Ladies and gentlemen, thank you for standing by and welcome to the Second Sight Fourth Quarter 2017 Results Conference Call. Now during today's conference, all telephone participants will start in a listen-only mode, but later we'll conduct a question-and-answer session. [Operator Instructions]. And a quick reminder, today's conference is being recorded, it's Wednesday, March 07, 2018. All right. It's now my pleasure to introduce Lisa Wilson, Investor Relations. Please go ahead.

Thank you, David. Good afternoon and welcome to Second Sight's fourth quarter and full year 2017 earnings call. This is Lisa Wilson, Investor Relations for Second Sight. With me on today's call are Dr. Robert Greenberg, Chairman of the Board of Directors; Will McGuire, President and Chief Executive Officer; and Tom Miller, Chief Financial Officer. At the close of market, the company issued a press release detailing financial results for the three and 12 months ended December 31, 2017. The press release can be accessed through the Investor Relations section of the Second Sight website at secondsight.com. You can also access the webcast of this call from there. Before we get started, I would like to remind everyone that any statements made on today's conference call that express a belief, expectation, projection, forecast, anticipation, or intent regarding future events and the company's future performance, may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to Second Sight's management as of today and involve risks and uncertainties, including those noted in this afternoon's press release and Second Sight's SEC filings. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. Second Sight specifically disclaims any intent or obligation to update these forward-looking statements except as required by law. A telephone replay of the call will be available shortly after completion of this call for the next two weeks. You'll find the dial-in information in today's press release. The archived webcast will be available for one month on the company's website, secondsight.com. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on March 07, 2018. Since then, Second Sight may have made announcements related to the topics discussed. So, please reference the company's most recent press releases and SEC filings. And with that, I'll turn the call over to Second Sight's Chairman, Dr. Robert Greenberg.

Thank you, Lisa and thank you all for joining our call this afternoon. We've begun 2018 with significant momentum as a direct result of the efforts we implemented last year. 2017 was an important year for Second Sight in which we implanted 75 patients with the Argus II while validating our centers of excellence strategy and growing our funnel of new patients in the U.S. We expanded our reach into new markets around the world and took steps to strengthen our position in Europe and Asia. Importantly, we see the momentum we achieved in 2017 continuing into 2018. Second Sight is also well-positioned to capitalize on expansion of our addressable markets as we advance our R&D and clinical research efforts. Just a few short weeks ago, we successfully implanted and also activated our first in human subject with the Orion cortical visual prosthesis at UCLA. This is a significant achievement for the company and an important milestone in advancing Orion. The patient was able to see phosphenes, or spots of light on nearly every electrode tested. This patient is doing well with no serious adverse events. We plan to continue with an additional four patients in this feasibility study at UCLA and the Baylor College of Medicine in Houston this year. Our efforts also extend to the expansion of our treatable RP market, to include better sighted individuals who otherwise suffer from no real usable vision. Next generation externals are currently undergoing verification and validation and anticipate having a regulatory submission ready by midyear and a launch by year-end. In the U.S. we submitted a humanitarian device exemption supplement to the FDA requesting a label expansion that would allow us to treat better vision RP patients in the U.S. With regard to our AMD trial in the U.K. we've opted to finish out the study in Manchester, but not extend or expand it at this time. Current performance does not justify enrolling additional patients. Instead, we intend to focus on the exciting opportunities provided by our better vision RP efforts and advancing the Orion. 2018 looks to be another significant year for Second Sight and we look forward to updating you on our continued commercial R&D and clinical research progress. And with that, I'd like to now turn the call over to Tom to review our fourth quarter and full-year financial results. Tom?

Thank you, Bob. For the fourth quarter of 2017, net sales increased to $3.1 million compared to $715,000 in the fourth quarter of 2016, driven mainly by the higher number of implants. For the year, net sales more than doubled to $8 million compared to $4 million in 2016, driven by a higher number of implants and a higher average revenue per implant. Our implant volume during the fourth quarter of 2017 increased to a record 30 units, compared to seven during the prior year quarter. For the year, we had 75 implants compared to 42 in 2016. The average revenue per implant was $106,000 in 2017 compared to $95,000 in 2016, reflecting the benefit of higher CMS pricing and the higher mix of North American implants, where selling prices are generally higher. During the quarter, 14 implants were performed in North America and 16 in Europe, the Middle East and Asia. For the year, 38 implants were performed in North America with the remaining 37 in markets outside of North America. We generated gross profit of $1.2 million in the quarter, compared to a gross loss of $2.6 million in the fourth quarter of 2016. Gross profit in the fourth quarter of 2014 included a credit of $1.4 million to partially reverse a previously established reserve for slow-moving inventory and an $800,000 charge for unabsorbed overhead costs. The gross loss for the fourth quarter of 2016 included a $2.1 million reserve for slow-moving inventory and a $700,000 charge for unabsorbed overhead costs. Gross profit for the full year was $2.8 million compared to a gross loss of $6.1 million in 2016. R&D expense including the offset due to grant revenue was $2.3 million during the fourth quarter of 2017 compared to $2.1 million in the prior year quarter. Grant…

Thank you, Tom and thank you all for joining us today. Before I discuss the successful activation of our first human patient with the Orion, I'd like to begin by stating that I'm pleased with our progress in 2017 and excited about our opportunities in 2018. If you will recall, in 2017 we set out to achieve three primary objectives. Our first objective was for Steve Oakland and the North America team to demonstrate traction with our Centers of Excellence or COE commercial model. As Tom stated, we completed 14 Argus surgeries during Q4 in North America. More importantly, as we begin the new year we believe 10 of our North American centers meet our COE definition and are committed to performing one or more Argus implants per quarter in 2018. By way of comparison, we had no North American centers performing at this level in 2016. I am confident that we now understand what it takes to establish and support an Argus Center of Excellence. The key part of the commercial strategy in North America is the development of our patient database to ensure a flow of patients to each center of excellence. Today that database has over 125 clinician qualified U.S. patients, up from 89 at the end of the third quarter and as of January 01 of this year, 10 different sites have four or more clinician-qualified patients awaiting scheduling, a goal we set in the second half of 2017. As evidence of the importance of the database eight of the 14 North America patients that we treated in Q4 were identified through our patient outreach efforts in the first quarter of 2017. We believe a majority of the patients in the database will ultimately receive the Argus II implant or could be considered for expanded treatment…

Yes sir. [Operator Instruction] The first question is coming from the line of Dan Weston. You may now proceed.

Yeah hi, good afternoon, guys. Thanks for taking the questions and congratulations on your year and your progress, especially on the successful Orion implant. I had a couple questions just in terms, first on the expected ramp that you see happening for implant on Argus throughout 2018. Should I look at that as kind of a linear continuous ramp or how should we be looking at that?

Hi Dan, this is Will, I’ll take that. Yeah, we're not going to give actual guidance for 2018, but I would like to make a couple of comments about what I expect. First of all, in North America, I have really great confidence in our ability to ramp volumes going forward and I attribute much of that to the Centers of Excellence strategy as we've discussed. I think we've got most of the issues at the centers addressed and we understand what kind of support they need in order to do a higher volume of Argus procedures. I'd say there's probably three main things that will drive the continued ramp and will drive greater volumes in the future, one, would be the patient database. Obviously, we've got to be able to funnel these patients to each one of these centers and as we as we said in the remarks, the database has grown to 125 clinician-qualified candidates and we'll keep growing that every quarter. The second thing that's important is predictable reimbursement coverage. We've done a good job of expanding our coverage. We still have a pretty good swath of the U.S. to go to add Medicare coverage and we're also working on all the other ancillary things that need coverage whether it be you know rehabilitation, programming, upgrades etcetera, etcetera. But again, we're making good progress and our intent is to maintain that momentum and make sure the reimbursement is kind of consistent going forward. And then finally is account expansion, overall in the U.S. right now we have approaching 20 centers. And as I said in the remarks, we think 10 of these are functioning at the level of what we expect from a center of excellence. But still with that number of centers we still have 50%…

Very good. I have a couple more if you don't mind. Just you're touching on the -- on your Centers of Excellence, I wanted to know or get a little better handle on the strategy there for maybe expansion of Centers of Excellence and how the centers of excellence strategy can relate to the overall ramp and implant volume?

Sure. I don't think we're ready to give I guess a prediction on how many centers we’ll add this year. I would say it would be more than last year, which was only four, so probably certainly in the five to 10 center range and we do expect all of the new centers that we add Dan to perform at the one or two units per quarter rate. So, we've had good -- and we've had good success. If you look at 2017, we added four new centers and those centers contributed 14 units for the year. And then if you just look at when they were added and calculate kind of a rate they all were performing at the rate of one to two units per quarter. So, I think we demonstrated last year that we could add the right centers and that they would perform. And now we will add more of those centers in 2018 and I fully expect that, that they will perform at this one to two units per quarter as well. So, yes, a short answer would be the new centers that we add could be a very significant driver to the growth in 2018 versus 2017.

That's great. Well I appreciate that. My last question just in terms of the competitive landscape, what should we all be looking for out there in terms of other competition, whether it be in gene therapy or maybe one of the companies out in Europe, I think it's Pixium and how that relates to your company? Maybe you can just discuss that in general?

Sure. Great. I'd be glad to. I will make a few comments concerning Pixium and then Bob can probably jump in and address your gene therapy. So, from Pixium, there's been really two announcements -- two major announcements from Pixium over the last 90 to 120 days. First, they did announce that they received two approvals to start two feasibility studies for their newest device which is called PRIMA and it's a sub retinal device and they announced to five patient feasibility study in Paris, France and then a five-patient feasibility study in Pittsburgh at UPMC. In both of these studies they're targeting dry AMD, so they're targeting AMD patients. So far, the update has been that they have implanted to patients in Paris, they said implanted and activated and they said there was a successful activation. The second, I guess, bit of news from Pixium was that they withdrew their product called IRIS II, and it was the device that had a CE mark and is more similar to Argus, it’s a epiretinal device. They withdrew it from the European market due to earlier than expected device failures in a trial and then they also announced the postponement developments to the IRIS II. So, they were they were going to do some developments to improve the implants life-expectancy but they postpone that. So, in essence I guess the bottom line is you know they have removed the product that was probably our most significant competitor in Europe. They removed it from the market. They're not actively working to improve it to get it back on the market. And they're really focusing on this new sub retinal device, PRIMA, which is just now entering feasibility studies.

Bob thanks. Thanks Dan for the question. So, on your question about gene therapy there has been some progress in gene therapy that's been in the news lately as a company Spark Therapeutics has a product that was approved by the FDA in December. It's for a very particular gene defect and RP. So there -- in retinitis pigmentosa, which the Argus currently treats, there there's well over 100 different genes that cause the disease. And Spark’s approvals is for one of those one of those genes, one of those 100 plus genes. The particular gene that they chose is one that affects children primarily. And so, the, I think the average age in their trial was around 15. And they're also treating patients who haven't lost their vision completely. So, they showed in their trial that they were able to improve light the ability of patients to navigate amaze and lower light lower light conditions. So, these are sighted partially sighted patients that were able to use their sight and lower light conditions, as a result of this of this gene therapy. So, we don't think it's going to have a significant impact at all on our Argus sales. Their patient population is quite small perhaps as small as 500 patients in the U.S. and the - it really doesn't overlap with our current indications for Argus even small population. One of the things that is interesting about them is they've announced their pricing $850,000 for this onetime treatment and that's something that Medicare has not agreed to yet, but it's something that we're following quite closely. They're looking at novel payment plans including instalment plans and success-based plans. And so those are things that could positively impact Argus if the industry moves to this much higher payment levels for therapies of these patients.

That's a great point Bob. I think what I'm going to jump back in queue. Let somebody else have a chance. I just want to say congratulations especially on Orion. And that's really exciting news. Congratulations.

Okay. Thank you very much.

[Operator Instruction] Next question comes from the line of Dayal from H. C. Wainwright & Co. you may now proceed.

Thank you. Good afternoon, guys. Good to see all the progress. Congratulations. Just in terms of how Orion progresses from here. I know you broke out some of the steps that are coming up, could you give us a little bit more granularity from a timeline perspective Q2, Q3, Q4, like what we should expect in terms of the company's milestones against Orion coming through?

Sure Amit. This is Bob. I'll take that one. So, the -- you maybe let me go back and tell you a little bit more about the patient that we implanted and kind of what our plans are going forward. So, as we mentioned on the call, our plans -- this study is for a five-patient study and we implanted our first patient so far and our plan is to implant the remaining patients this year. The patient that we implanted, the surgery was a two-hour surgery and that compares to the early Argus surgeries that were four hours. So, to give you an idea, this is about half the time of an Argus surgery. It was a quite straightforward surgery today. The Argus surgery is average about three hours. Patient went home the next day. Sutures came out a week later and we activated them a week after that. So, the plans going forward for this patient, we mentioned that we've tested individual electrodes and every electrode was able to produce visual perception. So, the plan is to activate multiple electrodes on the way to running full video, so that we can begin to assess the clinical benefit. And then so obviously we're going to implant the additional four patients, is the plan and another important milestone that we'll be talking about is we mentioned that the FDA has given us the breakthrough status for the Orion system. So that begins a negotiation process with the FDA as to exactly what our plan to market will be. So, what additional work might be required to get to a market approval and what work will be required for the post-market. As far as, what's going to happen, which quarter, I don't think we're ready to break things down to that granularity, but we certainly expect to have agreement with the FDA this year and also have all five patients from this feasibility trial implanted and operating with full video.

Awesome. Perfect. And then regards to reimbursement rates, I think Will commented that you're still waiting for CMS to come through with data for the year. Do you know when we should expect this by?

Yes. So, we're almost constant contact with CMS. So we already have begun I guess early discussions about what the 2019 rate would be and the timeline is very, very similar to the last few years and that they will put together a preliminary rate that will be published that's published sometime around July, around July 4 and then there is a comment period after that Amit for to get it 60 or 90-day comment period in which then they will move to have a final rate and that's usually published just after Halloween. So sometime around the first or second week of November, there would be a final rate that we should get a preliminary rate as I said sometime around the July 4 timeline.

Understood. And then in regards to Germany, the study or therefore the better sighted RP patients, how is that progressing, are patients enrolled? Any color on how that is going?

Yes. We've started screaming the patients. As I said in the comments, it started slower. We're frankly a little disappointed in the start, but there's been a couple of issues that we certainly can't go into much detail over at the sites. One of them, we have our primary investigator who for personal reasons can only spend at the most one day in the lab right now. So, it's really hampered that site's ability to work to get up and running and enroll patients and then another site we had some issues with the person or persons who were actually going to do the screening of the patients. They actually, together they left the institution or got reassigned. So, we didn't have anyone there to do the screening. So, a kind of slow start. We're kind of assessing right now the best path forward, and which could include just more resources at the sites, it could include considering other sites etcetera, etcetera. We're not really ready to say yet, but looking for the best path forward. Still interested in gathering some data and still believe it will get some very useful data there. I would say that you know, we did have kind of an additional part of our strategy that we talked about, which is in the U.S. trying to move forward without collecting any additional data. So, you know as we said, we're putting together this HDE supplement and we're putting some data in there from outside the U.S. and submitting that to the FDA in hopes that we can expand the label in the U.S. without waiting for additional data. We think we've got some strong data there that could support a label expansion, and that's key as we've talked about in the past, it's key for us to expand our label not only in the U.S. but outside the U.S., but key to expand our label so that we can start treating more of those patients that have better vision, but still really have no usable vision and there is quite a -- quite a large numbers of those patients out there as we've talked about in the past.

And is it going to be part of the second quarter response that you're expecting from the FDA?

The response, we'll see, the response could be, everything is great or it could be -- we don't agree with your proposal. We want more data. It could be any of the above Amit, so we'll just have to wait and see and based upon their response, we will respond accordingly and then when we know something more definitive we'll of course inform investors.

Just one final one for me in terms of what you guys are doing in terms of building the patient by-plan? I know there were some initiatives taken last year in the U.S. It looks like you're seeing some results from that. Is there anything new you're doing this year or you're just building on those efforts from last year?

I think for the most part, we're building on the efforts. I would say, we've probably gotten more aggressive and probably doing more advertising now. So, in the past, we were focused in areas where we had centers that we felt would be centers of excellence for us and we were doing ads just typically in local radio, talk radio or news radio. And I've gotten quite a few phone calls recently because we expanded that at the end of last year and started doing national ads on Sirius XM. So, we feel comfortable that we're going to expand within the U.S. this year, expand the number of centers and we thought it would be good to go ahead and start advertising more broadly in the U.S. on Sirius XM. So, response to that has been great. As we also mentioned, we've done some building up the pipeline if you will for Orion and did some local advertisements in LA and in Houston and had a tremendous response from that as well. But I'd tell you so far Amit, business as usual, doing the radio ads. We did talk about quite a bit last year and I'll mention again, that we added an extra step. So when we say clinician qualified, that's the extra step that we added last year, which means that we actually have a clinician or coordinator from one of our sites, that has a discussion with the potential candidate and basically gives them a green check and says yeah, from the discussion we had on the phone, this seems like a good surgical candidate and we should move them to the next step, which is referring them to a site and having a examination at the site. So, we have much higher confidence in those candidates than we did candidates a year ago,

Got it. That's all I have. Thank you so much.

Thank you.

All right. There is no further questions in queue. Let me turn the call back over to Will.

Okay. Thanks again to the Second Sight team and thank you for your participation in our call today. Have a great day.

And ladies and gentlemen, that will conclude the conference call for today. Thank you for your participation and you may now disconnect your lines. Thank you.