Risk Factors

Both Aviragen and Vaxart are subject to various risks associated with their businesses and their industries. In addition, the merger, including the possibility that the merger may not be completed, poses a number of risks to each company and its respective stockholders, including the following risks:

These risks and other risks are discussed in greater detail under the section titled “Risk Factors.” Aviragen and Vaxart both encourage you to read and consider all of these risks carefully.

Regulatory Approvals

In the United States, Aviragen must comply with applicable federal and state securities laws an d the rules and regulations of the Nasdaq Capital Market in connection with the issuance of shares of Aviragen common stock pursuant to the Merger Agreement and the filing of this proxy statement/prospectus/information statement with the SEC.

RISK FACTORS

The combined company will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement/prospectus/information statement, you should carefully consider the material risks described below before deciding how to vote your shares of stock. In addition, you should read and consider the risks associated with the business of Aviragen because these risks may also affect the combined company. These risks can be found in Aviragen ’s Annual Report on Form 10-K, as updated by subsequent Quarterly Reports on Form 10-Q, all of which are filed with the SEC. You should also read and consider the other information in this proxy statement/prospectus/information statement and the other documents incorporated by reference into this proxy statement/prospectus/information statement. Please see the section titled “Where You Can Find More Information.”

Risks Related to the Merger

The Exchange Ratio is not adjustable based on the market price of Aviragen common stock so the merger consideration at the closing may have a greater or lesser value than at the time the Merger Agreement was signed.

The Merger Agreement has set the Exchange Ratio for the Vaxart common stock, and the Exchange Ratio is only adjustable upward or downward based on increases or decreases in the number of shares of Vaxart ’s issued and outstanding capital stock and the number of shares of Vaxart capital stock issuable upon the exercise of all issued and outstanding equity awards, increases or decreases the number of Aviragen’s issued and outstanding common stock, if the cash balances at closing of either Aviragen or Vaxart fall outside a pre-determined range, and the proposed reverse stock split, prior to the closing of the merger as described in the section titled “The Merger—Merger Consideration.” The pre-reverse stock split Exchange Ratio is 0.3186, and the post-split Exchange Ratio will depend on the exact reverse stock split ratio that is ultimately mutually determined by Aviragen and Vaxart and certain changes in the capitalization of the two companies. Any changes in the market price of Aviragen common stock before the closing of the merger will not affect the number of shares Vaxart securityholders will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the closing of the merger the market price of Aviragen common stock declines from the market price on the date of the Merger Agreement, then Vaxart stockholders could receive merger consideration with substantially lower value. Similarly, if before the closing of the merger the market price of Aviragen common stock increases from the market price on the date of the Merger Agreement, then Vaxart stockholders could receive merger consideration with substantially more value for their shares of Vaxart capital stock than the parties had negotiated for in the establishment of the Exchange Ratio. Because the Exchange Ratio does not adjust as a result of changes in the value of Aviragen common stock, for each one percentage point that the market value of Aviragen common stock rises or declines, there is a corresponding one percentage point rise or decline, respectively, in the value of the total merger consideration issued to Vaxart stockholders.

Failure to complete the merger may result in Aviragen paying a termination fee or expenses to Vaxart and could harm the common stock price of Aviragen and future business and operations of each company.

If the merger is not completed, Aviragen and Vaxart are subject to the following risks:

In addition, if the Merger Agreement is terminated and the Aviragen board of directors determines to seek another business combination, there can be no assurance that Aviragen or Vaxart will be able to find a partner willing to provide equivalent or more attractive consideration than the consideration to be provided by each party in the merger.

If the conditions to the merger are not met, the merger may not occur.

Even if the proposals referred to herein are approved by the stockholders of Aviragen and Vaxart, specified other conditions must be satisfied or waived to complete the merger. These conditions are set forth in the Merger Agreement and described in the section titled “The Merger Agreement —Conditions to the Closing of the Merger.” Aviragen and Vaxart cannot assure you that all of the conditions will be satisfied or waived. If the conditions are not satisfied or waived, the merger may not occur or will be delayed, and Aviragen and Vaxart each may lose some or all of the intended benefits of the merger.

The merger may be completed even though material adverse changes may result from the announcement of the merger, industry-wide changes and other causes.

In general, either Aviragen or Vaxart can refuse to complete the Merger if there is a material adverse change affecting the other party between October 27, 2017, the date of the Merger Agreement, and the closing. However, certain types of changes do not permit either party to refuse to complete the Merger, even if such change could be said to have a material adverse effect on Aviragen or Vaxart, including:

If adverse changes occur and Aviragen and Vaxart still complete the merger, the combined company stock price may suffer. This in turn may reduce the value of the merger to the stockholders o f Aviragen and Vaxart.

The combined company will need to raise additional capital by issuing securities or debt or through licensing arrangements, which may cause dilution to the combined company ’s stockholders or restrict the combined company’s operations or proprietary rights.

The combined company may be required to raise additional funds sooner than currently planned. Additional financing may not be available to the combined company when it needs it or may not be available on favorable terms. To the extent that the combined company raises additional capital by issuing equity securities, such an issuance may cause significant dilution to the combined company ’s stockholders’ ownership and the terms of any new equity securities may have preferences over the combined company’s common stock. Any debt financing the combined company enters into may involve covenants that restrict its operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of the combined company’s assets, as well as prohibitions on its ability to create liens, pay dividends, redeem its stock or make investments. In addition, if the combined company raises additional funds through licensing arrangements, it may be necessary to grant licenses on terms that are not favorable to the combined company.

Certain Aviragen and Vaxart executive officers and directors have interests in the merger that are different from yours and that may influence them to support or approve the merger without regard to your interests.

Certain officers and directors of Aviragen and Vaxart participate in arrangements that provide them with interests in the merger that are different from yours, including, among others, the continued service as directors, in the case of Aviragen, or directors and officers, in the case of Vaxart, of the combined company, severance and retention benefits, the acceleration of stock options and continued indemnification.

For example, Joseph M. Patti, Ph.D., Aviragen ’s President and Chief Executive Officer, is expected to cease to serve as President and Chief Executive Officer, at which point Mr. Patti’s employment with Aviragen will end. Consistent with the terms of Dr. Patti’s existing employment agreement, upon the termination of Dr. Patti’s employment, assuming such termination occurrs on              , 2018, and in accordance with Dr. Patti’s employment agreement, Dr. Patti is expected to receive an aggregate of approximately $1,077,196 in cash severance benefits.

In addition, Mark P. Colonnese , Aviragen’s Executive Vice President and Chief Financial Officer, is expected to cease to serve as Executive Vice President and Chief Financial Officer upon the closing of the merger, at which point Mr. Colonnese’s employment with Aviragen will end. Consistent with the terms of Mr. Colonnese’s existing employment agreement, upon the termination of Mr. Colonnese’s employment, assuming such termination occurs on                      , 2018, and in accordance with Mr. Colonnese’s employment agreement, Mr. Colonnese is expected to receive an aggregate of approximately $556,439 in cash severance benefits.

In addition, all of Dr. Patti ’s and Mr. Colonnese’s outstanding stock options will vest in full immediately prior to the Effective Time, although they are currently out of the money based on the closing price of Aviragen common stock as of December 7, 2017. For more information, please see the section titled “The Merger—Interests of the Aviragen Directors and Executive Officers in the Merger.” Furthermore, in connection with the closing of the merger, any unvested equity awards held by the Aviragen board members will vest in full, including stock options for 96,666, 105,000 and 105,000 shares of Aviragen common stock held by Geoffrey F. Cox, Ph.D., John P. Richard and Anne M. VanLent, respectively, who are expected to remain on the combined company’s board of directors. The exercise price of all unvested stock option awards held by the Aviragen board members was above the trading price of Aviragen common stock as of December 7, 2017, other than options to purchase 140,000 shares of Aviragen common stock granted to non-employee directors in May 2017.

Additionally, certain of Vaxart ’s directors and executive officers are expected to become directors and executive officers of the combined company upon the closing of the merger. Specifically, Wouter W. Latour, M.D. and Sean N. Tucker, Ph.D., both of whom are currently executive officers of Vaxart, are expected to become executive officers of the combined company upon the closing of the merger, with Dr. Latour serving as the President and Chief Executive Officer and Dr. Tucker serving as the Chief Scientific Officer of the combined company. Additionally, Dr. Latour who is a current director of Vaxart, will be designated to serve on the combined company’s board of directors following the closing of the merger.

In addition, certain of Vaxart's executive officers and directors and affiliates of Vaxart's directors currently hold shares of Vaxart common stock and preferred stock. Affiliates of certain Vaxart directors and certain executive officers of Vaxart will convert their unsecured subordinated convertible promissory notes into shares of Vaxart common stock prior to the closing of the merger pursuant to the note purchase agreement. For more information, please see the section titled "The Merger—Interests of the Vaxart Directors and Executive Officers in the Merger."

The market price of the combined company ’s common stock following the merger may decline as a result of the merger.

The market price of the combined company ’s common stock may decline as a result of the merger for a number of reasons including if:

Aviragen and Vaxart stockholders may not realize a benefit from the merger commensurate with the ownership dilution they will experience in connection with the merger.

If the combined company is unable to realize the full strategic and financial benefits currently anticipated from the merger, Aviragen and Vaxart securityholders will have experienced substantial dilution of their ownership interests in their respective companies without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the merger.

During the pendency of the merger, Aviragen and Vaxart may not be able to enter into a business combination with another party at a favorable price because of restrictions in the Merger Agreement, which could adversely affect their respective businesses.

Covenants in the Merger Agreement impede the ability of Aviragen and Vaxart to make acquisitions, subject, in the case of Aviragen, to certain exceptions relating to fiduciary duties, or complete other transactions that are not in the ordinary course of business pending the closing of the merger. As a result, if the merger is not completed, the parties may be at a disadvantage to their competitors during that period. In addition, while the Merger Agreement is in effect, each party is generally prohibited from soliciting, initiating, encouraging or entering into certain extraordinary transactions, such as a merger, sale of assets or other business combination outside the ordinary course of business, with any third-party, subject to, in the case of Aviragen, certain exceptions. Any such transactions could be favorable to such party’s stockholders.

Certain provisions of the Merger Agreement may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.

The terms of the Merger Agreement prohibit each of Aviragen and Vaxart from soliciting alternative takeover proposals or cooperating with persons making unsolicited takeover proposals, except, with respect to Aviragen, in certain circumstances where the Aviragen board of directors determines in good faith, after consultation with its financial advisor and outside legal counsel, that an unsolicited alternative takeover proposal constitutes or is reasonably likely to result in a superior takeover proposal. In addition, if Aviragen or Vaxart terminate the Merger Agreement under certain circumstances, including terminating because of a decision of a board of directors to recommend an alternative proposal, Aviragen would be required to pay a termination fee of $1.95 million to the other party. These termination fees and reimbursement obligations may Merger Agreement described above may discourage third parties from submitting alternative takeover proposals to Aviragen and its stockholders, and may cause the Aviragen board of directors to be less inclined to recommend an alternative proposal.

The lack of a public market for Vaxart shares makes it difficult to determine the fair market value of the Vaxart shares, and Vaxart stockholders may receive consideration in the merger that is less than the fair market value of the Vaxart shares and/or Aviragen may pay more than the fair market value of the Vaxart shares.

Vaxart is privately held and its capital stock is not traded in any public market. The lack of a public market makes it extremely difficult to determine Vaxart’s fair market value. Because the percentage of Aviragen equity to be issued to Vaxart stockholders was determined based on negotiations between the parties, it is possible that the value of the Aviragen common stock to be received by Vaxart stockholders will be less than the fair market value of Vaxart, or Aviragen may pay more than the aggregate fair market value for Vaxart.

Risks Related to Aviragen

Investing in Aviragen common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information contained in this proxy statement/prospectus/information statement and in the other periodic and current reports and other documents it files with the SEC, before deciding to invest in its common stock. If any of the following risks materialize, Aviragen ’s business, financial condition, results of operation and future prospects will likely be materially and adversely affected. In that event, the market price of its common stock could decline and you could lose all or part of your investment.

Aviragen Risks Related to the Merge r

If the merger is not completed, Aviragen may be unsuccessful in completing an alternative transaction on terms that are as favorable as the terms of the proposed transaction with Vaxart, or at all, and Aviragen may be unable to reestablish an operating business. The Aviragen board of directors may decide to pursue a dissolution and liquidation of Aviragen. In such an event, the amount of cash available for distribution to Aviragen’s stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.

To date, Aviragen ’s current assets consist primarily of cash, cash equivalents and marketable securities, Aviragen’s clinical assets, potential royalty streams from Relenza ^® and Inavir ^® , Aviragen’s listing on the Nasdaq Capital Market and the Merger Agreement with Vaxart. While Aviragen has entered into the Merger Agreement with Vaxart, the closing of the merger with Vaxart may be delayed or may not occur at all and there can be no assurance that the merger will deliver the anticipated benefits Aviragen expects or enhance shareholder value. If Aviragen is unable to consummate the merger with Vaxart, the Aviragen board of directors may elect to pursue an alternative strategy, one of which may be a strategic transaction similar to the proposed merger with Vaxart. Attempting to complete an alternative transaction will be costly and time consuming, and Aviragen can make no assurances that such an alternative transaction would occur at all. Alternatively, the Aviragen board of directors may elect to continue operations to complete Aviragen’s Phase 2 clinical trial of BTA074 or decide to pursue a dissolution and liquidation of the company. In such an event, the amount of cash available for distribution to Aviragen’s stockholders will depend heavily on the timing of such decision, as with the passage of time the amount of cash available for distribution will be reduced as Aviragen continues to fund its operations. In addition, if the Aviragen board of directors was to approve and recommend, and Aviragen’s stockholders were to approve, a dissolution and liquidation of the company, Aviragen would be required under Delaware corporate law to pay its outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to Aviragen’s stockholders. Aviragen’s commitments and contingent liabilities may include severance obligations, regulatory and clinical obligations remaining under Aviragen’s clinical trials and fees and expenses related to the merger. As a result of this requirement, a portion of Aviragen’s assets may need to be reserved pending the resolution of such obligations. In addition, Aviragen may be subject to litigation or other claims related to a dissolution and liquidation. If a dissolution and liquidation were pursued, the Aviragen board of directors, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of Aviragen common stock could lose all or a significant portion of their investment in the event of a liquidation, dissolution or winding up of the company.

Failure to obtain stockholder approval for the proposed reverse stock split may result in the combined company being unable to obtain compliance with minimum bid price requirements for an initial listing on the Nasdaq Global Market and may result in Aviragen common stock being delisted from the Nasdaq Capital Market.

Aviragen is required pursuant to the terms of the Merger Agreement to submit to its stockholders a proposal to approve an amendment to its certificate of incorporation to authorize the Aviragen board of directors to effect a reverse stock split of all outstanding shares of its common stock. If the Reverse Stock Split Proposal is not approved by Aviragen’s stockholders, the combined company will likely not be able to obtain compliance with the minimum bid price requirement for an initial listing on Nasdaq Global Market and, as a consequence, Nasdaq will immediately provide the combined company with written notification that the combined company’s common stock will be delisted.

Upon receipt of such delisting letter, the combined company will appeal the determination to the Nasdaq hearings panel, or the Hearing Panel. In addition, the board of directors of the combined company will immediately call for a second special meeting of the stockholders following the closing of the merger and request the stockholders of the combined company to approve a reverse stock split that will allow the combined company to remain in compliance with Nasdaq listing requirements. If the second special meeting has not been held before the occurrence of a hearing before the Hearing Panel, the combined company will be required to provide a plan to attain compliance. If the combined company has not regained compliance with Nasdaq listing requirements prior to such hearing, and the Hearing Panel decides to continue with delisting of the combined company, the Hearing Panel’s decision may be appealed to the Nasdaq Listing and Hearing Review Council but such appeal would not stay the delisting process.

The issuance of shares of Aviragen common stock to Vaxart stockholders in the merger will dilute substantially the voting power of Aviragen’s current stockholders.

If the merger is completed, each outstanding share of Vaxart common stock will be converted into the right to receive a number of shares of Aviragen common stock equal to the Exchange Ratio determined pursuant to the Merger Agreement. Immediately following the merger, Aviragen securityholders are expected to own approximately 40% of the outstanding capital stock of the combined company on a fully diluted basis, and Vaxart securityholders are expected to own approximately 60% of the outstanding capital stock of the combined company on a fully diluted basis. Accordingly, the issuance of shares of Aviragen common stock to Vaxart stockholders in the merger will reduce significantly the relative voting power of each share of Aviragen common stock held by Aviragen’s current securityholders. Consequently, Aviragen securityholders as a group will have significantly less influence over the management and policies of the combined company after the merger than prior to the merger.

If the combined company after the merger is unable to realize the strategic and financial benefits currently anticipated from the merger, the Aviragen stockholders and the Vaxart stockholders will have experienced substantial dilution of their ownership interests in their respective companies without receiving the expected commensurate benefit, or receiving only part of the commensurate benefit to the extent the combined company is able to realize only part of the expected strategic and financial benefits currently anticipated from the merger.

The pendency of the merger could have an adverse effect on the trading price of Aviragen common stock and Aviragen ’s business, financial condition, results of operations or business prospects.

While there have been no significant adverse effects to date, the pendency of the merger could disrupt Aviragen’s businesses in the following ways, including:

Should they occur, any of these matters could adversely affect the trading price of Aviragen common stock or harm Aviragen ’s financial condition, results of operations or business prospects.

Aviragen is substantially dependent on Aviragen’s remaining employees to facilitate the consummation of a strategic transaction.

On October 27, 2017, Aviragen reduced its workforce by six to a total of 10 full-time employees. Aviragen ’s ability to successfully complete a strategic transaction depends in large part on Aviragen’s ability to retain certain of its remaining personnel. Despite Aviragen’s efforts to retain these employees, one or more may terminate their employment with Aviragen on short notice. The loss of the services of any of these employees could potentially harm Aviragen’s ability to consummate the merger, to run Aviragen’s day-to-day operations, as well as fulfill Aviragen’s reporting obligations as a public company.

There is no assurance that the proposed merger will be completed in a timely manner or at all. If the merger is not consummated, Aviragen ’s business could suffer materially and its stock price could decline.

The closing of the proposed merger is subject to a number of closing conditions, including the approval by Aviragen ’s stockholders of the issuance of shares of Aviragen common stock pursuant to the Merger Agreement and other customary closing conditions. If the conditions are not satisfied or waived, the merger will not occur or will be delayed.

If the proposed merger is not consummated, Aviragen may be subject to a number of material risks, and Aviragen ’s business and stock price could be adversely affected, as follows:

Risks Related to Aviragen ’s Business

Aviragen ’s success depends largely upon Aviragen’s ability to advance its product candidates through the various stages of drug development. If Aviragen is unable to successfully advance or develop its product candidates, its business will be materially harmed.

Even though Aviragen generates royalty revenue from its two commercialized influenza products, all of its remaining product candidates are in early stages of development and their commercial viability remains subject to the successful outcome of future preclinical studies, clinical trials, manufacturing processes, regulatory approvals and the risks generally inherent in the development of pharmaceutical product candidates. Failure to advance the development of one or more of Aviragen’s product candidates may have a material adverse effect on Aviragen’s business. The long-term success of Aviragen’s business ultimately depends upon Aviragen’s ability to advance the development of its product candidates through preclinical studies and clinical trials, appropriately formulate and consistently manufacture them in accordance with strict specifications and regulations, obtain approval of Aviragen’s product candidates for sale by the FDA or similar regulatory authorities in other countries, and ultimately have its product candidates successfully commercialized by Aviragen or a strategic partner or licensee. Aviragen cannot assure you that the results of its ongoing or future research, preclinical studies or clinical trials will support or justify the continued development of Aviragen’s product candidates, or that Aviragen will ultimately receive approval from the FDA, or similar regulatory authorities in other countries, to advance the development of its product candidates .

Aviragen ’s product candidates must satisfy rigorous regulatory standards of safety, efficacy and manufacturing before Aviragen can advance or complete their development and before they can be approved for sale by the FDA or similar regulatory authorities in other countries. To satisfy these standards, Aviragen must engage in expensive and lengthy studies and clinical trials, develop acceptable and cost effective manufacturing processes, and obtain regulatory approval of Aviragen’s product candidates. Despite these efforts, Aviragen’s product candidates may not:

Even if Aviragen demonstrates favorable results in preclinical studies and early-stage clinical trials, it cannot assure you that the results of late-stage clinical trials will be sufficient to support the continued development of Aviragen’s product candidates. Many, if not most, companies in the pharmaceutical and biopharmaceutical industries have experienced significant delays, setbacks and failures in all stages of development, including late-stage clinical trials, even after achieving promising results in preclinical testing or early-stage clinical trials. Accordingly, results from completed preclinical studies and early-stage clinical trials of Aviragen’s product candidates may not be predictive of the results Aviragen may obtain in future late-stage trials. Furthermore, even if the data collected from preclinical studies and clinical trials involving any of Aviragen’s product candidates demonstrate a satisfactory safety, tolerability and efficacy profile, such results may not be sufficient to obtain regulatory approval from the FDA in the United States, or other similar regulatory agencies in other jurisdictions, which is required to market and sell the product.

Clinical trials are risky, lengthy and expensive. Aviragen incurs substantial expense for, and devotes significant time and resources to, preclinical testing and clinical trials, yet cannot be certain that these tests and trials will demonstrate that a product candidate is effective and well-tolerated, or will ever support its approval and commercial sale. For example, clinical trials require adequate supplies of clinical trial material and sufficient patient enrollment to power the study. Delays in patient enrollment can result in increased costs and longer development times. Even if Aviragen, or a licensee or collaborator, if applicable, successfully complete clinical trials for Aviragen’s product candidates, Aviragen or they might not file the required regulatory submissions in a timely manner and may not receive marketing approval for the product candidate. Aviragen cannot assure you that any of its product candidates will successfully progress further through the drug development process, or ultimately will result in an approved and commercially viable product.

If the actual or perceived therapeutic benefits, or the safety or tolerability profile of any of Aviragen ’s product candidates are not equal to or superior to other competing treatments approved for sale or in clinical development, Aviragen may terminate the development of any of its product candidates at any time, and Aviragen’s business prospects and potential profitability could be harmed.

Aviragen is aware of a number of companies marketing or developing various classes of anti-infective product candidates or products for the treatment of patients infected with HPV, HRV, and RSV that are either approved for sale or further advanced in clinical development than Aviragen ’s, such that their time to approval and commercialization may be shorter than that for Aviragen’s product candidates.

Currently, there no approved HPV-specific direct acting anti-viral drugs to treat genital warts. Treatments for genital warts can be divided broadly into two categories: provider-administered ablative/cytodestructive therapies (including cryotherapy, laser ablation, and trichloroacetic acid) and patient-administered topical therapies such as podophyllotoxin (Condylox ^® ; Actavis), sinecatechins (Veregen ^® ; Fougera Pharmaceuticals, Inc.), and imiquimod (Zyclara ^® , Aldara ^® ; Valeant). Aviragen is aware that there are compounds under clinical development to treat genital warts, including Novan’s SB206 and Cassiopea’s CB-06-02. Aviragen anticipates that BTA074, if successfully developed, would directly compete with the patient-applied topical treatments for genital warts. Aviragen believes that key differentiating features of BTA074 could be its mechanism of action, favorable local skin tolerability, efficacy, and lower reoccurrence rate. Three prophylactic vaccines, primarily designed to prevent cervical, vulvar, vaginal, and anal cancers, are currently marketed: a bivalent HPV16/18 vaccine (Cervarix ^® ; GSK), quadrivalent HPV16/18/6/11 (Gardasil ^® ; Merck) and the 9-valent HPV 6/11/16/18/33/52/58 (Gardasil ^® 9; Merck). Gardasil ^® 9 is indicated for females aged 9 through 26 and males aged 9 through 15, to prevent various HPV related cancers and genital warts in both sexes. Gardasil ^® , Gardasil ^® 9, and Cervarix ^® are not known to exhibit a therapeutic effect on existing HPV lesions.

Currently, there are no approved direct-acting antiviral drugs to treat HRV infections. However, if ever approved, Aviragen’s vapendavir product candidate would indirectly compete with drugs approved to reduce the incidence of exacerbations or improve lung function in patients with asthma and COPD, such as fluticasone propionate (Advair ^® ), tiotoprium bromide (Spiriva ^® ), fluticasone furoate/vilanterol (Breo Ellipta ^® ), and roflumilast (Daliresp ^® ). In addition to these approved drugs, there are compounds at the clinical development stage that if successfully developed for the treatment of HRV infections could compete with vapendavir in the future.

Effective treatments of RSV infections in pediatrics, the elderly, and the immunocompromised are very limited. Currently, only Virazole ^® (ribavirin) is indicated for the treatment of hospitalized infants and young children with severe lower respiratory tract infections due to RSV. Aviragen is aware that the following compounds are under development to treat RSV infections: Gilead’s presatovir, Johnson & Johnson’s JJ-53718678 (ALS-8176), Ablynx’s ALX-0171 and Ark Biosciences’ AK0529. The only approved drug for the prevention of RSV infections in high risk infants is MedImmune’s palivizumab (Synagis ^® ), a monoclonal antibody. There are several vaccines and antibody products designed to prevent RSV infections in clinical development. Among the clinical stage product candidates in development are Novavax’s RSV F vaccine, GSK’s GSK3003898A vaccine, GSK’s GSK3389245A vaccine, Bavarian Nordic’s BN ^® RSV vaccine, MedImmune’s MEDI ÄM2-2 vaccine and MedImmune’s monoclonal antibody MEDI8897.

If at any time Aviragen believes that any of Aviragen’s product candidates may not provide meaningful or differentiated therapeutic benefits, perceived or real, equal to or better than its competitor’s products or product candidates, or Aviragen believes that its product candidates may not have as favorable a safety or tolerability profile as potentially competitive compounds, Aviragen may delay or terminate the future development of any of its product candidates. Aviragen cannot provide any assurance that the future development of any of Aviragen’s product candidates will demonstrate any meaningful therapeutic benefits over potentially competitive compounds currently approved for sale or in development, or an acceptable safety or tolerability profile sufficient to justify its continued development.

Aviragen ’s product candidates may exhibit undesirable side effects when used alone or in combination with other approved pharmaceutical products, which may delay or preclude their development or regulatory approval, or limit their use if ever approved.

Throughout the drug development process, Aviragen must continually demonstrate the activity, safety and tolerability of its product candidates in order to obtain regulatory approval to further advance their clinical development, or to eventually market them. Even if Aviragen ’s product candidates demonstrate adequate biologic activity and clear clinical benefit, any unacceptable side effects or adverse events, when administered alone or in the presence of other pharmaceutical products, may outweigh these potential benefits. Aviragen may observe adverse or serious adverse events or drug-drug interactions in preclinical studies or clinical trials of Aviragen’s product candidates, which could result in the delay or termination of their development, prevent regulatory approval, or limit their market acceptance if they are ultimately approved.

If the results from preclinical studies or clinical trials of Aviragen’s product candidates, including those that are subject to existing or future license or collaboration agreements, are unfavorable, Aviragen could be delayed or precluded from the further development or commercialization of its product candidates, which could materially harm Aviragen’s business.

In order to further advance the development of, and ultimately receive marketing approval to sell Aviragen’s product candidates, Aviragen must conduct extensive preclinical studies and clinical trials to demonstrate their safety and efficacy to the satisfaction of the FDA or similar regulatory authorities in other countries, as the case may be. Preclinical studies and clinical trials are expensive, complex, can take many years to complete, and have highly uncertain outcomes. Delays, setbacks, or failures can and do occur at any time, and in any phase of preclinical or clinical testing, and can result from concerns about safety, tolerability, toxicity, a lack of demonstrated biologic activity or improved efficacy over similar products that have been approved for sale or are in more advanced stages of development, poor study or trial design, and issues related to the formulation or manufacturing process of the materials used to conduct the trials. The results of prior preclinical studies or early-stage clinical trials are not predictive of the results Aviragen may observe in late-stage clinical trials. In many cases, product candidates in clinical development may fail to show the desired tolerability, safety and efficacy characteristics, despite having favorably demonstrated such characteristics in preclinical studies or early-stage clinical trials.

In addition, Aviragen may experience numerous unforeseen events during, or as a result of, preclinical studies and the clinical trial process, which could delay or impede Aviragen’s ability to advance the development of, receive marketing approval for, or commercialize its product candidates, including, but not limited to: 

Even if the data collected from preclinical studies or clinical trials involving Aviragen ’s product candidates demonstrate a satisfactory tolerability, safety and efficacy profile, such results may not be sufficient to support the submission of an NDA to obtain regulatory approval from the FDA in the United States, or other similar regulatory authorities in other foreign jurisdictions, which is required for Aviragen to market and sell its product candidates.

If the FDA does not agree to lift the clinical hold on BTA585, it is unlikely that Aviragen will be able to continue its development.

In May 2016, during the conduct of the Phase 2a RSV challenge trial, Aviragen announced a voluntary delay in enrollment due to the receipt of a lab result from one subject showing an increase of a cardiac enzyme level coupled with transient ECG changes, which led to a hospitalization of less than 24 hours for observation and assessment. The subject's ECGs normalized in the clinic prior to hospitalization and the cardiac enzyme levels returned to baseline shortly thereafter. Furthermore, a cardiac MRI was normal with no evidence of functional deficit or ongoing cardiac condition. After a review of the subject ’s data, the MHRA agreed to allow enrollment to resume in order to complete the higher dose level cohort. Aviragen also reported that subsequent to the submission of the requisite safety report of this event to the FDA, Aviragen received communication from the FDA that the investigational new drug application, or IND, for BTA585 has been placed on clinical hold for future studies conducted in the United States under the IND. In the first half of 2017, Aviragen completed the requested non-clinical studies requested by the FDA to support a response to the clinical hold, but has subsequently put all activities related to the BTA585 program on hold during the pendency of Aviragen’s review of strategic alternatives. If the FDA does not agree to lift the clinical hold on BTA585, the viability of BTA585 as a commercial product is subject to doubt, and it would be unlikely that Aviragen would continue the development of BTA585.

If third-party contract manufacturers, upon whom Aviragen relies to formulate and manufacture Aviragen ’s product candidates, do not perform, fail to manufacture according to Aviragen’s specifications, or fail to comply with strict government regulations, Aviragen’s preclinical studies or clinical trials could be adversely affected and the development of Aviragen’s product candidates could be delayed or terminated, or Aviragen could incur significant additional expenses.

Aviragen does not currently own any manufacturing facilities. Aviragen has historically used third-party contract manufacturers and Aviragen intends to continue to rely on third-party contractors for the foreseeable future to formulate, manufacture, fill and package Aviragen ’s product candidates. Aviragen’s reliance on these third-party contract manufacturers, which in some cases are sole sourced, exposes Aviragen to a number of risks, any of which could delay or prevent the completion of Aviragen’s preclinical studies or clinical trials, or the regulatory approval or commercialization of Aviragen’s product candidates, result in higher costs or deprive Aviragen of potential product revenues in the future. Some of these risks include, but are not limited to:

Manufacturers of pharmaceutical drug products are subject to ongoing periodic inspections by the FDA, the U.S. Drug Enforcement Administration , or DEA, and corresponding state and other foreign agencies to ensure strict compliance with FDA-mandated cGMPs, other government regulations and corresponding foreign standards. Aviragen does not have control over Aviragen’s third-party contract manufacturers’ compliance with these regulations and standards and accordingly, failure by Aviragen’s third-party manufacturers, or Aviragen, to comply with applicable regulations could result in sanctions being imposed on Aviragen or the manufacturers, which could significantly and adversely affect Aviragen’s business.

In the event that Aviragen needs to change its third-party contract manufacturers, its preclinical studies or its clinical trials, the commercialization of its product candidates could be delayed, adversely affected or terminated, or such a change may result in the need for Aviragen to incur significantly higher costs, which could materially harm Aviragen’s business.

Due to various regulatory restrictions in the United States and many other countries, as well as potential capacity constraints on manufacturing that occur from time-to-time in Aviragen’s industry, various steps in the manufacture of Aviragen’s product candidates are sole-sourced to certain contract manufacturers. In accordance with cGMPs, changing manufacturers may require the re-validation of manufacturing processes and procedures, and may require further preclinical studies or clinical trials to show comparability between the materials produced by different manufacturers. Changing Aviragen’s current or future contract manufacturers may be difficult, if not impossible for Aviragen, and could be extremely costly if Aviragen does make such a change, which could result in Aviragen’s inability to manufacture its product candidates for an extended period of time and a delay in the development of its product candidates. Further, in order to maintain its development timelines in the event of a change in a third-party contract manufacturer, Aviragen may incur significantly higher costs to manufacture its product candidates.

If third-party vendors, upon whom Aviragen relies to conduct its preclinical studies or clinical trials, do not perform or fail to comply with strict regulations, these studies or trials may be delayed, terminated, or fail, or Aviragen could incur significant additional expenses, which could materially harm its business.

Aviragen has limited resources dedicated to designing, conducting and managing Aviragen’s preclinical studies and clinical trials. Aviragen has historically relied on, and intends to continue to rely on, third parties, including clinical research organizations, consultants and principal investigators, to assist it in designing, managing, conducting, monitoring and analyzing the data from its preclinical studies and clinical trials. Aviragen relies on these vendors and individuals to perform many facets of the clinical development process on its behalf, including conducting preclinical studies, the recruitment of sites and patients for participation in Aviragen’s clinical trials, maintenance of good relations with the clinical sites, and ensuring that these sites are conducting Aviragen’s trials in compliance with the trial protocol and applicable regulations. If these third parties fail to perform satisfactorily, or do not adequately fulfill their obligations under the terms of Aviragen’s agreements with them, Aviragen may not be able to enter into alternative arrangements without undue delay or additional expenditures, and therefore the preclinical studies and clinical trials of Aviragen’s product candidates may be delayed or prove unsuccessful.

Further, the FDA, or similar regulatory authorities in other countries, may inspect some of the clinical sites participating in Aviragen’s clinical trials or Aviragen’s third-party vendors’ sites to determine if Aviragen’s clinical trials are being conducted according to GCP or similar regulations. If Aviragen or a regulatory authority determine that Aviragen’s third-party vendors are not in compliance with, or have not conducted Aviragen’s clinical trials according to applicable regulations, Aviragen may be forced to exclude certain data from the results of the trial, or delay, repeat or terminate such clinical trials.

Aviragen has a limited capacity for managing clinical trials, which could delay or impair Aviragen’s ability to initiate or complete clinical trials of Aviragen’s product candidates on a timely basis and materially harm Aviragen’s business.

Aviragen has a limited capacity to recruit and manage all of the clinical trials necessary to obtain approval for Aviragen’s product candidates by the FDA or similar regulatory authorities in other countries. By contrast, larger pharmaceutical and biopharmaceutical companies often have substantial staff or departments with extensive experience in conducting clinical trials with multiple product candidates across multiple indications and obtaining regulatory approval in various countries. In addition, these companies may have greater financial resources to compete for the same clinical investigators, sites and patients that Aviragen is attempting to recruit for its clinical trials. As a result, Aviragen may be at a competitive disadvantage that could delay the initiation, recruitment, timing and completion of Aviragen’s clinical trials and obtaining of marketing approvals, if achieved at all, for Aviragen’s product candidates.

If Aviragen is unable to attract or retain key employees, advisors or consultants, Aviragen may be unable to successfully develop its product candidates in a timely manner, if at all, or otherwise manage its business effectively.

Aviragen has increasingly adopted an operating model that relies on the outsourcing of a number of key responsibilities and activities to third-party vendors, such as contract research and manufacturing organizations, in order to advance the development of Aviragen ’s product candidates. Therefore, Aviragen’s success depends in part on its ability to retain highly qualified key management, personnel to develop, implement and execute its business strategy and operations, and oversee the activities of its vendors, as well as any academic and corporate advisors or consultants that may assist it in this regard. Aviragen is currently highly dependent upon the efforts of its small management team to accomplish this. In order to advance the development of Aviragen’s product candidates, Aviragen needs to retain and be able to recruit certain key personnel, consultants or advisors with experience in a number of disciplines, including but not limited to, research and development, product development, clinical trials, medical affairs, government regulation approval of pharmaceutical products, quality control and assurance, formulation and manufacturing, business development, accounting, finance, human resources and information systems. Aviragen may not be able to continue to do so in the future on acceptable terms, if at all. If Aviragen loses any key personnel, or is unable to retain qualified key personnel, directors, advisors or consultants, the development of Aviragen’s product candidates could be delayed or terminated and Aviragen’s business may be harmed.

Aviragen ’s industry is highly competitive and subject to rapid technological changes. As a result, Aviragen may be unable to compete successfully or develop innovative or differentiated products, which could harm its business.

Aviragen ’s industry is highly competitive and characterized by rapid technological change. Key competitive factors in Aviragen’s industry include, among others, the ability to successfully advance the development of a product candidate through preclinical and clinical trials; the efficacy, toxicology, tolerability, safety, resistance or cross-resistance, interaction or dosing profile of a product or product candidate; the timing and scope of marketing approvals, if ever achieved; reimbursement rates for and the average selling price of competing products and pharmaceutical products in general; the availability of raw materials and qualified contract manufacturing and manufacturing capacity to produce Aviragen’s product candidates; relative manufacturing costs; establishing, maintaining and protecting Aviragen’s intellectual property and patent rights; and sales and marketing capabilities.

Developing pharmaceutical product candidates is a highly competitive, expensive and risky activity with a long business cycle. Many organizations, including the large pharmaceutical and biopharmaceutical companies that have existing products on the market or in clinical development that may compete with Aviragen ’s product candidates, have substantially more resources than Aviragen has, as well as much greater capabilities and experience than Aviragen has in research and discovery, designing and conducting preclinical studies and clinical trials, operating in a highly regulated environment, formulating and manufacturing drug substances, products and devices, and marketing and sales. Aviragen’s competitors may be more successful than Aviragen is in obtaining regulatory approvals for their product candidates and achieving broad market acceptance once they are approved. Aviragen’s competitors’ products or product candidates may be more effective, have fewer adverse effects, be more convenient to administer, have a more favorable resistance profile, or be more effectively marketed and sold than any product Aviragen, or Aviragen’s potential future licensees or collaborators, may develop or commercialize. New drugs or classes of drugs from competitors may render Aviragen’s product candidates obsolete or non-competitive before Aviragen is able to successfully develop them or, if approved, before Aviragen can recover the expenses of developing and commercializing them. Aviragen anticipates that it or its potential future licensees or collaborators will face intense and increasing competition as new drugs and drug classes enter the market and advanced technologies or new drug targets become available. If Aviragen’s product candidates do not demonstrate any meaningful competitive advantages over existing products, or new products or product candidates, Aviragen may terminate the development or commercialization of its product candidates at any time.

These competitors, either alone or with their collaborators, may succeed in developing product candidates or products that are more effective, safer, less expensive or easier to administer than Aviragen ’s. Accordingly, Aviragen’s competitors may succeed in obtaining regulatory approval for their product candidates more rapidly than Aviragen can. Companies that can complete clinical trials, obtain required marketing approvals and commercialize their products before their competitors do so may achieve a significant competitive advantage, including certain patent and marketing exclusivity rights that could delay the ability of competitors to market certain products.

Aviragen also faces, and expects that it will continue to face, intense competition from other companies in a number of other areas, including (i) attracting larger pharmaceutical and biopharmaceutical companies to enter into collaborative arrangements with Aviragen to acquire, license or co-develop Aviragen’s product candidates, (ii) identifying and obtaining additional clinical-stage development programs to bolster its pipeline, (iii) attracting investigators and clinical sites capable of conducting its clinical trials, and (iv) recruiting patients to participate in its clinical trials. Aviragen cannot assure you that product candidates resulting from Aviragen’s research and development efforts, or from joint efforts with Aviragen’s potential future licensees or collaborators, will be able to compete successfully with Aviragen’s competitors’ existing products or product candidates in development.

Aviragen may be unable to successfully develop a product candidate that is the subject of an existing or future license agreement or collaboration if Aviragen’s licensee or collaborator does not perform or fulfill its contractual obligations, delays the development of Aviragen’s product candidate, or terminates the agreement.

Aviragen expects to continue to enter into and rely on license and collaboration agreements in the future, or other similar business arrangements with third parties, to further develop and/or commercialize some or all of Aviragen’s existing and future product candidates. Such licensees or collaborators may not perform as agreed upon or anticipated, may fail to comply with strict regulations, or may elect to delay or terminate their efforts in developing or commercializing Aviragen’s product candidates even though Aviragen has not met its obligations under the arrangement.

A majority of the potential revenue from existing and any future licenses and collaborations Aviragen may enter into will likely consist of contingent milestone payments, such as payments received for achieving development or regulatory milestones, and royalties payable on the sales of approved products. Milestone and royalty revenues that Aviragen may receive under these licenses and collaborations will depend primarily upon Aviragen ’s licensee’s or collaborator’s ability to successfully develop and commercialize Aviragen’s product candidates. In addition, Aviragen’s licensees or collaborators may decide to enter into arrangements with third parties to commercialize products developed under Aviragen’s existing or future collaborations using Aviragen’s technologies, which could reduce the milestone and royalty revenue that Aviragen may receive, if any. In many cases, Aviragen will not be directly or closely involved in the development or commercialization of Aviragen’s product candidates that are subject to licenses or collaborations and, accordingly, Aviragen will depend largely on its licensees or collaborators to develop or commercialize its product candidates. Aviragen’s licensees may encounter competition from new products entering the market, which could adversely affect Aviragen’s royalty income. Aviragen’s licensees or collaborators may fail to develop or effectively commercialize Aviragen’s product candidates because they:

Should any of these events occur, Aviragen may not realize the full p otential or intended benefit of its license or collaboration arrangements, and Aviragen’s results of operations may be adversely affected. In addition, a licensee or collaborator may decide to pursue the development of a competitive product candidate developed outside of Aviragen’s agreement with them. Conflicts may also arise if there is a dispute about the progress of, or other activities related to, the clinical development or commercialization of a product candidate, the achievement and payment of a milestone amount, the ownership of intellectual property that is developed during the course of the arrangement, or other license agreement terms. If a licensee or collaborator fails to develop or effectively commercialize Aviragen’s product candidates for any of these reasons, Aviragen may not be able to replace them with another third-party willing to develop and commercialize Aviragen’s product candidates under similar terms, if at all. Similarly, Aviragen may disagree with a licensee or collaborator as to which party owns newly or jointly-developed intellectual property. Should an agreement be revised or terminated as a result of a dispute and before Aviragen has realized the anticipated benefits of the arrangement, Aviragen may not be able to obtain certain development support or revenues that Aviragen anticipated receiving. Aviragen may also be unable to obtain, on terms acceptable to it, a license from such collaboration partner to any of its intellectual property that may be necessary or useful for Aviragen to continue to develop and commercialize the product candidate. Aviragen cannot assure you that any product candidates will emerge from any existing or future license or collaboration agreements Aviragen may enter into for any of its product candidates.

Risks Related to Commercial Matters

Aviragen has a history of incurring net losses and it may never achieve profitability.

Aviragen has a history of incurring net losses, some of which have been significant. Aviragen expects to incur additional net losses in the near-term, and these losses would likely increase as Aviragen’s research and development efforts progress to later stage activities. To become profitable, Aviragen, or its licensees or collaborators if applicable, must successfully manufacture and develop product candidates, receive regulatory approval, successfully commercialize and/or enter into profitable agreements with other parties and maintain existing and/or obtain additional intellectual property rights. It could be several years, if ever, before Aviragen receives significant revenues from any future license agreements or revenues directly from the sale of any of Aviragen’s product candidates.

Royalty revenues from Relenza ^® and Inavir ^® are unpredictable and subject to the seasonal incidence and severity of influenza, which could adversely affect Aviragen’s results of operations and financial condition.

Aviragen currently earns royalty revenue from the net sales of Relenza ^® and Inavir ^® , which are marketed by its licensees. Although the royalty rates paid to Aviragen by its licensees are fixed at a proportion of the licensees’ net sales of these products, Aviragen’s periodic and annual revenues from these royalties have historically been variable and subject to fluctuation based on the seasonal incidence and severity of influenza. In addition, returns of products to Aviragen’s licensees that were sold in prior years are taken into account in the calculation of net sales for purposes of determining the royalty revenue Aviragen receives and the amount of such returns are generally unpredictable. Aviragen’s licensees may encounter competition from new products entering the market, which could adversely affect Aviragen’s royalty income. In addition, most of Aviragen’s Relenza ^® patents have expired and the only substantial remaining intellectual property related to the Relenza ^® patent portfolio is scheduled to expire in July 2019 in Japan.  Further, Aviragen sold a portion of its Inavir ^® royalties to HealthCare Royalty Partners III, L.P., or HCRP, in April 2016.  Aviragen cannot predict with any certainty what its royalty revenues are likely to be in any given year.

If safety, tolerability, resistance, drug-drug interactions, or efficacy concerns should arise with Relenza ^® or Inavir ^® , Aviragen’s future royalty revenue may be reduced, which would adversely affect Aviragen’s financial condition and business.

Aviragen curren tly earns royalty revenue from Relenza ^® and Inavir ^® , which are marketed by its licensees. Data supporting the marketing approvals and forming the basis for the safety warnings in the product labels for these products were obtained in controlled clinical trials of limited duration in limited patient populations and, in some cases, from post-approval use. As these marketed products are used over longer periods of time and by more patients, some with underlying health problems or taking other medicines, new issues such as safety, tolerability, resistance or drug-drug interaction issues could arise, which may require Aviragen’s licensees to provide additional warnings or contraindications on their product labels, or otherwise narrow the approved indications. Further, additional information from ongoing research or clinical trials of these products that raise any doubts or concerns about their efficacy may arise. If serious safety, tolerability, resistance, drug-drug interaction, efficacy, or any other concerns or issues arise with respect to these marketed products, sales of these products could be impaired, limited or abandoned by Aviragen’s licensees or by regulatory authorities, in which case Aviragen’s royalty revenue would decrease.

If government and third-party payers fail to provide adequate reimbursement or coverage for Aviragen ’s products or those that are developed through licenses or collaborations, Aviragen’s revenues and potential for profitability may be harmed.

In the United States and most foreign markets, product revenues or related royalty revenue, and therefore the inherent value of Aviragen ’s products, will depend largely upon the reimbursement rates established by third-party payers for such products. Third-party payers include government health administration authorities, managed-care organizations, private health insurers and other similar organizations. Third-party payers are increasingly examining the cost effectiveness of medical products, services and pharmaceutical drugs and challenging the price of these products and services. In addition, significant uncertainty exists as to the reimbursement status, if any, of newly approved pharmaceutical products. Further, the comparative effectiveness of new products over existing therapies and the assessment of other non-clinical outcomes are increasingly being considered in the decision by payers to establish reimbursement rates. Aviragen, or its licensees or collaborators if applicable, may also be required to conduct post-marketing clinical trials in order to demonstrate the cost-effectiveness of Aviragen’s products. Such studies may require Aviragen to commit a significant amount of management time and financial resources. Aviragen cannot assure you that any products Aviragen or its licensees or collaborators may successfully develop will be reimbursed in part, or at all, by any third-party payers in any country.

Many governments continue to propose legislation designed to expand the coverage, yet reduce the cost, of healthcare, including pharmaceutical products. In many foreign markets, governmental agencies control the pricing of prescription drugs. In the United States, significant changes in federal health care policy were approved over the past several years and continue to evolve, and will likely result in reduced reimbursement rates for many pharmaceutical products in the future. Aviragen expects that there will continue to be federal and state proposals to implement increased government control over reimbursement rates of pharmaceutical products. In addition, Aviragen expects that increasing emphasis on managed care and government intervention in the U.S. healthcare system will continue to put downward pressure on the pricing of pharmaceutical products there. Recent events have resulted in increased public and governmental scrutiny of the cost of drugs, especially in connection with price increases following companies ’ acquisitions of the rights to certain drug products. In particular, U.S. federal prosecutors recently issued subpoenas to a pharmaceutical company seeking information about its drug pricing practices, among other issues, and members of the U.S. Congress have sought information from certain pharmaceutical companies relating to post-acquisition drug-price increases. Aviragen’s revenue and future profitability could be negatively affected if these inquiries were to result in legislative or regulatory proposals that limit Aviragen’s ability to increase the prices of Aviragen’s products that may be approved for sale in the future. Legislation and regulations affecting the pricing of pharmaceutical products may change before Aviragen’s product candidates are approved for sale, which could further limit or eliminate their reimbursement rates. Further, social and patient activist groups, whose goal it is to reduce the cost of healthcare, and in particular the price of pharmaceutical products, may also place downward pressure on the price of these products, which could result in decreased prices of Aviragen’s products.

If any product candidates that Aviragen develops independently, or through licensees or collaborators if applicable, are approved but do not gain meaningful acceptance in their intended markets, Aviragen is not likely to generate significant revenues.

Even if Aviragen’s product candidates are successfully developed and Aviragen or a licensee or collaborator obtains the requisite regulatory approvals to market them in the future, they may not gain market acceptance or broad utilization among physicians, patients or third-party payers. The degree of market acceptance that any of Aviragen’s products may achieve will depend on a number of factors, including:

There can be no assurance that physicians will choose to prescribe or administer Aviragen’s products, if approved, to the intended patient population. If Aviragen’s products do not achieve meaningful market acceptance, or if the market for Aviragen’s products proves to be smaller than anticipated, Aviragen may never generate significant revenues.

If Aviragen fails to enter into or maintain collaborations or other sales, marketing and distribution arrangements with third parties to commercialize Aviragen’s product candidates, or otherwise fails to establish marketing and sales capabilities in the future, Aviragen may not be able to successfully commercialize Aviragen’s products.

Aviragen currently has no infrastructure to support the commercialization of any of its product candidates, and has little, if any, experience in the commercialization of pharmaceutical products. Therefore, if Aviragen successfully develops any product candidate, and it is ultimately approved for sale, Aviragen’s future profitability will depend largely on Aviragen’s ability to access, arrange or develop suitable marketing and sales capabilities. Aviragen anticipates that it will need to establish relationships with other companies, through license, collaboration, commercialization or similar marketing and sales agreements, to successfully commercialize and market Aviragen’s product candidates in the United States and other countries around the world. To the extent that Aviragen enters into these types of agreements with other companies to sell, promote or market Aviragen’s products in the United States or abroad, Aviragen’s product revenues, which may be in the form of indirect revenue, a royalty, or a split of profits, may depend largely on the efforts of the other party, which may not be successful. In the event Aviragen decides to develop its own sales force and marketing capabilities, this may result in Aviragen incurring significant upfront costs to do so before Aviragen may generate any significant product revenues. Aviragen may not be able to attract and retain qualified third parties or marketing or sales personnel, or be able to establish marketing capabilities or an effective sales force.

Currency fluctuations and changes in exchange rates could increase Aviragen’s costs or lower Aviragen’s revenues.

Aviragen collects and pays a portion of Aviragen’s revenue and expenses in currencies other than the U.S. dollar. Fluctuations in foreign currency exchange rates can affect Aviragen’s operating results. Aviragen retains the majority of Aviragen’s cash and cash equivalents in U.S. dollars and utilizes foreign currency accounts for collection and payment of revenues and expenses. Any significant foreign exchange rate fluctuations could adversely affect Aviragen’s financial position and results of operations.

Aviragen ’s employees, representatives or agents may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could expose Aviragen to financial, reputational or other harm.

Aviragen ’s employees, representatives or agents may engage in any fraud or other improper activities, including those related to:

In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to Aviragen’s reputation. It is not always possible to identify and deter employee misconduct, and the precautions Aviragen takes to detect and prevent these activities may not be effective in controlling unknown or unmanaged risks or losses, or in protecting Aviragen from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against Aviragen, and Aviragen is not successful in defending itself or asserting Aviragen’s rights, those actions could have a significant impact on Aviragen’s business and results of operations, including the imposition of significant fines or other sanctions.

Laws and regulations governing international operations may preclude Aviragen from developing, manufacturing and selling certain product candidates outside of the United States and require Aviragen to develop and implement costly compliance programs.

Because Aviragen has subsidiaries and conducts business outside of the United States, Aviragen must comply with numerous laws and regulations in each jurisdiction in which it operates. The creation and implementation of international business practices compliance programs is costly and such programs are difficult to enforce, particularly where reliance on third parties is required.

The Foreign Corrupt Practices Act, or the FCPA, includes provisions that prohibits any U.S. individual or business from paying, offering, authorizing payment or offering anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the company, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. The anti-bribery provisions of the FCPA are enforced primarily by the Department of Justice, while the SEC is involved with enforcement of the books and records provisions of the FCPA.

Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with the conduct of clinical studies and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

Various laws, regulations and executive orders also restrict the use and d issemination outside of the United States, or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. Aviragen’s operations outside of the United States require Aviragen to dedicate additional resources to comply with these laws, and these laws may preclude Aviragen from developing, manufacturing, or selling certain products and product candidates outside of the United States, which could limit Aviragen’s growth potential and increase its development costs.

The failure to comply with laws governing international business practices may result in substantial penalties, including suspension or debarment from government contracting. Violation of the FCPA can result in significant civil and criminal penalties. Indictment alone under the FCPA can lead to suspension of the ri ght to do business with the U.S. Government until the pending claims are resolved. Conviction for a violation of the FCPA can result in long-term disqualification as a government contractor. The termination of a government contract or relationship as a result of Aviragen’s failure to satisfy any of its obligations under laws governing international business practices could have a negative impact on Aviragen’s operations and harm its reputation and ability to procure government contracts. The SEC also may suspend or bar issuers from trading securities on U.S. stock exchanges for violations of the FCPA's accounting provisions.

Risks Related to Aviragen’s Intellectual Property

If Aviragen is unable to adequately protect or expand Aviragen’s intellectual property related to Aviragen’s products, or current or future product candidates, Aviragen’s business prospects could be materially harmed.

Aviragen ’s business success depends in part on Aviragen’s ability to:

Aviragen can protect its proprietary intellectual property rights from unauthorized use by third parties only to the extent that Aviragen’s proprietary rights are covered by valid and enforceable patents or are effectively maintained as trade secrets. The patent position of pharmaceutical and biopharmaceutical companies involves complex legal and factual questions, and, therefore, Aviragen cannot predict with certainty whether Aviragen will be able to ultimately enforce Aviragen’s patents or proprietary rights, or avoid infringing on the patents or proprietary rights of others. Any issued patents that Aviragen owns or otherwise has rights to may be challenged, invalidated or circumvented, and may not provide Aviragen with the protection against competitors that Aviragen anticipates.

The degree of future protection for Aviragen’s proprietary intellectual property rights is uncertain because issued patents and other legal means of establishing proprietary rights afford only limited protection and may not adequately protect Aviragen’s rights or permit Aviragen to gain or keep Aviragen’s competitive advantage. Aviragen’s future patent position will be influenced by the following factors:

Due to the extensive time required for the development, testing and regulatory review and approval of a product candidate, it is possible that before a product candidate of Aviragen’s may be approved for sale and commercialized, Aviragen’s relevant patent rights may expire, or such patent rights may remain in force for only a short period following marketing approval. Aviragen currently relies on certain patents to provide Aviragen and its licensees with exclusive rights for certain of Aviragen’s products. When all patents underlying a license expire, Aviragen’s revenue from that license may cease, and there can be no assurance that Aviragen will be able to replace it with revenue from new or existing licenses.

Zanamivir, a neuraminidase inhibitor approved for the treatment and prevention of influenza A and B, is marketed worldwide as Relenza ^® by GSK. Most of Aviragen’s Relenza ^® patents have expired and the only substantial remaining intellectual property related to the Relenza ^® patent portfolio, which is solely owned by Aviragen and exclusively licensed to GSK, is scheduled to expire in July 2019 in Japan.

LANI, a long acting NI for the treatment and prevention of influenza A and B, is currently marketed as Inavir ^® in Japan by Daiichi-Sankyo. The patent relating to the structure of LANI expires in 2017 in the United States, the European Union and Japan, although the product has received patent term extension in Japan until 2021 for treatment and 2022 for prevention. The patent relating to hydrates and the crystalline form of LANI actually used in the product expires in 2021 (not including extensions) in the United States and EU and in 2024 in Japan. In February 2015, a patent containing claims relevant to the manufacture of Inavir ^® was issued in Japan and expires in December 2029. The dry-powder inhaler device patent portfolio, which includes TwinCaps ^® , is owned by Hovione International Limited, or Hovione, and is exclusively licensed to Aviragen and Daiichi Sankyo worldwide for the prevention and treatment of influenza and other influenza-like viral infections. These patents will expire in 2029 in the United States, and in 2027 in the European Union and Japan.

Vapendavir is an oral antiviral picornavirus capsid binder Aviragen is currently developing to treat HRV infections. Aviragen exclusively owns the vapendavir patent portfolio, and issued claims under this portfolio will begin to expire in some countries in December 2021, not including extensions. Claims from patents related to a compound comprising an anhydrous crystalline free base form of vapendavir and the preferred commercialization form of vapendavir have been allowed in the United States and other countries and extend intellectual property to 2034 without extensions.

BTA074 is a direct-acting antiviral Aviragen is developing as a topical treatment for genital warts caused by HPV 6 and 11. The patent containing composition of matter claims expires in the United States in 2029 without extensions. A United States patent with claims to method of use have issued and expire in 2033 without extensions.

Aviragen also owns a patent portfolio focused on developing oral antivirals for RSV. Issued patent claims covering the BTA585 composition of matter will begin to expire in 2031 without extensions.

Patent rights may not provide Aviragen with adequate proprietary protection or competitive advantages against competitors with or developing similar technologies or approaches to Aviragen’s. The laws of certain foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States, and certain countries may lack adequate rules and procedures for defending Aviragen’s intellectual property rights. For example, Aviragen may not be able to prevent a third-party from infringing Aviragen’s patents in a country that does not recognize or enforce patent rights, or that imposes compulsory licenses on or restricts the prices of drugs. Changes in either patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of Aviragen’s intellectual property. Aviragen may need to in-license certain technologies to successfully develop and commercialize its product candidates. Aviragen may not develop or obtain rights to products or processes that are patentable. Even if Aviragen or its licensors do obtain patents, such patents may not adequately protect the products or technologies licensed, or may otherwise be limited in scope. In addition, Aviragen may not have total control over the patent prosecution of subject matter that Aviragen licenses from others. Accordingly, Aviragen may be unable to exercise the same degree of control over this intellectual property as Aviragen would over its own. Others may challenge, seek to invalidate, infringe or circumvent any pending or issued patents Aviragen owns or licenses, and rights it receives under those issued patents may not provide competitive advantages to Aviragen. Aviragen cannot assure you of the degree of protection that will be afforded by any of its issued or pending patents, or those licensed by Aviragen.

Aviragen cannot be sure that any patents will be issued from the patent applications Aviragen owns or has licensed or, should any patents issue, that Aviragen will be provided with adequate protection against potentially competitive products. Furthermore, Aviragen cannot be sure that patents issued or licensed to Aviragen will be of any commercial value, or that private parties or competitors will not successfully challenge these patents or circumvent its patent position in the United States or abroad. In the absence of adequate patent protection, Aviragen’s business may be adversely affected by competitors who develop comparable technology or products.

If a third-party claims Aviragen is infringing on its intellectual property rights, Aviragen could incur significant expenses, or be prevented from further developing or commercializing its product candidates, which could materially harm Aviragen’s business.

Aviragen ’s success will also depend on Aviragen’s ability to operate without infringing the patents and other proprietary intellectual property rights of third parties. This is generally referred to as having the “freedom to operate.” The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights. The defense and prosecution of intellectual property claims, interference proceedings and related legal and administrative proceedings, both in the United States and internationally, involve complex legal and factual questions. As a result, such proceedings are lengthy, costly and time-consuming, and their outcome is highly uncertain. Aviragen may become involved in protracted and expensive litigation in order to determine the enforceability, scope and validity of the proprietary rights of others, or to determine whether Aviragen has the freedom to operate with respect to the intellectual property rights of others.

Patent applications in the United States are, in most cases, maintained in secrecy until approximately 18 months after the patent application is filed. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made. Therefore, patent applications relating to product candidates similar to Aviragen’s may have already been filed by others without Aviragen’s knowledge. In the event that a third-party has also filed a patent application covering Aviragen’s product candidate or other claims, Aviragen may have to participate in an adversarial proceeding, known as an interference proceeding, in the U.S. Patent and Trademark Office, or USPTO, or similar proceedings in other countries, to determine the priority of invention. In the event an infringement claim is brought against Aviragen, Aviragen may be required to pay substantial legal fees and other expenses to defend such a claim and, if Aviragen is unsuccessful in defending the claim, Aviragen may be prevented from pursuing the development and commercialization of a product candidate and may be subject to injunctions and/or damage awards.

In the future, the USPTO or a foreign patent office may grant patent rights to Aviragen’s product candidates or other claims to third parties. Subject to the issuance of these future patents, the claims of which will be unknown until issued, Aviragen may need to obtain a license or sublicense to these rights in order to have the appropriate freedom to further develop or commercialize them. Any required licenses may not be available to Aviragen on acceptable terms, if at all. If Aviragen needs to obtain such licenses or sublicenses, but is unable to do so, Aviragen could encounter delays in the development of Aviragen’s product candidates, or be prevented from developing, manufacturing and commercializing Aviragen’s product candidates at all. If it is determined that Aviragen has infringed an issued patent and does not have the freedom to operate, Aviragen could be subject to injunctions, and/or compelled to pay significant damages, including punitive damages. In cases where Aviragen has in-licensed intellectual property, Aviragen’s failure to comply with the terms and conditions of such agreements could harm Aviragen’s business.

It is becoming common for third parties to challenge patent claims on any successfully developed product candidate or approved drug. If Aviragen or its licensees or collaborators become involved in any patent litigation, interference or other legal proceedings, Aviragen could incur substantial expense, and the efforts and attention of Aviragen’s technical and management personnel could be significantly diverted. A negative outcome of such litigation or proceedings may expose Aviragen to the loss of Aviragen’s proprietary position or to significant liabilities, or require Aviragen to seek licenses that may not be available from third parties on commercially acceptable terms, if at all. Aviragen may be restricted or prevented from developing, manufacturing and selling Aviragen’s product candidates in the event of an adverse determination in a judicial or administrative proceeding, or if Aviragen fails to obtain necessary licenses.

Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information and may not adequately protect Aviragen’s intellectual property.

Aviragen also relies on trade secrets to protect Aviragen’s technology, especially where Aviragen does not believe patent protection is obtainable, or prior to Aviragen filing patent applications on any inventions Aviragen may make. However, trade secrets are difficult to protect. In order to protect its proprietary technology and processes, Aviragen may also rely in part on confidentiality and intellectual property assignment agreements with Aviragen’s corporate and academic partners, employees, consultants, outside scientific collaborators and sponsored researchers and other advisors. These agreements may not effectively prevent disclosure of confidential information or result in the effective assignment to Aviragen of intellectual property, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information or other breaches of these agreements. In addition, others may independently discover Aviragen’s trade secrets and proprietary information, and in such case Aviragen may not be able to assert any trade secret rights against such party. Enforcing a claim that a third-party illegally obtained and is using Aviragen’s trade secret is difficult, expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. Costly and time-consuming litigation could be necessary to seek to enforce and determine the scope of Aviragen’s proprietary rights, and Aviragen’s failure to obtain or maintain trade secret protection could adversely affect Aviragen’s competitive business position.

Obtaining and maintaining Aviragen’s patent protection depends on compliance with various procedural, document submissions, fee payment and other requirements imposed by governmental patent agencies, and Aviragen’s patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary fee payments and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If Aviragen and its licensors fail to maintain the patents and patent applications covering Aviragen’s product candidates, Aviragen’s competitive position would be adversely affected.

Aviragen may be subject to claims that Aviragen’s employees have wrongfully used or disclosed alleged trade secrets of their former employers.

Many of Aviragen’s employees, including its senior management, were previously employed at other biotechnology or pharmaceutical companies. These employees typically executed proprietary rights, non-disclosure and non-competition agreements in connection with their previous employment. Although Aviragen tries to ensure that Aviragen’s employees do not use the proprietary information or know-how of others in their work for Aviragen, Aviragen may be subject to claims that it or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee's former employer. Aviragen is not aware of any threatened or pending claims related to these matters, but in the future litigation may be necessary to defend against such claims. If Aviragen fails in defending any such claims, in addition to paying monetary damages, Aviragen may lose valuable intellectual property rights or personnel. Even if Aviragen is successful in defending against such claims, litigation could result in substantial costs and be a distraction to management .

Risks Related to Aviragen Common Stock

Aviragen ’s revenue, expenses and results of operations may be subject to significant fluctuations, which will make it difficult to compare Aviragen’s operating results from period to period.

Aviragen ’s revenues have historically been highly variable. Royalty revenues Aviragen earns are derived from the net sales of products used for the treatment and/or prevention of influenza. Influenza as a disease is seasonal and highly unpredictable, and sales of these products to treat influenza fluctuate in line with the nature and extent of the incidence and severity of influenza each season. Payments potentially due to Aviragen under its existing or any future collaborative arrangements, including any milestone and royalty payments, are generally intermittent in nature and are subject to significant fluctuation in both timing and amount, or may never be earned or paid at all. In addition, the returns of products to Aviragen licensees are taken into account in the calculation of net sales for purposes of calculating the royalty revenue Aviragen receives and the amount of such returns are in general unpredictable. Accordingly, Aviragen’s quarterly and annual revenue may be highly variable, and comparisons to previous periods may be difficult to make. Aviragen’s historical and current revenues may not be indicative of Aviragen’s ability to achieve additional payment-generating milestones or royalties in the future, or vice versa. Aviragen expects that its operating results will also vary significantly from quarter-to-quarter and year-to-year as a result of the initiation and success or failure of preclinical studies or clinical trials that it undertakes, the timing of the formulation and manufacture of its product candidates, or other development-related factors and activities, as well as any business or corporate development activities it may undertake. Accordingly, Aviragen’s revenues, expenses and results of operations for any period, particularly over the next several quarters, may not be comparable to the revenues, expenses or results of operations for any other period.

The reporting requirements of being a company that is publicly traded on the Nasdaq Capital Market increases Aviragen’s overall operating costs and subjects Aviragen to further increased costs and regulatory risk that may negatively impact Aviragen’s business or its ability to raise capital in the future.

As a company that is publicly-traded on Nasdaq, Aviragen is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the listing requirements of Nasdaq. Further, Section 404 of the Sarbanes-Oxley Act requires that Aviragen maintains effective internal control over financial reporting and disclosure controls and procedures. In particular, management must perform system and process evaluation and testing of Aviragen’s internal control over financial reporting to assess the effectiveness of Aviragen’s internal control over financial reporting. This testing is expensive and requires the attention of Aviragen’s limited management resources. The various financial reporting, legal, corporate governance and other obligations associated with being a company that is publicly traded on Nasdaq require Aviragen to incur significant expenditures and place additional demands and requirements on the Aviragen board of directors, executive officers, and other administrative, operational and financial personnel and resources. If Aviragen is unable to comply with these requirements in a timely and effective manner, Aviragen and/or its executive officers may be subject to sanctions by the SEC. Aviragen expects that it will continue to incur additional expenses as a result of being a company that is publicly traded on Nasdaq.

The price of Aviragen common stock price has been highly volatile, and your investment in Aviragen could suffer a decline in value.

The market price of Aviragen common stock has been and is likely to continue to be highly volatile and could be subject to wide fluctuations in response to various factors and events, including but not limited to:

In addition, the stock market in general, and more specifically Nasdaq, on which Aviragen common stock is traded, and the market for smaller biotechnology stocks in particular have historically experienced significant price and volume fluctuations. Volatility in the market price for a particular biotechnology company’s stock has often been unrelated or disproportionate to the operating performance of that company. Market and industry factors may seriously harm the market price of Aviragen common stock, regardless of Aviragen’s operating performance. Due to this volatility, you may be unable to sell your shares of Aviragen common stock at or above the price you paid and you could lose all or part of your investment in Aviragen.

In order to develop Aviragen’s product candidates and support Aviragen’s operations beyond 12 months from the date of this registration statement, Aviragen may need to raise additional capital. Such capital may not be available to Aviragen on acceptable terms, if at all, which could materially harm Aviragen’s financial condition, business and business prospects.

The timing and extent of Aviragen’s future financing needs are uncertain and will depend on many factors, some of which are very difficult to predict or may be beyond Aviragen’s control, including:  

Future issuances of shares of Aviragen common stock may cause Aviragen’s stock price to decline, even if its business is doing well.

The sale and issuance of additional shares of Aviragen common stock, or the perception that such future sales could occur, including any sales by Aviragen’s directors, executive officers, and other insiders or their affiliates, could materially and adversely affect the market price of Aviragen common stock and impair Aviragen’s ability to raise capital through the sale of additional equity securities at a price Aviragen deems appropriate.

If Aviragen raises additional capital in the future, your level of ownership in Aviragen could be diluted or Aviragen could be required to relinquish certain rights.

Any issuance of securities Aviragen may undertake in the future to raise additional capital could cause the price of Aviragen common stock to decline, or require Aviragen to issue shares at a price that is lower than that paid by holders of Aviragen common stock in the past, which would result in those newly issued shares being dilutive. Further, if Aviragen obtains funds through a debt financing or through the issuance of debt or preferred securities, these securities would likely have rights senior to your rights as a common stockholder, which could impair the value of Aviragen common stock. The terms of any debt financing Aviragen enters into may include covenants that limit Aviragen’s flexibility in conducting its business. Aviragen also could be required to seek funds through arrangements with collaborators or others, which might require Aviragen to relinquish valuable rights to Aviragen’s intellectual property or product candidates that Aviragen would have otherwise retained.

Aviragen does not anticipate paying cash dividends in the foreseeable future, and accordingly, you must rely on appreciation in the price of Aviragen common stock for any return on your investment in Aviragen.

Aviragen anticipates that Aviragen will retain its earnings, if any, for future growth and therefore does not anticipate paying cash dividends in the foreseeable future. As a result, Aviragen common stock will likely only provide a return to stockholders in the event there is appreciation in its price.

Aviragen ’s certificate of incorporation, Aviragen’s bylaws, and the laws of Delaware contain provisions that could discourage, delay or prevent a change in control of Aviragen or a change in Aviragen’s management.

Certain provisions of Aviragen’s certificate of incorporation, Aviragen’s bylaws and the laws of Delaware, the state in which Aviragen is incorporated, may discourage, delay or prevent a change in control of Aviragen or a change in Aviragen’s directors or management that stockholders may consider favorable. These provisions:

In addition, Aviragen is governed by the provisions of Section 203 of the DGCL, which may, unless certain criteria are met, prohibit large stockholders, in particular those owning 15% or more of the voting rights of Aviragen common stock, from merging or combining with Aviragen for a prescribed period of time. These provisions could discourage proxy contests and make it more difficult for you and other stockholders to remove and elect directors and take other corporate actions. These provisions could also limit the price that investors might be willing to pay in the future for shares of Aviragen common stock.

Aviragen may be subject to securities litigation, which is expensive and could divert management attention.

The market price of Aviragen common stock has been and may continue to be volatile, and in the past companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. Aviragen may be the target of this type of litigation in the future. Securities litigation against Aviragen could result in substantial costs and divert management's attention from other business concerns, which could seriously harm Aviragen ’s business.

If securities or industry analysts do not publish research, or publish inaccurate or unfavorable rating, about Aviragen ’s business, Aviragen’s stock price and trading volume could decline.

The trading market for Aviragen common stock is influenced by independent research and reports that securities or industry analysts publish about Aviragen or its business from time to time. There can be no assurance that analysts will continue to cover Aviragen or provide favorable ratings. If any analysts who cover Aviragen downgrade Aviragen ’s stock, change their opinion of Aviragen’s stock or disseminate negative information regarding Aviragen’s business, Aviragen’s share price may decline. If any analysts cease coverage of Aviragen, or fail to regularly publish reports on Aviragen, Aviragen could lose visibility in the financial markets, which could cause Aviragen’s share price or trading volume to decline.

Risks Related to Other Aspects of Aviragen ’s Business

If a product liability claim is successfully brought against Aviragen for uninsured liabilities, or such claim exceeds Aviragen ’s insurance coverage, Aviragen could be forced to pay substantial damage awards that could materially harm Aviragen’s business.

The use of any of Aviragen ’s existing or future product candidates in clinical trials and the sale of any approved pharmaceutical products may expose Aviragen to significant product liability claims. Aviragen currently has product liability insurance coverage for its ongoing clinical trials in the amount of $15 million. Further, Aviragen also requires clinical research and manufacturing organizations that assist it in the conduct of its trials or manufacture materials used in these trials to carry product liability insurance against such claims. This insurance coverage may not protect Aviragen against any or all of the product liability claims that may be brought against Aviragen in the future. Aviragen may not be able to acquire or maintain adequate product liability insurance coverage at a commercially reasonable cost or in sufficient amounts or scope to protect Aviragen against potential losses. In the event a product liability claim is brought against Aviragen, Aviragen may be required to pay legal and other expenses to defend the claim, as well as uncovered damage awards resulting from a claim brought successfully against Aviragen. In the event any of Aviragen’s product candidates are approved for sale by the FDA or similar regulatory authorities in other countries and commercialized, Aviragen may need to substantially increase the amount of its product liability coverage. Defending any product liability claim or claims could require Aviragen to expend significant financial and managerial resources, which could have an adverse effect on Aviragen’s business.

Aviragen ’s ability to use its net operating loss carry forwards to reduce taxable income generated in the future could be substantially limited or eliminated.

Aviragen ’s ability to use its net operating losses in the United States, Australia, France and the United Kingdom is subject to limitations and re-assessment due to ownership changes that have occurred, or that could occur in the future. Depending on the actual amount of any limitation on Aviragen’s ability to use its net operating loss carry forwards, a significant portion of Aviragen’s future taxable income could be taxable.

Additionally, tax law limitations may result in Aviragen ’s net operating losses expiring before Aviragen has the ability to use them. In addition, financing and acquisition transactions that Aviragen may enter into in the future could significantly limit or eliminate Aviragen’s ability to realize any value from Aviragen’s net operating losses.

Aviragen ’s internal computer systems, or those of Aviragen’s contract research organizations, or CROs, or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of Aviragen’s product development programs.

Aviragen ’s internal computer systems and those of Aviragen’s CROs and other contractors or consultants are vulnerable to damage from cyber security breaches, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While Aviragen does not believe that it has experienced any such material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in Aviragen’s operations, it could result in a material disruption of Aviragen’s development programs and business operations, whether due to a loss of Aviragen’s trade secrets or other proprietary information or other similar disruptions. For example, the loss of clinical trial data for Aviragen’s product candidates from completed or future clinical trials could result in delays in Aviragen’s regulatory approval efforts and significantly increase Aviragen’s costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, Aviragen’s data or applications or other data or applications relating to Aviragen’s technology or product candidates, or inappropriate disclosure of confidential or proprietary information, Aviragen could incur liabilities, Aviragen’s competitive position could be harmed and the further development and commercialization of its product candidates could be delayed. Moreover, breaches of Aviragen’s systems, which may give access to material non-public information about Aviragen’s operations or financial position prior to its public dissemination, could result in people trading in Aviragen’s stock with advance notice of this information, which could adversely affect trading by other stockholders.

Risks Related to Vaxart

Risks Related to Vaxart ’s Business, Financial Position and Capital Requirements

Vaxart has a limited operating history and has never generated any product revenue.

Vaxart is a clinical-stage biopharmaceutical company with a limited operating history. Vaxart was founded in March 2004 and its operations to date have been limited to organizing and staffing its company and developing oral recombinant vaccine candidates that are administered in tablet form. Vaxart has not yet successfully completed a large-scale, pivotal clinical trial, obtained marketing approval, manufactured Vaxart tablet vaccine candidates at commercial scale, or conducted sales and marketing activities that will be necessary to successfully commercialize Vaxart ’s tablet vaccine candidates. Consequently, predictions about Vaxart’s future success or viability may not be as accurate as they could be if it had a longer operating history or a history of successfully developing and commercializing tablet vaccine candidates.

Vaxart ’s ability to generate revenue and achieve and maintain profitability will depend upon its ability to successfully complete the development of Vaxart’s tablet vaccine candidates for the treatment of norovirus, seasonal influenza, respiratory syncytial virus, or RSV, cervical cancer and dysplasia caused by human papillomavirus, or HPV and other infectious diseases and to obtain the necessary regulatory approvals. Vaxart has never generated any product revenue, and has no tablet vaccine candidates in late-stage clinical development or approved for commercial sale.

Even if Vaxart receives regulatory approval for the sale of any of its tablet vaccine candidates, it does not know when it will begin to generate revenue, if at all. Vaxart ’s ability to generate revenue depends on a number of factors, including its ability to:

Because of the numerous risks and uncertainties associated with vaccine development and manufacturing, Vaxart is unable to predict the timing or amount of increased development expenses, or when it will be able to achieve or maintain profitability, if at all. Vaxart ’s expenses could increase beyond expectations if it is required by the U.S. Food and Drug Administration, or the FDA, or comparable non-U.S. regulatory authorities, to perform studies or clinical trials in addition to those it currently anticipates. Even if Vaxart’s tablet vaccine candidates are approved for commercial sale, it anticipates incurring significant costs associated with the commercial launch of and the related commercial-scale manufacturing requirements for its tablet vaccine candidates. If Vaxart cannot successfully execute on any of the factors listed above, Vaxart’s business may not succeed and your investment will be adversely affected.

Vaxart has incurred significant losses since its inception and expects to continue to incur significant losses for the foreseeable future and may never achieve or maintain profitability.

Vaxart has never generated any product revenues and it expects to continue to incur substantial and increasing losses as it continues to develop its tablet vaccine candidates. Vaxart ’s tablet vaccine candidates have not been approved for marketing in the United States and may never receive such approval. As a result, Vaxart is uncertain when or if it will achieve profitability and, if so, whether it will be able to sustain it. Vaxart’s ability to generate revenue and achieve profitability is dependent on its ability to complete development, obtain necessary regulatory approvals, and have its tablet vaccine candidates manufactured and successfully marketed. Vaxart cannot assure you that it will be profitable even if it successfully commercializes one of its tablet vaccine candidates. If Vaxart does successfully obtain regulatory approval to market its tablet vaccine candidates, its revenues will be dependent, in part, upon, the size of the markets in the territories for which regulatory approval is received, the number of competitors in such markets, the price at which Vaxart can offer its tablet vaccine candidates and whether Vaxart owns the commercial rights for that territory. If the indication approved by regulatory authorities is narrower than Vaxart expects, or the treatment population is narrowed by competition, physician choice or treatment guidelines, Vaxart may not generate significant revenue from sales of its tablet vaccine candidates, even if approved. Even if Vaxart does achieve profitability, Vaxart may not be able to sustain or increase profitability on a quarterly or annual basis. If Vaxart fails to become and remain profitable the market price of its common stock and Vaxart’s ability to raise capital and continue operations will be adversely affected.

Vaxart expects research and development expenses to increase significantly for any of its tablet vaccines, including those for the prevention of norovirus, influenza and RSV infection, as well as those for the treatment of HPV related dysplasia and cancer, and any other chronic viral infections and cancer. In addition, even if Vaxart obtains regulatory approval, significant sales and marketing expenses will be required to commercialize the tablet vaccine candidates. As a result, Vaxart expects to continue to incur significant and increasing operating losses and negative cash flows for the foreseeable future. These losses have had and will continue to have an adverse effect on its financial position and working capital. As of September 30, 2017, Vaxart had an accumulated deficit of $78.9 million.

Vaxart is dependent on the success of its tablet vaccine for the prevention of norovirus infection which is still in early-stage clinical development, and if this tablet vaccine does not receive regulatory approval or is not successfully commercialized, its business may be harmed.

None of Vaxart ’s tablet vaccine candidates are in late-stage clinical development or approved for commercial sale and it may never be able to develop marketable tablet vaccine candidates. Vaxart expects that a substantial portion of its efforts and expenditures over the next few years will be devoted to its tablet vaccine candidate for norovirus. Accordingly, Vaxart’s business currently depends heavily on the successful development, regulatory approval and commercialization of Vaxart’s norovirus tablet vaccine. Vaxart’s norovirus tablet vaccine may not receive regulatory approval or be successfully commercialized even if regulatory approval is received. The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of tablet vaccine candidates are and will remain subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries that each have differing regulations. Vaxart is not permitted to market its norovirus tablet vaccine in the United States until it receives approval of a biologics license application, or BLA, from the FDA, or in any foreign countries until it receives the requisite approval from such countries. To date, Vaxart has only completed Phase 1 clinical trials for one of the two strains necessary for Vaxart’s bivalent tablet vaccine candidate. As a result, Vaxart has not submitted a BLA to the FDA or comparable applications to other regulatory authorities and does not expect to be in a position to do so for the foreseeable future. Obtaining approval of a BLA is an extensive, lengthy, expensive and inherently uncertain process, and the FDA may delay, limit or deny approval of its seasonal influenza tablet vaccine for many reasons, including:

Vaxart ’s independent auditor has expressed doubt about Vaxart’s ability to continue as a going concern.

Based on its cash balances, recurring losses since inception and existing capital resources to fund planned operations for the next twelve months, Vaxart’s independent auditor has included an explanatory paragraph in its report on Vaxart’s financial statements as of and for the year ending December 31, 2016 expressing substantial doubt about Vaxart’s ability to continue as a going concern. If the merger is not consummated Vaxart will, during 2018, require significant additional funding to continue operations. If Vaxart is unable to continue as a going concern, it may be forced to liquidate its assets and the values it receives for its assets in liquidation or dissolution could be significantly lower than the values reflected in its financial statements.

Vaxart will require additional capital to fund its operations, and if Vaxart fails to obtain necessary financing, it may not be able to complete the development and commercialization of its tablet vaccine candidates.

Vaxart expects to spend substantial amounts to complete the development of, seek regulatory approvals for and commercialize Vaxart ’s tablet vaccine candidates. Even with the expected cash reserves of the combined company, Vaxart will require substantial additional capital to complete the development and potential commercialization of its tablet vaccine candidates for norovirus, seasonal influenza, RSV, HPV, and the development of other tablet vaccine candidates. If Vaxart is unable to raise capital or find appropriate partnering or licensing collaborations, when needed or on acceptable terms, it could be forced to delay, reduce or eliminate one or more of its development programs or any future commercialization efforts. In addition, attempting to secure additional financing may divert the time and attention of its management from day-to-day activities and harm its development efforts.

Based upon its current operating plan, Vaxart believes that the expected cash reserves of the combined company will enable it to fund its operating expenses and capital expenditure requirements through at least the full year of 2018. Vaxart’s estimate as to what it will be able to accomplish is based on assumptions that may prove to be inaccurate, and it could exhaust its available capital resources sooner than is currently expected. Because the length of time and activities associated with successful development of its tablet vaccine candidates is highly uncertain, Vaxart is unable to estimate the actual funds it will require for development and any approved marketing and commercialization activities. Vaxart’s future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:

Additional funding may not be available on acceptable terms, or at all. If Vaxart is unable to raise additional capital in sufficient amounts or on terms acceptable to it, Vaxart may have to significantly delay, scale back or discontinue the development or commercialization of its tablet vaccine candidates or potentially discontinue operations.

Raising additional funds by issuing securities may cause dilution to existing stockholders, and raising funds through lending and licensing arrangements may restrict Vaxart ’s operations or require it to relinquish proprietary rights.

Vaxart expects that significant additional capital will be needed in the future to continue its planned operations. Until such time, if ever, as Vaxart can generate substantial product revenues, Vaxart expects to finance its cash needs through a combination of equity offerings, debt financings, strategic alliances and license and development agreements in connection with any collaborations. Vaxart does not currently have any committed external source of funds. To the extent that Vaxart raises additional capital by issuing equity securities, Vaxart ’s existing stockholders’ ownership may experience substantial dilution, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting Vaxart’s ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring dividends, creating liens, redeeming its stock or making investments.

If Vaxart raises additional funds through collaborations, strategic alliances or marketing, distribution or li censing arrangements with third parties, it may have to relinquish valuable rights to its technologies, future revenue streams, research programs or tablet vaccine candidates or grant licenses on terms that may not be favorable to us. If Vaxart is unable to raise additional funds through equity or debt financings when needed, or through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties on acceptable terms, it may be required to delay, limit, reduce or terminate its tablet vaccine development or future commercialization efforts or grant rights to develop and market tablet vaccine candidates that it would otherwise develop and market Vaxart.

The terms of Vaxart ’s credit facility place restrictions on Vaxart’s operating and financial flexibility .

In December  2016, Vaxart entered into a loan and security agreement, or the Loan Agreement, with Oxford under which Vaxart borrowed $5 million. Vaxart's outstanding debt facility with Oxford is collateralized by substantially all of Vaxart's assets, except for intellectual property, and contains customary financial and operating covenants limiting Vaxart's ability to transfer or dispose of assets, merge with or acquire other companies (including in connection with the merger described herein), make investments, pay dividends, incur additional indebtedness and liens and conduct transactions with affiliates. Vaxart therefore may not be able to engage in any of the foregoing transactions until its current debt obligations are paid in full or Vaxart obtains the consent of Oxford, which Vaxart expects Oxford will unconditionally grant as of the closing date of the merger. Compliance with these covenants may limit Vaxart’s flexibility in operating its business and Vaxart’s ability to take actions that might be advantageous to Vaxart and its stockholders.

Under the Loan Agreement, an event of default will occur if, among other things:

Vaxart may not have enough available cash or be able to raise additional funds through equity or debt financings to repay such indebtedness at the time any such event of default occurs. In that case, Vaxart may be required to delay, limit, reduce or terminate Vaxart ’s clinical development efforts or grant to others rights to develop and market product candidates that Vaxart would otherwise prefer to develop and market ourselves. Oxford could also exercise its rights as collateral agent to take possession and dispose of the collateral securing the Loan Agreement for its benefit. Vaxart’s business would be harmed as a result of any of these events.

If Vaxart fails to obtain or maintain adequate coverage and reimbursement for its tablet vaccine candidates, its ability to generate revenue could be limited.

The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford expensive treatments. Sales of any of its tablet vaccine candidates that receive marketing approval will depend substantially, both in the United States and internationally, on the extent to which the costs of Vaxart ’s tablet vaccine candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors. If reimbursement is not available, or is available only on a limited basis, Vaxart may not be able to successfully commercialize Vaxart’s tablet vaccine candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow Vaxart to establish or maintain adequate pricing that will allow it to realize a sufficient return on Vaxart’s investment.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and Vaxart believes the increasing emphasis on cost-containment initiatives in Europe, Canada and other countries may cause Vaxart to price Vaxart ’s tablet vaccine candidates on less favorable terms that it currently anticipates. In many countries, particularly the countries of the European Union, the prices of medical products are subject to varying price control mechanisms as part of national health systems. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, Vaxart may be required to conduct a clinical trial that compares the cost-effectiveness of its tablet vaccine candidates to other available therapies. In general, the prices of products under such systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that it is able to charge for its tablet vaccine candidates. Accordingly, in markets outside the United States, the reimbursement for its products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits.

Moreover, increasing efforts by governmental and third-party payors, in the United States and internationally, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for its tablet vaccine candidates. Vaxart expects to experience pricing pressures in connection with the sale of any of Vaxart ’s tablet vaccine candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products into the healthcare market.

Vaxart ’s future success depends on its ability to retain executive officers and attract, retain and motivate qualified personnel.

Vaxart is highly dependent on its executive officers and the other principal members of the executive and scientific teams, particularly its President and Chief Executive Officer, Wouter W. Latour, its Chief Scientific Officer, Sean N. Tucker, its Chief Financial Officer, John M. Harland its Chief Medical Officer, David Liebowitz. The employment of Vaxart ’s executive officers are at-will and Vaxart’s executive officers may terminate their employment at any time. The loss of the services of any of Vaxart’s senior executive officers could impede the achievement of Vaxart’s research, development and commercialization objectives. Vaxart does not maintain “key person” insurance for any executive officer or employee.

Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel is also critical to Vaxart ’s success. Vaxart may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. Vaxart also experiences competition for the hiring of scientific and clinical personnel from universities and research institutions. Vaxart’s industry has experienced an increasing rate of turnover of management and scientific personnel in recent years. In addition, Vaxart relies on consultants and advisors, including scientific and clinical advisors, to assist it in devising Vaxart’s research and development and commercialization strategy. Vaxart’s consultants and advisors may be employed by third parties and have commitments under consulting or advisory contracts with other entities that may limit their availability to advance Vaxart’s strategic objectives. If any of these advisors or consultants can no longer dedicate a sufficient amount of time to the company, Vaxart’s business may be harmed.

Vaxart will need to expand its organization, and may experience difficulties in managing this growth, which could disrupt operations.

Vaxart ’s future financial performance and Vaxart’s ability to commercialize Vaxart’s tablet vaccine candidates and compete effectively will depend, in part, on Vaxart’s ability to effectively manage any future growth. As of September 30, 2017, Vaxart had 21 employees. Vaxart expects to hire additional employees for Vaxart’s managerial, clinical, scientific and engineering, operational, manufacturing, sales and marketing teams. Vaxart may have operational difficulties in connection with identifying, hiring and integrating new personnel. Future growth would impose significant additional responsibilities on its management, including the need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors. Also, Vaxart’s management may need to divert a disproportionate amount of its attention away from Vaxart’s day-to-day activities and devote a substantial amount of time to managing these growth activities. Vaxart may not be able to effectively manage the expansion of its operations, which may result in weaknesses in its infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Vaxart’s expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of its tablet vaccine candidates. If Vaxart is unable to effectively manage its growth, its expenses may increase more than expected, its ability to generate and/or grow revenues could be reduced, and Vaxart may not be able to implement its business strategy.

Many of the other pharmaceutical companies that Vaxart competes against for qualified personnel and consultants have greater financial and other resources, different risk profiles and a longer history in the industry than Vaxart. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates and consultants than what it has to offer. If Vaxart is unable to continue to attract and retain high-quality personnel and consultants, the rate and success at which it can select and develop its tablet vaccine candidates and its business will be limited.

Vaxart ’s employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers and other vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have an adverse effect on Vaxart’s results of operations.

Vaxart is exposed to the risk that its employees and contractors, including principal investigators, consultants, commercial collaborators, service providers and other vendors may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or other unauthorized activities that violate the laws and regulations of the FDA and other similar regulatory bodies, including those laws that require the reporting of true, complete and accurate information to such regulatory bodies, manufacturing standards, federal and state healthcare fraud and abuse and health regulatory laws and other similar foreign fraudulent misconduct laws, or laws that require the true, complete and accurate reporting of financial information or data. Misconduct by these parties may also involve the improper use or misrepresentation of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to Vaxart ’s reputation. It is not always possible to identify and deter third-party misconduct, and the precautions Vaxart takes to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting it from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against Vaxart, and it is not successful in defending Vaxart or asserting its rights, those actions could have a significant impact on Vaxart’s business and financial results, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, reputational harm, diminished profits and future earnings, and curtailment of its operations, any of which could adversely affect Vaxart’s ability to operate its business and Vaxart’s results of operations.

Vaxart ’s business and operations would suffer in the event of system failures.

Vaxart ’s computer systems and those of its service providers, including its CROs, are vulnerable to damage from computer viruses, unauthorized access, natural disasters (including earthquakes), terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in Vaxart’s or their operations, it could result in a material disruption of its development programs. For example, the loss of preclinical or clinical trial data from completed, ongoing or planned trials could result in delays in its regulatory approval efforts and significantly increase Vaxart’s costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to data or applications, or inappropriate disclosure of personal, confidential or proprietary information, Vaxart could incur liability and the further development of its tablet vaccine candidates could be delayed.

Vaxart has identified a material weakness in its internal control over financial reporting, and if Vaxart is unable to maintain proper and effective internal controls over financial reporting, the accuracy and timeliness of Vaxart ’s financial repor ting may be adversely affected.

In connection with the audit of Vaxart ’s financial statements for the years ended December 31, 2015 and 2016, Vaxart and its independent auditors identified a material weakness in its internal control over financial reporting. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of Vaxart’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness related to Vaxart lacking sufficient qualified resources and adequate processes thereby impacting Vaxart’s ability to appropriately segregate duties and perform effective and timely review of account reconciliations and nonroutine transactions.

Assuming the closing of the merger, the combined company intends to take steps to remediate this material weakness, including increasing the depth and experience within its accounting and finance organization, as well as designing and implementing improved processes and internal controls. However, its efforts to remediate this material weakness may not be effective or prevent any future material weakness or significant deficiency in the combined company’s internal control over financial reporting. If the combined company’s efforts are not successful or other material weaknesses or control deficiencies occur in the future, the combined company may be unable to report its financial results accurately on a timely basis, which could cause combined company’s reported financial results to be materially misstated and result in the loss of investor confidence and cause the market price of the combined company’s common stock to decline.

The combined company will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to annually furnish a report by management on, among other things, the effectiveness of its internal control over financial reporting. This assessment will need to include disclosure of any material weaknesses identified by the combined company ’s management in its internal control over financial reporting. The combined company’s independent registered public accounting firm may be required to attest to the effectiveness of its internal control over financial reporting depending on the combined company’s public float. The combined company will be required to disclose changes made in its internal control and procedures on a quarterly basis. To comply with the requirements of being a public company, the combined company may need to undertake various actions, such as implementing new internal controls and procedures and hiring accounting or internal audit staff.

Vaxart expects to incur significant additional costs as a result of being a public company, which may adversely affect its operating results and financial condition.

Vaxart expects to incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act, as well as rules implemented by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, the Securities and Exchange Commission, or the SEC, and Nasdaq. These rules and regulations are expected to increase Vaxart 's accounting, legal and financial compliance costs and make some activities more time-consuming and costly. In addition, Vaxart will incur additional costs associated with its public company reporting requirements and Vaxart expects those costs to increase in the future. Vaxart also expects these rules and regulations to make it more expensive for it to maintain directors' and officers' liability insurance and Vaxart may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for Vaxart to attract and retain qualified persons to serve on its board of directors, its board committees, or as executive officers. Increases in costs incurred as a result of becoming a publicly traded company may adversely affect Vaxart's operating results and financial condition.

Risks Related to Clinical Development, Regulatory Approval and Commercialization

If Vaxart fails to continue to develop and refine the formulations of its tablet vaccine candidates, it may not obtain regulatory approvals, and even if approved, the commercial acceptance of its tablet vaccine candidates would likely be limited.

In Vaxart ’s H1N1 influenza Phase 2 trial it used vaccine tablets that contained approximately 1.5 x 10 ¹⁰ IU of vaccine. Accordingly, subjects in this trial were required to take 7 tablets in a single setting to reach the aggregate dose of 1 x 10 ¹¹ IU, the target dose for this trial. Vaxart believes that in order for its seasonal influenza vaccine candidate to be commercially successful it will need to continue to refine its formulation and develop influenza vaccine tablets that contain the desired dose for each vaccine strain in a single tablet, resulting in a vaccination regime of no more than four tablets. In addition, Vaxart intends to develop a seasonal influenza vaccine tablet that contains the optimal effective dose for all four influenza vaccines necessary to create a quadrivalent vaccine, resulting in a vaccination regime of one tablet. Increasing the potency of the vaccine tablets may affect the stability profile of the vaccine and Vaxart may not be able to reduce the vaccination regime for an influenza strain to a single tablet or combine the four influenza strains into one vaccine tablet. In addition, increasing the potency of the vaccine tablets or combining the influenza strains necessary to create a quadrivalent vaccine may adversely affect manufacturing yields and render such tablets too costly to manufacture at commercial scale. Vaxart’s efforts to develop tablet vaccine candidates for norovirus and RSV face similar formulation challenges. If Vaxart’s unable to further develop and refine the formulations of its tablet vaccine candidates, it may not obtain regulatory approval from the FDA or other regulatory authorities, and even if approved, the commercial acceptance of its tablet vaccine candidates would likely be limited.

Clinical trials are very expensive, time-consuming, difficult to design and implement and involve an uncertain outcome, and if they fail to demonstrate safety and efficacy to the satisfaction of the FDA, or similar regulatory authorities, Vaxart will be unable to commercialize its tablet vaccine candidates.

Vaxart ’s tablet vaccine candidates for norovirus and seasonal influenza are still in early-stage clinical development and will require extensive additional clinical testing before Vaxart is prepared to submit a BLA for regulatory approval for either indication or for any other treatment regime. Vaxart cannot predict with any certainty if or when it might submit a BLA for regulatory approval for any of its tablet vaccine candidates, which are currently in pre-clinical development, or whether any such BLAs will be approved by the FDA. Human clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. For instance, the FDA may not agree with Vaxart’s proposed endpoints for any clinical trial it proposes, which may delay the commencement of its clinical trials. The clinical trial process is also time-consuming. Vaxart estimates that the clinical trials it needs to conduct to be in a position to submit BLAs for Vaxart’s tablet vaccine candidates for seasonal influenza, norovirus and RSV will take several years to complete. Furthermore, failure can occur at any stage of the trials, and it could encounter problems that cause it to abandon or repeat clinical trials. Tablet vaccine candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials, and the results of early clinical trials of the tablet vaccine candidate for seasonal influenza as well as the pre-clinical results Vaxart has observed for its norovirus and RSV tablet vaccine candidates therefore may not be predictive of the results of its planned Phase 1 and 2 trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials.

Moreover, preclinical and clinical data are often susceptible to multiple interpretations and analyses. Many companies that have believed their vaccine candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. Success in preclinical testing and early clinical trials does not ensure that later clinical trials, which involve many more subjects and, for influenza, all four strains rather than the one strain Vaxart has studied in Phase 1 clinical trials to date and the results of later clinical trials may not replicate the results of prior clinical trials and preclinical testing.

Vaxart may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent its ability to receive marketing approval or commercialize its tablet vaccine candidates, including that: