Good morning, ladies and gentlemen, and welcome to EnteroMedics First Quarter 2013 Financial Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now turn the call over to Greg Lea, Senior Vice President, Chief Financial Officer and Chief Operating Officer to start the call. Mr. Lea?

Good morning. Thank you for joining us this morning to discuss our financial results for the first quarter of 2013. As a reminder, this conference call as well as EnteroMedics' SEC filings and website at enteromedics.com, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our actual results could differ materially from those discussed due to known and unknown risks, uncertainties and other factors. These risks and uncertainties are described more fully in the company's filings with the Securities and Exchange Commission, particularly those factors identified as risk factors in the company's 10-K filed March 7, 2013. On the call from EnteroMedics is Dr. Mark Knudson as well. We will begin with prepared remarks. When these are concluded, we will open the call for questions. I will now turn the call over to Mark. Mark?

Thank you, Greg. We had a pivotal quarter this past quarter, which began with the announcement of a statistically significant and clinically meaningful Excess Weight Loss outcome and excellent safety profile from our randomized ReCharge trial of VBLOC vagal blocking therapy for the treatment of obesity. These results included an average Excess Weight Loss of over 25% for VBLOC Therapy-treated patients with almost 60% of patients achieving at least 20% EWL in the per protocol population. That is the population of patients that completed the 12-month visit, a group containing almost 90% of subjects. The results, while missing the predefined efficacy measures, demonstrate both an excellent benefit to risk equation for this patient population and a clinical effect over the control group, therefore supporting our belief that the Maestro System and VBLOC Therapy may fill a significant gap in the treatment spectrum for obesity. The safety profile from the ReCharge Study was exemplary and easily made its predefined endpoint. We remain on track to submit a premarket approval application or PMA with the U.S. Food and Drug Administration in the current quarter of 2013, a milestone we look forward to updating you on as we achieve it. Now while our resource focus will be on U.S. regulatory pathway, we do have important activities planned for the year centered around Australia and Europe. In Australia, we continue to pursue reimbursement for the device and procedure with the aid of our partner, Device Technologies. Our efforts thus far remain on track, and we are confident that we will make significant progress toward reimbursement by the end of 2013. In Europe, our team is working to enhance our CE Mark for obesity to include 2 new indications, one for diabetes and one for hypertension. If approved, these amendments will allow us to market…

Thank you, Mark. For the 3 months ended March 31, 2013, the company reported a net loss of $6.6 million or a negative $0.14 per share, including research and development expenses of $2.7 million and general and administrative expenses of $3.6 million. Our cash burn from operations was $5 million, mostly related to the cost of running the ReCharge Study and G&A activity. Operating expenses were primarily associated with the support of our multiple ongoing clinical trials, including the ReCharge Study, our international commercialization efforts and the continued development of the Maestro System. On March 31, 2013, the company's cash, cash equivalents, restricted cash and short-term investments totaled $29.6 million. In February, we completed a public offering of common stock providing net proceeds to the company of approximately $12 million. This additional funding, combined with our current cash, gives us the necessary resources to execute our key regulatory and commercial activities during 2013 and into 2014. I will now turn the call back over to Dr. Knudson. Mark?

Thanks, Greg. In summary, we look forward to bringing VBLOC Therapy, an important and potentially revolutionary treatment option for obesity and its co-morbidities of diabetes and hypertension to the millions of people looking for new treatment solutions around the world. We are confident in our path forward and we look forward to updating you on our progress as the year unfolds. With that, I would like to open the line for questions. Operator?

[Operator Instructions] Our first question comes from Matt Hewitt with Craig-Hallum.

This is actually Dillon [ph] calling in for Matt. Just a couple of quick questions for you. Are you guys going to be continuing to monitor the patients from the ReCharge trial? Just -- I understand that there won't be any benchmark considering the fact that the ReCharge trial patients who were implanted with a sham device were rewarded with the actual VBLOC Therapy at the end of the trial. But any insight into they're continuing to monitor those patients, how often are you monitoring them if you are, and are you going to be submitting that data to the FDA?

Dillon [ph], this is Mark. Our plan, as you know, these patients were all consented for 5 years, so we will continue to follow the patients. We are continuing to follow the patients in both groups as we move into this second year of the trial. And as we submit the PMA that will cover the 12-month data, as we prepare for and move in the panel, we will be obviously at that point, we will need to give them data on the ongoing success of these patients for which we will then be reporting out as well. What we're seeing so far has been encouraging in terms of ongoing weight loss for patients. And it's consistent with what we've seen in the trials that we've previously reported where our patients continue to lose weight into the second year.

Okay, sounds great. And then just real quick on the cash burn rate with the $5 million that looked pretty much aligned with what our expectations were. What is going to be the cadence through that as we progress through the PMA? Is it going to maintain at around that $5 million rate and then taper off from there after the PMA? Or just what do you guys expecting in terms of lumpiness or consistency with that cash burn?

This is Greg. I can answer that. We think that we will -- while we don't give cash guidance going forward, we think we're going to settle in between that $4 million and $5 million a quarter cash burn. We made some adjustments here as a company that we told you in the past. And coming out this first quarter, we think we'll settle in, in that area. There could be a little lumpiness in that and that's why I've given you the $4 million to $5 million, but we think we're in that range.

Our next question comes from Bill Plovanic with Canaccord.

Just -- it's a pretty straightforward with moving forward with the filing and following the patients. Just a question, I mean, given that the U.S. pivotal is so important in terms of getting the U.S. approval, I mean, at this point, how much are you spending on international commercial efforts? And why even bother, I mean, you're not generating sales wouldn't you want to just conserve as much cash as possible to try to get through the U.S. FDA?

Actually, Bill, that is exactly how we're handling this. Because we essentially in Australia are monitoring the work that we'd already previously done, there is not a lot of ongoing additional work that needs to be done in Australia. And in Europe, really what we're doing is focusing on a couple of thought leaders there that can give us some insights into some of the commercial aspects of moving forward and help us with some of our other objectives for the year in terms of positioning ourselves for other opportunities as we move out of this year. So we're spending -- the vast majority of our cash this year is directed toward U.S. regulatory approval. I will let Greg address that in more detail if you'd like, Greg?

Yes. Bill, this is Greg. I would tell you that 95% or more of our expenditures in the next year are focused on the U.S. regulatory path. We have no resources added to the team to pursue the OUS commercial. We're just, as Mark said, leveraging what was already started there which really doesn't cost us a significant amount.

Okay. And then, so in the second quarter we get the filing? And then, I mean, is there an accept -- not accept, or what's the next step in timing after your official submission?

So after we do our official submission, then FDA reviews it for completeness, and then it makes the decision to accept it, which is usually a relatively straightforward process. Once it's accepted, then the 100-day clock starts. And that starts from the date we filed, not from the date they accepted. And at 100 days, they then give us a meeting for which they either give us major deficiency letter or schedule a panel meeting. So we would anticipate that sometime toward the end of summer or early September, we would expect to have that meeting. And hopefully then set a panel date.

Okay. So really for us, it's whether they accept it and they do the pretty quickly. So it's within the first 30 days, is it not?

It often is, yes.

Okay. And then so once we get past that, well, will you press release that of how will that be conveyed to investors?

We think that's pretty material so we will probably press release that. Yes.

And then once we go that, then it's the 100-day and then, well, you'll press release after the 100-day. So in September we'll have another kind of data point?

Yes, yes, that's exactly right.

[Operator Instructions] Our next question comes from Chris Lewis with Roth Capital Partners.

First off, can you just provide some color on the conversations and discussions that you had with the FDA to this point? And what gives you the confidence that a submission this quarter is realistic?

Chris, this is Mark. We've -- we are in, as all device companies are essentially in the modern world, in nearly constant communication with FDA, filing supplements, filing annual reports and having just all the activities that need to go on in terms of dealing with that. So in terms of things that are -- that have been happening, we have been in formal dialogue with them all along. We obviously have seen that paper, we've seen their -- the panel approval of the NeuroPace product, we saw the full approval of the Proax product, and we do think that we are in a good position right now in terms of how our benefit risk profile shapes up in an area that FDA really is focused on trying to help deal with this public health issue. In terms of our confidence of whether we can get it filed this quarter or not, getting it filed is in our control, and we have been able to keep our team together. The team continues to be very positive about the data that we showed in the ReCharge trial, and we are confident that we'll be able to file this quarter.

Okay, great. And then moving to Australia. I wanted to clarify one thing. Did you say you expect reimbursement coverage by the end of this year? And then if so, what type of commercial traction should we expect in that market once reimbursement coverage is obtained?

I think that we're reluctant to forecast that we'll have reimbursement by the end of this year in Australia. As Greg mentioned, we have focused all of our resources in the U.S. And right now, there's a significant backlog of reimbursement projects going through the reimbursement agency in Australia called MSAC, and we are not trying to push things there because that requires a lot more effort and expense than we're willing to put into it so we have completed our process here in the U.S. and know exactly will spend on money. So at this point, we are not forecasting whether or not we'll get reimbursements this year. So until we actually get through that process and have better visibility evident and start focusing our efforts back in Australia, we are not going to forecast that. Would you say that's accurate, Greg?

I would agree with that.

Okay. And then can we expect the ReCharge clinical trial data that we published in a peer review, generally, at some point this year?

You can expect it to be published, yes.

Okay. Would that be towards the end of the year or what kind of timing...

We expect to submit it this year. Whether we'll get published or not this year, who knows? But I would -- I think that it's an important enough study. It is the first and the best obesity trial that's been done in a randomized control fashion. So I would anticipate that, that it would get high precedents in a good journal.

[Operator Instructions] I'm currently showing no further questions at this time. I will now turn the call over to over to management for closing remarks.

Well, thank you very much, everyone. We appreciate your joining the call today, and we look forward to updating you as we continue to meet our milestones this year and we move through the U.S. regulatory process toward approval. So thank you very much for joining us, and we will talk again soon. Goodbye.

Thank you, ladies and gentlemen. That does conclude today's conference. You may all disconnect, and have a wonderful day.