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Sunshine Heart, Inc. (NASDAQ:SSH)

Q2 2014 Earnings Conference Call

August 12, 2014 09:00 AM ET

Executives

Dave Rosa – President and Chief Executive Officer

Jeff Mathiesen – Chief Financial Officer

Kimberly Oleson – Senior Vice President, Clinical Affairs

Brian Brown – Senior Vice President, Technology and Operations

William Cohn – Texas Heart Institute

William Abraham – Ohio State University

Analysts

Jason Mills – Canaccord Genuity

Tom Gunderson – Piper Jaffray

Operator

Thank you and welcome to Sunshine Heart Second Quarter 2014 Earnings Call. Today we will be going through prepared remarks. Before we get started, I would like to remark briefly about forward-looking statements. Except for historical information mentioned during the conference call. Statements made by the management of Sunshine Heart are forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve known and unknown risk and uncertainties that are based on management's beliefs, assumptions, exceptions and information currently available to management. Those risks included but are not limited to risks associated with possibility that the Company's clinical trials do not meet their enrollment goals, meet their endpoints or otherwise fail that regulatory authorities do not accept the Company's application or approve the marketing of the C-Pulse System, the possibility that the Company may be unable to raise the funds necessary for the development and commercialization of its products, that the Company may not be able to commercialize our products successfully in the EU and the other risk factors described under the caption "Risk Factors" and elsewhere in our filings with the SEC. By providing this information, we undertake no obligation to update or revise any projects or forward-looking statements, whether as a result of new information, new developments or otherwise.

You should review the cautionary statements and discussion of risk factors included in our press release issued today our Form 10-Q for the quarter ended June 30, 2014 filed today. Our Form 10-K for the year ended December 31, 2013 as well as our other filings with the Securities and Exchange Commission under the titles Risk Factors or cautionary statements related to forward-looking statements.

For additional discussion of risk factors that could cause actual results to differ materially from our current expectations and those discussion regarding risk factors as well as the discussion of forward-looking statements in such sections are incorporated by reference in this call and are readily available on our website at www.sunshineheart.com. With that said, I would now like to turn the call over to Dave Rosa, Sunshine Heart's President and Chief Executive Officer. Please go ahead.

Dave Rosa

Thanks operator. Good morning, everyone and thank you for attending Sunshine Heart's second quarter 2014 results conference call. With me today are Jeff Mathiesen, Sunshine Heart's Chief Financial Officer and Kimberly Oleson, Senior VP of Clinical Affairs. Before we comment the call, I just want to address two items.

First I'd like to introduce a new member to the Sunshine Heart team Brian Brown, who's also participating on this call. Brian is our Senior VP of Technology and Operations. He recently joined Sunshine Heart after a stellar 24 year career at Boston Scientific as a VP of Research and Development. Where he led a number of business units that were the primary growth drivers for Boston Scientifics Cardiovascular Division.

Brian is credited with 53 patents numerous device introductions and technology integration of acquisitions. Secondly, I'm pleased to announce that participating during the Q&A portion of today's teleconference is Dr. William Cohn of Texas Heart Institute. Dr. Cohn will be available to answer questions pertaining to the results of our 90-day chronic animal trial for our Fully Implantable System as he conducted the trial at his facility.

Dr. William Abraham of the Ohio State University one of our Co-PI of the COUNTER HF study will also join the call for a brief period to address any questions as well. As we reflect on the quarter and report the status across clinical, financial and corporate development front. I'm pleased with the progress to company achieved in this particular period and feel confident about our overall position in terms of progress with the COUNTER HF and OPTIONS HF studies.

The development of our next generation Fully Implantable C-Pulse System and the Company's growth trajectory. During the quarter, we achieved significant progress with C-Pulse COUNTER HF US Pivotal Study. 24 patients were identified and scheduled to visit with their physician to discuss C-Pulse, 15 were seen by doctors and seven were enrolled in the study representing just about 50% conversion rate.

Of the nine, that were not seen; three were postponed until Q3; four declined the therapy and one required CRT and one we did not receive any detailed information. The seven patients were recruited from four centers, three of which were new. We are pleased to report, that with the current volume of patients in the pipeline, we expect Q3 enrollments to reach double digits as over 30 patients have already been identified. Four physician meetings to discuss study participation.

In fact, it's important to note that every center has identified at least one patient who fits the studies pre-enrollment criteria. 15 total sites were activated and able to enroll by the end of Q2 up from 13 over Q1. An additional two activated sites are awaiting clinical contract amendments which should resolve in Q3.

With 18 additional sites committed to participate, this bring our total number of participating study sites to 35 and as of today 16 sites are capable of enrolling patients with another two waiting for dendum [ph] signatures which will enable full activation.

Last quarter, I mentioned that sites had raised questions on the ability of patients implanted with C-Pulse to move from heart plant status two to status one, as is the case when a balloon pump or LVAD is placed.

We have been in contact with UNOS which stands for the United Network for Organ Sharing to be granted the same status as patients receiving a balloon pump and anticipated decision in the very near term. I also communicated during last quarter's call that we would be evaluating to release of Angina [ph] in a small number of patients in the COUNTER HF trial.

In addition, we were approached by a center regarding a position sponsored comparative effectiveness research study to evaluate depression, anxiety and caregiver burden in COUNTER HF stations that receive either C-PULSE therapy or remain on optimal medical therapy.

These parameters will also be applied to a non-randomized third arm of LVAD and their caregivers as a comparator. I feel it's important to brief everyone on these ancillary activities as they further validate the enthusiasm as the participating sites around the C-Pulse opportunity and its potential and other applications.

As you can imagine all of us at Sunshine Heart are constantly exploring strategy to facilitate COUNTER HF's clinical study timeline. To this extent, Kimberly Oleson has played an instrumental role in our decision to approach the FDA regarding an interim analysis strategy.

In essence, we are hopeful that we will be in a position to conduct an interim analysis of the clinical study outcomes to reduce the clinical trial timelines. There will be three possible outcomes of an interim analysis. If the results meet the more rigorous threshold for the primary endpoint. The Independent Data Safety and Monitoring Board may recommend that the study be stopped early because of efficacy.

In the second scenario, the results may not meet the more rigorous threshold for the primary endpoint and the DSMB would recommend that we continue to study. In the third scenario, the results could also meet a preset threshold for utility and the DSMB may recommend that the study be stopped.

With a DSMB recommendation to stop the study early because of efficacy, we would approach the FDA with our data set in an effort to initiate the agencies review of the clinical data, before we have randomized the number of subjects currently forecasted for the study.

If approved by the FDA, this interim analysis strategy would allow us to reduce the overall PMA timeline. Well I'm not without risk, is nonetheless a strategy we believe is worthwhile to pursue for the COUNTER HF Pivotal study. Kim will be available and answer questions regarding this initiative at the conclusion of our prepared remarks.

Regardless of outcome, we maintain an excellent working relationship with the FDA to this point and in fact the agency itself, recently contacted us to see if there is any help they could provide to increase after they read an interview in the Gray Sheet regarding Sunshine Heart.

Regarding the OPTIONS HF European post market study. We reported last quarter, that our UK studies were not yet able to enroll. I'm pleased to note, that we completed two implants in Q2 with one being the first at the Royal Brompton & Harefield Hospital in the UK.

The other was done at Dr. Holger [ph] [indiscernible] center in Germany; the springs are total to 12 implants to-date. We have also been informed that first patient been identified at our other site in the UK and we are awaiting word on whether or not the patient is suitable and willing to participate in the OPTIONS HF study.

We are also pleased to see, that although we remain early in the trial with limited numbers. The observed rate of exit site infections in the OPTIONS HF study improved significantly over our US feasibility study results and is well below historical rates for LVAD devices. Today based on investigator reported results the observed rate of exit site infection is 8.3% or one of 12 subjects. Well below our prior US pilot study experience of 40% or eight out of 20 subjects.

I would like to provide insight on our first patient treated in the UK. As the case offers a great example of the lifestyle impact that is inherent with the C-Pulse solution. This patient is a 55-year old male that suffered from ischemic heart failure. He wanted the C-Pulse therapy as he wanted to walk his daughter down the aisle for her wedding this summer. The site reported the following information regarding this patient.

Initially, after implant there was concern this patient's baseline poor cardiac output, may require an urgent transplant. One week later, the patient's condition improved and resulted in an increased six minute hall walk by approximately 100 meters. Two weeks later, he was discharged and had more than doubled his six minute hall walk numbers. And apparent heart murmur was also no longer present.

The patient had excellent skin color and warm and he stated he felt very well. The patient continues to do well and has been taken off the urgent heart transplant list and yes, he did get to walk his daughter down the aisle for her wedding. The BBC is expected to cover the story very soon and the company also has plans to quickly generate PR from this as well.

We believe that this is the type of news that will helpful in generating excitement for both COUNTER HF and our OPTIONS HF trials. Moving to other parts of our update last quarter. We mentioned that our 90-day chronic animal trial for the next generation Fully Implantable C-Pulse was completed. The following is a summary of the data that was captured.

Immunodynamic measurements at implant and at the conclusion of the trial confirmed the desired diastolic pressure augmentation and pre-systolic pressure aortic pressure reduction generated by the device.

The Crop C [ph] was performed in the histopathology findings were in line with what we’re expecting at this stage and similar to those found in early chronic animal studies using the current C-Pulse system. The lung tissue, against which the pump was placed, had an fibrovascular pump capsule that was flexible and did not appear to be inhibiting the function of the pump.

Histopathology of the major organs found all organs to be normal. We are currently evaluating the ability to accelerate the development of the system, as well as produce further miniaturization of the existing system. Before handling the call over to Jeff, who will provide financial update? I just want to quickly provide commentary on the Company's continued emergence within the cardiology community.

We continue to gain exposure and one highlight worth mentioning is that we have been assured by the peer review journal Jack [ph] heart failure that our pilot study manuscript will be published online in September and in print in October. We have also submitted a case study manuscript to the American Society for Artificial Internal Organs also known as ASAIO Journal and this paper entitled extended extra aortic counter pulsation with the C-Pulse device does not alter aortic wall structure. It will be available online in November.

In addition, we have had four poster presentations in this quarter; two were presented by Dr. Chang and Dr. Harts' [ph] at the International Society for Heart and Lung Transplantation or ISHLT, 34th Annual Meeting, April 10 through 13 in San Diego, California and two more were presented by Dr. Harts [ph] and Dr. Cherie [ph] at the annual meeting of the Heart Failure Association also known as HFA of the European Society of Cardiology, ESC, May 17 through 20 in Athens, Greece.

We will have two additional poster presentation at the Heart Failure Society of America, known as HFSA Annual Meeting late breaking session in September in Las Vegas. Dr. Agarwal [ph] also has submitted an abstract to TCT and will be presenting his data on recovery at the meeting session on medical device in heart failure in September.

Finally Dr. Harts [ph] submitted on abstract at the AHA meeting to be held at Chicago in November and we are waiting for the organizers response at this time. I will now turn the call over to Jeff Mathiesen. Who will provide the financial update?

Jeff Mathiesen

Thanks Dave. Good morning, everyone. This morning, we released our earn out financial results for the second quarter and first six months of 2014. I will now walk you through a few of the financial highlights. The company's results for the six months ended June 30, 2014 included reimbursement revenue of $59,000 for an implant of the C-Pulse System under its US COUNTER HF study, during the first quarter, 2014.

The company did not have a reimbursement revenue in the second quarter, 2014 based upon enrollment activity under its trial during, this quarter. There were no implants build in the first six months of 2013. As we have previously guided, we have modeled approximately 70% of US implants under the pivotal study to be eligible for reimbursement and therefore billable by Sunshine Heart.

As we progress through the study, we will modify our model if and as appropriate based upon our experience. Given that we continue to implant our devices under clinical studies in both the US and Europe, we are currently recording all cost associated with our devices directly to research and development expenses as incurred.

We expect to continue to do so, until such time as we begin producing devices for commercial sales in Europe anticipated to be in 2015. Accordingly, we have no reported cost of sales or gross profit in the periods presented. Excluding equity compensation cost, non-GAAP operating expenses in the second quarter, 2014 totaled $5.9 million compared to $4.7 million in the second quarter, 2013 and for the first six months of this year, it totaled $11.6 million compared to $8.6 million in the first six months of last year.

The increase over the prior year periods as a result of increased clinical research and infrastructure expenses related to the US pivotal study and the European post-market as well as increased development cost related to our fully-implantable device.

Equity compensation cost included in operating expenses totaled $753,000 in the second quarter, 2014 compared to $591,000 in second quarter, 2013 and totaled $1.5 million for the first six months of 2014 compared to $1.1 million in the first six months 2013. The increase in the current year period is attributed to equity award during the second half of 2013 and also during the first half of 2014.

We expect the equity compensation expense to continue to trend above prior year levels in 2014 based upon expected future equity award activity. Income tax benefits from the receipt of R&D tax credit refunds in Australia totaled $265,000 in the second quarter, 2014 compared to approximately $1.1 million received in the second quarter, 2013.

These refunds related to R&D spending activity in Australia for the 12-month period ended June 30, 2013 and 2012 respectively. As we have previously communicated, we have significantly the level of R&D activity in Australia in recent periods and expect future R&D refunds, if any to be greatly reduced from previous periods.

We have not yet completed analysis of the R&D spending for the 12-month period ended June 30, 2014 to determine if a refund for that period is available. Excluding equity compensation cost, non-GAAP net loss for the second quarter in six months ended June 30, 2014 was $5.6 million or $0.33 and $11.2 million or $0.67 per share respectively. Compared to losses of $3.6 million or $0.30 per share and $7.5 million or $0.71 per share in the comparable periods 2013.

As reported, our net loss was $0.38 per share for the quarter and $0.75 per share through year to-date as compared to $0.35 per share and $0.81 per share in the same periods of 2013. Cash used in operating activities totaled $11.9 million in the first six months of 2014 compared to $7.6 million in the first six months of 2013 and the increase was driven primarily by increased clinical and research expense.

We ended the second quarter of 2014 with approximately $42.1 million in cash and no debt. At quarter-end, we had 16.9 million shares outstanding with an additional 3.6 million shares reserved for outstanding stock options warrant and restricted stock units.

Going forward, we expect to see minimal revenues from reimbursements of implants in the US for the remainder of the current year. We have not modeled any revenues for implants in Europe in 2014 and are targeting 2015 for reimbursement to begin to be established in individual countries there.

We expect that our quarterly operating expenses and cash burn to be above comparable periods prior year levels as we support our studies in the US and Europe. We believe that our equity compensation expense will fluctuate period to period based upon the timing and structure of equity of awards.

We have not accessed our ATM or equity line of credit facilities and we have no present plans to raise capital under these facilities. With that said, I will now turn the call back over to Dave.

Dave Rosa

Thanks, Jeff. Before brining Dr. Cohn and Dr. Abraham on the line to join the Q&A. I just want to conclude by stating as a company, we remained steadfast in the value C-Pulse represents and with the addition of Brian Brown, we now have further strengthened the company to facilitate progress on all fronts as we prepare for the company's next stage of growth.

Thank you again for joining us this morning and operator please Dr. Cohn and Dr. Abraham to join the conversation. I would ask that, the questions for Dr. Abraham asked be as first as I know, he is on a very tight timeline. We are now ready to turn the call over for Q&A.

Question-and-Answer Session

Operator

Thank you, ladies and gentlemen. (Operator Instructions) and I'm showing our first question is from Jason Mills with Canaccord Genuity. Your line is now open.

Jason Mills – Canaccord Genuity

Dave, great progress this quarter. Congratulations on that and following your instructions. Perhaps the first question to Dr. Abraham or whomever, you'd like to give to, just simply about the pace of enrollment is picked up this quarter. Clearly, that function of new sites, but I'm wondering sort of the changes that were made with respect to the inclusion, exclusion protocols earlier this year. What impact that may have had in sort of what patients, how they're reacting to the trial in the field, would be wonderful to hear Dr. Abraham's perspective on that.

And you mentioned, you have a couple of folks that decided to forego the therapy. Will be interested in understanding a little bit more about that, and I have one other follow-up? Thank you.

Dave Rosa

Okay. So Bill, why don't you go first and then I'll follow on.

Bill Abraham

Sure, absolutely and it's a pleasure to join you for the call. So first of all, I share a high level of optimism in regard to enrollment for the trial. I believe that dates projection for the next quarter realistic and that we all see double digit enrollment during that quarter. Based those observations on the fact that I have personally talked to a number of investigators and other sites and have observed first-hand the activity at our site, at Ohio State University and the overall level of activity screening actively seeking patients for the study is increasing substantially.

I would attribute that in part to some of the changes made in the protocol which have opened enrollment up a bit and also to the fact that we have made a deliberate attempt to really create a sense of ownership around this study, among the heart failure specialist and heart failure investigators. So I think, when we began with a surgically expensive [ph] device, perhaps this would be as more of a surgical trial, but it really is a heart failure study and much of the enrollment in this trial will be driven by the heart failure specialist and heart failure investigators and in talking to many of them around the country, there is now I believe a very high level of enthusiasm, which is reflected in an increased rate of activity [indiscernible] ultimately enrollment.

But remember, this is the funnel, you've got to get a lot of patient in the hopper you know to get the few at the bottom, who ultimately get randomized in the study and what I've seen happen during the past quarter at our own site and then talking to a number of other investigators is [indiscernible]. So I think it does double digit enrollment for the next quarter is a reasonable expectation and certainly have seen an increased level of enthusiasm for enrollment around the country.

Dave Rosa

So what I would add to that, Jason as I do think, the protocol changes particularly in the clarification on inotropes is held. The PR I really believe has greatly helped more primarily patients than physicians. The PR that, we are targeting physicians for is just starting now and as probably pretty good timing as our data gets published, but there's he brought up a couple other things and I think some of the key points to think about our number one; this is the first time we've had all centers that have identified at least one patient and we track all this.

And usually you have 20, I don't know 20%, 25% of centers that do nothing for you. Right now to-date, we have all of our centers that have at least identified one patient. So I feel very good about that. The other thing is, it's easy to say, like gosh, why don't you guys have 30 patients and why isn't everyone getting randomized and number one.

I had a large investor tell me this, when we were starting this study and he has heavy positions in both HeartWare and Thoratec and he said, Dave you're going to get pressured to get this trial done and he said companies in the past have halted in to that pressure and taking patients that really should not have been taken to increase enrollment and then you get to the end of the trial and trial comes out negative.

You said no matter, what people tell you make sure you're getting the right patients for this therapy because I think there is a place for it and I would agree with that. So we are not a company that in the business to take a number of deviations to just to show that we can enroll patients.

So we are being very strict about that. I think the challenge remaining and you know it's a challenge that I think can be overcome as more and more success stories like this UK patient get publicized but yes, patients I've been told this for quite a while that patients believe that they don't need an LVAD, when they have clients for heart failure, they don't feel they're sick enough and that's probably you know the biggest that we still have to do and I think one way of doing that is to get these stories out from patients like the UK patient that look, you really are that sick and the doctors have to help us with this as well, the heart failure cardiologist and how they present it, but it's like you're at that sick look at the what the device can do for you.

And I think the PR that we can generate from that can be used by physicians when they're talking to their patients is going to help us overcome some of this, but in the end that's the battle and that's to convince patient at the end of the day that this therapy could be very helpful for them.

Bill Abraham

And I will Dave, there is certain amount of patients that one needs to have with these patients because the typical response to anytime we talk to the patient about it, mechanical pump or a heart transplant, is one of denial. I mean this is a normal human response and I would say that, the we come back around to reengaging some of the patients that may have not been quite ready to say yes, to enrollment and the study like this, but some of them won't successfully say yes, it just takes a while to sink in and we see that in day-to-day clinical practice with that, the transplant.

Jason Mills – Canaccord Genuity

That's helpful. Obviously you're taking some learning's in the LVAD trials who have increasingly focused on patient selection and that's really help to outcome, so that makes a lot of sense Dave and I appreciate Dr. Abraham your comments those are helpful. And my second question and I'll get back in queue, I'm sure other who have to more enrollment questions and ask questions to Dr. Cohn about the analyst studies about which I'm interested as well.

My second question, obviously Kimberly as having an impact, I would be interested in more details about the interim analysis objectives or addressed that you mentioned on the call, Dave and maybe hash that out a little bit more, when you might hear back from the FDA and what sort of milestones are there.

Kimberly Oleson

Yes, Jason. This is Kimberly Oleson and good morning, thanks for asking the question. So I was understanding you'd just like to know a little bit more about the interim analysis and obviously, we need to have that conversation with the FDA. So we've made our formal request, we just haven't heard back yet, these things do take time, but as David outlined there is if you will an opportunity to relook at our interim analysis, our overall clinical strategy and request the permission to include in interim data analysis.

David already outlined there are three different times of outcomes that are associated with that set form of analysis, we would agree with the FDA at pre-specified point in time to look at the data and the three types of outcomes that you would expect to see as number one; the independent data taking monitoring board. Follows its established rules and they may recommend that the trial be stopped early because of utility.

What that means in that situation is that, there is a very low or a very low chance of success in continuing and meeting the endpoints of this study. The second item is that, the DSMB may recommend that we either stop the trial or modify the trial design, due to efficacy at our pre-defined interim analysis point.

This being said, we would be able to demonstrate compelling efficacy with an adjusted very aggressive threshold of performance. Now that performance would be preset data very, very low P value. If that were to occur Sunshine Heart International Co-PIs need to have a consult with the FDA on the appropriate steps.

It's not so simple that you go then and then suggest that you submit your PMA. It is a conversation you have to have with the FDA. And under the third scenario, the data safety monitoring board may recommend that we just keep going on with the trial. It's a positive piece of news that means that we didn't achieve the aggressive efficacy threshold at the interim analysis point, but again it means that it's not utility and it's not absolute outstanding efficacy at that early point and then continue the trial is good news to allow us to move forward.

So in this, when you take a little peak during the middle of a study. You pay a penalty and that penalty comes in the form of much lower P value threshold for your primary efficacy endpoint at that interim analysis, you also have to balance that with the overall safety findings in the trial and then they described those three outcomes. Outcomes two; going efficacy or outcome three which is close but no cigar, but keep going.

These are all positive signs progress in the study and so when you take a look part way through at the end of the study, if you either look somewhere in the middle or you look somewhere at the very end you originally had designed, this translates at the very end. You might have to pay a price at also, a penalty on the P value at the end of the study and the way that we're looking at this P value that we believe that we would need to achieve at the end of the study, given one look at an interim point that is a negligible change and thus we see actually low down side for conducting the interim analysis.

So when we go through all of this with the FDA, a lot of it is discussing sort of, where we've been, what change at recent terms of our timing in the study and then having as if you will, a good collaborative discussion with the FDA to agree on what the right next steps are to move forward, but I'm very pleased that Sunshine's taken this step. I think it's the right move to make.

Jason, did that answer your question about the interim analysis?

Jason Mills – Canaccord Genuity

It did, just as a follow-up, sorry if I'm missed it, but did you say at what point during the trial that would be, that interim analysis to look in, would occur?

Kimberly Oleson

Jason, I didn't specify exactly when I think, that's a point of discussion that we have with the FDA I have in my mind exactly where I think, we should be, we've had good discussion Dr. Kumacho [ph] and Dr. Abraham on this to get there wise counsel on this and again, I think a very compelling request to make to the FDA and I think I just need to respect and wait for FDA to give a chance to open the door, so we can have a nice talk.

Jason Mills – Canaccord Genuity

Thank you, fair enough.

Operator

Our next question comes from Tom Gunderson with Piper Jaffray. Your line is now open.

Tom Gunderson – Piper Jaffray

Dave, to your directions I'll go with Dr. Abraham first and then maybe a quick one for Billy as well. Dr. Abraham, you talked about patient denial, can you help us on Wall Street. We seem to look at information quickly, make decisions quickly and go forward. So if you've got Class III heart failure, your doctor tells you, it's a progressive disease. You've seen it get progressive yourself from I to II to III and you know IV is around the corner.

You have a choice of a cocktail of drugs or CRT or entering an experimental trial. How do you position that with the patient and how do you get them over the risk of going into this, in their minds experiment?

Bill Abraham

Yes, I think the key is, as you know as required by good clinical practice and also by the protocol. We really have exhausted all of the currently available evidence based guideline recommended therapy for these patients.

So these patients are already on optimal guideline directed medical therapy and tolerated and they've got an invitation for ICB or CRT device they have it and despite all of that, they remain in Class III or ambulatory Class IV and so, it eventually does take in, this is sort of no other option situation.

And what the patient wrestle with is, when I satisfy with my current quality of life and where things on and those [indiscernible] that I'm looking or do I want to enter into clinical trial and have an opportunity take a chance of becoming better and again there is sort of number of stages that the patient is through.

Some patients, that you might imagine perhaps a Wall Streeter would just immediately say yes. Some people aren't quite as good as making decisions right away and they want to think about, they want to mall it over, they want to talk to other people and you know, you need to kind of come back around to them, time and time again.

So that's why, one of things that I'm doing with calls that are making to investigators is encouraging them to keep those patients on their screening with, keep those patients on their potential list of study patients and maybe come back to them at their next visit, 1-month or 2 months and again offer them the opportunity to participate.

Tom Gunderson – Piper Jaffray

Thank you and then just real quickly for Dr. Cohn. Could you talk, two things on the animal study, number is was there anything in the outcomes that surprised your number two positive or negative and number two; what else do you need. You've seen this up close and personal, what else would you need from a company or data to do a first in man.

William Cohn

Sure. So first of all, we were delighted with the histology and anatomic findings of the chronic studies. So nothing to report negative, as you just told everything looks great, the device is functioning beautifully, the angiogram on the animal prior to SAC [ph] looks great, the aorta looked fine, the lung was just supposed to the actual can, was fine. So I'm fine there.

The one hesitancy I had, was perhaps related to the size of the device and whether it would fit it out or not, through minimal invasive incision, we've now looked at that extensively in the cadaver lab and once we verify that the device is robust, as we think it is and that it works as well, as we think it does, we are ready to go.

Tom Gunderson – Piper Jaffray

So bench testing is the remaining part here on the latest design.

William Cohn

Yes and right now, I mean the pump at that 90-day term, the durability was fine, there is no evidence of where any other challenges or anything noticed suggesting any failure. We know that the dynamic between the device and the aorta is going to be just what we see with CP1 and that was confirmed in the study.

So once they tell us, that they are confident at the actual mechanics and the silicon pump. It is robust, then I think the rest of the system is very similar CP1 and we know, we can get it through small incision safely and metable line to position. So I think, would be ready to go. And it's all up to the company of course, but I have no concern as a surgeon.

Dave Rosa

So there is two pieces of this Tom, one is the pump and then the other is the test system, the powering system. I mean, they obviously have two different schedules because we are working with two different companies on this. So all the testing so far, was just on the pump because we really feel that since we are using a modified off the shelf system that's already worked before for the test that some that should be theoretically that should be the shorter time line.

Is it going to be the shorter line, well we're obviously waiting for the vendor that we are using to come back with us. Started to come back to us. On the pump side, you've got certain surgeons that can take larger devices maybe it's 10% of all the surgeons, who are still good that they can make anything work.

We want the pump small enough so that the majority of the 90% of surgeons, the average surgeons can assist us in without any type of struggle and in the cadaver labs, we have had a number of cadaver labs, where we brought another surgeons who are participating in our trial and they feel fairly confident, they can do that, that being said. We want to further reduce the size of that pump.

So in addition to doing, bench-top testing on durability, we also want to get the size of that pump down and I think, by the end of next quarter. We will be able to give you a better idea of what's where thinks are with the test system, where we are with the durability, with the existing system and where we are with further miniaturization of the pump as well.

Tom Gunderson – Piper Jaffray

Got it. Thanks, that's it from me. I'll let others get in here.

Operator

(Operator Instructions) and our next question comes from Joshua Jennings with Cowen. Your line is now open.

Unidentified Analyst

Thanks for taking, it's actually Christen [ph] for Josh. You answered most of the questions on the interim analysis, but perhaps maybe would if the timeframe, you feel like you'll hear back from the FDA to kind of nail down what time to take that interim analysis and then I'll just sort of follow-up on data presentation.

Kimberly Oleson

So this is Kimberly Oleson and so the question is when will we hear back from the FDA and when will expect to see the interim analysis strategy, if it's approved by the FDA to be implemented in the study.

And again, I'm waiting for –we made our request to the FDA and we still need to wait and to hear from them. I hope this isn't going to take a yearlong process, but I think that we should just allow sometime, so we get further on in the quarter. I'll be able to be more confidence in terms of when we should be able to nail down that plan, but I think it's probably not appropriate to say, here's exactly when we'll hear back from the FDA and here's exactly how confident we will be, that will be allowed to move forward.

I think the benefit is really having the FDA to understand, the current enrollment in the trial, the opportunities that we have to reduce over our burden of running the study, but also making sure that we both agree, both between the investigators, I'm showing hard on the FDA, on what might be best for the study.

So it's difficult for me to make a commitment at this time, but we are looking forward to hearing back from the FDA.

Dave Rosa

Josh, I have to say people well not the FDA, but with the fact, that the matter is the FDA contacted us after the reading that Gray Sheet in Today's, give us a call, we can help out, we'd love to help out. So I thought, that was a really positive sign, again not one that I honestly was expecting.

So by the way, I know Josh you had a follow-up question. Dr. Abraham is going to have to drop off, so I'm just going to ask, if anybody else has any enrollment questions for Dr. Abraham. Now would be the time to ask.

Unidentified Analyst

Okay, you want to me to ask my follow-up, after that or.

Dave Rosa

No, no it looks like we are fine with that. So Dr. Abraham. I want to thank you for hanging in there because I know we overextended you, but thanks again for participating.

Bill Abraham

Well, it's my pleasure. Thank you.

Dave Rosa

Sure. Okay, Josh go ahead.

Unidentified Analyst

Yes, thanks and just on the what's going to be presented at HSFA, did I hear right, there will be two presentations, but one is late breaker and maybe just summarize what those presentations will be again. Thank you

Dave Rosa

Sure, so at HSFA we have two poster presentations and so, let me just see here we have two, actually I don't have the detail on what those poster presentations are, so I will have to follow-up with you. I have a detail on TCP and some of the other meetings, but not the HSFA in front of me.

Unidentified Analyst

Okay, not a problem. Thanks.

Operator

At this time, I'm showing no further questions and I would like to turn the call back over to Dave Rosa for further remarks.

Dave Rosa

Okay, I just wanted to thank everybody for joining us for the call today and also to both Dr. Cohn and Dr. Abraham for their participation as well. Thanks very much.

Operator

Ladies and gentlemen. Thank you for your participation in today's conference. This does conclude the program and you may now disconnect.

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