Please standby. Good day everyone, and welcome to the CytoSorbents First Quarter 2016 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.

Thanks Leanne, and good afternoon. Welcome to the CytoSorbents First Quarter 2016 operating and financial results conference call. Joining me today from the company are Dr. Phillip Chan, Chief Executive Officer and President; Vincent Capponi, Chief Operating Officer; Kathleen Bloch, Chief Financial Officer; Dr. Christian Steiner, VP of Sales and Marketing from Germany, and Chris Cramer, VP of Business Development. Before I turn the call over to Dr. Chan, I'd like to remind listeners that during this 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 discussed today. And therefore, we would like to refer you to a more detailed discussion of these risks and uncertainties in the company's filings with the SEC. Any projections as to the company's future performance represented by management include estimates that are current as of today, May, 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 first quarter 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 to 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 session and official transcript of today's call will be available within the next week on our website at www.CytoSorbents.com. CytoSorbents is leader in critical care immune therapy we are leading the prevention or treatment of life-threatening inflammation in the ICU and cardiac surgery using CytoSorbent blood purification. CytoSorbent targets $20 billion opportunity in critical care and in cardiac surgery. It is only specifically approved extra-corporal set of kind filter in the European Union and its clinically proven to remove key cytokines in the blood of critically ill patients. And as a very broad occasion for use and is approved for any situation where cytokines are elevated. It works with standard dialysis machines as well as continuous renal replacement therapy machines or CRT machines. And those heart and lungs machines that are found in hospital today and CytoSorbent is a plug and play cartridge. CytoSorbent also removes many other inflammation mediators such as free hemoglobin, bacterial toxins, bilirubin, myoglobin, activated complement and others that are driving an uncontrolled inflammatory response. CytoSorb has been safe and will tolerated in more than 12,000 human treatments and the goal of CytoSorb is 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 intense care unit today. In doing so we hope to be able to improve patient outcomes and survival while decreasing the cost of ICU and patient care. We believe CytoSorb is very unique product that has the potential to revolutionize the treatment of many life threatening illnesses such as the intensive care such as those seen in the intensive care seen today such as sepsis a key respiratory distress syndrome burn injury, trauma, pancriatitis influenza, cytokine release syndrome and cancer therapy and complications of cardiac surgery. With that let me turn over to Kathleen Bloch to go over some of our operating and financial highlights. Kathy?

Thank you Phil. And good afternoon everyone. For today's call I will be providing an update regarding CytoSorbents first quarter 2016 financial results including product sales as well as our working capital and cash runway. Turning to reported financial results. CytoSorb product sales for the quarter ended March 31, 2016 were approximately $1.6 million which is a 127% increase over product sales of $704,000 for the quarter ended March 31, 2015. Our first quarter 2016 annualized product sale run rate rose to $6.4 million rose to $6.4 million as compared to an annualized run rate of approximately $2.8 million one year ago. Total revenues which includes product sales and grant revenue was approximately $1.8 million for the quarter ended March 31, 2016 as compared to $723,000 for the same quarter in 2015 which is an increase of approximately 150%. In the first quarter of 2016 our gross margin rose to approximately $1 million which is more than double our gross margin of $490,000 for the first quarter of 2015. We continue to experience strong gross profits margins on product sales. Gross profit margins were approximately 62% for the quarter ended March 31, 2016 as compared to gross profit margins of approximately 59% for the first quarter of 2015. Now let's take a look at our quarter-over-quarter product sales. Our first quarter 2016 product sales of $1.6 million represents our best quarterly product sales ever. This is our fourth consecutive period for which we have reported quarter over quarter product sales growth. It is also our third consecutive quarter of achieving record sales. In the past we have reported on the impact of the Euro. The Euro was relatively stable when comparing the first quarter of 2016 to the first quarter of 2015. Still for this report we have admitted the…

Thanks very much, Kathy. Since we just gave a fairly comprehensive update a couple of months ago I thought today we would focus more on the interest from clinical users as well as the clinical data that are being generated and published. So specifically I wanted to focus on some events that just happened recently after our last update to shareholders. So this is a picture from the third international users meeting held in Brussels , Belgium in March and as you can see from this picture this we brought together 107 people from 23 countries around the world to share their experiences with each other and how to use CytoSorb on their patients and to learn from each other. And to create a sense of community amongst the group and this group continues to get larger every year and we continue to bring new people in and so the actual community is very broad. On this next slide is the congress that happens immediately after our third international CytoSorb users meeting which is ISICEM. The International Symposium on Intensive Care Emergency Medicine also happening in Brussels. On the left hand side you can see the ISICEM news and this is professor [indiscernible] who is the organizer of what is one of the largest critical care conferences in Europe every year. This is one of our largest events you can see that we are prominently featured on the front page this daily update and what you can see here also are is our booth, this is a very large booth that is not with most of the others vendors but is actually one of the major players where most of the attendees go by to get to their various lectures and you can see some of the activity that we…

Thanks Dr. Chan, Leanne we are ready to begin pulling for questions.

Thank you. [Operator Instructions] we will go ahead and take our first question from Jonathan Aschoff with Brean Capital.

Thanks. I was wondering still what seems to be taking I think maybe more time to launch and I would have originally expected would have with any exactly what has been going on there in the last few months and for Kathleen can you just give me a little more detail on the types of different types if there are actually different types of debt financing you’re looking at?

Yes so, I think in terms of -- didn't become the largest company on the world because they were careless about what they were, what they do and I think they had been extremely -- and very careful in terms of making sure all the pieces were in place before launching the product in thess territories. It is their reputation on the line, it is their sales people out there pitching CytoSorb and so I think as a large corporation they have been working to make sure that everything is in place before they go out there. So we call these last mile issues and these are things that they are just many, many looking to launch in the multi-country territory as percentage of doing. So during several during the prior months I would say in the last six months in track has been out there actively talking to the leaders prepping the market for this alternate market launch and availability in CytoSorb in six countries and so I don't think that it has been wasted time in fact that I think there have been generating a lot of pent up demand for the product and that will hopefully translate into more rapid adaption when the product is finally launched as they have told us later this month. So I think that is how we view things.

How would you actually -- before how would you contrast your sales force pitch versus what [indiscernible is planning how sufficient your time?

Well, I think we work in very closely with Fresenius to make sure that they have learned from our experience our extensive experience assigned the products in the driven market as well as the Swiss market as well. And I think that we have been working very hard to have a transfer of materials much of the marketing materials reflects a lot of the content that was provided by our team their people have undergone extensive training through multiple sessions with our sales force and our trainers and they are I think very well prepared for this market launch. And so I think that the approach and the pitch will be very similar to how we sell in Germany which is of course the home base for and I think we look forward to see what their sales people and distribution can do.

Okay and Kathy?

Hi Jonathan, so we are right on process on that which involved about 12 different lenders some of whom we have known from the past and I can't be really specific but I don't want to be at this time but I will tell you that it was very competitive process the net was caste wide in terms of what we are looking for and as we said this would be we would like this to be uncomplicated financing that's what we are working toward.

Okay. Thanks guys.

Thanks very much Jonathan.

And we will take our next question from Sean Lee with HC Wainwright.

Good afternoon Kathy and Phil. Congratulations on a great quarter and thank you for taking my questions.

Thanks Sean.

Any addition to Fresenius, do you have any update s on the other geographies such as Russia and Middle East?

We actually have been making substantial progress in those areas and although we are not prepared to talk about it today we expect to be able to talk about that in the near future.

Okay. Also on the international registration data how is that being compiled when can we expect some interim results from that analysis?

So, the international registry, is an international registry collecting treatment data from countries all over the world. I believe we have more than a 100 institutions now registered to submit data which mainly of them actively submitting data I am pleased to say that the first analysis has been one by the university of Yana which is the third party that is managing this international set of registry this is by the center or clinical studies led by professor Frank Brunkhorst and university of Yana is well known as the kind of epicenter of sepsis research and contract critical care research in Germany as well as in Europe they were the home of Germany sepsis society they started the global sepsis alliance this is one of the universities that had the only government funded sepsis institute in the country so they are very well positioned to evaluate this registry. The registry is being managed by a scientific steering committee that is independent of [indiscernible] and so they are capable of evaluating that data in the way that they see best fit we do have access to that data however so we can use it for our own purposes but they have told us that the first analysis is completed that has been on a small subset initial patients but that analysis will be moving it’s towards a report soon but the next analysis will be coming up shortly as the numbers of patients. And so the goal of this CytoSorb international CytoSorb registry again is not just a sepsis registry but is actually collecting data in cardiac surgery, liver failure, stress syndrome, pancreatitis, and many other indications and it provides a standardized way of people all over the world to submit data in a way that it can be analyzed and utilized in larger statistical analysis. And so we’re very excited about the progress that we’re making.

Thank you for the color on that. Final question for me, last week I saw that you guys established a subsidiary for Switzerland, what are your plans for the country?

We applying or planning.

What are you planning to applying or are you starting to like marketing there, what are your price for --?

Well, Switzerland has always been considered one of our direct markets and I think establishment of Swiss subsidiary is more of a virtual entity it’s not resulting in any significant cost to the company. It allows us to however, our key opinion leaders in that part of the world better helps us respond the expected demand better it our sales force in Switzerland will fall under that umbrella and it will also and there are some advantages there in terms of tax and other things that we will benefit from so as we get a larger presence in Switzerland it just makes sense for that subsidiary at this time.

Thank you for taking my questions.

Sure Sean. Thank you.

And we will take our next question from Jason Kolbert with Maxim GRP.

Hi, it's [indiscernible] for Jason. My question is can you walk me through the direct sales processing EU and how does each adoption translate into product revenue? Thank you.

So the sales process is relatively straight forward, typically we market on the ICU side to – typically initially to the head of the department via either medical ICU, the surgical ICU, the cardio thoracic ICU, the trauma ICU and basically we talk to them about better product. And the sales pitch is actually fairly straight forward because physicians today already know about the massive inflammatory response that occurs in many life threatening illnesses such as sepsis and infection per an injury trauma and many of the other diseases that we have talked about. And they have known that cytokines are mediating this massive inflammatory response and they know that there has not been any effect if therapies are removing cytokines in the past as well as any therapies that can effectively remove other inflammatory remediaters as well. Not that others haven’t tried, and we can certainly talk about the competitive landscape but CytoSorb is currently being viewed as really a leader in the field. So when we approach these key opinion leaders now in Germany most even new accounts have already heard about CytoSorb and that’s we’re having the conversation and one of the reasons why we’re so interested in talking to us and potentially starting CytoSorb at their institutions because they’ve heard positive word of mouth from their colleagues and other institution often in the major hospitals in the major cities throughout Germany. But if they’re in other countries for example sales people will typically talk to key opinion leaders, get them introduced to the technology and again the pitch typically only takes about 10-15 minutes at a time the doctors get the technology to be understand, they do a lot of extra therapy today in their ICUs for chemo dialysis and chemo filtration which are the top…

Yes. Yes thank you it's in great detail. So I might have another question. Do you have any post sales strategy say after each patient treated with CytoSorb, will you be able to monitor them and use the data from for potential US trial?

Yes so that is the purpose of the CytoSorb registry as well as the interest in getting a lot of our data published by investigators who are doing investigator in the studies. So the CytoSorb registry again is good clinical practice registry that is collecting these data that we believe can be used to support our US applications but would not be used in lieu of a US lead, a US based trial. But certainly any kind of papers that are published into journals as well as reports from our registry could be used in support of our discussions with the FDA.

Okay. Great. Thank you.

Thank you very much.

And we will take our next question from Andrew D’Silva with Merriman Capital. Andrew D’Silva: Hey good afternoon everyone. Thanks for taking my calls. I just got a couple of quick questions here. first off were there any during the quarter any initial large stock motors that took place from any large first time customers that you can discuss or was it fairly stable order process as we have seen previous quarters?

Kathy would you like to take that?

Yes, I will take that one so no there were no initial stocking orders that were material to our sales. So I would characterize it as strong repeat sales. Andrew D’Silva: Alright and did the fourth quarter by chance have any large stocking order or is that the same situation as with the first quarter of this year?

That will be the same Andy. Andrew D’Silva: Okay great. And then with Biocon anything you gone on there, little while ago they were working on gathering data and increasing marketing has there been any progress you can discuss with them and then staying on that tune maybe discuss some of the differences between strategic partnership but Biocon has present any essence why maybe the ramp up with -- is expected to be quicker than with Biocon if you could?

Yes so the relationship with Biocon has been going very strong, we have met recently with their leadership and they reiterated their commitment to CytoSorb and are actually looking to establish separate division within Biocon to basically to make ensure that they have dedicated resources towards pushing CytoSorb further into the market. So currently today Biocon is pursuing the market in India as well Sri Lanka but we have been in discussions with them about expanding that relation given the great job that they have been doing. Now Biocon is an example of a large multinational corporation that has a very strong marketing sales and marketing arm similar to Fresenius and so for Biocon has been selling critical care antibiotic particularly the class antibiotics into the ICU for a long time and so they have established lot of relationships and it has been a very smooth segway to add CytoSorb to create the most what we believe is the most comprehensive approach to the treatment of sepsis with antibiotic treating the infection as well as CytoSorb treating the runway immune response. Now we anticipate that Fresenius because they owned the machines they own the infrastructure that is in these hospitals and they focus on extracorproal therapy that in fact they maybe ultimately more successful than even Biocon has been because they are able to push this therapy directly into their sales channel. Again Fresenius sales machines they sell dialysis machines across the world but they also are one of the leading sellers of blood purification disposables such as hemo dialysis and hemo filtration filters that remove during toxins and injury and kidney failure for example but again we are now providing them with the ability to remove and reduce cytokines in patients with massive inflammatory response adding a significant weapon to their repertoire of critical care therapies. And so for that reason we think that Fresenius, we are very excited about the Fresenius launch pending launch and look to see what they can do. Andrew D’Silva: Alright, just a couple more quick questions here. As far as interest goes have you seen any increased interest with existing hospitals keeping leaders since you released your most recent data from the third international CytoSorb meeting or other conferences you have had data come out of and that could be sales related inquiries, or just inquiries about the data just has there been increased traction that's noble and attributable to that data?

Yes, actually maybe Christian if you want to comment on sort of the response of keeping the leaders falling our recent conferences and other activities.

Yes certainly. Yes, actually as you have said there was number of presentations on new clinical data at the different conferences and in fact the presentation especially in Germany on septic shock patient has led to saturation that key opinion leaders really think that this is a new quality a new level of data we can present. So at the moment we are waiting for the publication, food publication, but other data who confirm or support this kind of outcome data. So the question was actually what other answers or response after this presentation so we have in fact a number of more carrier for presentation or first treatments and not to know it's still explained before the sales process chef about it and we would see the effect on the different presentation or data coming this week and months delay but we have started several years go to set this program up. And the more data and establish are presented the more we get results in the next quarter.

I guess the question was how did the data result in any increased interest or inquiries since it was positive I mean how you gotten any more inbound calls or anything of that extend that you can attribute to data coming basically I am trying to it’s the positive data that's coming out is having a beneficial aspect to what you are currently seeing in the market it doesn't have to be related. Andrew D’Silva: Okay. Good. Last question is Kathy I noticed that your R&D spend dropped sequentially and year-over-year and I was expecting maybe a slight increase going forward primarily due to the refresh study is there a reason why decline or is that just normally with respect that the increase going forward?

I think actually our grand activity, which absorbs many of our fixed R&D expenses is up over last year so that's the reason that R&D spend that you see is well, so the portion of spend in R&D that relates to revenue is included in cost of goods sold and that results in a reduction in the amount shown on R&D expense line. Andrew D’Silva: Got it. Great. Alright thank you very much for answering my questions and good luck going forward for the rest of the year.

Thanks very much Andy.

And we will take our next question from Jan Wald with Benchmark.

Thank you. Good afternoon everybody and congratulations on the quarter. You did the good one. I guess my I have two questions. My first question is this as you move more towards distributor model in Europe. What percentage of your sales do you think you are going to be distributor based and how do you what’s the take on the margins of that distributors do you think?

Yes so, currently our landed gross margin is 62% and that is blend of higher margin direct sales versus lower margin distributor as well as partnered sales and so I think as we move forward we expect that our gross margins will continue to rise as we expect to see good balance between direct sales as well as distributor partners sale, but as we are also able to reduce cost to manufacturing inefficiencies and economic scale and as we continue to expand the market worldwide with the balance of dollar base revenues as well as euro based revenues. And so, we had not broken out the exact ratio because it's really difficult to tell at this time but currently we expect in either case to be very profitable for at least, profitability to have very good gross margins increasing gross margins overtime.

Okay and next my last question is just trying to understand the US regulatory strategy little bit more it sounds like you believe you go into US sometime probably early in 2017 would you expect that trial to be clinical -- when you think you are going to be able to submit to the FDA and then in parallel will be doing something else for US submission or you are going to wait until you get surgical approval?

Well as we discussed last time I think the cardiac surgery trial we believe is a lower risk way to get approved in United States compared to a critical care path just because of the [indiscernible] patients known level and the ability to act very immediately on the reduction of the inter-mediators as they are being generated during this complex open heart surgery. So that being said it remains the focus of our US regulatory strategy in our discussions with the FDA in the past they have left the door open for potential to NOVA 510K application but that is not the fault that would be just upside for the company but that is not considered default path but that would essentially reach the approval of in the US outside the CytoSorb I think full during open heart surgery but that is one of the reasons why we look to have a conversation with the FDA later this year once refresh one and refresh one are known. Now the default pathway is the PMA path and this is a anticipated to be 300 to 400 patient randomized control registration for site serving United States that would be considered a pivotal trial designed for approval in the US and in this particular study the outcomes would be clinical outcomes and that would be more focused on the reduction in organ dysfunction following open heart surgery. And so these two paths in fact are not mutually exclusive we got approval as a tool under our DeNOVA 510K path we would still look to continue that study to demonstrate clinical outcomes in the post market period and in the adaptive trial design or we would just go straight to the pivotal trial and the PMA trial and even if we went down this default path we do not believe that it would be significantly longer than a DeNOVA 510K path because this is a very quick trial to enroll again you are only using CytoSorb during open heart surgery and then all you are doing in the post operative period is taking blood samples looking at clinical outcomes and we typically call these patients just during their time in the ICU and then a phone call or a visit to check on 30 days follow-up to see how they are doing. And so, we think that this study can be done very rapidly one center can do more than one patient a month. Clearly one more than patient a month and because of that we think that we can get that study done relatively quickly in the order of year and half to two years then hopefully by the FDA and then if everything went well we would be on the market for 2019.

And would you be looking for other labels during that time or are you when you focus the effort in US and that trial until it's completed you are able to launch the product for cardiac surgery?

We absolutely are looking at parallel path to add to the label for CytoSorb in the United States and so we are actively designing clinical studies in the areas of sepsis for example to be conducted both here and the United States as well as other studies aboard. These studies are designed to be to inform a pivotal study design that we would look to do in the United States to gain access for that particular indication but as we have been discussing in the past many, many other applications at CytoSorb at the broad spectrum filter that can do many, many different things and so we are actively evaluating other strategies to get CytoSorb approved in United States and add to that label in parallel.

Okay thank you very much.

Sure Jan, thank you.

And we will take our next question from [indiscernible].

Yes thanks. Phil can you remind us about some of the details associated with seamless contract, kind of launch here shortly are you providing them with some amount of initial inventory and at what point do you recognize? Thanks.

Sure. Thanks. So we have not made the details of the agreement with the Fresenius publicly available but what we have studied in the past that this is an exclusive strategic distribution arrangement with Fresenius where they are bound to minimum annual purchases to maintain exclusivity in the six countries and I think that those numbers should they be able to meet their annual minimum would be material overtime and I think on the last call we mentioned that they would be potentially 7 digits or more. And so I think that these are Fresenius has is a $7 billion year in revenue company this product addresses a $20 billion total addressable market in critical care medicine a billion to billion dollars and half in Germany alone so these are major markets that and if Fresenius meets our expectations this could be a very significant partner for us.

Okay. That's all I have thanks.

Thank you very much Kay.

And we will take our next question from Brian Marckx with Zacks Investment Research.

Hi guys congratulations on the quarter. Was any of the micro-toxin grant in the Q1 revenue?

Kathleen, hi Brian, Kathleen why don't you take that.

There was a very minor piece of that grant revenue related to micro-toxin.

Okay. So you talked about the colon cardiac study why don’t you talk a little bit more in detail about that and when you think that may read out in terms of the forward results and is there any sort of overlap in terms of end points or efficacy measures that you are looking at in that study as it compares to the refresh study?

Yes so the that study is a three item study looking at three groups one is patients undergoing cardiopulmonary bypass without CytoSorb, patients undergoing cardiopulmonary bypass with CytoSorb and patients undergoing off pump surgery which is typically for less complex procedures. In this particular study in our discussions with them their ethic committee wanted them because this is one of the first randomized control studies of CytoSorb in the world and the ethic committee wanted them to start off with the low risk population similar to the population that was presented in the medical university of Vienna paper where they were low to moderate risks. So these patients we do not expect them to see major changes in cytokines but I think what they have already presented is they have seen some changes in cytokine levels already the therapy has been safe well tolerated again no complications so these are again common themes that are running through these trials CytoSorb is very easy to use and again the one finding that they did report on at the users meeting was a statically significant reduction in store wound infection and that is a very important finding because of the potential problems that infection and mediastinitis may cause on these patients. It has very high mortality if it gets that far.

Okay, great. And relative to liver failure which sounds like it's kind of an new end point if you will that you have been looking at is that something you think you may pursue as more direct focus in future case studies or maybe even a formal clinical study here in Europe or potentially in the US?

Yes, I think that there are actually some ongoing studies being planned for liver failure, you want to talk a little bit about some of that you can but I think that liver failure is a very interesting market for us I think it's still really I think that we have seen a lot of people who are using the products have been seeing a lot of very exciting results using the therapy and these are anecdotal but people suggestions are reporting the abilities to bring patients [indiscernible] which is one of the major complications in patients with liver disease as well as removing bilirubin and other inflammatory in the patient population so we it is becoming an increasing area of focus for us I will not say that we are pursuing that actively. Certainly they are investigating in studies that are being planned in this area but if the market wants this and if the data continue to come back very positive of course it will be an area that we would look to get more randomized data on in a company sponsored study.

Great. Thank you.

Sure.

And at this time I would like to turn it back to management for any additional or closing remarks.

Great. Well, thank you everyone for taking the time today to get on this call and we really appreciate your participation. If you do have any other questions please feel free to reach out to Amy Vogel at avogel@cytosorbents.com and we will try to answers to your question where possible. In the meantime, we hopefully have an opportunity to meet many of you at our annual meeting on June 7, 2016 in New York City and look forward to the next update on the next quarterly call. Thank you everyone very much. Good night.

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