Al Kildani - Vice President of Investor Relations and Business Development Terry Winters - Co-Chairman and Chief Executive Officer Mike Swanson - Chief Financial Officer Duane Nash - Executive Vice President and Chief Business Officer Rob Ashley - Executive Vice President, Chief Technical Officer Jan Stange - Chief Medical Officer.

Bruce Nudell - Credit Suisse Katherine - William Blair.

Good day ladies and gentlemen, and welcome to the Vital Therapies Fourth Quarter and Full Year 2014 Financial Results Conference Call. At this time, all participants are in listen-only mode. Later we’ll have a question-and-answer session and instructions will be given at that time. [Operator Instructions].

As a reminder, this conference call is being recorded. I’d now like to turn the call over to Mr. Al Kildani, Vice President, Investor Relations and Business Development. Please go ahead..

Thank you, Nicholas. Good afternoon, my name is Al Kildani, Vice President of Investor Relations and Business Development. Thank you for joining Vital Therapies' management team on our conference call to discuss the Company's financial results for the fourth quarter and fiscal year ended December 31, 2014.

On today's call, are several members of Vital Therapies Senior Management, including Dr. Terry Winters, Co-Chairman and Chief Executive Officer; Mike Swanson, Chief Financial Officer; Dr. Duane Nash, Executive Vice President and Chief Business Officer; Rob Ashley, Executive Vice President and Chief Technical Officer and Dr.

Jan Stange, Chief Medical Officer.

Before we begin, we would like to remind you that some of the statements that we make today will include forward-looking statements such as statements related to the timing and conduct of our clinical trial programs and expected top-line results release, the timing of certain development goals including regulatory filings, our projected cash runway and plans and objectives of management for future operations.

These forward-looking statements are subject to a number of risks and uncertainties that could cause actual events or results to differ materially, including the risk that our clinical trials program is delayed or is ultimately unsuccessful.

Please note that these forward-looking statements reflect our managements reviews only as of today’s date and we disclaim any obligation to update any forward-looking statements except as required by law. Please refer to our SEC filings for a more detailed discussion of the risk factors that could cause actual events or results to differ materially.

We encourage investors to use our Investor Relations Web site as a way of easily finding information about the company. Vital Therapies promptly makes available on this Web site reports that the company files or furnishes with the SEC, corporate governance information, press releases and other posters and presentations.

A replay of this call will also be available on our Investor Relations Web site later today. I would now like to introduce Dr. Terry Winters, Vital Therapies' Co-Chairman and CEO..

Thank you Al and good afternoon everyone and welcome to our fourth quarter earnings call. Thank you very much for joining us today. First a brief summary of the company. We are developing ELAD, a bio-artificial liver system which incorporates a unique allogeneic cellular therapy and could improve survival in liver failure.

We have two Phase 3 trials underway, ELAD has orphan biologic designation in United States and EU and we plan to commercialize it directly in most major markets of the world. I’ll now summarize the status of our first Phase 3 trial VTI-208.

This is a randomized controlled open-label trial evaluating the ELAD system in subjects with alcohol-induced liver decompensation. We reached our target enrollment of 200 subjects in VTI-208 trial on January 28th, due to subjects still in the screening process enrollment freeze on January 31 at 203 subjects.

The subjects were enrolled of 40 clinical sites in the United States, United Kingdom and Australia on work period of 22 months. The primary end point of the trial is overall survival up to at least 91 days assessed by a couple of minor analysis.

The final subject will complete the 91-day visit in early May and we expect database lock in the third quarter. At database lock medium time subjects will have been in the trial to over one year.

The baseline characteristics of subjects enrolled in the trial will be described in the poster that has been accepted for o presentation at the European Association for the study of the liver meeting known as EASL this April. We are very pleased that VTI-208 enrolled its subjects in 22 months which was within one month of our plan.

This trial was conducted mainly in each hospital's intensive care unit with critically ill subjects and required the active involvement of the investigators and hospital staff as well as our clinical teams. I would like to salute the dedication and the hard work of everyone involved especially including the patients and their families.

These patients had limited therapeutic options and were ineligible for liver transplantations. We are all here for the patients and the prospect of saving lives is what drives us. We plan to release top line results of the VTI-208 trial after database lock both expected in the third quarter.

This is about one quarter later than we had previously projected due to our decision to wait into database lock to begin analyzing the results. Our decision to wait until late database lock needs some explanation particularly as this is an open label trail.

Our plan was to begin analyzing the data to produce the top line results soon after the last patient completed to 91 days of the trial which would have been in mid May. However, when we saw FDA's comments on this plan it was evident that such an early look carried a risk of compromising to study results.

We have therefore decided to take the conservative root and to ways into database lock to be safe. This is in line with the usual practice in the industry for pivotal clinical trials. It will take us about three months after last patient's last visit to achieve database lock hence the third quarter date for release the top line results.

The top line analysis that will be disclosed in the press release will reveal whether the trial has met or has not met its primary end point and our preliminary conclusions on safety. So more details including plans for filing the Biologics License Application or BLA is appropriate, will then be released sooner after.

Then we intend to present the results at a medical conference in the fold. With respect to investor relations on the recommendation of our legal counsel we will not be discussing any aspect of the VTI-208 clinical trial with the public or the financial community outside of these prepared remarks until the top line results of the trial are announced.

We will look forward to the trial results in the third quarter and we appreciate your understanding and respect for this policy.

Our second Phase III trial VTI-210 is a randomized controlled open label survival trial in severe acute alcoholic hepatitis patients, thereby suspect if this trial due to strong results it will be sufficient by itself to gain EU approval. With an event driven design we are targeting enrollment of a minimum of 150 subjects.

As of yesterday VTI-210 had six subjects enrolled including our first subjects in Spain and 18 sites open to enrollment. There [overlap] of VTI-208 clinical trial is fully enrolled, we expect the opening of VTI-210 sites and enrollment of subjects to accelerate over the next few months up to its target of over 40 sites.

Because we are now waiting for database lock to start data analysis we expect the top line result in this trail in early 2017.

In addition to the VTI-210 sites currently open in the U.S., UK and Spain the recent approval of our German Clinical Trial Authorization or CTA means that we could begin to open sites in Germany where we are targeting 10 sites. The addition we are planning to conduct the trail in additional countries in the EU.

We explain in our last earnings call that the results of the UK National Institute for Health Research funded STOPAH study. They give us the opportunity to change the design of VTI-210. Please recall that STOPAH was an 1,100 subject randomized trial which showed no long-term survival benefit in acute alcoholic hepatitis from steroid therapy.

We have now amended the 210 protocol to eliminate the requirement for subject to receive seven days treatment with steroids before enrollment. We are implementing this protocol change in U.S.

and we're pleased to announce that we were recently advised that the protocol amendments are acceptable to the Scientific Advice Working Party or SAWP of the EMA. The subjects will now be observed for seven days on standard of care alone which may or may not include steroids. We expect this change to expand the pool of potential subjects.

Our third clinical trial VTI-212 is a Phase 2 single arm survival trial in fulminant hepatic failure and surgery induced liver failure. As of yesterday, four patients were enrolled in this trial and 10 sites were opened for enrollment with others in process. We continue to expect top-line results in 2016.

With completion of enrollment in VTI-208, we expect opening of sites and subject enrollment to accelerate in VTI-212. The last several months have been a very active time for our regulatory team.

The Paul Ehrlich Institute in Germany the conference of regulatory authority in that country advised us in December that our CTA was approved which enables us to begin opening clinical sites in Germany for VTI-210.

The EU has a centralized approval process; the clinical trial process is country-by-country with each country in the EU requiring a different CTA. We also submitted a chemistry manufacturing and controls or CMC regulatory meeting request in package to FDA and received the response in December.

This response addressed all of our questions in enough detail that we did not need to proceed with the scheduled meeting with FDA.

The response covered CMC items related to the potential PMA filing and commercialization for both the biologic and the delivery cost in the ELAD System and are consistent with the company's current plans as well as prior interactions with the agency.

We are continuing to expand our work to better define the biochemistry and potential mechanisms of action of ELAD in liver failure. We have added significant internal expertise in protein and metabolic chemistry as well as in genetic analysis.

With these resources we have begun further characterization of the capabilities of our C3A cells and we are developing a body of evidence to demonstrate their ability to replicate the aspects of liver function.

On that topic, a second poster has been accepted at AASLD in Vienna in April which describes work on identifying the expression of key genes of the liver's cytochrome P450 enzyme system in our C3A cells.

A third poster was just accepted for the International Liver Transplant Society meeting in July of this year showing some of the critical immunologic proteins our cells produced. We expect to continue this mechanism of action work with more publications and presentations in the near future.

I'd like to close by highlighting our key milestones in future. First top line results in VTI-208 clinical trial expected in the third quarter. Second, presuming positive results from the VTI-208 trial filing the BLA in the first half of 2016.

Third, opening over 40 clinical sites in the U.S., UK, Spain and Germany for the VTI-210 trial by year-end, we announced the top-line results early in 2017. And finally announcement of top-line results for VTI-212 in 2016. Now I'd like to hand it over to Mike Swanson our Chief Financial Officer to provide an update on our financial situation.

Mike?.

Thanks Terry and good afternoon. With respect to finance, we ended 2014 with cash and cash equivalents of $102.2 million. Our monthly burn rate during the fourth quarter was approximately $3.5 million. We currently have about 92 million in cash.

As we've previously discussed, the company strengthened its financial position during the fourth quarter with the completion of a follow on offering.

In total, we sold 2.050 million shares of our common stock at a price to probably $17.50 per share resulting in net proceeds to the company of approximately $33.4 million after underwriting discounts and commissions. Based on our current business plan our existing cash would fund our operations into the third quarter of 2016.

This is a change from the fourth quarter of 2016 as our last projection reflecting higher expected cost principally relating to preparations to file BLA in the events of positive VTI-208 results.

However, if VTI-208 trial has good results and we proceed to file the BLA and begin to prepare for the future market launch, we would anticipate increasing our burn rate and raising additional funds. If VTI-208 results do not support the BLA filing; we'd expect to focus on conserving cash in order to enable completion of the VTI-210 clinical trials.

As a reminder, a connection with our following offering all of our executive officers, Board members and certain of our shareholders including our largest beneficial stockholder entered into lock-up agreements with the company fairly committed not to sell any shares prior to the date of issuance of our press release that includes the top-line results from the VTI-208 Phase 3 clinical trial.

Summarizing our results for the year ended December 31, 2014. The company reported a net loss of $47.7 million, this compared to a net loss of $31.4 million for 2013. The increase in the net loss in 2014 as compared to 2013 primarily reflects an increase in the Phase 3 clinical activities.

We expect our cost to continue the increase in 2015 as we prepare and analyze the data from our VTI-208 clinical trials later in the year as participation and enrolment in our VTI-210 and VTI-212 clinical trials increase and as we incur cost and preparation for a potential BLA filing.

For more details on these financial results, please refer to our press release issued earlier today and our annual report on Form 10-K. With that I turn it back to you Terry..

Thank you, Mike. As you can tell these are exciting times for Vital Therapies and we look forward to updating you on key developments in the upcoming months including Phase 3 data from the VTI-208 clinical trial. With that, we’ll open up the call to your questions. In addition to Mike, joining me for the Q&A portion of this call are Dr.

Duane Nash, our Executive VP and Chief Business Officer, Rob Ashley, Executive VP and Chief Technology Officer and Dr. Jan Stange, our Chief Medical Officer. So operator, could you please provide instructions and open up the call for questions..

I have three questions; the first one you may or may not be able to answer.

Firstly, I think people would want some reassurance that the delay in the data analysis isn’t driven by just starting to have more time for separation survival curves? The second is really about if this is VTI-208 is positive, are there parameters around which should we think it would this be sufficient.

How should we think about, how the FDA would view it in terms of being sufficient for approval, like how big separations survival curves? And thirdly, could you just comment on your latest thinking on U.S.

reimbursement?.

Firstly to your first question, now there is nothing in that, we’re not doing this reassessment of the curves, basically we’ve had an ongoing dialogue with the FDA about this topic. And we have initially concluded but we could begin to analyze the data off to the last patient that have been enrolled. So this is an open-label study.

But subsequently quite frankly we have been unable to obtain assurance from FDA that such an analysis would not compromise the interoperability of the data. I am sure you're aware of at least one reason high profile case here and this area is a particular concern to the FDA.

So, we've decided to take the safest and most conservative approach of liking for data base lock. So I hope that addresses that… How does the FDA view this? I prefer not to get into that, we did say we really don’t want to talk about to relate trial and the analysis where of there will be plenty of time for that in the future..

And on the reimbursement side?.

Yes, I was just getting to that. On the reimbursement, I really would like to call on Duane to give us some comments on reimbursement..

So, we've obviously continued to do a lot of work in this area, but the end result is that we’re thinking the same exact price range as we were earlier as disclosed in the SEC filing. So somewhere in the low six figures, obviously the price that we go out with it at the end will to some extent be depended on where our data sits.

But we remain as confident as ever that our initial price target is reasonable..

And is it so based on the idea of using outlier payments et cetera. .

For some portion of our patients based on the tracking we've doing so far it appears that most of our patients are going to be private pay patients with private terms at least that appears to be the case. And outlier payments will clearly play a big role in the Medicare portion in early part of reimbursement if that answers your question..

Our next question comes from the line of Katherine with William Blair. Your line is now open. Please proceed with your question..

With regards to the 208 study, can we just have a brief idea of the sort on the time line perspective of a treatment? So the patients were beyond ELAD for about five days. And how long usually is the hospital stay and then when usually are they discharged and then when there are 90 days usually they're at home or things like that.

Could you just give us some kind of average on those time points?.

Katherine we don’t have that for the 208 trial. And I think we mentioned we really didn’t want to get into that. I think what we can talk about is to quote from the protocol which is posted on clinicaltrials.gov.

And you can go back also to the VTI-206 trial and what we're targeting of course is a five day treatment which I think that answers your main question..

And the for [210] on the design change if you’re just changing let's say seven day on standard of care but that probably in the end will still be mostly steroid. What is the thought behind that and then can you just make it pretty much like it's slow rate, to eliminate those seven days..

Well it won't be I don’t think it will mostly be steroids but I'd like to hand it over to Rob..

I think there will still be a lot of people who carry on with treating with steroid such as despite the STOPAH data difficult to change treatment practices. I think what this allows us to do though it's open the study up to those patients that would be ineligible for steroids.

And there are variety of reasons why somebody might be ineligible for steroids that’s why we feel that this increase is a subject tool. And it also -- there are some places that simply for want of better word don't believe in steroids.

So again those sites would be much keener to participate in the study if they weren’t forced to administer something that they don’t believe in. So that's the rationale and that’s why we believe that it will increase the pool of subject that’s available for the study..

Who are usually not eligible for steroids?.

Patients for example that have a history in infection, certain other conditions that allergies inside them make them not good candidates to steroid therapy as it does..

And lastly for 212 can you just detail little bit on the methodology about comparison with historical or [cash] control..

Sure we're working with couple of databases there aren't that many large databases fulminant hepatic failure patients.

For example, we're working with one of the teams that has a database like that and we're developing a couple of matching strategies and in fact we're discussion with FDA about these strategies, they're extremely interested in this area of clinical trial development.

We can match one on one we can match the [pills], we can match to small pills certain number of strategies available to those and we're already adopting them this early stage of the study..

And lastly since the 210 study data top line is sort of delayed into 2017.

I'm just wondering from a financial guidance perspective are we still looking at that the current cash could actually cover the top line release of all three studies?.

Mike you want to comment on that?.

We mentioned in the prepared statements we right now project cash flow takes out to the third quarter of 2016, so we wouldn’t quite get there. However, if the 208 data is not positive and we need to get through 210 or 208 is not standalone. We will look for ways to conserve cash and get to the completion of VTI-210..

[Operator Instructions]. Our next question comes from the line of Salveen Richter with SunTrust. Your line is now open. Please proceed with your question..

This is [Lucas] for Salveen and thank you for taking the questions. So two questions please here. First, can you just walk us through the steps that are needed at this point towards the data lock up and the data analysis? And secondly with respect to the base line characteristics of the 208 enrolled patients.

Can you provide us some high level comments whether the demographics are in line with your expectations? And do you have any color on the AAH versus non-AAH ALD patients?.

[Lucas] we really don’t want to get into the details of the 208 trial and I would prefer not to be addressing those questions..

And what about the steps that are needed for the database lockup and the data analysis?.

Well that is really simply conventional steps. I don’t see anything special here. Yes, go ahead Mike..

Yes regarding, as you know we got three months of follow up with these patients, so last patient last date is in May. And there's certain amount of data here to clean up, a lot of data that we gathered these are critically ill patients there is lot of calmative medications and things like that.

So we're working through the process of soft locking individual patients until the end we have all of the patients locked and checked just like this were any other study. And we believe that that process probably will take us around about three months after the last patient last visits, so that's the rationale for what we're proposing at the moment..

And then can you comment on the extent that the sites involved in the 208 are now rolling over into the other ongoing trials?.

I think we can say that it's happening at a healthy rate..

And then the last, a lot of the recent presence that you've had at conferences and also at AASLD back in November.

Can you just tell us something about the increased awareness of ELAD among physicians? How do you see the enthusiasm for the 210 and the 212 studies?.

We see that as being good. I think I would illustrate that by the sites we've opened and by the acceleration on enrollment in trials..

[Luca] one other quick point is that we -- I think as we mentioned in the conference call, we will be disposing or discussing the VTI-208 base line data in our poster presentation at the EASL conference at the end of April in Vienna and apart from anything else we’re embargoed from talking about that in the short-term, so data will be released then.

And the abstract will be published along with the other EASL abstracts I think the end of the first week of April somewhere then you can see on the EASL Web site..

Isn’t it two weeks before?.

Yes, a couple of weeks before the meeting, so you can just look that up on the EASL Web site..

There are no further questions in the queue. I'd like to turn the call back over to management for closing remarks..

Again I'd like to thank everyone for joining us on this quarterly conference call -- this quarterly conference call. If you do have further questions we'd appreciate if you could reach out to Al Kildani, VP of Investor Relations. So that concludes the call. Thank you very much everybody. Bye..

Ladies and gentlemen thank you for your participation in today's conference. This does conclude the program. And you may now disconnect. Have a good day everyone..