CytoSorbents Corporation (OTCBB: CTSO) 2013 Third Quarter Earnings Conference Call Transcript

CytoSorbents Corporation (OTCBB: CTSO)

2013 Third Quarter Earnings Conference

November 6, 2013 @ 4:15 pm Eastern

Good day ladies and gentlemen. Thank you

for standing by. Welcome to the CytoSorbents 2013 Third Quarter Earnings Conference Call. During today's presentation, all

parties will be in a listen-only mode. Please press star, zero, for Operator assistance at any time. This conference is being recorded

today, November 6, 2013.

I would now like to turn the conference

over to our host, Mr. Valter Pinto of Alliance Advisors. Please go ahead, sir.

Valter Pinto - Alliance Advisors

Thank you, Operator, and good afternoon.

Welcome to CytoSorbents 2013 Third Quarter Update Conference Call. With us today are:

Before I turn the call over to Dr. Chan,

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 6, 2013, and the Company assumes no obligation

to update these projections in the future as market conditions change.

During today's conference call, we

will first have an overview presentation covering the financial and operational highlights for the quarter by Dr. Chan and Kathleen

Bloch. We again have taken everyone's submitted questions. We will do our best to address them in the presentation and in

the question-and-answer session with management to follow. Thanks, everyone, again, for participating. If we do not answer your

question, we do ask that you either contact myself at Alliance Advisors or the Company directly after the call.

At this time, I'd like to turn the

call over to Dr. Phillip Chan. Phil, please go ahead.

Great. Well thank you very much, Valter,

and welcome everyone to our Third Quarter 2013 Earnings Conference Call. Thank you, everyone, for taking the time to join us for

For those of you who are new to the story,

CytoSorbents is a critical care-focused company working to save lives by targeting uncontrolled inflammation through blood purification.

Inflammation plays a major role in nearly every known disease, as was highlighted in this Time article "Inflammation,

the Secret Killer". Inflammation plays a major role in life threatening conditions such as sepsis and trauma, autoimmune

diseases like rheumatoid arthritis, inflammatory bowel disease, psoriasis and lupus, heart disease, peripheral artery disease,

even cancer, cancer cachexia, graft versus host disease, and neurodegenerative diseases such as Alzheimer's disease, multiple

sclerosis and Parkinson's, and many, many others. In fact, uncontrolled inflammation wreaks havoc on the body and can be

One of the reasons why it can be so deadly

is that severe inflammation causes organ failure. Organ failure occurs when vital organs such as the heart, lungs, brain, kidneys,

or liver stop working. That is not compatible with life and it causes nearly half of all deaths in the ICU today, but little can

be done to treat or prevent it.

CytoSorb is designed to remove the

"fuel to the fire" of inflammation from blood. In fact, CytoSorb is the only specifically approved extra-corporal

cytokine filter in the European Union. What that means is that cytokines and other inflammatory mediators are removed by CytoSorb .

Cytokines and these inflammatory mediators are the substances in blood that drive inflammation. CytoSorb is clinically proven

to reduce key cytokines in blood by 30 to 50% in critically ill patients, and it is in fact approved for use in any situation where

cytokines are elevated. We now have safety data on more than 1,100 human treatments, where there have been no serious device-related

adverse events, and where the therapy has been well tolerated.

What we're hearing out in the marketplace

today is that CytoSorb may represent a powerful new strategy to control severe inflammation in the ICU [intensive care unit].

Many of the therapies located on the left and the right of the CytoSorb cartridge here are perhaps well known to people on

the phone. On one hand there are things like NSAIDs [non-steroidal anti-inflammatory drugs], like Motrin, or aspirin, or anti-oxidants

that are weak anti-inflammatory drugs and too weak to control the inflammation seen by critically ill patients. Even stronger substances

such as anti-cytokine antibodies and anti-integrin antibodies are no match for the severe inflammation seen in the ICU. On the

other hand, there are many other drugs like corticosteroids, chemotherapy, anti-rejection organ transplant drugs, radiation, immune

system ablation and anti-leukocyte antibodies that are very powerful at controlling the immune response, but in many cases too

What we're hearing is that CytoSorb

is really one of the first truly immunomodulatory therapies out there on the market today, because you can adjust the dose with

the amount of treatment that you give these patients. It's sort of like a Goldilocks story where the treatment is "just

So, the goal of CytoSorb is to actively

prevent or treat organ failure in many life-threatening conditions such as sepsis, acute respiratory distress syndrome, burn injury,

trauma, pancreatitis, influenza, and complications of surgery that form a market of about $10 to 15 billion alone in the United

States and in Europe. The goal, of course, is to improve patient outcome and survival while simultaneously decreasing the massive

cost of ICU and patient care.

The heart of our technology is a highly

biocompatible and very porous polymer bead that acts like a tiny sponge to remove harmful substances from blood. Each of these

beads is roughly the size of a grain of salt, but when you magnify them up close, each bead has millions of pores and channels

that can remove things by pore capture as well as surface adsorption. Things that are too big cannot fit in the pores and are not

removed. Very small things go straight through the beads. But, appropriately sized molecules will get trapped in the vast network

of pores and channels in every single bead, thereby permanently being removed from blood. This is a technology that is protected

by 32 issued U.S. patents and multiple applications pending, and is manufactured at our ISO 1345 certified facility in New Jersey,

and in fact is one of the highest-grade medical sorbents on the medical market today.

These beads enable a very broad technology

portfolio. The first picture here is our CytoSorb cartridge designed for critical care in high-risk surgery. This is a product

that is CE mark-approved, but we have a host of other products behind this, including HemoDefend for blood transfusions,

a product that we'll talk about a little bit later, as well as ContrastSorb, DrugSorb and BetaSorb, that are under advanced

In addition, this technology has been the

beneficiary of more than $15 million in U.S. Government support. DARPA has awarded us a $3.8 million five-year contract as part

of its Dialysis-Like Therapeutics program to treat sepsis by removing cytokines and pathogen-derived toxins. We are currently in

year two of this program. The U.S. Army awarded us a $1.15 million SBIR contract for the treatment of trauma as well as burn injury

research. The U.S. Air Force recently funded a 30-patient human pilot study in trauma that is valued at approximately $3 million.

The FDA has approved this trial to begin this year, and we hope to have our first enrollment in the next couple of months. The

U.S. Department of Health and Human Services also awarded us a $0.5 million grant because our therapy has the potential to save

lives and reduce costs. In addition, our major collaborator Dr. John Kellum at University of Pittsburgh Medical Center was awarded

$7 million over five years as part of an NIH grant to help develop this technology for the treatment of sepsis. And most recently,

we were awarded a $0.2 million Phase I SBIR grant to advance our HemoDefend purification technology to improve the quality

and safety of blood transfusions.

So with that, I'd like to turn it

over to Kathy Bloch, our Chief Financial Officer, to go over some of the financial highlights for the quarter. Kathy?

Kathleen Bloch - CFO:

Thank you, Phil, and good afternoon, everyone.

I'm pleased to be able to report

CytoSorbents' third quarter 2013 financial results. For today, I'll be focusing on three areas. First, a review of

the Company's financial highlights; second, revenues, and in particular product sales of CytoSorb; and finally, our cash

position and the sources of capital that we have available to us to fuel our business.

So, this first slide provides a summary

of our key financial results for the three- and nine-month periods ended September 30th 2013. More details can be found

on our Form 10-Q which was filed earlier today. As you can see, CytoSorbents achieved record quarterly revenues in the third quarter

of 2013 of $881,000. Revenues for the nine months ended September 30th 2013 were $1.54 million, which included more

than $500,000 in product sales. So, let's look a little more closely at our product sales.

This chart illustrates the product sales