Good day ladies and gentlemen and welcome to the ETRM Second Quarter 2014 Earnings Call. At this time, all participants are in a listen-only mode. (Operator Instructions) As a reminder, this conference call is being recorded. I will now turn the call over to Greg Lea, Senior Vice President, Chief Financial Officer and Chief Operating Officer. You may begin.

Thank you for joining us this morning to discuss our second quarter financial results and business update. As a reminder, this conference call, as well as EnteroMedics’ SEC filings and Web site at enteromedics.com, contains 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 the 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 27, 2014. With me on the call from EnteroMedics is, Dr. Mark Knudson, our President and Chief Executive Officer. 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.

Thank you Greg. Our focus for the last several quarters has been centered on preparing for the advisory committee or panel meeting with the FDA, an event which took place this past June. This meeting is an integral part of a larger goal of achieving regulatory approval in the US for the Maestro system as a treatment for obesity. As we have discussed over the last several months, FDA's approach to approval of obesity devices has evolved significantly since the IDE for the ReCharge drug [ph] study was approved. Specifically FDA is now focused on assessing the benefits of the device relative to its risks in the approval process. Dr. Herb Lerner, deputy division director in the office of device evaluation and his FDA colleagues addressed this evolution of FDA's views on benefit risk paradigms for obesity devices in a paper titled Benefit Risk Paradigm Clinical Trial Design Of Obesity Devices FDA Proposal published in Surgical Endoscopy in March 2013 in which the following statement was made: “If a device fails to meet a predetermined primary endpoints of the trial but has a good safety profile, the agency will review the submission in its entirety and make a final determination based on both benefit and risks”. This is why we were very pleased with the panel voted 8 to 1 in favor of safety and 6 to 2 with one abstention that the benefits of the Maestro system outweighs risks. While the efficacy vote was closed at 4 to 5 against, the critical safety and overall benefit risk questions received strong positive votes. We are grateful to the advisory committee members for their insights as well as the outcome of their discussion. And while the FDA is not bound by a panel's recommendation, it does take that recommendation into consideration…

Thank you, Mark. For the three months ended June 30, 2014 the company reported a net loss of 7.5 million or a negative $0.11 per share. Research and development expenses were $3.1 million and selling, general and administrative expenses were $4.3 million. For the six months ended June 30, 2014 the company reported a net loss of $14.2 million or a negative $0.21 per share. Operating expenses were primarily associated with the cost of supporting the company's PMA application, multiple ongoing clinical trials, including the ReCharge study and continued development of VBLOC therapy. On June 30, 2014 the company's cash, cash equivalents and short-term investments totaled $21.7 million. In June 2014 the company closed down its $20 million aftermarket ATM equity facility with Canaccord Genuity having raised gross proceeds of $19.9 million and then entered into a new ATM equity facility with Cowen and Company for gross proceeds of up to 25 million. To date we have not issued any shares under this new facility. We believe that our current resources will allow us to begin to build our commercial infrastructure as we continue to work towards a pivotal regulatory milestone and FDA approval decision which is expected this year. I will now turn the call back to Dr. Knudson. Mark?

Thank you, Greg. To conclude, EnteroMedics continues to work toward our pivotal regulatory milestone and FDA approval decision on VBLOC therapy for the treatment of obesity. We maintain an open and productive dialogue with the FDA at this stage and we continue to expect that an approval decision will take place later this year. As our discussions with the FDA progress we are concurrently working to build an infrastructure for our US commercial launch as well as develop our global commercial strategy, all with the goal of delivering VBLOC therapy to the millions of individuals suffering them obesity and its related comorbidities. With that I will open the line for questions. Operator?

(Operator Instructions) Our first question comes from Bill Plovanic of Canaccord. Kyle Rose – Canaccord Genuity: Thanks, this is actually Kyle on for Bill. Can you hear me all right? Just a few quick questions, one, wanted to understand that the panel took place in June and you’re expecting FDA decision by the end of the year. Just wanted to know – are there any milestones or timelines that we can expect as we go through that process, anything that you can formulate – help us get a little color on that process?

We think that – you can look at the history of these things and I would say it's probably centered around four months from panel through approval, it can be as quick as three months and it can be as long as you know a lot longer than that, we don't anticipate it being a lot longer than that. So that's really all we can say. I can tell you that as we were before panel, we continue to have an open and productive dialogue with the division. Kyle Rose – Canaccord Genuity: And then just a little more information on as far as what the plans are for preparing for commercialization and building out that team. Understand you’re putting together resources for sales and marketing efforts as well as reimbursements, just wondering if you could kind of walk us through exactly what that means just from a headcount standpoint – are those pieces in place or are you waiting for FDA approval to make formal hires? And also just specifically about the initial rollout that you talk about, understand that you’re going to go out to the existing centers of excellence, one, can you just please remind us of how many centers those? And then two, how long – upon approval how long you think it'll take to get those initial centers up and running as far as getting new patients I the queue and implants – and then that’s it?

Kyle, that’s great, I will try and remember all the question. So let me start with the commercialization. As we indicated in the comments we have started, you will recall that we announced earlier this year the addition of a VP of marketing and that really was a good signal of our start in that process of moving our team from what we would like to call an R&D environment to a more viable commercial organization. And you can expect to hear more from us as we go through the year and we continue to add to that team that was just a start in that process. And we’re well into that. Your second question I believe was around the number of centers. We had 8 US centers in our ReCharge trial and 13 of them have been trained overall with our technology and so some of those if not all of them in some way would be the centers we intend to start with, there will be a more formal level of training and certification as Mark indicated in his comments that they will have to go through but that would be our focus, immediately after FDA approval and that's why we refer to it as controlled commercial rollout. We want to be very careful and do it the right way. Now I don't know if I've answered all your questions – if you could let me know what else there was but I think we tried to cover it.

Our next question comes from Chris Lewis of ROTH Capital Partners. Chris Lewis – ROTH Capital Partners: You guys mentioned the dialogue with the FDA, can you talk a bit more about the nature of those discussions you are having with the FDA at this point following the positive panel review and perhaps how those discussions are getting you increased confidence for – chances for FDA approval later this year?

Sure, the fact that FDA continues in in dialogue with us, is I think the best sign that we would need that we’re moving – we continue to move forward and we're having discussions with them about things like labeling and as a post approval study, those sorts of questions. There is also other questions that come up on things that came up during the panel meeting that they’ve asked us questions about and we respond to those questions. So it's just been kind of getting through those sort sorts of conversations with the agency. We feel that coming out of the panel with that positive vote on benefit risk we felt based on the paper by Lerner at all that that was very positive sign, so I don't want to endorse your comment of increasing confidence. I think coming out panel we were very pleased with the outcome of that panel and they are continuing to work toward approval with FDA. Chris Lewis – ROTH Capital Partners: And then I guess in terms of the efficacy vote in the panel, maybe walk us through your reaction and take away to that vote and how you expect that to layer into the approval decision process I guess versus the positive risk benefit and safety votes?

I thought that was a very interesting vote. As you know afterwards each panelist was asked to give their color on their vote and three of the five who voted no said that they would've voted yes for the efficacy, they believe it was efficacious, they just couldn't bring themselves as trialists, clinical trialists to vote yes when a primary endpoint hasn’t been met. And one of them said because there was a long-term safety data – not safety, long long-term data long enough. Also color that with the fact that during the deliberations of the panel the question was asked of each panel member that they believe that the 18 months data was adequate and would they vote for efficacy there and that was a unanimous yes vote. So I think based on that I think that shows in light of the Lerner ad hoc paper that FDA is rightly moving to reliance on benefit risk rather than strict adherence to the endpoints that were designed back before either industry physicians or FDA really were ready to try to figure out how to do these kinds of trials. So I think that that's how we view the efficacy endpoint and we think that FDA is so relying on benefit risk. Chris Lewis – ROTH Capital Partners: And then you mentioned on the reimbursement front, you mentioned the six Category III CPT codes following FDA approval, maybe walk us through the conversion process to get a Category I code there, how along will that take, what efforts does the company need to take to achieve that category one code and during that time until a category one code is granted, I guess what's the company’s plan in terms of reimbursing and to drive commercial adoption and implant procedure volume?

Once we receive approval, as you know converting to category one is dependent on receiving approval. We will then take steps like printing the dossier of information that would detail description of the product and the procedure, description of the typical patient, the work provided by the physician or the healthcare provider, the patient diagnosis and who will perform that procedure, we will certainly submit all copies of peer-reviewed articles which are two very important to the category one process. And as far as timing it depends on when we receive first FDA approval and then when we receive approval from the panel – the editorial panels that take place three times a year. But conservatively if we receive approval from the FDA let's say by the end of this year we believe we can have reimbursement in 2016.

In the interim we expect to be working with private insurers and the local Max to get local and regional coverage in areas so that we hope – we expect and hope to be meaningful.

Our next question comes from Bruce Jackson of Lake Street Capital Markets. Bruce Jackson – Lake Street Capital Markets: With the Australian reimbursements, can you tell us is the FDA approval a rate limiting factor and when do you think you might have some of those reimbursements in Australia?

Hi Bruce. Yes I think that for practical purposes getting FDA approval, well not formally a rate limiting effect has turned out to be practically a rate limiting effect. And so we expect that once we have the FDA approval and the same kind of therefore the peer-reviewed publications and that approval, that that dossier that Greg referred to will essentially help us immensely in completing the process of getting reimbursement in Australia. Bruce Jackson – Lake Street Capital Markets: And then you also said that you might be pursuing some of the metabolic indications for you – I think that was going to be in Australia or if that was for the CE mark dossier?

That is for the CE mark dossier, we have been pursuing that for almost a year. As you know that process has gotten much more rigorous and time-consuming. We continue to pursue that with our notified body. We continue to be optimistic that we will get a metabolic indication and hopefully it will be this year with that metabolic indication, we will then use that submission to that metabolic indication to our Australian listing on the Australian registry of therapeutic goods. Bruce Jackson – Lake Street Capital Markets: And then in the United States if you do get the approval, and roll out to your clinical sites, is there a backlog of patients at these sites and would you anticipate that the rate of implants would be similar to the trial or would it be faster or slower?

I think it’s safe to say that yes there is a backlog of patients because as Mark indicated in this comments, this obesity space is so dramatically underserved. So I think there are a lot of patients who are interested in a different procedure than the surgical procedures that exist today .We hear that from our investigators as we are in dialogue with them. I think the question will be while you’re moving through this reimbursement process, how many of them will be able to take advantage of this from a more private pay environment and that's yet to be determined as we have a discussion .We believe there are those patients and as soon as we have FDA approval we will move in that way to start learning but this control rollout will be a learning process for us as we move through the early stages of commercialization. Bruce Jackson – Lake Street Capital Markets: One quick question about the panel, there was some concern that the patient population was highly focused on women – did that potentially have any effect on the indications for use or is it – would you anticipate that it would be a broad label that you would get?

No, we expect that the only effect that, that will have would be on the post approval study that we may be asked to have a specific target enrollment targets in the post approval study for underrepresented groups in the ReCharge study group itself. That's how that – those questions have been handled in the past in post approval studies.

Our next question comes from Matt Hewitt of Craig-Hallum Capital Group. Matt Hewitt – Craig-Hallum Capital Group: One for Greg and then maybe a strategic question for Mark. Greg, was there any warrants converted ahead of or around the time of that panel meeting, and if so, would you mind providing what the true cash burn rate was in the second quarter?

Yeah there were some minor warrants converted and continue to be conversions all the time. I don't think there's anything very significant but on a year-to-date basis I think we've announced approximately 2 million, 2.2 million I believe it was in the warrant conversions. Matt Hewitt – Craig-Hallum Capital Group: And the cash burn rate in the quarter?

Cash burn rate in the quarter was – I think about 5 million, Matt. I don't have exact number, I have to get the CapEx for you and it’s about 5 million. Matt Hewitt – Craig-Hallum Capital Group: And then maybe a strategic question for Mark, you’ve indicated that you’re clearly going down the commercialization road or path. And I am curios have you had discussions with potential strategic suitors [ph], partners or where are those discussions today, is everyone kind of on hold or are they ongoing? And what is going to determine whether or not you ultimately look to sell this company upon an FDA approval versus trying to go it alone and commercialize it yourself?

We are always open to partnership interest from potential strategic people that could be of help to us. We continue to have dialogue with folks but the fact of the matter is that until we actually have a partnership in place we are building a business to move this product forward and to protect the interests of all the stakeholders in EnteroMedics. We believe that getting this product to market would be well served by having partners and that's the strategy that we’re moving forward with but we don't think that it's required that we have partners to move that in the United States. We have 13 excellent centers, a great deal of enthusiasm for the product and in those centers and outside those centers. Many of you heard someone who is not – was not at one of those centers or a member of any of the teams that were part of either the EMPOWER or ReCharge trial, yet spoke at the panel for us – Dr. Caroline Apovian who is a nationally recognized expert in this area and is very enthusiastic about having another tool to begin treating her Patients. That's the kind of the enthusiasm that we see that we need but we will see what happens when we have FDA approval and we are open to that kind of opportunity.

Thank you. I would now like to turn the call back over to EnteroMedics for closing remarks.

Well, thanks everyone for joining in on our call. We look forward to speaking with you again and toward moving forward toward this next important milestone – that milestone being at FDA regulatory approval. Good bye.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. You may all disconnect. Everyone have a great day.