Will O'Connor – Stern Investor Relations Joseph Patti – President and Chief Executive Officer Mark Colonnese – Executive Vice President and Chief Financial Officer Anna Novotney-Barry – Vice President-Clinical Development.

Kevin DeGeeter – Ladenburg Ted Tenthoff – Piper Jaffray Ed Arce – H.C. Wainwright.

Good day, ladies and gentlemen, and welcome to the Aviragen Therapeutics, Inc. Second Quarter 2017 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time [Operator Instructions].

As a reminder, today’s program maybe recorded. I would now like to introduce your host for today's program, Will O'Connor, Stern Investor Relations. Please go ahead..

Thank you, Operator. My name is Will O'Connor of Stern Investor Relations. I would like to welcome you to the Aviragen Therapeutics conference call and webcast to review the Company’s second quarter fiscal year 2017 earnings results, and to provide an update on recent pipeline and corporate developments.

Earlier today, we issued a press release, which outlines the topics that we plan to discuss. The release is available at aviragentherapeutics.com. With me today from Aviragen are President and CEO, Dr. Joseph Patti; EVP and CFO, Mark Colonnese; and Vice President of Clinical Development, Anna Novotney-Barry.

Before we begin the call, I would like to remind you that today's discussion will contain forward-looking statements that involve risks and uncertainties. These risks and uncertainties are outlined in today's press release, and in the Company's recent filings with the Securities and Exchange Commission, which we urge you to read.

Our actual results may differ materially from what is discussed on today's call. With that, I'll now turn the call over to Aviragen’s CEO, Dr. Joseph Patti..

Thanks, Will and good afternoon everyone. Thank you for joining us today. We entered 2017 looking forward to the near-term readout from two Phase 2 clinical studies.

As you know, we reported the first of these yesterday with top line results from the Phase 2a RSV Challenge Study of BTA585 and we expect to report top line results from our Phase 2b SPIRITUS trial, a multi-center, randomized, double-blind, placebo-controlled dose-ranging study of vapendavir, in moderate-to-severe asthmatics with rhinovirus infection in the coming weeks.

And with positive results from this trial, we’d expect to move as quickly as possible to an end of Phase 2 meeting with the FDA. As of today, we remain acutely focused on walking the SPIRITUS database and reporting top line data. All clinical trials come with some degree of risk but we feel the SPIRITUS trial is well powered and well designed.

Further based on two previous Phase 2 studies we have seen vapendavir’s ability to significantly reduce rhinovirus load, cold symptoms and improve asthma control all with the favorable safety profile.

Before we elaborate further on the SPIRITUS trial and our thoughts ahead of the data, we like to provide a brief overview of the top line results reported yesterday. While the RSV Challenge Study results were more variable than we expected. We are pleased with the overall safety profile BTA585.

The Phase 2a Challenge Study was double-blind, placebo-controlled and designed to evaluate the safety pharmacokinetics and antiviral activity of our orally dosed fusion inhibitor BTA585.

In adult, infected intranasally with RSV, we randomized three cohorts of 20 healthy adults who received either 400 milligrams or 600 milligrams of 585 or placebo dosed twice a day for seven days. The primary endpoint of the trial was the area under the curve for the viral load from the first dose of the study drug through day 12.

Key secondary endpoints included severity of RSV disease and mucus weight.

We did observe biologic activity on several of the endpoints however the considerable variability in the viral load among the cohorts and the small number of subjects that became infected with RSV likely impacted the ability to detect the statistically significant difference between the groups.

Looking at the primary endpoint subjects receiving 400 or 600 milligrams of BTA585 had viral loads of 484.6 and 534.9 respectively compared to the placebo which showed a viral load of 552.9. These values represent a 12% and 3% reduction in viral load for the 400 and 600 milligrams respectively compared to placebo.

The mean AUC for RSV related clinical symptom scores for the 400 milligram cohort was 162.1 for the 600 milligram cohort and 244.3 compared to the placebo of 318.1. These values represent a 47% and 27% reduction for the 400 and 600 milligram cohorts respectively.

I would like to point out that only nine of the 13 placebo subjects who had a measureable viral load reported any clinical symptoms during the entirety of the study period. Finally, subjects receiving 400 to 600 or placebo had total mucus weight of 8.4 grams, 15.5 grams and 16.8 grams respectively.

These values represent reductions of 50% and 8% respectively. The overall incidence of treatment emerging adverse events was very similar across placebo and active treatment arms, there were no adverse events or laboratory abnormality that led to treatment discontinuation.

Adverse events that were more common with 585 treatment compared to placebo and incurred in more than two BTA585 treated subjects were urine discoloration, nosebleed, abdominal discomfort and upper respiratory infection.

There is one serious treatment emergent adverse event of an increased cardiac enzyme in the 400 milligram cohort, which was previously reported. There were no clinically meaningful adverse trends in vital signs clinical safety chemistry or hematology laboratory results.

You may recall that the IND from BTA585 is currently on clinical hold with the FDA. The agency had requested additional non-clinical toxicology study as well as the risk benefit analysis as a basis for lifting the clinical hold.

The results from the completed non-clinical studies together with the full clinical data from the Phase 2 study particularly safety information will form our basis for our request to remove the clinical hold. We expect to have further clarity from the agency next quarter. At which point, we expect to be able to communicate our plan for this program.

We are dedicated to the preservation of shareholder value and will not be initiating any substantive activities on the program until we have further clarity on the regulatory front. Now I’d like to turn to our vapendavir program, our most advanced direct acting anti-viral candidate.

In the coming weeks, we expect to announce top line data from our Phase 2b SPIRITUS trial. Moderate-to-severe asthmatics who have a history of their asthma worsening with an upper respiratory infection are randomized into the trial when they are experiencing a symptomatic rhinovirus infection.

As you may recall the primary endpoint this SPIRITUS trial is a change from baseline to study day 14 measured by a patient reported asthma control questionnaire ACQ-6 total score. The study is powered at 80% to detect the 0.5 change in the ACQ-6 score, which is considered clinically relevant.

The secondary endpoints are focused on safety and tolerability, lung function assessments such as forced expiratory volume in one second or also known as FEV1, incidence of asthma exacerbations, assessments of the severity and duration of cold symptoms as measured by the Wisconsin Upper Respiratory Symptom Survey and a number of virological assessments.

We believe the asthma control questionnaire is an appropriate endpoint for the Phase 2 data as it has been used in well over 200 clinical trials and the development of other asthma medications. Further we are very interested to see the impact vapendavir has on lung function in this highly compromised patient population.

We believe that forced expiratory volume in one second, FEV1 and objective measure of lung function has the potential to be a primary endpoint in pivotal Phase 3 trials. We look forward to updating you on the vapendavir results in the coming weeks and which if positive could be a significant value creating event.

Over the last 9 to 12 months, we've been working closely with leading infectious disease physicians at premier transplant centers in the country to design a Phase 2 trial that assesses the ability of vapendavir to treat rhinovirus infections in hematopoietic stem cell transplant patients.

It was brought to our attention by these physicians that patients in the post-transplant settings are often left without a functional immunity and are susceptible to opportunistic infection.

As a result infection are common causes of death in stem cell transplants and rhinovirus is the most prevalent virus leading to both upper and lower respiratory tract infections among these patients. Importantly, the mortality rate from lower respiratory tract infection is estimated to be as high as 30% in this patient population.

Accordingly, this quarter we expect to initiate a Phase 2 trial of vapendavir for the treatment of rhinovirus infections in this highly vulnerable patient population. The primary endpoint of this trial will be time weighted average change from baseline to the end of treatment visit in rhinovirus load.

Secondary endpoints include mortality rate of progression of rhinovirus in upper respiratory infection to lower respiratory tract infection duration of rhinovirus shedding in the transplant patients and the proportion with hospitalization and hospitalization time.

Now turning to our BTA074 program, we have made considerable progress on the manufacturing front for 074, our 5% topical anti-viral in Phase 2 development for the treatment of condyloma caused by HPV type 6 and 11.

We have previously reported that the delay in availability of drug product had limitations on the number of clinical slides able to conduct the Phase 2 study.

After successfully completing G&P manufacturing and producing sufficient clinical trial material to complete the study, we've expanded the number of countries and sites participating in the trial.

We expect to be in a better position to provide guidance on enrollment once the new sites have been up and running and we get a sense of the randomization patterns. With that, I’ll turn the call over to Mark to review the financials.

Mark?.

Thanks, Joe, and good afternoon, everyone. Today, I'll be reviewing the financial results of the second quarter of our fiscal year 2017, as well as providing an update of our cash position. So, let's start with the bottom line.

Our net loss for the three month period ended December 31, 2016 was $9.1 million or $0.24 per share as compared to $6.5 million or $0.17 per share in the same period of 2015.

The income statement components of our loss are as follows; revenue increased to $3.8 million for the three-month period ended December 31, 2016 from $1.7 million in the same period of 2015, mainly due to the recognition of non-cash royalty income related to Inavir sales in Japan.

Regarding the non-cash Inavir royalties recall that we sold these royalties to healthcare royalty partners, or HCRP in a royalty monetization transaction last April. The accounting rules require us to record these as revenue but note that this cash goes straight to HCRP and does not benefit Aviragen’s cash position.

Regarding royalties that we receive from Glaxo on their Relenza flu product as a result of the appeals court ruling last fall that did not go in our favor. We will get no future royalties from U.S. sales of the product.

Our only remaining substantial patent that will generate future royalties is in Japan and based on history we can expect to receive total royalties of about $2 million a year related to Relenza going forward.

Turning now to research and development expense, we increased our investment to $10.2 million for the three-month period ended December 31, 2016 from $6.3 million in the same period of 2015.

The increase reflected higher clinical costs associated with our Phase 2a RSV Challenge trial, the BTA585 continuing cost for our Phase 2b SPIRITUS trial for vapendavir and clinical and manufacturing costs for our Phase 2 BTA074 trial for the treatment of condyloma.

Looking forward the final cost associated with the Challenge trial and the SPIRITUS trial should be paid in our upcoming quarter ended March 31. So after that quarter, our R&D cost should be lower than it have been since we will only have two Phase 2 trials active starting with the June quarter.

Looking at general and administrative costs, we continued our trend to flat or decline in spending on a year-to-year basis in the G&A area, as we keep to our plan of investing every available dollar into advancing our clinical product candidates.

One last note on the income statement, we recorded non-cash interest expense of about $500,000 in the quarter. As a reminder, much like the non-cash royalty income, this is an accounting convention it has no impact on the Company’s cash position. The Company held $49.2 million in cash as of December 31, 2016.

And based on our current operating plan, which going forward will include two ongoing Phase 2 development programs as well as expected start-up costs for vapendavir Phase 3 program should last roughly into early 2018.

As a reminder, the second quarter 2017 financial results, as well as this afternoon’s announcement are available on the Investors section of our website. So at this point, let’s open up the call for questions.

Operator?.

[Operator Instructions] Our first question comes from the line of Kevin DeGeeter from Ladenburg. Your question please..

Hi, guys.

Thanks for taking my question, with regard to 585 and specifically the non-clinical data, can you comment, first of all are those studies complete at this point and can you comment just qualitatively with regard to in the completed studies what you've seen in terms of cardiovascular adverse events?.

Sure. Kevin. So the requested non-clinical study was a 28 day rodent study, which we looked at, a dose we had tested previously as well as higher doses. It was a three dose study, what we can say is that the outcome of that, the histological assessment on all organs including the heart.

The result of that study allowed us to increase our NOAEL from what was previously 400 milligrams per kilogram per day to 600 milligrams per kilogram per day. So we have actually we’re able to move it up based on histological assessment of that study. So it was favorable in that matter.

It is complete and we'll be combining that non-clinical data as well as the clinical data from the current Challenge study and that will form the basis for our submission to the agency..

Okay, great. Thank you for the clarification and with regard to the upcoming vapendavir data. Do you anticipate being able to provide the top line analysis, FEV1 and exacerbation data or should we look for primarily the composite score within the context of top line data with more granularity in either publication arm [indiscernible]..

I think that's a great question Kevin, for Anna, I’m sure she has that answer..

So we did do a complete assessment of lung function and spirometry and exacerbations and both the primary efficacy endpoint surrounding the ACQ changes as well as spirometry and exacerbations our data that we expect to include in the top line results..

Okay, terrific. And I think that's it from me today. I will get back in the queue. Thank you..

Thank you. Our next question comes from the line of Ted Tenthoff from Piper Jaffray. Your question please..

Great. Thank you very much and thanks for the clarity on the last question.

So preparing for success, obviously the focus now is locking the database from reporting the data but what kind of activity are you thinking that in terms of either preparing for the end of Phase 2 meeting, is this – is there a potential partnership opportunity either overseas or regionally or even globally to help pay for the Phase 3?.

Yes. Thanks Ted. There’s been a number of activities well underway. In anticipation hopefully of success and that is preparing for end of Phase 2 meeting.

It involves third-party consultants to have a lot of expertise in addition to our team here to prepare the best package possible for the agency, in order to have a good and robust discussion about Phase 3 designs and endpoints.

So that's well underway and obviously the last piece or missing piece of that preparation is the data, which will be coming forthcoming and we expect that meeting, the timing that meeting could occur mid-year, with our current timing for that meeting.

In addition to preparing for end of Phase 2 meeting, we've had considerable interactions with potential partners both global players as well as regional players. And they're well aware of the timing of the data and we would again embark on more fulsome discussions with the data in hand probably beginning early next month..

Okay, excellent. Well thanks Joe and fingers crossed wishing you guys all the best..

Thanks..

Thank you. Our next question comes from the line of Ed Arce from H.C. Wainwright. Your question please..

Great. Thanks for taking my question, a couple of the important ones have already been answered but I guess, I wanted to ask you about 585 and as you think about the best path forward there, I know that you still have to go through complete data.

But you also mentioned there was some regulatory clarity that you would like to see as well maybe if you could just expand on that a bit?.

Yes, that's related to the – having the IND on clinical hold in the U.S. realizing that the RSV Challenge Study was conducted in the UK under MHRA. It is on clinical hold here and so in order to continue development, in the United States we need to have that address and so that’s the regulatory clarity that we're looking for.

And part of the process of putting together our non-clinical package as well as the clinical package and making our risk benefit analysis to the agency hopefully will provide us that clarity we’ll be looking for..

Okay. Well, perhaps just one other question. Just on the modeling side. If you could, I think I missed it as you're thinking about R&D expenses throughout this year.

If you could just repeat what commentary you had earlier?.

Sure. So for the last couple of quarters we've seen increasing R&D expenses as we’ve gotten, three – basically have three Phase 2 programs running concurrently that higher level of spend should complete itself by the end of this quarter ending March 31 and starting next quarter there will only be two ongoing Phase 2 trials.

So we expect a reduction in that spend until we commence start-up activities for our Phase 3 trial based on positive SPIRITUS results..

Okay. Sure, makes sense. As I was thinking through this actually there was one more question if I may. On the SPIRITUS trial and moving forward assuming that you do have positive data. FEV1, as you mentioned is an objective measure of lung function.

Is there a preference from your perspective going forward for the pivotal Phase 3 on an end point?.

This is Anna. Yes. I think we would prefer or would be delighted if we had the data to support going forward with the spirometry endpoint or a lung function endpoint because of the fact that it is objective and there's a lot of power inherent in the endpoints that you can design around those endpoints.

And so the overall size of the trials can be smaller than if you were pursuing for example a severe exacerbation endpoint..

Okay, great. Thanks a lot and best of luck..

Thank you. [Operator Instructions] Our next question is a follow-up from the line of Kevin DeGeeter from Ladenburg. Your question please..

Hey, thanks for taking the follow-up. Just as a housekeeping item as well. Mark, with regard to revenue recognition. You know about I guess two-thirds of revenue recognized in the quarter was under the non-cash royalty.

Is that a reasonable benchmark to think about on an annualized basis in terms of the portion that goes to healthcare royalty versus portion it stays with Aviragen or is this not necessarily a split that should be extrapolated long-term?.

I think on a normal basis, that's a ballpark, a decent ballpark. We haven't got into specifics on it obviously, and don't plan to do that publicly. The one caveat I would say is that there is a cap as we've disclosed on the amount that HCRP can get.

So if there is some reason like for instance government stockpiling, which has happened extensively for Relenza in the United States if that happens with Inavir in Japan, it actually happened for Relenza in Japan as well. But if it begins to happen then our portion could go up and it could go up considerably but I think that's the one caveat..

And with regard to that cap have you commented as to whether that's an annual cap.

Is that a – how do we think it sort of the time period or the duration which that cap would apply?.

Right, in general it is an annual cap..

Great. Thanks so much.

Sure..

Thank you. Our next question comes from the line of [indiscernible]. Your question please..

Hi Joe. Quick question for you, its Chow [ph]. I may have missed this earlier in your commentary about the RSV trial but I read that you cited variability among the patients in small numbers as being part of the issue.

What was the trial intended to be bigger and is there a way from a trial design standpoint to further optimize the results?.

The variability obviously the larger then you have like the variability will condense, I think 24-arm it has been at least the most other recent fusion inhibitor studies done at this site with this virus 20 is a very reasonable end per arm.

Again the variability really came in more importantly on the total symptoms scores, where we anticipated somewhere around a third, wouldn't eventually become infected but the standard metric for that study that model but what we didn't necessarily appreciate was that another smaller subset were even though they became effective weren't going to have measurable symptoms.

That would – that sort of goes counterintuitive that if you have a virus you should have symptoms at least that’s how it works in my mind, and the fact that a quarter of our placebo patients even though they had virus that could be measured had no symptoms. So again that's where I'm really pointing to the variability.

Obviously the larger the better but I thought – I felt from for an exploratory Phase 2 study at this juncture of the drugs development that a 60 patients study was more than adequate..

Got it. And the site the study site, here is just the same facility that did like the Gilead and Alios trials..

Yes. We believe so..

Okay, thank you..

Thank you. And this does conclude the question-and-answer session of today’s program. I'd like to hand the program back to Joe Patti for any further remarks..

Thank you. In closing, we remain confident in our direct acting antiviral pipeline are committed to advancing these important programs to the benefit of patients suffering with difficult to treat viral infections.

We look forward to several near-term clinical milestones not only the data readout from the SPIRITUS trial of vapendavir and asthmatics but also the initiation of a Phase 2 trial for the treatment of rhinovirus in hematopoietic stem cell transplant patients. Thank you for joining us today and have a wonderful rest of the day..

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day..