CytoSorbents Corporation (OTCBB: CTSO) Q1 2014 Earnings and Operating Results Conference Call

Corporation (OTCBB: CTSO)

Q1 2014 Earnings and Operating Results

May 14, 2014 @ 4:15 pm Eastern

This official company transcript has

been edited for clarity and does not differ materially from the actual conference call. Slide numbers have been inserted to allow

readers to follow along with the associated presentation

Good day, ladies and gentlemen. Thank you

for standing by. Welcome to the CytoSorbents First Quarter 2014 Shareholder Update Conference Call. During today's presentation,

all parties will be in a listen-only mode. This conference is being recorded today, May 14, 2014.

I would now like to turn the conference

over to our moderator, Ms. Amy Vogel. Please go ahead, Amy.

Amy Vogel - Moderator:

Thank you operator and good afternoon.

Welcome to CytoSorbents First Quarter 2014 Operating and Financial Results 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 May 14, 2014 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 Ms.

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

in the Q&A session with management to follow. Thanks everyone again for participating. If we do not answer your question, we

would ask that you contact the Company directly after the call today.

At this time, I would like to turn the

call over to Dr. Phillip Chan. Please go ahead Dr. Chan.

Thank you very much Amy and welcome everyone

to our first quarter 2014 operating and financial results conference call. Thank you very much for taking the time to join the

Given that we recently

gave an extensive presentation on our operating strategy for 2014 in the Fiscal 2013 year-end presentation, today's presentation

will be brief. I would encourage investors to visit our website at www.cytosorbents.com to obtain a copy of the transcript and

presentation of that year-end presentation. For new investors, I would like to now give a short overview of the company prior to

getting into our financial results.

call today are myself, Vincent Capponi, Kathleen Bloch, Christian Steiner and Chris Cramer, our Vice President of Business Development.

Slide 4: CytoSorbents

is an emerging leader in the $20 billion critical care immunotherapy space. We are leading the prevention or treatment of life-threatening

inflammation in the intensive care unit.

our flagship product, removes the fuel to the fire of inflammation and represents a powerful immunotherapy tool to control inflammation.

It is approved in the European Union as the only specifically approved extracorporeal cytokine filter and has been clinically proven

to remove key cytokines in blood by 30% to 50% in critically ill patients. It is approved for use in any situation where cytokines

are elevated and it has been safe in more than 3,000 human treatments with no serious device-related adverse events reported.

of our technology is based on a state-of-the-art, biocompatible, highly 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 and has millions of pores and channels

in every single bead. These beads are protected by 32 issued U.S. patents and multiple applications pending, is manufactured at

our ISO 13485 certified manufacturing facility in New Jersey and is in fact one of the highest grade medical sorbents on the medical

of our technology is to prevent or treat organ failure, with the goal of not only improving patient outcome and survival by reducing

the incidence of organ failure, but also by decreasing the very expensive costs of ICU and patient care. The technology has been

used in many different applications including sepsis, ARDS and lung injury, burn injury, trauma, pancreatitis, influenza, surgical

complications and many other applications and we believe, it truly has the potential to revolutionize critical care medicine.

I turn it over to Kathy to go over the operating and financial highlights, I'd like to reiterate this slide that was in our previous

presentation. Not only are we addressing a major market, with what we believe is an exceptional therapy, but CytoSorb also has

an outstanding business model.

First of all, CytoSorb

addresses a huge market. We sell this product to hospitals and critical care physicians, targeting a "need to have"

$20 billion worldwide critical care opportunity addressing organ failure. There is little to no competition. Critical care physicians

understand the problem of how inflammation, caused by cytokines and excessive cytokine production, can lead to organ failure and

death. It is a plug-and-play high margin disposable razorblade in someone else's razor business model and is compatible with existing

hemodialysis machines found at hospitals around the world. Therefore, hospitals do not need to buy any new hardware to use our

Technicians already know

how to use our device. CytoSorb is also reimbursed in Germany and Austria at more than $500 per cartridge, so depending on the

application and the devices used, revenue potential per patient is on the order of $1,000 to $5,000 per patient. And the treatment

is affordable yet very profitable, with gross margins greater than 60% with target gross margins greater than 80% in volume. Last

but not least, intensive care units are highly centralized and easy for a small sales force to access.

Slide 10: In addition

to our business model, we have had some positive operational progress in the first quarter. Most importantly, we raised $10.2 million

in March 2014, which fortified our balance sheet with net proceeds of $9.5 million in cash from our financing. This cash will enable

an aggressive growth strategy, focused on growing CytoSorb sales, generating clinical data, as well as new product development.

We currently have an estimated one to two years of cash to be supplemented by CytoSorb sales, grant income and potential strategic

partnerships. This financing was led by Brean Capital.

Slide 11: In addition

to our financing, another major event for us was the signing of Techno Orbits as a distributor and the expansion into the Middle

East. This was an exclusive distribution agreement for CytoSorb in the Gulf Cooperation Council Countries of Saudi Arabia, UAE,

Kuwait, Qatar, Oman and Bahrain, as well as related states of Yemen, Iraq and Jordan. This territory covers almost 105 million

There are many trends in

our favor for growing usage in this territory. First of all, there is a growing population. The government sponsors universal healthcare.

There is strong purchasing power from government agencies, due to rises in oil prices, and there is significant interest in innovative

new medical technologies, particularly as it relates to emerging threats like the MERS outbreak that is currently spreading across

the Middle East and other parts of the world. We will talk about that in a few moments. Product registration is currently pending,

but we hope to hear back very shortly, about getting this product registered very soon.

pursuing a very broad distribution strategy and our European Union approval enables us to do that. Currently we have signed 18

countries, including the United Kingdom, Ireland, Netherlands, Turkey, Russia, India and the countries of the Middle East, covering

approximately 1.7 billion lives. We are now expanding to other parts of Europe and other countries outside of the European Union

that accept the CE mark approval, and this is just the list of some of our distributors in many of the different territories around

So with that, let me turn

it over to Kathy Bloch, our Chief Financial Officer. Kathy?

Kathleen Bloch - CFO:

Thank you, Phil. Good afternoon everyone.

Slide 13: For today's call,

I will be providing an update regarding CytoSorbents' revenues and also our working capital position as of March 31, 2014.

First quarter 2014 total revenue was approximately

$1.1 million, which is an increase of 186% compared to total revenues of approximately $371,000 for the first quarter of 2013.

Product sales for the first quarter of 2014 were approximately $569,000, that's at the upper end of our guidance and it's

an increase of approximately 223% over product sales for the first quarter of 2013 of approximately $176,000.

Grant income for the first quarter of 2014

was approximately $491,000, an increase of more than $150% as compared to grant income of approximately $195,000 for the first

First quarter 2014 product gross margins

were in excess of 60%.