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Dear Shareholder:

Thank you for your perspective and comments. Be assured that the Company’s goal is always to create value for shareholders. The board of directors and senior management continually review all potential strategic options for the company and are open to considering those that can maximize shareholder value. As previously stated, the Company was perplexed by the decision to terminate the BARDA contract at this time. Based on the near-term, top-line Phase 2 data and management continues to see value in the program. The Company will continue the critical path activities required to get the Phase 2 IGLOO top-line results, which are anticipated in the third quarter of this year.

The Value of LANI and the Pipeline
· The Company believes that the IGLOO data, combined with other Phase 3 placebo controlled trials of LANI and other neuraminidase inhibitors (NIs), should be sufficient to make a well-educated decision on whether to advance LANI into Phase 3 clinical trials.
· Based upon success in Japan, the Company believes that LANI represents a de-risked commercial asset and has future value, notwithstanding the recent U.S. government’s decision to not financially support its further development for pandemic preparedness.
· When the forthcoming Phase 2 data is reviewed, the best next steps for that program will be determined. The BARDA contract clearly enhanced the value of LANI to our shareholders, but management does not believe it constituted the entire potential value of the program.
· The Company also believes that its vapendavir and RSV programs have potential to create significant value for shareholders.

The BARDA Contract
· The Company was provided no indication as to the reason for the termination for convenience in the written notification received from ASPR/BARDA.
· In a follow up call with the contracting officer, the Company was provided confirmation that the termination was not performance-related. The Company was verbally provided several reasons as to the IPR’s decision to terminate for convenience (as disclosed in in our 10-Q filing on May 12, 2014), though management does not concur with those reasons.
· The reasons for terminating for convenience included the time, costs, and challenges associated with enrolling IGLOO and future trials—increasing concerns about the resistance profile of the NIs class and LANI against emerging H7N9 strains and the fact that LANI was not amenable to an IV formulation to provide a solution to treat critically ill, hospitalized patients with complicated flu.
· It should be noted that CDC data shows that LANI demonstrates a favorable resistance profile compared to other NIs, and LANI was never amenable to an IV formulation, and there were no clinical development dollars in the contract with BARDA for this indication.
· One can speculate, due to the fact that BARDA chose not to wait to see the forthcoming Phase 2 data, that ASPR/BARDA made a strategic decision to consolidate and focus its scarce resources on new mechanisms of action to treat flu, are concerned about resistance vulnerabilities to emerging flu strains and supporting the development of LANI (in addition to Tamiflu and Relenza) for the treatment of uncomplicated flu is no longer a significant component of its strategic mission or plans for preparedness.

Dr. Robinson’s Comments
· Management cannot confirm any statements made by or attributed to Dr. Robinson, other than the statement he personally provided to the Company. Management confirms that the Company was officially advised by the contracting officer at ASPR, who is the individual in charge of making the final decision and handling stop work orders and terminations.
· Dr. Robinson appears to be responding to certain media outlets or inquiries via emails and not via official press releases and definitely not in writing to the Company.

Finances
· The Company cannot speculate on the financial impact of this decision, but we refer people to the regulations that cover this type of event (FAR Part 49 and pursuant to FAR clause 52.249-6, Termination (Cost-Reimbursement).
· Over the past year the Company has dramatically reduced overhead costs and the burn rate. In operating expenses for the 9 months ended March 31, 2014, the Company reported a $1M operating loss, versus an almost $16M loss last year. A large portion of that improvement came from cost reductions that the current management team implemented.
· At March 31, 2014, the Company had $80.1 million of cash and cash equivalents, not including accounts receivable that will convert to cash during the next quarter as receivables are collected from royalty revenues earned to-date.
· Management will continue to evaluate opportunities to align the Company’s cost structure with the plan to not to be wasteful with shareholder's capital.

Sincerely,

Lee M. Stern, CFA