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

Katherine Xu - William Blair Matt Keller - Credit Suisse.

Good day, ladies and gentlemen and welcome to the Vital Therapies’ Fourth Quarter 2015 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would like now introduce your host for today's conference Ms. Al Kildani. Sir, you may begin. Al Kildani Thank you, Shawnell. 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 operations, update and earnings for the fourth quarter and year ended December 31, 2015. On today's call are several members of Vital Therapies' senior management team, including Dr.

Terry Winters, Co-Chairman and Chief Executive Officer; Mike Swanson, Executive Vice President and Chief Financial Officer; Dr. Duane Nash, President; Rob Ashley, Executive Vice President and Chief Technical Officer; Dr. Jan Stange, Chief Medical Officer and John Dunn, General Counsel.

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

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 ultimately unsuccessful.

Please note that these forward-looking statements reflect our management's views only as of today's date and we disclaim any obligations, update any forward-looking statements expect 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.

Vital Therapies property makes available on its website 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 be available on our website later today. I would now like to introduce Dr.

Terry Winters, Vital Therapies' Co-Chairman and CEO..

Thank you, At least. And good afternoon, everyone. And welcome to our fourth quarter 2015 update call. First, a brief summary of the company for those of you who may be new to our story. We are developing ELAD, an extracorporeal, human allogeneic cellular therapy which could improve survival in acute forms of liver failure.

ELAD is at the phase 3 clinical trial stage and has orphan drug designation in the United States and the European Union. Assuming successful clinical results in the future, we plan to seek regulatory approval and to commercialize ELAD directly in most major markets of the world.

VTI-208, our first phase 3 trial which reported top line data last August, enrolled 203 subjects primarily in severe acute alcoholic hepatitis, but did not meet its primary or secondary survival endpoints. However, pre-specified analyses led us to the design of a new phase 3 trial called VTL-308.

The agenda for today's call will be to review first an update on the continuing analyses of data from VTI-208, our first phase 3 trial. Second the status of the VTL-308 trial. Third, our latest work to define ELADs mechanism of action.

Fourth, an update on corporate matters and finally a summary of our financial results for the fourth quarter and year ended December 31, 2015, after which we will open the call for Q&A Since reporting top line results for VTI-208 in August of last year, we have continued to collect survival data and to update our analyses in accordance with the predefined statistical plan.

Although the trial did not meet its primary or secondary endpoints, we continue to gain valuable information that belong to an outcomes in the study population. Our initial database lock was July 31, 2015. At that time we had a range of between six months and 27 months of follow up data.

The subjects are being followed in the VTI-208E extension study with periodic contacts to assess long-term survival and the incidence of cancer, and liver transplant and to assess quality of life.

We have now updated the survival data as of December 31, 2015, giving us an additional five months of follow up data, analyses of these survival data has viewed in some interesting observations. Number one, with the additional data there are no significant changes in the conclusions from the July 31, 2015 data.

Two, in the intent-to-treat population there were an additional or confirmed deaths, three in the control group and one in the ELAD group. In addition one subject withdrew consent and two were lost to follow-up.

The overall survival data for the primary endpoint of intent-to-treat Kaplan Meier analysis continued to show no difference between treated and control groups. Three, the pre-specified and post-hoc subsets which showed a strong trend or a significance difference in overall survival showed no significant changes.

And four, the Kaplan Meier analysis of the post hoc subset of 60 subjects that is the basis for the new VTL-308 trial maintained its p value of less than 0.01 and a hazard ratio of 0.28. Survival at 180 days was 89.7% in ELAD-treated subjects and 48.4% in control subjects.

There is of course no guarantee that these results can be replicated in the VTL-308 trial. We encourage you to take a look at the new Kaplan Meier curves in our Form 10-K filing for a visual representation of the overall survival curve in the intent-to-treat population and in the pre-specified and post-hoc subsets.

Overall, our continuing analysis of VTI-208 gives us greater confidence that we have identified the appropriate patient population for study in VTL-308 and we are more excited than ever to move forward with this trial.

In November, the VTI-208 results with a subject of a late break of presentation made at the annual meeting at the American Association for the Study of Liver Disease or AASLD in San Francisco by David Reich, MD, Professor and Chief of the Division of Multi-organ Transplantation and Hepatobiliary Surgery, Vice Chairman of the Department of Surgery, at Drexel University College of Medicine and Hahnemann University Hospital in Philadelphia.

The presentation was made for an audience of over 3000 liver physicians and staff. A paper describing the results of the trial is in preparation. The paper will be co-authored by the clinical investigators to enroll the most subjects in the VTI-208 study, representing major academic centers in the United States, United Kingdom and Australia.

Although the timing of the publication of this paper is out of our control, we hope to see it in print later this year. Moving on to the status of our VTL-308 phase 3 clinical trial. We remain on track to enroll the first subject in the first half of 2016.

In November, we received written responses from the FDA to our Type C briefing document that included a draft VTL-308 trial protocol. Those responses were similar, to our prior written guidance from FDA and we are proceeding with the trial. FDA suggested that we incorporate an event driven feature into VTL-308s design, which we have done.

VTL-308 enrollment will continue until at least 150 subjects had been enrolled and 55 deaths have occurred, which represents an event rate consistent with what was observed in the target sub population from VTIL-208. We have three sites opened in the US and they are actively screening for subjects.

We expect to begin opening trial sites in the EU soon. In preparation for initiating the VTL-308 enrollment, we held an investigators meeting in January for all US and EU sites that was attended by clinical representatives of 37 of the 40 sites. We are targeting for participation in VTL-308.

We were encouraged by the level of engagement and excitement demonstrated by our clinical investigators. In parallel in our work in launching the VTL-308 trial, we have continued our R&D work to characterize ELADs mechanism of action as described in recent scientific presentations.

Subject to the caveat that this laboratory work and has not yet been related to clinical outcomes, I would like to summarize some of the new findings.

In November we presented a really exciting poster at the AASLD meeting confirming that 11 key factors known to stimulate liver regeneration are produced by the VTL C3A cells and can be found in the fluid that has been circulated around the cells during production, known as conditioned media.

We also showed that this conditioned media actually reduced the rate of apoptosis or cell death of human hepatocytes in cell culture. This is significant because it could explain how ELAD stabilizes the liver and allows for its regeneration through preventing further hepatocyte cell death.

This poster is now available on our website and I would encourage you to review it at your convenience. We have also recently completed a metabolomics study of samples from 8 ELAD-treated and 8 control subjects from the VTI-208 trial and from the condition media from our cell growth process. We will be reporting on this at our future medical meeting.

But in summary, the work provides additional support that the VTL C3A cells in the cartridges performed some of the metabolic processes that comprise liver function and that’s resulting metabolite levels aren’t changed in the blood of ELAD treated patients.

This fluid [ph] helps to support the four main pathways that we believe are significant paths of ELADs mechanism of action. To recap, these are, one, provide acute-phase response proteins to help dampen the proinflammatory environment. Number two, promote liver regeneration by providing factors known to be associated with liver repair.

Three, to produce blood coagulation factors that may address blood clotting imbalances common in patients with acute forms of liver failure. And four, to assist in the restoration of liver function by providing liver-specific metabolism and detoxification capabilities.

We are currently focusing research efforts on the first two topics, namely modulation of information and promotion of liver regeneration, as our recent research suggest that these apnea [ph] to have the greatest impact on mechanism of action.

Before turning the call over to Mike Swanson, our EVP and CFO for a discussion of financial results, I would like to make a few comments on recent executive promotions, the investor lawsuits and finances. I am delighted to announce that Dr. Duane Nash has been promoted to President.

I will remain the CEO and Co-Chairman, and Duane will closely work with me on the strategic and personal aspects of the company. In addition, it is a great pleasure to recognize Mike Swanson performances of his CEO responsibilities by promoting him to become Executive Vice President and CFO.

As you maybe aware there have two securities class action complaints filed against the company alleging securities law violations. Two complaints are substantially similar and there are motions pending to consolidate the complaints into a single action and also to select a Lead Plaintiff.

We have not yet had any opportunity to respond to the complaints, but we intend to defend these lawsuits vigorously. As Mike will detail, we finished 2015 with a little over $83 million in cash. We believe that if we maintain our current plan, our existing cash would be sufficient to fund our operations into the first quarter of 2018.

This is about four to six months less runway than we projected on our last investor call, due to the fact that we have decided to reinitiate some of the programs we have tabled last fall, such as the long lead items necessary for filing the Biologic License Application or BLA.

We believe that the BLA work is prudent since it will save significant time to approval assuming a successful phase 3 trial.

As we have mentioned before, we currently expect to raise the additional capital over the next two years such as through at the market equity offerings, if that is not possible, we can reduce spending to help get us to top line data for the VTL-308 trial expected in mid-2018. Now I would turn the call over to Mike Swanson..

Thanks Terry, and good afternoon. As Terry alluded to, w ended December 31, 2015 with cash and cash equivalents of $83.4 million. Our average monthly cash usage for operations and capital expenditures during 2015 was approximately $4.4 million.

Assuming we limit our focus principally to the VTL-308 clinical trial, and related activities, we expect to average monthly cash usage in 2016 to be about $3 million a month. Our use of cash were very based primarily on the timing and enrollment of the VTL-308 trial.

Summarizing our results for the quarter ended December 31, 2015, the company reported a net loss of $9.9 million, a $0.34 basic and diluted loss per share.

Non-cash expenses for stock-based compensation, depreciation and amortization totaled $1.5 million in the fourth quarter of 2015, this compared to a net loss of $14 million or a $0.59 basic and diluted loss per share for the corresponding period in 2014 which included non-cash expenses of $1 million for stock-based compensation, depreciation and amortization.

For more details on these financial results please refer to our press release issued earlier today and our 2015 annual report on Form 10-K. With that I’d like to turn it back to Terry..

Thank you, Mike. Before we take your questions, I would like to summarize our key upcoming milestones. First, enrollment of the first subject in VTI-308 is anticipated in the first half of 2016, the top line data is expected in mid-2018. Second, additional presentations on ELAD mechanism of action are expected at medical meetings in 2016.

Third, the possible publication of the VTI-208 results in a peer-reviewed journal later this year. We would now like to open up the call to your questions. In addition to Mike Swanson joining me for the Q&A portion of our call are Dr. Duane Nash, President, Rob Ashley, Executive Vice President and Chief Technical Officer and Dr.

Jan Stange, Chief Medical Officer and John Dunn, our General Counsel. Operator, can you please provide instructions and open up the call for questions..

No problem. [Operator Instructions] And our first question comes from the line of Katherine Xu of William Blair. Your line is now open. Please go ahead..

Good afternoon.

I wondered whether you could help us review the assumptions, specific to the call, following assumptions for VTL-308?.

Yes. Rob, could you take that please..

Sure. Katherine, the prior assumptions was built originally around the outcome of the VTI-208 study which have reinvestigated that outcome exactly would have been significant with about 70 patients also in the studies, between the two arms [ph] and one, two arms randomization.

However, we decided that we would aim for 150 patients to really ensure that the study was extremely well powered, given our assumptions hazard ratio and variation in the study. So with a 150 patients in the study depending on the hazard ratio the study is powered between 0.95 and 0.99 to achieve significant less 0.05 outcome..

Did that answered your question, Katherine?.

Yes. Thank you..

Thank you. You're welcome..

Thank you. And our next question comes from the line of Matt Keller of Credit Suisse. Your line is now open. Please go ahead..

Hey, guys, thanks for taking the questions and congrats Duane and Mike on the promotions.

Just on the added 208 follow up data that was in today's release, can you give us any color on the cause of deaths and the control and new add-on's and anything you can tell us about the length since you've had a range of follow up times, how long past the index hospital status that’s occurred?.

This is Rob. In general sense the patients die from the several [ph] things that you would anticipate how these patient to die from and have multi organ failure, that a failure [indiscernible] and so on.

There is no significant difference between the causes of death, that the ELAD-treated patients and the controlled patients when you got into these out times that long past - that the period of time of ELAD-treatments.

If you look at Kaplan-Meier test, you can assess the kinds of death because with each event it’s characterized by a step down in the Kaplan-Meier test and so those particularly four subjects times event would be identified in the Kaplan-Meier test..

Matt. So this Duane. So maybe a little bit more color. So if you remember what we presented in August, we presented data from patients through July 31, and the last patient was enrolled as the end of January.

So at that point we had at least 180 days on every single patient and what would have occurred right now would have been deaths that would have occurred subsequent to 180 days. Now the conventional wisdom about acute alcoholic hepatitis is that it’s about six months process.

So chances are patients who does have acute alcoholic hepatitis, if they are going to die, they probably would die in the first six month.

So I don’t have that at the tip of my fingers when these four deaths occurred, but we do know they occurred after six months and they could be a variety of cause, there could be car accident, there could be a heart attack or there could be a separate episode of acute alcoholic hepatitis..

That makes sense. That’s helpful.

And then I guess just one follow up on the enrollment patient, the three center so far, when do you think that you'll have all or most of all the US sites open enabled to enroll?.

Matt, that’s a good question. It’s always difficult to anticipate that. In general terms it takes about six months to open up a site these days and quite frankly, the process is getting longer. There are increasing layers of bureaucracy in the sites and in the process in general.

And I would be very disappointed if we couldn’t have the sites, a large majority of the sites up and running by the middle of this year. But I doubt that we could get up to the full 40 sites by then. But it is a prolonged process and we have to have a great deal of patients in working with them..

Got it. Thanks for taking questions guys..

Thanks. Good question. Thanks, Matt..

Thank you. [Operator Instructions] And I am showing no further questions at this time. I will now like to turn the call over to management for some closing remarks..

Thank you, operator. We appreciate it and thanks to everybody for being on the call today. We look forward to the next one at the end of the first quarter. Thank you. Bye..

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day..