Cytosorbents Corporation (CTSO) Q4 2015 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to the CytoSorbents 2015 Financial and Operating Results Conference Call. [Operator Instructions] Today’s call is being recorded. At this time, I would like to turn the call over to our moderator, Lee Roth. Please go ahead.

Thank you, Ann, good afternoon everyone, and welcome to the CytoSorbents 2015 operating and financial results conference call. Joining me today from the company are Dr. Phillip Chan, President and Chief Executive Officer; Vincent Capponi, Chief Operating Officer; Kathleen Bloch, Chief Financial Officer; Chris Cramer, VP of Business Development; and Dr. Christian Steiner, VP of Sales and Marketing from Germany. Before I turn the call over to Dr. Chan, I’d like to remind listeners that during the call, management’s prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties. And that management may make additional forward-looking statements in response to your questions today. Therefore, the company claims protection under the Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Our actual results may differ from the results discuss today. And therefore, we refer you to a more detailed discussion of these risks and uncertainties in the company’s filings with the Securities and Exchange Commission. Any projections as to the company’s future performance represented by management include estimates as of today, March, 9, 2016, and we assume no obligation to update these projections in the future as market conditions change. During today’s call, we will have an overview presentation covering the financial and operating highlights for 2015 by Dr. Chan and Ms. Bloch. Following that presentation, we’ll open the line to your questions during the live Q&A session with the rest of the management team. At this time, it’s my pleasure to turn the call over to Dr. Phillip Chan. Dr. Chan, go ahead, please.

Thank you very much, Lee, and welcome everyone for the call this afternoon. We encourage all new investors to review our earnings release this afternoon and the investor presentation on our website, which provides detailed background information about the company. After relatively short presentation, we will open up to the live Q&A period. And official transcript of today’s call will be available within the next week on our website at www.CytoSorbents.com. So CytoSorbents is [Audio Dip] ICU and cardiac surgery using CytoSorb blood purification. What CytoSorb does is that it removes the fuel to the fire of inflammation and it targets the 20 plus billion dollar opportunity in critical care and cardiac surgery. It is the only specifically approved extracorporeal cytokine filter in the European Union. And it is clinically proven to remove key cytokines in the blood of critically ill patients. It has a very broad indication for use approved for any situation where cytokines are elevated and it works with standard dialysis CRRT machines and heart/lung machines that are found in hospitals today. It is a plug and play cartridge. But it also removes many other inflammatory mediators such as free hemoglobin, bacterial toxins, bilirubin, complement and other factors that are driving an uncontrolled inflammatory response. It has been safe and well tolerated to date more than now 10,000 human treatments. The goal of CytoSorb is to try to control the deadly inflammatory response and in effort to try to prevent or treat organ failure, which is the leading cause of death in the intensive care unit today. And then doing so hopefully be able to improve patient outcomes and survival, while decreasing the cost of ICU and patient care. We believe CytoSorb is a very unique product that has the potential to revolutionize the treatment of many life-threatening illnesses seen in the intensive care unit today, such as sepsis, ARDS, burn injury, trauma, pancreatitis, influenza, cytokine release syndrome, and complications of cardiac surgery. With that, let me turn it over to Kathy Bloch to go over some of our operating and financial highlights. Kathy.

Well, thank you, Phil, and good afternoon everyone. For today’s call, I will be providing an update regarding CytoSorbents 2015 financial results including product sales and also an update around our working capital and cash runway, but before I go into these details. I just like to say that we’ve had a really solid year from a financial standpoint, which included ringing the NASDAQ opening bell to celebrate our one year anniversary of being on the NASDAQ exchange. And we are also now classified as an accelerated filer by the SEC. Now as required by the Sarbanes-Oxley Act along with the annual financial audit for 2015, we’ve also had our system of internal controls audited. And I’m pleased to report that our auditors have given their opinion that we have maintained in all material respects effective internal controls over financial reporting. And this should give our shareholders audit assurance regarding the reliability of our financial information and reports. And today, we filed our annual report on Form 10-K. for the year ended December 31, 2015 in advance of the filing deadline required for accelerated filers, which is March 15th. So with that let’s look at our year-over-year sales. CytoSorb product sales for the year ended December 31, 2015 were approximately $4 million, which is a 29% increase of our product sales for the year ended December 31, 2014 of approximately $3.1 million. 2015 product sales were negatively impacted by approximately $637,000 as a result of the declining exchange rate for the euro, in other words changed from 2014. 2015 product sales would have been approximately $4.7 million, which is an increase of 49% over 2014 product sales. Our grant revenue for 2015 was approximately $748,000 as compared to approximately $987,000 in 2014. And we continue to experience strong gross profit margins on product sales. Gross profit margins were approximately 64% for the fourth quarter of 2015 and approximately 62% for the year ended December 31, 2015. And I want to turn to our fourth quarter 2015 product sales chart. Our products sales were $1.5 million, our best quarterly revenue ever. This is an increase of approximately $624,000, or 72% over the fourth quarter 2014 product revenue, which was approximately $871,000. Now this chart that we’re looking at shows the euro adjusted quarterly sales of the company since we began commercialization of our product. The dark blue portion added to the top of the 2015 quarterly bars adjust the sales for the four quarters of 2015, as if the euro to dollar exchange rate was unchanged from the same period in 2014. Our euro adjusted sales for the fourth quarter of 2015 were approximately $1.7 million and that’s an annual run rate of approximately $7 million. And we are seeing steady quarter-over-quarter improvements in direct sales both as a result of new customers, but also from repeat orders from existing customers. And as we have said, we are just scratching the surface and revenues should continue to climb as direct sales continue to grow as existing distributors complete product registrations, and generate repeat sales and as additional distributors and/or strategic partners come onboard in new regions. Furthermore, as we continue to develop clinical data from our registry, investigator initiated studies and FDA trial; we will be able to accelerate acceptance and adoption of CytoSorb in the marketplace. And then finally, I just like to provide some notes on our working capital position and cash runway. As of December 31, 2015, we had approximately $7.5 million in cash and short-term investments. In addition, in January 2016, we received another $325,000 in funding from the sale of our NOLs through the New Jersey Technology Business Tax Certificate Transfer Program. We believe that we have sufficient cash to fund our operations through 2016. Now as we build sales and drive our operations towards breakeven helped by a highly profitable product with blended gross margins of 62% or better, we are exploring a number of different funding sources in order to fund clinical activity that is intended to help drive CytoSorb [Audio Dip] United States regulatory approval. Consistent with our past history and overall philosophy, we look to do so in a financially responsible way with the goal of limiting shareholder dilution. As we have previously announced, our existing $100 million self-registration gives us tremendous flexibility to raise capital under a wide range of financing options. And we believe that amount is in excess of what we will require. Of this we have $25 million controlled equity offering sales agreement in place with Cantor Fitzgerald. And during the fourth quarter of 2015, we raised approximately $225,000 in net proceeds at an average selling price of $8.02 per share under this facility. We also believe that strategic partners can provide potential future sources of capital and in light of the current state of the equity markets, we are additionally investigating non-dilutive debt financing as a bridge to more traditional fundraising. Turning to our capital structure, as of December 31, 2015 on a fully diluted basis, we have approximately 29 million common shares outstanding. And with that, I’d like to turn the call back over to Phil.

Thanks very much, Kathy. So rather than go over our accomplishments for 2015, which you can read about in our press release today, what I thought I do is cover some of the near-term events that we find very exciting for our overall business and the future of CytoSorb in the world. So just coming up next week, CytoSorbents will host its third international CytoSorb users meeting in Brussels, Belgium on March 14. Currently, there are more than one 100 people registered to attend the meeting from a total of 22 countries and the agenda includes 12 clinical and pre-clinical presentations, as well as one panel session on a wide variety of topics including sepsis and septic shock, cardiac surgery, liver failure, burn injury, acute pancreatitis as well as trauma. In addition immediately following our users meeting will be the 36th International Symposium of Intensive Care and Emergency Medicine also called ISICEM in Brussels, Belgium on March 15th through the 18th. And this conference is one of the largest most prominent critical care conferences in the world attracting more than 6,200 professionals from all over the world. CytoSorbents is a gold sponsor and will exhibit and host a research symposium on Thursday March 17 led by Chairman, Dr. John Kellum at the University of Pittsburgh Medical Center, Dr Antonio Pesenti from Milano, Italy, and we’ll feature talks from three major thought-leaders including Dr. Herwig Gerlach, Dr. Zsolt Molnar as well as Dr. Axel Nierhaus. Now also at ISICEM will be Fresenius Medical Care and Fresenius Medical Care is the largest dialysis company in the world and one of our strategic partners. Fresenius will initiate the marketing push behind CytoSorb at the ISICEM conference next week ahead of the forthcoming launch. This is actually a very exciting event because this is really the coming out party so to speak of the partnership between Fresenius and CytoSorbents’ to the European critical care community. CytoSorb will be featured in the Fresenius Exhibition Booth on the multiFiltrate Acute Therapy System. And Fresenius will use the event to introduce CytoSorb therapy broadly to its customers, particularly those in the six countries where they have exclusive distribution rights including France, Poland, Denmark, Norway, Finland, and Sweden. Fresenius is also sending approximately 18 people to our third international CytoSorb Users Meeting on March 14. Now in terms of Biocon and potential cardiac surgery partners, Biocon and CytoSorbents recently completed a four city week long trip in India and Sri Lanka with Professor Zsolt Molnar, Chairman of SepsEast, the Central and Eastern European Sepsis Forum and he’s also an experienced user of CytoSorb for critical illnesses. Through that trip, they introduced CytoSorb to more than 250 key opinion leaders in that part of the world. In the aortic cardiac surgery, we have ongoing partnership discussions with multiple cardiac surgery partners, who have expressed strong interest in CytoSorb. Interestingly at our Third International CytoSorb Users Meeting key clinical data from the cardiac surgery evaluation study led by Professor [indiscernible] Cardiothoracic Surgeon and Vice-Dean of Research from the University Hospital at Honnechy, France in a patient population that was very similar to those being treated in our REFRESH I U.S. study that data will be presented there as well and we’re very interested to see how the community respond to that data. That provides in our segue to our REFRESH I fall update, again this stands for – REFRESH stands for the REduction of FREe plaSma Hemoglobin and that is a 40 patient, eight center study evaluating the safety and efficacy of its operative use of CytoSorb and the heart/lung machine during complex cardiac surgery in elective non-emergent cardiac surgery that is expected to last longer than three hours. So this includes many complex cardiac surgery procedures such as aortic reconstruction, CABG reduce, multiple valve replacements and other types of surgeries. The goal of the study is to show safe REduction of plaSma free Hemoglobin and other inflammatory mediators that can cause post-operative complications. And again, the therapy has been used intra-operatively in more than 1,000 cardiac surgeries to date in Europe thus far exceeds actually that number today. So we are working with major cardiac surgery centers in the United States, which includes Baylor and Texas Heart, Baystate Medical Center, Columbia, Cooper University Hospital, University of Kentucky, University of Maryland, University of Pennsylvania as well as the University of Pittsburgh Medical Center and currently seven of eight sites are active in the trial. The trial currently is 35% enrolled with several additional patients already consented for the study and those surgeries are expected to take place this month. We expect that to complete enrollment by mid-2016 to be followed by discussions with the FDA on the direction for a potential pivotal trial, which we call REFRESH II that is intended to support application for U.S. approval CytoSorb for cardiac surgery. I also wanted to give a registry update. Now, the CytoSorb registry is intended to collect treatment data from all over the world. It is funded by CytoSorbents, but is managed independently by the center of clinical studies at the University of Vienna led by Professor Frank Brunkhorst. Now the analysis of the state is governed by an independent medical joint committee composed of leaders in critical care and cardiac surgery and currently we have 103 institutions that are registered to submit data to the registry. What I’m pleased to say is that the first interim data analysis from the registry is expected to be finalized soon and once we know the results of that study, we will like to share that with you. And one last update before I move to a couple of very interesting case reports is a new development which is the sepsis definition update. Now, recently, the Third International Consensus Definitions Task Force published the new guidelines for the definition of sepsis in the Journal of the American Medical Association also called JAMA. And sepsis was defined as “the life threatening organ dysfunction caused by a dysregulated host response to an infection”. Now the reason why that sounds familiar is because it aligns very well with the message that we’ve been communicating with key opinion leaders around the world about what CytoSorb is designed to do. As one of the only therapies designed to target the underlying causes of both dysfunction and organ failure in sepsis as well as a host of other life threatening conditions, we believe we are strategically positioned to be a leading therapy to save lives and change the way critically ill patients are treated today. So, what I’d like to do now is this transition to a couple short case reports. And the first one I’d like to cover is the study that we recently put out a press release on in the area of refractory septic shock. So at this 26th symposium for Intensive Care Medicine and Critical Care Conference in Bremen, Germany. Dr. Sigrun Friesecke, Senior Intensivist in the Greifswald University Hospital, MICU, Medical Intensive Care Unit, reported on a perspective single-arm study in 22 patients with refractory late-stage septic shock. Now when we say refractory shock, we are talking about patients where nothing is working to help keep their blood pressure above a critical threshold level that is required to pump oxygenated blood to vital organs. Now, these patients have refractory shock despite the use of high doses of vasopressors. They had respiratory failure, required mechanical ventilation or ECMO, extracorporeal membrane oxygenation. They had anuric kidney failure requiring dialysis. So this is not just kidney dysfunction or kidney failure, this is when you’re not producing any urine at all, the worse form of kidney failure. And they also had a lactate greater than 8 millimoles per liter. Now to put into perspective, when the definitions came out for sepsis and septic shock just recently, these were patients who qualified for septic shock were patients who had a vasopressor requirement to be able to keep the blood pressure above 65, but they are not sure blood pressure above 65 millimeters of mercury and had a lactate greater than two millimoles per liter. And in that patient population, the mortality was greater than 40%. Now clearly, this patient population that we’re talking about right now is a much more severe population with septic shock. And to point that out a similar population within the end of 2016 reported by Conrad adult, who received standard of care where shock could not be reversed. These patients were also on mechanical ventilation with an initial lactate level of 6 and 75% required renal replacement therapy. These patients had a mortality of 100% at 28 days. So, the results of the Greifswald study showed that that 22 survival was 41%, which is a 30% to 40% absolute improvement over what was expected in this patient population with a mortality of these moribund patients is typically extremely high again approaching 100%. Also CytoSorbents was able to resolve shock in 68% of the patient and in terms of the reduction an inflammatory mediators, CytoSorb led to a reduction from an initial average of 87,000 picograms per mL. Again all of us on the phone here should have a aisle six of about ten, sound with community acquired pneumonia that is treated on an outpatient basis may have an aisle six of about 200 to 300. So these levels are extremely high. So it reduced the average levels from 87,000 picograms per mL to below 10,000 picograms per mL after 24 hours of treatment. So this is a very exciting study and to be able to bring people back from the brink at all was quite remarkable. The second study – the second case report is a case of severe burn injury. This involves a 51-year-old man, who was admitted in acutely treated for severe burn injury approximately 60% of his total body surface area. Now if you look at your palm, that is 1% of your total body surface area, so imagine your body covered with severe burns on 60% of those palm areas, so he’s very severely burned. And he also had an inhalation trauma due to an explosion accident. So no surprise that he – I think he had massive inflammation and he went up developed acute kidney failure requiring dialysis. He’s subsequently developed shock, requiring high doses of vasopressors to the fact that he’s on three vasopressors and still in shock is again very close to be called a refractory shock. So due to his massive burn injuries, he also developed severe rhabdomyolysis with myoglobin in his blood, which is an intracellular protein that carries oxygen in muscle. And when muscle gets injured as from a burn injury or from trauma, its gets released into the blood and then can crystallized in the kidneys and cause kidney failure. His levels has been very high, almost 16,000 micrograms per liter and he had severe inflammation as measured by a number of inflammatory parameters. Well, the patient underwent continuous CytoSorb treatment for 72 hours using the total of three devices. And with treatment he regained hemodynamic stabilization with significantly decreased needs for vasopressors. And his real function also improved. We still required dialysis. And his myoglobin decreased just approximately 8,000 micrograms per liter and his inflammatory markers also dropped dramatically. But what CytoSorb’s help to do is to stabilize this patient and he was ultimately weaned from both mechanical ventilation and dialysis before he was successfully discharged from the hospital to physical rehab. So, with that that ends my formal comments and we’re ready I think for questions.

Operator, we’re ready to pull for questions now.

Thank you very much. [Operator Instructions] We’ll take our first question from Jonathan Aschoff from Brean Capital.

Hi, guys. Congrats on the progress. I had about four questions. So I was wondering could you elaborate on what exactly Fresenius will be doing initially perhaps in some sort of quantitative way headcount for sales stuffs like that.

Yes, well, hi, Jonathan. Well Fresenius is planning on launching CytoSorb in the six countries and specifically for the area of critical Illness. And so they will be marketing the technology heavily to intensivists for the treatment of many different illnesses such as the ones that we’ve talked about today. So, in terms of the magnitude of those sales, we can’t predict that right now. What we do know is that France is the second largest medical device market in Europe. Poland is a very large market I believe with 80 million to 90 million people in that country. And then the Scandinavian countries are fortunate to have a very high [indiscernible] in healthcare with very good insurance. And so, there was a very important reason why CytoSorb was chosen for those six countries. So, we know when Fresenius launches how the product will be received in marketplace, but today we do know that there are major key opinion leaders in those countries, who are very eager to use the product and a number of them will be attending many of the sessions that we’ll be holding in next week.

Okay. You gave since a little bit of CytoSorb directional sales guidance for the first quarter of 2016, but can you also say that it will be higher than 4Q 2015 sequentially will that quarter be an uptick because the first quarter of 2015 kind of a low hurdle.

Yes, so traditionally we have not given guidance while the quarter is still underway and for the near-term that would be our preference.

All right, how that’s any of our guidance on COGS for 2016?

So, we expect that 2016, we haven’t quantified the magnitude of the increase, but again, there are many reasons why we believe that 2016 will be a much stronger year than 2015. In particular Fresenius will turn on that will bring six countries online. We’re waiting for final registration in Russia. We are waiting for registration in other countries outside of the Saudi Arabia, in the Middle East. We’re waiting on Israel, Canada and a number of other countries that we believe will turn on in 2016. And so, in addition, we see a lot of momentum as we discussed in our letter to stockholders in January about moving forwards an inflection point about how things are –we’re reaching a critical mass of awareness of usage of clinical data and others things that we believe are helping to drive one our direct sales, which again have tripled from a year in this fourth quarter, have tripled from a year ago on a doubling of our customers. But we believe that a lot of these things will be ticking in, in 2016, leading to substantial growth, but we have not yet – we have not provided guidance on what that might look like.

Okay. And then lastly, I was just curious – do you see anecdotally much CytoSorb use in patients that that you don’t think were reasonable candidates to possibly benefit from it?

We have seen CytoSorb being reused in all sorts of different situations both late as well as early. And I think the value of having a broad indication for usage that it can used technically on label really for any situation where cytokines are elevated. And I think that the original strategy of having that broad indication is paying off because you’re seeing a lots of reports on usage of the things that we never really thought were going to be major markets for us, but have turned out to be very promising areas. So, there is of course we are dealing with the sickest of the sick. These are critically ill patients, who are – who has major systems in their bodies tailing around them and are very difficult to succeed. Now, when used really on late patients, who have [indiscernible] necrosis and other things. It has been much more difficult to bring those back, which I think is one of the reasons why the study in refractory septic shock that I talked about earlier is so exciting. In that particular study, they actually use CytoSorb much more aggressively than we have been using on these patients, meaning that they use CytoSorb twice a day rather than once a day and that led to the improved outcomes that they saw in that study. Now, we obviously that is a single-arm study and we have to approach the interpretation of that study cautiously. But that being said, I think the results were quite remarkable, I think the audience based on reports from the conference that where the state it was presented, so we’re very excited by the effects here, but we’ll still need to demonstrate that in a true randomized controlled study. Now, the interesting thing about it though is that the effect is so large that that study that – that sort of pivotal study if you will could be actually very small, which would be something that would be very exciting.

Great, so thank you very much.

Sure.

We’ll take our next question RK Ramakanth with HC Wainwright.

Hi, good evening. This is Sean sending in for RK. Congratulations on the solid quarter and thank you for taking my questions.

Sure, hi, Sean.

I see it’s a very encouraging data from the German sepsis study. And since the 28 day mortality rate seems to be major clinical outcome measure and also the regulatory hurdle. So, this new data impact your plans for an IDE sepsis study in the U.S.?

Certainly, I think these data are really [indiscernible]. And so a study that focuses on this refractory septic shock population is certainly amongst the types of studies that we would look to do in sepsis whether or not here in the United States or in Europe. And so – but as we mentioned before, we continue to push to set options in sepsis in the United States. And if we can do so with a very small trial that would be to our advantage clearly.

Okay, thank you. And the REFRESH I study, you mentioned that it’s expected to complete enrollment by mid-year. When can we expect major results of this trial?

Sometimes certainly thereafter – most likely in the third quarter of this year.

And if it goes with this plan, do you expect to start REFRESH towards the end of the year?

We expect to submit the IDE if everything goes well, the IDE application to I, REFRESH II before the end of this year.

Great. And okay one final question for you, international registry, the interim results, is that going to be published or presented at a scientific meeting somewhere or?

I think that is going to be up to the discretion of the scientific steering committee for the International CytoSorb Registry. But, yes, I mean that was the intention of setting up the registry to make these data publicly available to help better educate and inform the use of CytoSorb all over the world on how CytoSorb is best used and then what indications its best view.

Okay, thank very much. That’s all my questions.

Thank you.

[Operator Instructions] We’ll go next to Andrew D’Silva with Merriman Capital. Andrew D’Silva: Hi, good afternoon. Thanks for taking my call, just a couple of quick questions for you. First off…

Hi, Andrew… Andrew D’Silva: Hey, guys. First off, can you give us a quick update on how Fresenius sales team is ramping up? Are you really engaged right now educating them in the products application and do you believe they are up to speed with the products capabilities?

Yes. For that one, I’ll turn it over to Chris Cramer, our VP of Business Development, he’s been working very closely with Fresenius. Chris?

Sure, thanks, Phil. Hi, Andrew. Thanks for the question. I would say, as you know, we’ve been working very hard together with FMC to establish the right structure to support a successful rollout for CytoSorb across all six countries. And it’s been, I would say, a big effort, but all the pieces are now coming into place. To answer your question directly, I’d say that between we’ve been doing a lot of training over the last quarter of FMC’s sales, marketing and clinical support specialist. And I don’t have the exact number off of hand, but I would say we’re close to 30 or 40 people. And I would say it’s going well. They understand the products, they get the value proposition. And I would say they’re very enthusiastic. And so, I think that all signs are very positive on the people that would be supporting the product in the field. Andrew D’Silva: Got it. All right, thanks for that. And then maybe as it relates to your expectations this year, I asked this on the last call and I just wanted to see if your thoughts have changed as now we’re a little bit into 2016 already. Do you anticipate of this year the majority of your sales, should be derived through direct internal sales initiatives, or would you anticipate at this point that sales from distributors and strategic partners will be able to overtake direct sales may be count the lion's share of things going forward, as there are a lot of regions that should be up online this year that weren’t in 2015?

Yes – I think that as we’ve discussed before our direct sales territories in Germany, predominantly Germany, but also Austria and Switzerland, we started those about a year before we had any distribution partners or strategic partners. And so from the market development standpoint they are roughly about a year ahead. But that being said, what we’ve seen is an acceleration of sales in our direct territories, again because of that greater awareness, that greater usage, the increase in clinical data and other things, as well as the increase in usage from a episodic basis to a more regular basis, particularly with certain disease states where CytoSorb has been used almost as a standard of care at select hospitals. So going forward, in 2016 we believe that direct sales will play a major role in our overall sales growth this year. We anticipate that direct sales will likely be more than half of our sales this year. But that being said, we’ll wait to see how that trends out, because our distributor channel is actually coming on nicely and as we move to additional territories the contribution of the distributors and strategic partners will become more important. So I think if we could keep that balance at a 50/50 split, that would be actually very positive thing overall. Andrew D’Silva: And then for this past year 2015 do you know what the split was direct versus external?

Again, we haven’t broken that level of detail out historically. But direct sales again we’re a very important part of our overall sales in 2015 and we continue to expect that to continue in 2016. Andrew D’Silva: Fair enough. And then as far as regions do you have approval and received registration and have you had success in establishing reimbursement in those areas and do you investigator initiated studies as well as product registry data, you established help you in this regard.

So the reimbursement of CytoSorb is typically accomplished in different ways. As you know, unlike the United States, the European as well as the world markets are very fragmented. Where you typically need to obtain reimbursement or others – or some other type of payment, for example through a DRG, Diagnosis-Related Group in other countries. And so we continue to work on reimbursement in most of our territories. In fact, we’ll have this year we have a specialist that we brought into the company that will be focused on that as a full time physician. And but in many different countries they have ways of obtaining a reimbursement for CytoSorb and its very basic level it’s through a sort of a lump sum DRG payment. But in other countries that like Germany for example it’s a dedicated payment. So we continue to work on reimbursement and that will only help to accelerate sales growth in the future. Andrew D’Silva: Yes, last question for you. Obviously it was nice to see the positive data related to the refractory septic shock study. But are there any investigator initiated studies that you’re aware of today that are looking at advantage of CytoSorbent maybe at earlier stages of sepsis versus being used as maybe a salvage therapy. Obviously your comment stated that that is the desired end-market earlier stage perhaps much larger and also more opportunity to help stabilize.

Absolutely, we have 50-plus investigator initiated studies that are being planned with about 17 of those actively enrolling patients for that have been completed to-date. And so of those absolutely there are a number of dose that are focused specifically on the early an aggressive use of Cytosorb in these patients as a means to try to prevent organ failure from happening in the first place, which is really what leads to the overall morbidity and mortality in these patients. And where the reasons why they wind up stuck in the intensive care unit because they are on machines life support that helps to keep them alive. So absolutely that is a major focus not only the company, but not only these investigator initiated studies, but also the company and that is one of the types of trials that is being considered for the U.S. market. Andrew D’Silva: Thank you for the color. Good luck going forward this year. Take care.

Great. Thanks, Andrew.

We’ll go next to Brian Marckx with Zacks Investment Research.

Hi, Phil. Congratulations on the quarter. I’m wondering as you can – want to be just talk about sepsis and kind of a bigger picture view in terms of the U.S. and what your thoughts are in terms of pursuing it or potentially not pursuing it. And then does the updated definition of sepsis potentially impulse your strategy in terms of trial design or in terms of pursuing or not pursuing?

Yes. Actually, could you just repeat that last one please?

Just out of bigger picture of you in terms of what your thoughts are today whether sepsis in the U.S. is something that you have committed I guess in your mind anyway to pursuing.

Yes, Sepsis is a massive market, it’s actually a top 10 killer around the world. It accounts for approximately million cases admitted to the intensive care unit in the United States every single year. So there’s about 27 million cases of severe sepsis and septic shock every year. And United States is no exception even with the higher standards of medical care that you will find in this country. Now sepsis is being driven by a number of different factors. One of the major factors is the aging baby boomer generation. These are patients who are at high risk of developing infection because of age, but also because of an epidemic in diseases like cancer and diabetes that put them at high risk of developing an infection, also because of use of indwelling implants like artificial hips in use that get infected and wind up putting the patient at very high risk of developing sepsis and also the increase in hospital-acquired infections and antibiotic-resistant infections such as MRSA that are really driving this. So when the CDC did a study on sepsis they noted that the incidence of sepsis doubled in the year ending – in the decade ending 2008 due to this increase in due primarily to patients who are greater than 65 years of age and who are in that baby boomer generation. So sepsis also accounts for approximately 10% to 20% of all hospital admissions, ICU admissions, I apologize. And for that reason it is a market that is very difficult to neglect. So in fact we have a lot of data now. In fact most of our treatments are on patients with sepsis and septic shock. And we have a lot of data that the therapy is working in this patient population. And that we’re helping to stabilize these patients from a multi-model mechanism that not only involves a reduction in inflammatory mediators, but also involves a reduction of bacterial toxins, for example, a redirection of the immune response, protection of organs against the – against toxic nature of cytokines et cetera. So we absolutely believe that sepsis is, should be a major target for us in the United States. Now whether or not we – the hopes and fears of the world on a clinical steps are strong in United States is a different story. Our strategy is slightly different. We’ve been pursuing the [indiscernible] trial, the reason why I said most sepsis studies have not worked. In fact there’s only been one trial that’s been successful in the treatment of sepsis and that was Xigris by Eli Lilly and Xigris has been subsequently taking off the market. So because of that history we have focused on cardiac surgery as the initial way to get CytoSorb on the market in the United States and then pursue a label extension strategy to try to add on different subgroups of sepsis where CytoSorb can be shown to work with a relatively small number of patients. We believe that this is a safer and less risky approach to pursuing the sepsis market in the United States and that’s currently what we’re focused on today. So does that help the answer to that question.

Yes, if I could just follow-up. So what I gather is from your comments that you expect to go through REFRESH and then hopefully REFRESH II, assuming REFRESH I is successful. And then at that point evaluate options potentially for expanding the label after cardiac surgery is a successful indication. Is that a fair estimation?

Well, not exactly because we don’t believe that we have to do this in series. We can certainly run clinical studies in sepsis for cure as well in abroad, while we pursue the cardiac surgery indication. And although the studies were not necessarily be pivotal studies or pivotal registration studies for the application of sepsis, what they really do is help identify and identify patient populations where the device or slightly not identified but validate the patient populations where CytoSorb both test and the treatment sepsis, and sepsis subgroups. So I think while we pursue cardiac surgery, we absolutely intent to pursue trials in sepsis or septic shock as well as early sepsis and that’s one of the reasons why we look to raise additional capital to be able to fund that study.

Okay. So, in terms of the definition of 28-day mortality, you’re using that as sepsis indication. How do you kind of – does that fit with what we’re talking about here. Or is sepsis try to how we’re talking about more of just a general indication I guess. Or is there down the road potentially a pivotal study in the U.S. that is 28-day mortality.

Yes. So I think what the FDA has made clear is that, what they’re looking for to have changed the sepsis label that they would be looking for 28-day all-cause mortality. Now the next thing about the refractory septic shock study is that again with a relatively small number of patients, it showed a fairly robust effect. And if that means that that so called pivotal study it would be relatively small then that would work again in our favor. So I think that if we want to get the formal indication for sepsis in the United States, we will have to pursue this 28-day all-cause mortality endpoint. But again one of the benefits of having so much experience right now in the treatment of sepsis worldwide is that we have actually good ideas about where CytoSorb is being used best and where it is being used most effectively. And because of that we are hopeful that we will be able to pursue studies in the United States that are not a 1,000-patient studies are not several 100-patient studies, but maybe something smaller.

Okay, okay. That’s very helpful. I appreciate that. If I could just on the cardiac surgery partners, you mentioned that you having discussion with multiple or multiple potential partners, how does that differ from the initial partner I guess that you were talking to and is that company still in the mix?

So what I would say is that the successes that we’ve had in the marketplace and the positive feedback from many, many key opinion leaders, leaders in the cardiac surgery space have led to a very strong interest amongst the major cardiac surgery players in the world and where there is an overlap in what they're asking for, and what they are looking for, in terms of what territories, et cetera, that we can potentially provide. And I think that has been the one of the things that has been actually a very positive thing for us. But it's also complicating matters as well.

Okay, all right. Are they looking for the top line data at least from REFRESH I. As a potential trigger to I guess move things in the direction of going that away.

It's interesting. I don't think that's the case. I think that – certainly REFRESH I is very interesting. But the nice thing about working with these major strategic partners is that they have the footprint of key opinion leaders in the lot of the territories where we currently use CytoSorb and where CytoSorb is being used for cardiac surgery. And so there's been a lot of – they're not taking our word that is working, they've been talking to their key opinion leader networks. And so I think that's been a very positive thing. I think that the [indiscernible] data that will be presented at the 3rd International Users' Meetingnext week, I think highlights the kind of experiences that cardiac surgeons are seeing particularly in the area complex cardiac surgery.

Great. Thanks, Phil. I appreciate it.

Sure. Thank you, Brian.

Thank you. That's all the time we have today for questions. I would now like to turn the call back over to management for any additional or closing remarks.

Well, thank you very much Lee and if there's any – thanks everyone for taking the time today for the call and we certainly appreciate your participation. If you do have any questions that were not addressed today, please feel free to address – to reach out to Amy Vogel at avogel@cytosorbents.com and we will try to get back to you soon. So in the meantime, we look forward to speaking with you again on the next Q1 2016 earnings call. Thank you very much.

Thank you. And that does conclude our conference today. I would like to thank everyone for their participation and have a great day.