Good day ladies and gentlemen, and welcome to the CytoSorbents Third Quarter 2016 Operating and Financial Results Conference Call. Joining me for today's call from the Company are Dr. Phillip Chan, Chief Executive Officer and President; Vince 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, 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. Management may make additional forward-looking statements in response to your questions today. Therefore, the Company claims protection under Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from results discussed today. And therefore, we 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 today as of November 7, 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 the third quarter by Dr. Chan and Ms. Bloch. Following that presentation, we will open the line for your questions during the live Q&A session with the rest of the management. It is now my pleasure to turn the call over to Amy Phillips. Please go ahead.

Thank you very much moderator and welcome everyone to the call. For those new to the story, I first like to give a quick overview what we view followed then by our quarterly financial and operating progress. So CytoSorbents is a leader in clinical care immune therapy, we are leading the prevention of treatment of life-threatening inflammation in the ICU as well as cardiac surgery using CytoSorb blood purification. On Slide 4, CytoSorb is designed to remove the fuel to the fire of inflammation targeting a $20 billion opportunity in critical care medicine also in cardiac surgery. CytoSorb is approved in the European Union as the only specifically approved extracorporeal Cytokine filter broadly indicated for used in any situation where cytokines are elevated. CytoSorb has removed Cytokines as well as many other inflammatory mediators such as free hemoglobin, bacterial toxins, myoglobin and activated complement and is plug-n-play compatible with standard dialysis and heart lung machines stand in hospitals today. We are pleased to state that CytoSorb now has been used safely and has been well powered in now approximately 17,000 human treatments which is up from 14,000 treatments last quarter. The goal of CytoSorb is try to control this deadly inflammation as the means to prevent or treat organ failure which is the leading cause of death in the intensive care unit today. Our goal with CytoSorb is to treat patients early and aggressively thereby hoping to try to improve patient outcome and survival while decreasing the massive cost of ICU and patient care. And given the many, many different illnesses and conditions where CytoSorb has been used successfully to-date we truly believe that CytoSorb has the potential to revolutionize critical care medicine. And on Slide 6, this is why we believe that CytoSorb is uniquely positioned to lead this…

Thank you, Phil and good afternoon everyone. For today's call I will be provide an update regarding CytoSorbents' third quarter 2016 financial results including our product sales progress, an update around our working capital and cash run rate and some trends regarding our operating progress towards breakeven. CytoSorb product sales for the Q3 2016 doubled to $2.14 million as compared to product sales of approximately $1.07 million for Q3 2015. Our Q3 2016 annualized product sales run rate rose to $8.6 million as compared to an annualized run rate of approximately $4.3 million one year ago. Total revenues, which includes product sales and grant revenues were approximately $2.4 million for Q3 2016 as compared to approximately $1.3 million for Q3 2015, which is an increase of approximately 79%. In Q3 2016 our gross profit of $1.4 million has more than doubled as compared to gross profits of approximately $705,000 for the Q3 of 2015. And we continue to experience strong gross profit margins on product sales. For Q3 2016 gross profit margins were approximately 68% largely as a result of the sales mix as compared to gross profit margins of approximately 63% for Q3 2015. And now let's take a look at our quarter-over-quarter product sales. Our third quarter 2016 product sales of approximately $2.14 million represented our best quarterly product sales ever and it represents our first quarter of more $2 million in CytoSorb products sales. Q3 2016 product sales were approximately $290,000 or 16% higher than the previous quarter of Q2 2016. Q3 2016 represents now our sixth consecutive period for which we have reported quarter-over-quarter product growth as well as our fifth consecutive quarter of record sales. We also note that the change in euro relative to the dollar did not have a material impact on our…

Thank you very much, Kathy. So what I like to do is focus on our operating highlights for the quarter. And one of our major accomplishments was the completion of our U.S.1 REFRESH trial where we confirm safety. REFRESH stands for the reduction in free hemoglobin trial and this was a 40-patient 8-center study, evaluating the safety and efficacy of intra-operative CytoSorb usage in a heart lung machine during complex cardiac surgery and elective non-emergent cardiac surgery that is expected to last longer than three hours. This includes very complex procedures such as aortic reconstruction, multiple valve replacements, cabbage reduce and other types of procedures. Our primary endpoint for the study was safety predominantly and the reduction in plasma free hemoglobin that can cause post-operative complications. We ran the study in major U.S. cardiac surgery centers such as Texas Heart Institute, Columbia University, University of Pennsylvania as well as The University of Pittsburgh Medical Center. A total of 46 patients were enrolled with approximately 40 patients with evaluable biomarker data. We are pleased to say that the Date Safety Monitoring Board evaluated all adverse and serious adverse events in the control and treatment arms and concluded that there was no safety issue with CytoSorb therapy which achieved a primary safety endpoint of the trial. This was a in fact the first randomized controlled trial using CytoSorb in high risk cardiac surgery demonstrating safety. So as we have mentioned the endpoint of the study was reduction in free hemoglobin and free hemoglobin is a known toxin that is generated during open heart surgery caused by hemolysis of red blood cells. Free hemoglobin not only causes the formation of oxygen radicals that can damage blood vessels and vital organs but it is also a very potent scavenger of nitric oxide which is…

[Operator Instructions] We'll go to our first caller, Jason Wittes with Aegis Capital. Please go ahead.

Okay. Hi thank you for taking the question. Maybe if you could --you mentioned the partnerships that you have. Was there any focus particularly on Fresenius in terms of where they are in training and what your expectations are this year and maybe a little bit into next year in terms of rollout?

Yeah. Before I turn it over to Chris for some colored commentary, Fresenius just launched in May of 2016, so less than six months ago they began marketing and selling CytoSorb into their six territories of France, Denmark, Norway, Sweden, Finland and Poland. So what I would say is that, they have been doing a very nice job particularly with the marketing of CytoSorb and they have already -- they have been selling the product now in their key accounts for plus five or so months. Chris, would you like to maybe give a little bit more color on that?

Sure. Thanks Phil. For Fresenius, I would say, things are going are very well as Phil had mentioned. After they initiated commercial efforts earlier this year, they have done a nice job of getting CytoSorb out to their customers. So far they have created a full set of marketing materials about four pieces. They are doing a very nice job of articulating the benefits of CytoSorb. In addition, from what we've seen their sales force has a strong network. They have been trained and they are active in the market, and on top of that I would say, they are out in front of customers on a regular basis. They are talking about CytoSorb. They are actively competing to win business in all six countries, and in some cases, even through tenders. I would say, at this point, this is all a result of getting customers to use the product and they have only witnessed firsthand multiple success stories. We are currently working with them and their customers to have their stories published wherever it's possible. So overall things are headed in the right direction, I would say. Looking forward, we'll be sitting down with them to review progress and to develop a game plan for next year. I would say, with everyone focused on driving sales, I am looking forward to 2017 and we expect it to be a positive year for everyone.

Okay. I turn will turn myself to just this one and then maybe just follow-up to that one question and then maybe just if you could touch on Terumo as well and whether even REFRESH 1 may have some influence on their marketing efforts.

Phil, do you want me to take or do you want to answer it?

Yeah, go ahead Chris.

Yeah. First of all I just want to say, we are very excited to welcome Terumo as our newest partner, and as Phil mentioned we sign that agreement in September and I think as everyone has seen, we've been working very closely to get them prepared for the sales launch. So far they have gotten the word out to a lot of potential customers at EDACs and as well as the follow-up meeting as Phil had mentioned and needs at the perfusionists meeting. At this stage we are in the final stage of what I call the setup phase and so we are very close to having everything ready. So we are just finalizing a lot of the operational details, the purchasing stuff, getting some dedicated marketing of collateral approved, and shortly we'll be conducting training for the Terumo sales force. And once that's all in place, they can hit the market and start selling. Just one thing to add, I think it's worth noting is that, and Phil alluded to this is that, we'll be releasing a new CytoSorb CPB that has been really tailored for use in cardiac surgery. So in addition to CytoSorb, the kit itself also includes components that allow customers to quickly and easily implement CytoSorb on the heart lung platform. It's really nicely done. It showcases some of our new packaging and graphics which I think are also great, and have been very well received by the market. So it's a good time right now on that side of the business. So overall, things are going well. We expect Terumo to place an initial order and beginning very soon, and what I would say is given their install base and what we've seen so far I think they should be able to make a strong push into the market with what we have. I would say on top of that to the other part of your question with REFRESH data in hand, I think that would only accelerate and enhance what they are already doing. So I view it as additive to what I think is already good situation.

Great, thanks. I'll jump back in queue.

[Operator Instructions]. We'll go to Andrew D'Silva with B. Riley. Andrew D’Silva: Hi good afternoon. Thanks for taking my call. So I guess my question just relates to the sales dynamic during the period. Maybe give a little bit of color or granularity on the spread. Was it pretty evenly spread out between direct and indirect sales? And then you mentioned in your prepared remarks that you are becoming a de facto of standard of care. Can you maybe elaborate on those indications as well?

Yeah. I think that because we started direct sales about a year before we even began any kind of international sales effort. Direct sales continued to represent a bulk of our overall sales. Although distributor sales as well as partner sales are coming on strong, and so because of that natural delay again more focused on direct sales currently. But again as Kathy mentioned as Fresenius, Terumo and Biocon began hitting on all cylinders next year and the investments that we've made in our international sales division began to bear fruit. We expect that these distributor and partner sales will pick up significantly going forward. Your second question Andy was…? Andrew D’Silva: Just in your prepared remarks you said CytoSorb is becoming a de facto of standard of care. I was wondering if you could let me know what the indications that you're seeing and become more prevalent in?

Yeah. So there are a number of indications where CytoSorb is being used regularly today. We have mentioned this on previous calls. One of the areas is in trauma and then reduction in myoglobin caused by crush injury to muscle. And this myoglobin can actually lead to kidney failure and increase the risk of death in trauma patients significantly. And certain hospitals like the University of Hamburg - Eppendorf and others have been incorporating this into their treatment modalities as a de facto standard of care because they have seen it work so many times and they have seen it reduce myoglobin and have positive outcomes for their patients so many times that they are using it on a regular basis in those select patient populations. In the area of cardiac surgery, we are seeing CytoSorb being used in again high risk cardiac surgery patients either where they enter surgery unstable from diseases like endocarditis or heart failure requiring vasopressors or as a prophylactic method when patients are undergoing this complex cardiac surgery procedures such as the ones that we are evaluating in the REFRESH 1 and future REFRESH 2 studies. But there are many others things like liver failure, we are seeing it used more and more -- we may not be necessarily de facto standard of care yet, but we can see definitely a path to getting there even without necessarily doing large scale pivotal studies given the tremendous need for new therapies in these various areas. Andrew D’Silva: Great, thanks. Just I guess the follow-up was, since direct sales are still the bulk of revenue, I'm assuming stocking orders, they were no major stocking orders that would have influenced the quarter or went out of the norm?

I think it's very encouraging that our business is that, it is based predominantly on reorders and steady organic growth and usage of our product through the markets that we serve. There is always going to be a little bit of lumpiness based on initial stocking orders and other things, but by far the vast majority of our revenues are from reorders coming from existing customers who are using the product on a continuous basis. Andrew D’Silva: Great. Thank you very much. Good luck going forward.

Sure. Thanks, Andy.

Our next question comes from Jason Kolbert with Maxim Group.

Hi guys. A couple of questions, can we talk a little bit about margins. Right now margins, gross top-line margins seem to be running around 45% which is not bad. At what point does that scale start to tweak a little bit higher?

So Kathy maybe let me have you take that one.

Okay. Sure. So I do think that there are a couple of things that are going to contribute to higher margins in the near-term, probably the most important one are several initiatives that we have underway to reduce costs in our production of the product. That's probably going to be significant not in 2016, but in 2017, I think it will have a big increase. The second thing which is less direct and linear will be establishing reimbursement within many of the countries that we're in. This is an initiative that we have put forth for the Company and as reimbursement is achieved we will be able to achieve higher selling prices and so I think that would be a secondary influence to improve gross margin.

Yeah. Just to be clear, Jason, our blended product gross margins today that combined higher margin -- direct sales gross margins versus lower margin indirect distributor and partner sales, it's currently 68%. What you're seeing is the blended gross margin that you're referring to incorporates not only our product sales but also are on research and development grants and contracts, and those margins are typically lower because we bill our R&D expenses against those revenues so on a more or full basis. So that's why the margin appears to be lower but when we look at just our product gross margins, they are actually quite high.

Got you and that makes sense. I'm looking at the model and that's very consistent with the way we are modeling the Company. Phil, can we just talk a little bit kind of changing gears to more a clinical outlook. REFRESH 2 becomes very critical particularly when we start talking about the start of REFRESH 2 in 2017. Can you just talk with me a little bit about what kind of discussions you're anticipating with the FDA particularly in terms of the regulatory path and maybe the size of the clinical trial? And I realize it's very early and you're probably limited in what you can say. Maybe you could talk just a little bit about what would be the best case scenario for you in terms of the outcome with discussions with the agency?

Sure. Well, I guess to reiterate again, I believe that we have the data necessary to move on to a REFRESH 2 study based on our safety as well as free hemoglobin data. So I think that's one that's very important. The second part of the story though revolves around what is the clinical path that the FDA will guide us on whether or not it is a PMA path or whether or not it maybe a De Novo 510(k) path. When we discussed this with the FDA prior to REFRESH 1, the FDA was basically wanted to see again safety first and then also wanted to see whether or not free hemoglobin was a problem in our target patient population and whether or not we could predict those patients that were having problems with high levels of free hemoglobin. They basically stated that there could be two potential paths to U.S. approval. One path would be potentially through De Novo 510(k) path where we could get approved as a tool, potentially as a tool for the reduction in free hemoglobin, and we would have to demonstrate that with clinical significance in a pivotal study, but that study would be relatively small. We estimate that that study would be about 100 to 150 patient tops that we could conduct at a probably a dozen or so cardiac surgery sites and get that study done within a year at relatively modest cost and potentially be on the market in 2018. But we continue to expect that the default pathway will be the PMA path where we would be looking at clinical outcomes as the endpoint of the trial. By the way, the De Novo 510(k) trial, we discuss this internally many times and believe that they are advantages of getting approved…

Phil, thank you for a very clear answer, yeah. So I appreciate that, yeah. Thank you. I think you hit all my points. Thank you.

Okay. Thank you, Jason.

We'll go to Brian Marckx with Zacks Investment Research.

Hi everybody and congratulations on the great quarter. So wondering if you could talk about the free hemoglobin data at all and if you can add anything more that you can talk about there in terms of what you had hoped to I guess. And then do you expect to announce the data prior to your meeting with FDA or your potential future IDE filing?

Yes. I apologize when I was talking and there was an interruption from the music, I think I was maybe clear than I could have been, but with that being said, I think that again Dr. Parmer described the hemoglobin data as promising and again I think the FDA was looking to see that we had the right criteria to select patients with high levels of free hemoglobin and that we were able to reduce those levels or at least show a trend of benefits reducing those levels with our CytoSorb device. Now again the pivotal trial where we demonstrate this statistically significant reduction in free hemoglobin if we haven't demonstrated already, but I think that's -- and so given all of that we believe that we have the data that the FDA needs to give us the green light to move forward to the REFRESH 2 study. We won't know that until obviously talking with the FDA and presenting those data to them, but we feel that the data that we have are compelling.

Okay. In terms of the clinical sites, are there any additional clinical sites that you all bringing on board with REFRESH 2 and then any requisite IOB approvals that you need before moving into REFRESH 2?

So we think that we can jump start REFRESH 2 and get with just a modification of clinical trial contracts from our existing sites, we can jump start that trial very quickly and begin getting patient enrolments very quickly on that study. In a De Novo 510(k) study again, we will look to extend that trial base slightly from the nine centers that we used in REFRESH 2 to dozen or so centers. So we don't think that that process will be delayed much if we went down that route. Now if we went through the PMA path we believe that this is study that would require approximately 40 sites and in order to enroll that trial rapidly and from what we've seen a single site can enroll many patients per month but taking a very conservative view on roughly half a patient per site per month which is we believe is quite conservative given how easy it is to run this trail. Again all you are doing is using CytoSorb during the open heart surgery procedure in the machine and then you're just taking blood samples and recording data on those patients during their ICU stay in the recovery period. So this is not like an ICU trial where you're treating for seven days, this is a one in time kind of trial much easier to get enrolled. With that being said that process obviously would require a ramp up of our sites and we've already been talking to many well regarding cardiac surgery institutions to participate in a REFRESH 2 study, but again we would be right there starting with a number of our existing sites for REFRESH 2 and would look to rapidly bring on additional sites for PMA trial.

Great. Thank you, Phil.

Sure. Thanks Brian.

Thank you. At this time I'd like to turn the conference back over to management for any additional or closing remarks.

Great. Well if there are no further questions I just wanted to thank everyone for joining us on the call today. And if you do have any questions that did not get answered, please feel free to reach out to Amy Vogel at avogel@cytosorbents.com and we will try to get back to you answers to your question where possible. Thank you very much, and have a nice evening.

Thank you. That concludes our conference for today. I would like to thank everyone for their participation. Have a great day.