eastern Respiratory Syndrome. In preclinical models, the Ebola VLP vaccine candidate is serum-protected [ph] [indiscernible] antibodies in cross neutralization to an older strain of Ebola. We recently initiated a nonhuman primate study and our goal is to initiate a Phase I clinical trial in December of 2014 to evaluate the safety and immunogenicity of our Ebola vaccine. So with that, I will turn the call back to Stan. Thank you.

Okay. Sorry for the delay. Okay. Thanks, Greg. So let me take a moment to provide you with a brief overview of the recently approved extension of our HHS BARDA contract that covers the development of the quadrivalent seasonal influenza VLP Vaccine and the VLP vaccine against the Avian Influenza virus H7N9 that has pandemic potential. Based on our accomplishments to date, the continued development of our seasonal and pandemic influenza vaccines, BARDA elected to exercise the option period under the contract and extend its term until September 2016. In addition to the extension, BARDA approved an additional $70 million in funding under the agreement on top of the initial $97 million in base-period funding. Through September 30, 2014, we recognized approximately $72 million of the $97 million in base-period funding, leaving approximately $25 million available. That $25 million plus the additional $70 million in option-period funding will provide Novavax with the $95 million funding to continue to build these programs. This is a significant achievement for the company, and the partnership with BARDA will allow us to continue to move forward with the development of these 2 important programs. As we look forward to the balance of the year, we expect to initiate 3 more clinical studies: A Phase I clinical trial of our RSV F vaccine candidate for protection of children. With the initiation of this trial, we will have clinical studies running in parallel in all 3 of our RSV [indiscernible]. A Phase II clinical trial for a quadrivalent VLP seasonal influenza vaccine. And this is expected to be our final Phase II study prior to a pivotal Phase III study. And then finally, as Greg just mentioned, a Phase I clinical trial of our new Ebola GP vaccine candidate. So let me just spend maybe -- allow me to spend 2 minutes just bragging a little bit about the success of the company in the past quarter and what's coming forward. So to put this in perspective, we have reported on 3 -- in the last 60 days, we've reported on 3 clinical trials: the H7N9; the RSV Elderly Program, where we determined that we had data that allowed us to establish a clinical trial in 1,600 elderly starting last month; a third trial, which Greg reported on, for RSV in women that showed we had protection as measured by reduction of infection. We have initiated 2 new clinical trials in the last month, and we have 3 new clinical trials to be initiated in the next month. So we've got a group that is energized and really executes. So with that, I'll turn the call over to Buck to review our third quarter financial results.

Thank you, Stan. For the third quarter of 2014, we recorded a net loss of $19.7 million or $0.08 per share. This compares to a net loss of $15.3 million or $0.09 per share for the prior year period. Revenue for the quarter was $8.2 million compared to $4.8 million for the same period in '13. The increase in revenue is related to activities under our contract with BARDA, more specifically, activities related to H7N9 clinical trial, which has been recently completed, and activities in preparation for the initiation of the Phase II seasonal influenza trial that we expect to start in the fourth quarter of this year. Cost of government contracts increased to $4 million in the period over $2.3 million in the same period of 2013. This increase is directly related to the same activities that led to the increase in revenue in the quarter, activities conducted under our contract with BARDA and specifically the H7N9 clinical study and preparation for the Phase II seasonal influenza clinical trial. R&D expenses increased to $19.2 million in the quarter compared to $13.9 million in the same period of 2013. The increase in R&D expense is primarily due to a milestone payment accrued under our Wyeth agreement, which relates to positive developments at CPLB, our Indian joint venture, and a general increase in program funding, specifically preparation for the initiation of 3 RSV F vaccine clinical trials in the fourth quarter, as well as an increase in employee-related costs tied to the growth of the business. G&A expenses increased to $4.8 million in the quarter compared to $3.9 million for the same period in 2013. And again, this is primarily due to an increase in employee-related expenses tied to the growth of the business here at Novavax. As of September 30, 2014, the company had $190.3 million in cash, cash equivalents and investments on the balance sheet. This compares to $133.1 million as of December 31, 2013. With that, I'll close my comments and turn the call back over to Stan.

Okay, thanks, Buck. So we'll open up to questions now.

[Operator Instructions] Our first question comes from Bill Tanner of FBR Capital Markets. William Tanner - FBR Capital Markets & Co., Research Division: I had several of them -- maybe they're all for Greg. As you think about the baboon data and as you think about then vaccinating pregnant women, in the event that the maternal immunity is not transferred to the infant or the neonate, what would be the commercial utility of the RSV vaccine for pregnant women to prevent RSV infection of them, that being really the only effect?

Yes. Just to be clear, I think we're very confident that the antibodies we induce in the adults will transfer transplacentally. I think we've now reported on 2 models, the guinea pig and the baboon. The guinea pig actually has a more physiologically, structurally related placenta to humans than with the baboons. So in both those studies, we see very good transplacental transfer. In fact, in the upcoming RSV conference, which I think we mentioned in the press release, we have 5 presentations, and I think we're going to detail them later. But 2 of those do relate to the rates of transplacental transfer. So just to establish that we're very confident we're going to see the antibodies that we induce in the mothers show up in the infants. So the issue here is that if we can protect the adults, the mothers, potentially, they are one of the conduits through which infants, we think, infants receive the RSV virus. So they're infected from the mothers who touch doorknobs, touch people, et cetera. So that's one point. So the cocooning effect would be an effect. And then secondly, we know that in healthy adults, that there's a certain amount of pathology in adults from RSV. So I can cite, for example, you can see in my slide deck that I presented at the Vaccine Congress in Philadelphia, [indiscernible] that looked at military recruits. And amongst them, about 10% of them had RSV, and all of those subjects had clinical disease. So everyone in the field in terms of immunization has been of the belief that the infection does in fact cause pathology in pregnant women like it does for flu, and we're looking forward to seeing more and more data there. But we would suggest that the data we're seeing should prevent both transmission and infection to infants and benefit both the mother and the infant from immunization by preventing these infections. William Tanner - FBR Capital Markets & Co., Research Division: Okay, that's helpful. And then, I guess there's a, in the press release, comment about data in the third quarter of 2015 from the pregnant women in the third trimester. So is there any commentary that can be provided as to the enrollment pace relative to expectations, which, I guess we don't really know what those are?

Yes, no, we really don't know. Normally, we just report FSI, and then when we get the results, I remain confident that we can execute in our plans. We've had a track record of doing that. So but we'll just report our results in I think quarter 3 of this coming year. William Tanner - FBR Capital Markets & Co., Research Division: Okay. And then I guess the last question, if I could, on the RSV vaccine and the elderly, as you move into the pivotal stages, wondering if you could just comment as to what would be the approvable endpoint. And then any analogs between influenza and RSV just in terms of -- maybe what you've seen with your vaccines, which -- either the influenza vaccine or the RSV vaccine. And I guess, the extrapolate-ability of that to the confidence that the elderly trial is going to work the pivotal.

Well, okay. So in this Phase II trial, what we have done is we've collected a fairly broad set of data on the attack rate that would include medically attended illness to very minor illness. And we will generate, I think, a very robust data set that the trials designed for us to then choose the primary and secondary endpoints from that data. And we expect that, for example, medically attended respiratory illness RSV positive would be a very likely primary endpoint for the trial. And as you know, RSV does have a significant burden of disease in this population, roughly 15,000 to 20,000 deaths and 180,000 estimated hospitalizations, a lot of medical visits. So we think that prevention of these illnesses will be very important. And so I think the trial 1,600 subjects is powered. It is powered for us to, in a observational way, look for the vaccine effect. So the combination of defining the attack rate, collecting the data, which allows to determine the endpoint and look for the vaccine effect is a very good way, a very sound way, to approach the design of the Phase III efficacy trial. We are expecting at this point that would begin in the RSV season of next year.

Our next question comes from Jonathan Eckard of Citi.

I was just wondering for the H7N1 and Ebola, could you just help us understand what are the steps -- the next steps required in the general time line to potentially get over the finish line to get these so they're ready for potential stockpiling and whatnot?

Yes, so as I mentioned with the 8, 7 and 9, that's being -- that's work being done under our BARDA contract, and we expect the next steps to be a dose-ranging study in the elderly adults. And with that data, with the additional data, we then expect to do a Phase III, in that case, immunogenicity trial. So without having the chance to do a pandemic efficacy trial, we believe that CBER will accept the immunogenicity of the vaccine as the primary endpoint for licensure. So for Ebola, it's a little less certain. We did a -- I think had a very historical accomplishment last year in our H7N9 effort in that we essentially recognized that it could be a serious pathogen. We knew that this would be of importance, in BARDA's mind, as the pandemic strain. And we elected, very shortly after the virus appeared, it was obviously causing significant human pathology, to progress towards making a vaccine. And I think, really, with the historic accomplishment moving from recognition of the gene sequence in a publication to having clinical data, clinical lots, and as you know, publish that in New England Journal of Medicine. So that's been -- that was a very important feeder for our BARDA program. And as I mentioned, that's taking us towards Phase III licensure. With Ebola, as you may know, one of the major transitions that's happened -- this virus has been around in various forms since 1976. And what happened recently is it's transitioned to almost completely human-to-human transmission with a high mortality rate. And we read the paper by Garry et al. in Science in September and felt that it was very important to have a current sequence vaccine made, as this could be, like most viruses, an issue. That is, if you don't have a vaccine that matches the circulating strain, it may not work. And so we thought it was really important for us to make a current strain-based vaccine beginning in 2014. Frankly, it is a very close cousin to the RSV vaccine, so the structure, the way it's produced, the immunogenicity, et cetera. And that allows us to take advantage of our experience, our very positive experience with RSV. There also have been monoclonal antibodies that have been defined to be important, so we're able to utilize that data as well to define the vaccine. And so we are feeling very confident that our vaccine will be suitable for the candidate. And where we're at today, we have begun clinical manufacturing of the vaccine. We've had numerous, very positive discussions with the FDA. And we're aiming to be in clinical trials in December. So think about that, that the sequence was identified and published in Science in mid-September. And we're expecting to have a clinical start in the December time frame. So again, I think our -- it represents the professionalism of our team, able to execute on vaccines, and I think, as a company, we are really in a unique position to respond to these novel, lethal viruses that have arisen. So where we'll go after the Phase I trial? I don't think we have defined that at this point. We know there's a tremendous amount of interest by the U.S. government. Every agency that has a hand in public health is very busy thinking about what to do with Ebola. We think that having a Ebola vaccine with clinical data will be a big asset for them and for the West African countries that are facing this problem. So we intend to execute and we think we'll have very good data from our vaccine. I should also mention that the Matrix-M adjuvant seems to be -- play a very important role in the vaccine. We get extremely high antibodies. They seem to be -- we hope that they will do what we saw with our pandemic vaccine where you can see cross-neutralization of other sort of related but not the same virus. And so we intend to deploy that asset as well for the Ebola vaccine effort.

All right, great. And just one quick one is when do you think you might consider a combination RSV flu trial again?

Well, we're in the planning stage, and we are thinking that this coming year we will be able to execute in a clinical trial for that.

Our next question comes from Cory Kasimov of JPMorgan. Matthew James Lowe - JP Morgan Chase & Co, Research Division: It's actually Matt Lowe in for Cory today. Just wondering what you could tell us about the pace of enrollment that you expect in the Phase I trial for pediatrics for the RSV program. Do you expect that to be, I guess, in any way, slower versus the elderly or the maternal immunization trial? Just interested in comments around that.

Yes, I mean, I think that's -- it's being done by experienced investigators. I think we don't anticipate having difficulty enrolling, but just in terms of pace, it would be slower. I mean, the enrollment of the elderly trials can be very fast. So it's -- it is -- it's -- they're more. Obviously, there's a parent and a child involved, so there's more to consenting and discussion, but -- so it will be slower. It's a smaller trial, and there are -- there have been many RSV trials done in this population, so we anticipate that we'll be able to enroll. And I think I would admit the pace will be slower than the elderly. Matthew James Lowe - JP Morgan Chase & Co, Research Division: Okay. And then just as a follow-up, I apologize if I missed this in the preprepared remarks. Just in terms of feedback on data presented at the Vaccine and the ISV Congress, if you could just give us a flavor of the feedback you got? And any extra detail on what you'll be presenting at the RSV conference in November.

Yes, I think, first of all, the room was electric as we presented on our Ebola vaccine. I think experienced vaccinologists represent that the nanoparticle approach to vaccines is very strong. I think many of them are familiar with our track record with RSV, so they equate that going forward. I think they want the -- the data was extremely relevant, so I think it was very well received. I think that's also true of the Western blot data showing reduced infections. Again, the experienced vaccinologists recognize that it's likely to predict that the vaccine should result in protection and that the effect, the numerical effect should be amplified in our target population. So we have 5 presentations that we'll -- I think, we'll detail that will happen in South Africa, so we're very excited to be there at the meeting. We have a big presence. We are clearly the most advanced clinical program in all areas, and it's a lot of -- it's gratifying to go talk to experienced folks in the RSV field. I think we're going to detail the title topics, but I can tell you that we will summarize our clinical experience. We will present then 202 data, which was the most recent maternal immunization, in more detail. There will be a presentation on transplacental transfer in baboons and guinea pigs, and then there'll be a presentation from Baylor College of Medicine on escape mutants and protection with our vaccine.

Our next question comes from Ed Tenthoff of Piper Jaffray.

2015 is going to be a great year. Question, a lot of the other ones have been touched on. So seasonal flu, update us on sort of what next steps are there, if you would, going into the IIb study and kind of what the registrational plan would be there.

Okay. So we are about to start -- I think we have in our guidance, we're about to start the, what's called the S206 trial. That will be a modest dose ranging trial in healthy adults, and we expect to see that result in, I think, the Q3 of the coming year. So we're on track for that trial to be done. We -- I'm not sure where we are with guidance on our Phase III program right now.

Ted, it's Buck. At this point, as you know, we haven't guided to Phase III. Obviously, there's a pathway post being able to see the data from the Phase II that we'll share with our partners, HHS, BARDA, and we'll make those determinations at that time. We, as you know, operate very closely with our partners in this development program.

Our next question comes from Kevin DeGeeter of Ladenburg. Kevin DeGeeter - Ladenburg Thalmann & Co. Inc., Research Division: Perhaps just a follow-up on the influenza program. Specifically, how should we think of the fast-track designation for H7N9? I guess, previously, I've been thinking of the primary path to a regulatory clearance for the influenza program being seasonal and then perhaps a follow-on in a more pandemic indication. Is there an opportunity here to go, perhaps, an accelerated path with an H7N9 vaccine, perhaps even before seasonal?

I think that the basis of licensure will require efficacy data for -- in the seasonal flu program, so that's the relationship that BARDA sees. So that -- just talking about the fast-track designation, I do think it's a recognition of -- from the FDA. It's designed for programs that treat a serious or life-threatening disease, and they think that the program has the potential to address major unmet needs. So it is a type of validation, and really, what it does for us, every important step that we can have more dialogue with the FDA is helpful, so opens -- it opens up to more dialogue. And then when you get to the BLA phase, it allows you to have rolling submissions of your different modules for review instead of waiting for the entire NDA submission. And then finally, once you have the submission and it provides a full priority review, down from the usual 10 months to 6 months. So I do think it's significant that we are able to have FDA recognize our program with the fast-track drug development. So the -- just to reiterate, the efficacy, I think, in the seasonal flu will be the basis -- final basis for licensure, so those programs are tied together. One could imagine the vaccine could be deployed under EUA in extreme circumstances as it moves along. But we're expecting to conduct a Phase III efficacy trial in our -- within our BARDA collaboration. Kevin DeGeeter - Ladenburg Thalmann & Co. Inc., Research Division: Okay, great. And then maybe one follow-up from me. Greg, on a very high level, can you characterize some of the strengths of the Novavax approach to vaccination against Ebola compared to a few of the other programs that are out there, from perhaps more academic groups, acknowledging that it's kind of early days and there's limited data on each of these programs?

Sure. I can -- I'll let -- Stan's -- he's excited to talk about this, so I'll let him go.

Yes, I think it's a great question, Kevin, and we put a lot of thought into this. As we looked at the events -- everybody reads the same newspapers that we do, and we looked at solutions that were being proposed by others. And then we looked at our program, and we looked at what we do, and what we've done in the past, and we looked at our ability to respond to emerging viruses with a particle-based vaccine that induces robust neutralizing antibodies. We looked at our adjuvant and its ability to reduce doses and get cross-protection. We looked at our ability to manufacture large volumes very quickly. We looked at our ability to ship product that could be stored probably from 2 to 8 degrees, and we looked at the fact that we could make a vaccine that mimics the current strain circulating. And we realized that these are advantages to our program that I don't know that is inherent in any of the other programs. And when we looked at that, we saw the opportunity for us to participate and possibly, the right word is the obligation that we had because of these attributes of our product, to enter this field. And we did it with a lot of thought. We looked at it in terms of the impact on other programs at Novavax because all of our other programs are extremely important and on tracks that we don't want to delay. And we concluded that this was as good a time as any to enter with an Ebola candidate because we had finished making and releasing all of the products for the 5 clinical trials -- for the other 4 clinical trials that we are starting this quarter and it would have the least impact on our programs going forward at least in the near term. And then we looked at the investment in this program financially and concluded that with all of the world organizations organizing themselves, assembling sums of money to throw at this program, we think that while we're making -- we're making the investment on our own and entirely because we would have too much delay in the program if we waited to secure funding for the initial stages of this program. So we took it upon ourselves to do that. We have an energized employee base who knows that we can do this, and they're all participating and working the weekends and overtime to get this done. So all of those factors went into our very careful consideration of whether we were going to enter this. And we assume that as we get data and as we start talking to the various world health organizations that financing will be available to support not just the clinical trials of this but to support the purchase and distribution of these vaccines -- this vaccine globally. So that's the thinking behind it.

Our next question comes from Heather Behanna of Wedbush Securities.

Just a quick Ebola follow-up. First, is the nonhuman primate study a gating factor to starting the human study in December? Or is that just a manufacturing issue?

No, that's -- so again, we started this program, we started making the call [ph] in September, and we've -- on parallel pathways, we're doing animal studies and preparing -- making GMP material for human studies, and we're doing everything in parallel rather than in sequence. So we will do -- so nonhuman primate studies are not rate limiting to our human trials. They'll be done in parallel.

And just sort of a question on the maternal immunization program. When we think about the data that will read out next year, for duration of protection as far as the newborns, is there something -- is there -- are the competing antibodies or the IgG, is there one that we should be looking at more than another one in those data readout? Or they all should trend in the same direction, and they should all pretty much correlate to each other as far as protection and duration of protection.

Yes, they're all pretty closely related. What -- we -- what we are going to do in the Phase III trial, is looks for an immune corollary. And I'm of the belief that we'll find that the -- we'll have more than one, but the anti-F IgG will be the most facile to use because it's an [indiscernible] range, and the measurement is so high. So I think when we look at the concordance between palivizumab-competing antibodies and anti-F, it's very close, so I think the anti-F, while it's not mechanistically something that you would you say works for protection in terms of the indicatives [ph] and we know palivizumab -- competing antibodies, for example, bind to a certain part of the virus, it would be a marker for protection. So I think all of them are important. We intend to measure PCA, anti-F and neuts. We are -- intend to study the question, and I think the critical factor will be in the Phase III trial looking for a new correlate, like you have for other vaccines, where then further testing can be done without efficacy. It would be done looking at immunogenicity with confidence that the immunogenicity is meaningful because you've established a correlate.

Our next question comes from George Zavoico of MLV & Company. George B. Zavoico - MLV & Co LLC, Research Division: With regarding the RSV vaccine, these trials seem to have started ahead of the RSV season. And you described the post hoc analysis you did on the women. Is that also in the cards for these 2 trials that just began?

Yes. The current trials, actually, we've began to do active surveillance, and of course, with the maternal immunization, it's a small trial, and we are looking to see that there is no severe outcome. It's too small to make any assessment on efficacy, so -- and they're averaging [ph] 25 per group. However, in the elderly, we are doing active surveillance and PCR for the presence of RSV disease, so we collect -- we are going to collect any respiratory symptom, and anybody that has a respiratory symptom, we will also do PCR. That will allow us to describe the RSV attack rate in the elderly population. So we have right now a very broad net for catching anything related to RSV, and that will allow us to determine the endpoints. But it is all -- they all are being PCR swabbed, and we will test them for RSV. George B. Zavoico - MLV & Co LLC, Research Division: Okay. That'll be, I think, a quite a valuable addition to the data.

Yes, it will be terrific data. It's prospective, so it's a prospective trial for the attack rate of RSV based on PCR. George B. Zavoico - MLV & Co LLC, Research Division: And it goes right through the -- goes right through this upcoming RSV season, which is about to begin or...

Precisely. Yes, precisely, that's correct. It's -- depending on the geography, it has -- it's just beginning to happen. So the goal, as you would for a seasonal vaccine, you immunize people at the beginning of an RSV season. And in the case of the infants, we want them to be born -- so we started in September. We want them to be born during the RSV season, so they are -- there is some exposure. And so that's -- that timing of development's [ph] important. So the RSV season generally ends in early April for most geographies. So this trial, this post hoc results with 201, we were immunizing specifically outside the RSV season because we were assessing the vaccine immunogenicity, and we wanted no interference with immunogenicity from the virus. So it provided a unique opportunity. We have the serum. Western blot has historically been used as a diagnostic tool for infection, so we had this unique opportunity with a post hoc to see if there was signs of vaccine efficacy. We were very pleased, and frankly, I think our colleague at Baylor was surprised that there was any effect because this is a high bar to prevent infection. George B. Zavoico - MLV & Co LLC, Research Division: Okay, that's good. With regard to the H7N9, I mean, what are the aspects of your VLP vaccines, that you also generate antibodies, generate neuraminidase? Is this part of the analysis you're going to be looking for that, those antibodies to develop as well? And how might that influence the outcome and the potential efficacy?

Yes, absolutely. As we have followed many investigators who have shown that neuraminidase is an independent factor in protection against influenza disease, so the -- I think there has been, in the field, a struggle to measure neuraminidase content on the vaccine and then secondly, to accurately measure the anti-neuraminidase antibodies in human subjects that have been vaccinated. So we -- one of our geniuses, Dr. Fries, who spent 10 years doing lab work at the NIH and by that, I mean, at the bench doing assays, he and his team have, I think, cracked that problem, so we now have an assay for evaluating the content of neuraminidase in the surface of the vaccine and then measuring the antibody response that we see after vaccination. And as you may remember, a recent H7N9 trial, we have very high anti-neuraminidase antibodies that we measure after vaccination going from unmeasurable to 97%, 100% of the subjects have good, strong, measurable responses. So that's, I think, one of the very exciting things that we've seen in our program through the pandemic vaccination, is the production of robust neuraminidase antibodies. I think, again, somebody asked earlier what people at conferences think about this. I think when we have a chance to talk about our H7N9 data, this is clearly one factor in our program that many investigators think is a significant advance [ph]. And we would expect it to manifest itself positively when we move into the efficacy trials. And we, of course, preserve neuraminidase as an antigen on our seasonal vaccine as well. So it would be quite interesting when we get to the efficacy phase of our program because we think both hemagglutinin and neuraminidase antibodies are going to contribute to protection. George B. Zavoico - MLV & Co LLC, Research Division: The various strains of the N1 through 9, they're not close enough to be -- for antibodies to be cross-reactive, so I mean, I'm wondering whether -- if some of these patients are seasonally vaccinated commercially, and then they get into the H7N9 trial, is there any chance of interference there? Probably not on the hemagglutinin, but I'm wondering about the neuraminidase because that doesn't mutate as much as the hemagglutinin.

So again, that can be, I think, very positive for us. So a couple of things. We know that the saponin-based adjuvants allow presentation of epitopes that more or less spread the immune response over the surface of these proteins. So -- then that manifests itself as the vaccine having more cross-clade, more cross-strain protection than an unadjuvanted product. So we expect that, but to date, we don't have studies to document that. But we are looking at that in the context of both neuraminidase and hemagglutinin. So we do know with hemagglutinin that, that has -- that happened. So we will see. I think that's -- I think it's a plus for us because the conservation of these antigens is -- generally manifests itself as big, better efficacy. There -- so we will see it. It's a bit of a new topic. What I do know firmly is that anti-neuraminidase antibodies are independently associated with decreased attack rates to influenza-like illness, and one would expect that the antibodies to neuraminidase would manifest itself in better efficacy in a clinical trial. George B. Zavoico - MLV & Co LLC, Research Division: Okay, great. And my final question, perhaps to Buck. The BARDA contract, I see you've got $95 million left on it. What do you foresee that $95 million covering? Will it take you all the way to market? Will it take you through to Phase III? How far will that $95 million go?

Well, I think it's important to recognize, George -- and thank you for the question. The $95 million is intended to advance both the quadrivalent seasonal influenza program as well as our H7N9 VLP program right now. So it will fund further development of both those programs. As the contract is currently arranged, as you know, it'll fund the contract into September of 2016, based on what was released so far. I think what it funds under the agreement is all the preliminary work necessary to reach the point of initiating a Phase III. And really, that's the catalyst point in the contract to talk with BARDA and to get them onboard to help us fund that Phase III clinical trial that would obviously go beyond September of 2016. George B. Zavoico - MLV & Co LLC, Research Division: And that's the Phase III both in the pandemic and the seasonal, you're talking about, right?

Yes. George B. Zavoico - MLV & Co LLC, Research Division: Now just as a follow-on. There's an extension -- you already had one extension for the first part. Is there a possibility for an extension on this $95 million as well in case you don't spend all $95 million by next September?

Absolutely. We've got a great relationship with BARDA, obviously, built over numerous successes over the last number of years in the development programs. So really, the question -- we will continue to deliver on the progress of these programs, and I think BARDA is incented to stay in the game with us on these pandemic influenzas and with our seasonal. So we're very confident that we'll continue to move this program forward.

[Operator Instructions] I'm showing no further questions at this time. I'd like to turn the call back over to Mr. Stan Erck, CEO.

Okay, thanks, everybody. It's been a bit of an extended Q&A, but we're happy to do that and look forward to talking to you next quarter, if not before. Thanks.

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