Thomas Meyer - Chairman & CEO Sven Zimmerman - CFO Bettina Stubinski - CMO.

Ryan Martins - Jefferies Liisa Bayko - JMP Securities Elliot Wilbur - Needham & Company.

Good day and welcome to Auris Fourth Quarter and Full Year 2014 Financial Results and Business Update Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Sven Zimmerman, please go ahead Sir..

Thank you, operator, and thank you, everyone on the call for joining. On behalf of Auris Medical, I would like to welcome everyone to our full year 2014 earnings call. My name is Sven Zimmerman, I'm Chief Financial Officer of Auris Medical.

With me are Thomas Meyer, Chairman and Chief Executive Officer of Auris, and Bettina Stubinski, Chief Medical Officer. Earlier today we issued a press release available at aurismedical.com with our results for the full year 2014. We also filed this press release with the SEC earlier today.

During today's call, we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements that address future operating, financial, or business performance or our strategies or expectations.

Forward-looking statements are based on management's current expectations and beliefs and involve significant risks and uncertainties that would cause actual results, development, and business decisions to differ materially from those contemplated by these statements.

These risks and uncertainties include, but are not limited to, the timing and conduct of our clinical trials, the clinical utility of our product candidates, the timing or likelihood of regulatory filings and approval, our intellectual property position and our financial position, as well as those described in the risk factors section of our prospectus relating to our registration statement on Form S-1.

In addition, any forward-looking statement represent our view only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change.

With that, I would like to hand it over to Thomas..

Thank you, Sven. Good morning to our listeners in the US, good afternoon to our listeners in Europe. Together with Bettina and Sven, I am very pleased to provide you today with a report on the first quarter and full year 2014 and to give a general business update. Let me begin with some highlights.

We achieved significant progress during 2014 led by our ongoing drug development programs and we ended the year with cash and cash equivalents of approximately CHF57 million. Full year operating expenses came in at the low end of our guidance.

The New Year 2015 has started well for us in medical, with positive results from interim analysis in the postacute stratum of our TACTT3 trial with AM-101. As previously announced, our investigational tinnitus treatment was tested for the first time beyond the acute stage, and showed activity also there, especially in the earlier post-acute phase.

This outcome lends further support to our strategy of targeting tinnitus at the periphery of the auditory system and could lead to significantly broader indication for AM-101. Bettina will provide you with an update on our clinical development program with AM-101.

I will then give you an update on our AM-111 program where we just received an IND from the FDA. Then we will conclude the presentation by walking you through the financial results. With that let me pass over the call to Bettina for an update on the AM-101 clinical program..

Thank you, Thomas. The AM-101 Phase III clinical program in acute activity has continued to progress and it remains on track.

By the beginning of the month more than one-third of target patient number for the TACTT2 trial which is being conducted primarily in North America, and more than 40% of the target for the TACTT3 trial which has all its sites in Europe had been involved.

The interim efficacy analysis in the exploratory postacute tinnitus stratum of the TACTT3 trial which affected patients with tinnitus onset between three and twelve months, and recalled stratum B showed positive results. The analysis showed activity of AM-101 B on the core target indication of acute tinnitus.

The security threshold was cleared, meaning that as per creative fine statistical analysis stratum B could continue without changes, and we remain blinded to the actual data.

An independent data [ph] has evaluated the unblended data and this committee has recommended to adopt the inclusion criteria in order to focus on the early postacute stage where higher levels of activity ropes up compared to the later stage.

And so accordingly stratum B will continue to enroll patients with tinnitus onset between three and six months prior, and holding all patients with onset between six and twelve months prior to enrollment.

The TACTT2 trial are North American trial and stratum A of TACTT3 which are pivotal trials and enrolled patients with tinnitus up to three months from onset were not part of the interim analysis and are not effective by – they will continue unchanged.

The important and mathematical need in tinnitus care was highlighted at a recent educational event for investors in New York City which was sponsored, and which was well received by the SMD. Dr.

Michael Seidman, Director of Otologic/Neurotologic Surgery at the Henry Ford Health System in Detroit described the lack of effective and satisfactory treatment and management options that are currently available for tinnitus patients.

These results are reiterated by the account of the patient who describes the alternative and how many unsuccessful attempts to define relief. Dr.

Seidmen stated that you consider AM-101 mechanism of action to be more attractive in treating tinnitus in other current approaches and noted that AM-101 subject to positive outcomes from the Phase III trials could become the first approved drug for the treatment of tinnitus where the cost is available on the Auris Medical website.

And with that I will hand back to Thomas..

Thank you, Bettina. As previously announced, Auris Medicals key portfolio has been expanded through the recent issuance of patent survive the Chinese and Indian patent offices which cover the use of AM-101 with the treatment of tinnitus.

AM-101 now benefits from extensive patent coverage in more than 40 jurisdictions worldwide, including major countries and regions such as the US, Europe, Japan, China, India, and Russia. Brazil is the only remaining country where prosecution is still pending.

As a reminder, we also have a second patent similarly relating to AM-101 that is focusing on the formal [ph]. Here we have patents in 18 countries so far, last European patent which is now being nationalized for various numbers of states. Prosecution in the US is still ongoing. With that let me turn now to the AM-111 program.

As you know, we are working towards a pivotal trial for HEALOS that will be conducted in several European and Asian countries. HEALOS will enroll patients suffering from severe to profound idiopathic sudden sensorineural hearing loss or in short sudden deafness.

In September 2014 we had a pre-IND meeting with the FDA where we received important feedback and guidance on the AM-111 program including HEALOS. In total we worked on a separate study which will be called REACH and which will be conducted in the US.

We were very pleased that the FDA recently opened an IND for AM-111 for the treatment of acute sensorineural hearing loss. Under the IND the company intends to conduct a randomized placebo controlled double blind Phase II/III trial to asses AM-111’s efficacy and safety in the treatment of surgery-induced hearing loss following cochlear implantation.

AM-111 concentration of 0.4 mg/ml will be administered in a single dose in patients undergoing cochlear implantation surgery.

In a pre-clinical model of cochlear implant surgery trauma, local application of AM-111 30 minutes prior to cochlear electrode insertion provided a significant level of protection against surgery-induced hearing loss, loss of hair cells and damage to neural elements. These results were published in 2013 in the Journal [ph].

We believe that treatment with AM-111 could allow for effective hearing preservation and protection of at-risk cochlear sensory structures during the process of cochlear implantation, which is a key objective in patients who still maintain residual hearing.

Since the drug is given during surgery, AM-111 will be well distributed within the cochlear at the time of the trauma. Low cochlear residual hearing due to surgery trauma has been a key factor holding back the more widespread use of cochlear implants in the AM’s population.

And we expect AM-111 if the trial is successful to play a key role in overcoming these obstacles. We have time to involve additional stakeholders in this project, personal information on the project will be provided in due course.

Preparations for our planned pivotal HEALOS trial with AM-111 in Europe and Asia continue to progress towards an expected initiation in the third quarter of 2015, i.e. first patient in.

Following the FDA's feedback from the Pre-IND meeting for HEALOS, we expect to complete the regulatory consultation process with additional input from the European Medicines Agency shortly. With that let me pass over the call to Sven..

Thank you, Thomas. So with regard to the financials, as usual the financial information has been prepared using the same accounting policies and methods of computation as compared with the most recent annual financial statements.

Financial statements are presented in Swiss francs, the company's functional and presentation currencies, and all amounts are in Swiss francs, unless otherwise specified.

Our cash and cash equivalents as of December 31, 2014, was CHF56.9 million, compared to CHF62.9 million at the end of September 2014, and CHF23.9 million at the end of December 2013.

The year-over-year increase in cash is due to our IPO in August 2014 during which we raised gross proceeds of $60.7 million, or CHF56.4 million after that's after underwriting discount but before IPO related expenses. A part of the increase in cash was obviously offset by our operating expenses during the first and fourth quarter.

Our research and development expenses increased from CHF13.2 million in the twelve month ended December 31, 2013, to CHF7.7 million in the twelve months ended December 31, 2014. The increase is mainly due to higher clinical expenses due to the progression of our AM-101 Phase III clinical development program.

In addition, we continue to perform our preparatory activities related to our late stage AM-111 clinical program, whereas in twelve months ending December of 2013, the AM-111 Phase II had just been completed with a complement decline in spending.

General and administrative expenses increased more than threefold from CHF1.3 million in the twelve months ending December 2013 to CHF4.5 million in the twelve months ending December 2014. The increase was primarily related to legal and auditing expenses in relation to the IPO preparations.

Net financial income was at CHF4 million in the twelve months of 2014 as we recorded significantly higher unrealized foreign exchange gains. Since majority of our cash and cash equivalents are held in US dollars, the appreciation of the US dollars against Swiss francs had a very strong impact here.

So with total operating expenses at CHF22.2 million, we came out at the low end of our guidance of CHF22.5 million to CHF24.5 million and this is mainly due to a continued focus on cost control.

The reported net loss for the twelve months of 2014 was CHF18.1 million, compared with CHF15 million in the same period in 2013, corresponding to a net loss per share of CHF0.69 versus CHF1.01.

As far as 2015 is concerned, from today's perspective, we expect the operating expenses for the entire 2015 financial year to be between CHF25 million and CHF30 million, with the majority of the increase over 2014 due to higher R&D cost. With that I would now like to turn the call back to the operator who will open the lines for questions..

Thank you, Sir. [Operator Instructions] We take our first question today from Ryan Martins of Jefferies. Please go ahead..

Alright, thanks.

So given the enrollment update you provided for 101 on ongoing Phase III trials, are you still expecting the trials to be on track for data in the first half of 2016?.

Yes, absolutely. The studies are enrolling nicely now, we are cruising out, we expect enrollment to end by the end of the year and first half have data available at the beginning of next year..

Okay.

And then just maybe one for Sven Zimmerman, given your OpEx guidance for 2015, does that contemplate the initiation of both these 111 trials that you've talked about or are you still considering non-delivery options for financing as you had talked about in your previous earnings call?.

So the operating expense guidance that we gave, the CHF25 million to CHF30 million is without the AM-111 cost related to reach MT loss. We are still contemplating various options and we will obviously update in due course before starting the trials..

Okay.

And then finally, if you could clarify the AM-111 regulatory strategy so that HEALOS I'm assuming that Phase III in Europe and Asia, is that sufficient for approval in those regions and will that – will you able to get any sort of US approval with that data? And then secondly, on the Phase II/III trial, the re-trial, are you again – that's just going to be a US trial and I mean – just trying to understand what indications you could get approval with one of either trial in either region, US or Europe..

Well, I will take this question.

You know that our target indication here is the treatment of acute sensorineural hearing loss, and this is an umbrella term which includes idiopathic sudden sensorineural hearing loss, acute trauma and surgery induced trauma, so actually our orphan drug designation is also based on this umbrella term and the part is that there is a common pathway, so we are dealing here exactly with the same mechanism.

So we have apoptosis for sensory structures inside the cochlear, and we also have inflammatory responses.

So the goal is the idiopathic sudden sensorineural hearing loss trial that this will be of course pivotal trial, now the REACH trial, we consider it a Phase II/III, there will be an interim analysis which will look into futility, it will be a one part of the overall package that we plan to submit well depending on outcomes obviously we may have a similar pivotal trials sufficient for approval, but we don't want to rely on that scenario, this is why we have here a second program under preparation and importantly it is a trial in the US, and importantly as you can also see, it will be a placebo controlled trial.

So this is now how we have a combination of these two trials, both falling under this umbrella term of acute sensorineural hearing loss..

Okay, thank you..

Thank you. We now move on to our next question from Jo Schwartz of Leerink Partners. Please go ahead..

Hi guys, this is Mayank [ph] dialing for Jo, and thanks for taking my question. And I would assume lines on ASNHL, can you please help us understand like how big is this idiopathic versus per induced population, and any differences that you can highlight between the REACH and the HEALOS trial, that would be much appreciated.

And my second question is that on the patent where you described the second family of patent for AM-101, can you help us to understand the nature of that patent family and how long that would go beyond 20-25 which I understand is your composition as matter [ph]. Thanks..

Okay, so the first question was about the size of the market opportunity, well the idiopathic sudden sensorineural hearing loss population is the largest within this ASNHL group.

So here we have data for example, for the US showing that 66,000 patients a year sought treatment in 2013, we know that actually an under diagnosed and under treated problem in the US for example in Japan which is definitely smaller in population size, the numbers are more than 80,000; we know that in other areas it's also higher than in the US.

Now the surgery type of trauma or accused trauma, it is smaller, but actually it has – we consider a pretty significant growth potential.

So when you look at the market, the number of cochlear implants that are actually implanted per year in the US, I believe it is around 15,000 to 20,000 a year, so this is a growth market actually and in adults [ph] market growth has been held back clearly by this risk of losing residual hearing so people still hear at lower frequencies and by or through the implantation there is damage and loss of functional hearing which of course is something one would like to avoid or prevent.

Now we believe that this is a long term growth market and AM-111 treatment like this and although protecting could provide a significant acceleration to this if we can demonstrate that it is successful.

Now let's say the key attraction here is clearly that these are scheduled patients, so this is a scheduled surgery and therefore you know, okay, these patients there will be there – which is of course different from idiopathic sudden sensorineural hearing loss where you have events happening and then patients have to go and see their doctor.

So that is the response to the question about the market potential. I would like to mention also that besides cochlear implantation there are also types of mini ear surgery where there maybe – from us so that would also fall under ASNHL. So we would expect that this surgery type of trauma would represent approximately 40,000 cases per year.

So it could be very significant for Auris Medical.

Now with regards to the IP question, we have this second family which is called pharmaceutical compositions for the treatment of inner ear disorders, now here we have already some patents issued which cover the use of ketamine as ketamine [ph] in ionic acid, the gel formulation for the treatment of tinnitus in some countries, it's broader, it is the class of a real cycloamines or there are also other partners involved here.

So we have based on that family we have also initiated a number of continuations in the US because this patent which was filed in 2005 so it will go to 2025, it may have some additional coverage here in the space. I hope this answers all your questions..

Yes, it does, thank you. I really appreciate it..

Thank you. [Operator Instructions] We'll now take a question from Liisa Bayko of JMP Securities. Please go ahead..

Hi, good morning, thank you. For AM-111, can you maybe talk about for the Phase II/III, how you would actually measure – there is an efficacy end point, I'm just curious because it seems like – I don't know lot about cochlear implantation but it seems like maybe patients are hearing lot before implants.

So how do you measure kind of those – the change of hearing, an act of surgery with AM-111, and then I have a follow-up..

Liisa, this is – basically it's a kind of risk reduction so the low frequency, the speech frequencies are at risk. So clinical and meaningful loss is considered as a 10 decibel deterioration. Here we are talk about frequencies of 500 hertz, 750 hertz, so that is pre-surgery and post-surgery.

And in the end what is sold is actually that you can reduce in a significant fashion, the risk of losing significantly amount of hearing in these frequencies..

Okay. And you are able to test those because you have an additional variable, you have cochlear implants being done, so before surgery patients can hear those decibels and then they get implants which changes their hearing and then you also kind of test the effective drug.

So I'm just wondering how to think about that properly because you expect some improvement alright with the implant itself?.

Yes, actually – yes, the implants, they are typically activated only after few weeks, after surgery and then there is a two to four week period and only after that period the implant is activated.

And you can always have unaided or aided hearing and as you correctly point out we are of course primarily interested in the drug’s efficacy, however, of course, we are also interested in how the overall outcome looks like but the key, the primary for us is clearly the drug effect..

And so when will you be taking a measurement?.

We have the baseline and day 28, and then there will be subsequent measures. While we plan to have let's say more detailed update on the program, also I would say number of sides, number of patients and all that over the next few months as we will develop this program in detail.

We also mentioned there will be other stakeholders involved in this, so it is a very exciting program that we feel and we also see and feel quite a high interest in ENT circles for this concept actually of preserving residual hearing through this compound AM-111..

Okay.

So just sort of two questions I'll add, the day 28 is prior to when the cochlear implant is turned on?.

Correct..

Okay. And then, what is – how many patients actually experienced hearing loss post-surgery, perhaps you mentioned this, I just didn't catch it.

It's a proportion?.

Well, it is a significant proportion, so there has been a number of publications but it always depend on what frequencies you are looking at, usually it's 500 hertz and 750 hertz, so that's pretty much established.

And so when you have a 10 DB or 15 DB, I mean, there are rates which are above 50%, even 70% or 80% of patients who suffer clinically significant deterioration in hearing and basically these are very important frequencies, so these are speech frequencies and if you want to use the electrode and the cochlear implant part for the mid to higher frequencies, of course, it's very beneficial if you can still have functional hearing in the speech area..

Are you going to be testing different doses or just a single dose?.

[Indiscernible] report since this is the concentration that grow out the best outcomes in our Phase II. Also we know from the pre-clinical work that has been done before that this falls very nicely in line with other models of trauma..

Okay, great. And then just final question, just strategically, so from a regulatory perspective you will do another Phase II in Europe towards approval, more or less kind of be in this same setting.

And then how does this enable European approval on this principal setting?.

Well, as already pointed out, we consider REACH together with HEALOS to be the key pillars of our regulatory submission.

The reason why we actually took HEALOS also to the FDA is because we wanted to have their input and to reflect their input in the design of our HEALOS study, so this is clearly the plan that covers the ear path sick part we will have here the surgery related part.

In the end it will all depend on the outcomes, so we feel pretty confident that with this combination with this package we will have for this orphan drug indication sufficient package..

Okay, great. Thank you for answering my questions..

Thank you. Our next question comes from Elliot Wilbur of Needham & Company. Please go ahead..

Thank you, good morning. I just wanted to ask a clarifying question around stratum B of the TACTT3 trial.

Given the interim futility analysis and obviously you're going to continue to enroll postacute patients in the three to six month period, it wasn't clear to me whether or not you would continue to roll up to a 450 patients using the new criteria or if in fact the percentage of patients in the three to six month period already enrolled would be sufficient to enable the analysis.

Then follow-up for Thomas maybe – just if you would mind maybe talk about what you think some of the key potential events or over the course of the year milestones and valued flexion points that we should be paying attention to. Thanks..

I will take the first part. So stratum B, we are continuing to enroll but we do not need to enroll another 300 as you are implying.

So what we would be doing is enrolling up to about additional 180 patients, something on that which is defining the final size of that but that means we will be in the end just about the 300 patients we had originally planned for the overall stratum B..

Is that sufficient?.

Yes, I believe that answers the question, thank you..

Okay. So with regards to news flow, well we definitely have additional news flow on AM-111, that is both from HEALOS as it will progress towards initiation for REACH more details. On the study and the overall concept was on 11th, as you know we will also compliment the financing here to fully finance this AM-111 program.

And we will then in fall we will have news flow related to enrollment of patients into TACTT2 and TACTT3. So there will be various important milestones throughout the year..

Thank you. At this time we have no further questions in the queue..

Okay, so thank you very much, operator, and thanks to everyone for joining the call today and your interest in Auris Medical, however big. And well, remember to take care of your ears. Thank you. Goodbye..

Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect..