Dave Rosa - President and Chief Executive Officer Jeff Mathiesen - Chief Financial Officer Kimberly Oleson - Senior Vice President, Clinical Affairs Molly Wade - Vice President, Worldwide Patient Recruitment and Marketing.

Tom Gunderson - Piper Jaffray Jan Wald - Benchmark Josh Jennings - Cowen Jeff Chu - Canaccord Genuity Suraj Kalia - Northland Securities Steven Lichtman - Oppenheimer & Company Karen Koski - BTIG.

Ladies and gentlemen, thank you for standing by and welcome to the Sunshine Heart Third Quarter 2014 Earnings Conference Call. Before we get started, I would like to remark briefly about the forward-looking statements.

Except for historical information mentioned during the conference call, statements made by the management of Sunshine Heart are forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve known and unknown risks and uncertainties that are based on management’s beliefs, assumptions, expectations and information currently available to management.

Those risks include, but are not limited to risks associated with the possibility that the company’s clinical trials do not meet their enrollment goals, meet their endpoints or otherwise fail that regulatory authorities do not accept the company’s application or approve the marketing of the C-Pulse System, the possibility that the company may be unable to raise the funds necessary for the development and commercialization of its products that the company may not be able to commercialize our products successfully in the EU and other risk factors described under the caption "Risk Factors" and elsewhere in our filings with the SEC.

By providing this information, we undertake no obligation to update or revise any projections or forward-looking statements, whether as a result of new information, new developments or otherwise.

You should review cautionary statements and discussion of risk factors included in our press release issued today our Form 10-Q for the quarter ended June 30, 2014 or Form 10-K for the year ended December 31, 2013 as well as our other filings with the Securities and Exchange Commission under the titles Risk Factors or cautionary statements related to forward-looking statements.

For additional discussion of risk factors that could cause actual results to differ materially from our current expectations and those discussions regarding risk factors as well as the discussion of forward-looking statements in such sections are incorporated by reference in this call and are readily available on our website at www.sunshineheart.com.

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 is being recorded. At this point, the company will now present prepared remarks.

I would now like to turn the call over to Dave Rosa, Sunshine Heart’s President and Chief Executive Officer. You may begin sir..

Thanks, operator. Good morning, everyone and thank you for attending Sunshine Heart’s third quarter 2014 results conference call. With me today are Jeff Mathiesen, Sunshine Heart’s Chief Financial Officer, Kimberly Oleson, Senior Vice President of Clinical Affairs, and Molly Wade, Vice President of Worldwide Patient Recruitment and Marketing.

It is real pleasure to provide today’s update as we have made tremendous progress over the past quarter on multiple fronts that will greatly impact the company moving forward.

Clearly, COUNTER HF study enrollment is top of mind for all of us involved with Sunshine Heart and to this end we have achieved the double-digit enrollment threshold, which was projected during our Q2 conference call.

This milestone further validates the significant number of patients who suffer from Class III heart failure and can potentially benefit from C-Pulse implantation and therapy. In brief, here is the snapshot of progress with respect to the COUNTER HF study during the quarter.

The company experienced dramatic increase in the number of patients identified as potential matches for the COUNTER HF study, which allowed us to reach the double-digit enrollment. To-date, 12 of the 19 COUNTER HF sites have enrolled their first patients and all 19 centers have identified at least one patient for enrollment.

While some centers have had a 100% patient consent rate, others have experienced a lower consent rate. One of our principal investigators is working directly with those sites that have not yet consented any patients, but have identified multiple patients they believe are eligible to participate.

We believe this situation is addressable and applies to the physician’s presentation of the therapy to 2 patients.

While 19 total sites, up from 16 last quarter, were activated and able to enroll patients, challenges remain with clinical study budget amendments as many centers are increasingly concerned about private pay insurance companies refusing to cover the cost of the implantation procedure and follow-up visits, even though Medicare has agreed to reimburse the procedure.

We expect to find replacement centers for these sites as the cost of the company could be uncapped and significant at these specific centers. However, we do not believe this will impact us longer term.

To summarize the COUNTER HF study status, I just want to be clear that we absolutely expect sustained growth in enrollment numbers which are reflected in the doubling of quarter-over-quarter enrollment.

However, I would like to point out that the only possible exception to this in the near-term may be the fourth quarter as patients may delay their decision to move forward with implantation and therapy until next year as many prefer to spend the holidays with families and not in the hospital.

Given our technology is elective, not emerging we expect hesitancy during the holiday season as well as fewer opportunities for surgical procedures given physician and staff vacation schedules. Fourth quarter aside we expect to see the continued trajectory of enrollments continue in the first quarter of next year.

And finally, as many of you know, the company shared its strategy to approach the FDA regarding the need to conduct an interim analysis of the COUNTER HF data after approximately half of the patients had been enrolled in the study. We expect to have a decision from the FDA by the end of the 2014 calendar year.

If the FDA grants our request, the study timeline could potentially be reduced by one year. Moving to the OPTIONS HF European post market study, the third quarter saw the activation of four additional sites bringing the total number of study centers to 13.

Although we did not perform any additional implants in the third quarter, the company implemented management and personnel changes that improved the overall efficiency and performance of our study team. Five of the centers have already identified patients with one case already scheduled next month.

The company is bullish on future enrollment in the OPTIONS HF study and expects to see momentum, increased momentum in the first half of 2015. The OPTIONS HF study results from Europe and Canada consistently demonstrate improved performance over our U.S. pilot study.

Exit site infection rates were reported at 8.3% approximately 1 in 12 patients, which is an early indication of remarkable improvement over our prior U.S. feasibility study which had a 40% exit site infection rate. These rates do not account for patient weaning as it could impact outcomes if patients are re-hospitalized due to worsening heart failure.

However, one patient who was previously weaned continues to do well and has been asymptomatic. Completion of six minute walks and increases in the ejection fraction without stroke clotting or bleeding were also noted in the OPTIONS HF patients.

In regards to re-hospitalization rates due to worsening heart failure, our early results show an overall rate of 16.7% re-hospitalization or 2 in 12 patients at sites outside the U.S. This is significant as Medicare recently mandated that effective October 4, 2014, 2,610 U.S.

hospitals will be penalized for reporting high rates of unplanned re-hospitalization due to worsening heart failure. It is expected these reductions in payments will save CMS $428 million. Currently, 25 of the 30 sites listed to participate in the COUNTER HF study will be penalized.

These penalties are based on unplanned readmission occurring within 30 days after discharge for one of five conditions heart failure, heart attack, pneumonia, chronic obstructive pulmonary disease and hip, knee arthroplasty for patients discharged between July 10 and June 2013.

Early results indicating a low heart failure readmission profile along with the non-blood contacting nature of the technology placed C-Pulse in the company in a unique position in the Class III ambulatory Class IV heart failure space.

Before handing the call over to Jeff who will provide a financial update, I want to briefly provide an update on our fourth quarter exposure at upcoming medical meetings.

In the fourth quarter, we expect to present oral updates on clinical data from the OPTIONS HF study at the American Heart Association, where it will be our first time in attendance, the British Society for Heart Failure and the EUMS, the European Union Mechanical Support meetings.

I will now turn the call over to Jeff Mathiesen who will provide a financial update..

Thanks Dave and good morning everyone. This morning we released our unaudited financial results for the third quarter and first nine months of 2014. I will now walk you through a few of the financial highlights.

The company’s results for the three and nine months ended September 30, 2014 included reimbursement revenue of $59,000 and $118,000 respectively compared to $59,000 in each of the comparable periods in the prior year for implants of the C-Pulse System under the U.S. COUNTER HF study.

As we have previously stated, we will monitor reimbursement activity and modify our reimbursement model if and as appropriate based upon our actual experience. Accordingly, we are now modeling approximately 30% of U.S. implants under the pivotal study to be eligible for reimbursement and therefore billable by Sunshine Heart.

As we progressed through the study, we will continue to modify our model if and as appropriate based upon our experience.

Given that we continue to implant our devices under the clinical studies in both the United States and Europe, we are currently recording all costs associated with our devices directly to research and development expense as incurred. (Technical Difficulty) periods presented.

Excluding equity compensation costs non-GAAP operating expenses in the third quarter of 2014 totaled $5.5 million..

Ladies and gentlemen, please standby. Your conference call will resume momentarily. Once please standby, your conference call will resume momentarily..

Andrew, this is Jeff.

Did we lose connection there?.

Yes, sir. Yes, you did, but you are back on now and the conference is live..

Thank you..

You are welcome..

Okay, thank you. I will go back and think to get to where I think we cut off. So, I was talking about our income tax benefits. We received an income tax benefit of $136,000 for the State of Minnesota research and development tax credit during the third quarter of 2013 for the 2012 tax year.

As we have previously disclosed, the Minnesota R&D tax credit is not refundable to taxpayers active by 2012 tax year. Income tax benefits from the receipt of R&D tax credit refunds in Australia totaling $265,000 were recorded in the first nine months of 2014 compared to approximately $1.1 million received in the same period last year.

These refunds related to R&D spending activity in Australia for the 12-month periods ending June 30, 2013 and 2012 respectively. As we have previously communicated, we have significantly reduced the level of R&D activity in Australia in recent periods and expect future (Technical Difficulty).

We have not yet completed an analysis of the R&D spending for the 12-month period ended June 30, 2014 to determine if a refund for that period is available.

Compensation costs, non-GAAP net loss in the third quarter and nine months ended September 30, 2014 was $5.4 million or $0.32 per share and $16.7 million or $0.99 per share respectively compared to losses of $5 million or $0.39 per share and $12.5 million or $1.11 per share in the comparable periods of 2013.

As reported, our net loss was $0.36 per share for the quarter and $1.12 per share year-to-date as compared to losses of $0.47 per share and $1.29 per share in the same periods of 2013.

Cash used in operating activities totaled $17.4 million in the first nine months of 2014 compared to $11.8 million in the first nine months last year, with the increase driven primarily by increased clinical and research expenses. We ended the third quarter of 2014 with approximately $36.6 million in cash and no debt.

At quarter end, we have 16.9 million shares outstanding and an additional 4 million shares reserved for outstanding stock options, warrants and restricted stock use. Going forward, we expect to see minimal revenues from reimbursement of implants in the United States for the remainder of the current year.

We have not modeled any revenue from implants in Europe for 2014 and are targeting 2015 phenomenal reimbursement to begin to be established in individual countries there. We expect our quarterly operating expenses and cash burn will be above levels in comparable periods of prior years as we support our studies in the United States and Europe.

We believe that our equity compensation expense will fluctuate from period to period based upon the timing and structure of equity of awards and fluctuation of our stock price. We have not accessed our ATM or equity line of credit facilities. With that said, I will now turn the call back over to Dave..

Thanks, Jeff. I want to apologize one of the points that I missed, which is probably the most important is to make you all aware that our enrollment in the third quarter was 14 patients. I missed that sentence. So, I apologize for that.

So, this concludes our prepared remarks and I will now turn the call over to the moderator to commence the Q&A portion of this call..

Thank you. (Operator Instructions) And our first question or comment comes from Tom Gunderson with Piper Jaffray. Your line is now open..

Hi, good morning. So, Dave in your prepared remarks, I understand that the enrollment increased significantly and it’s nice to see that ramp up, but then you also commented on two push backs, one is from hospitals that are worried about private pay and one is on some docs not being able to enroll as well as others.

I get that docs are going to have a bill curve on their enrollment and I get that you are working on that, but on the private pay sampling, could you give a little bit more color on that as I would assume that for the cost of these that are pre-approval and that process is going on slow as it maybe for some hospitals? And do you have any specialists or any outside firm that’s helping you get reimbursement or for the hospital in the clinical trials? Thanks..

Thanks, Tom. So, we do have an external reimbursement consultant who has worked with the large medical device companies, cardiovascular companies in town. And she is available to work with these centers to ensure that would help them be able to qualify for Medicare reimbursement. And we have had no one rejected for Medicare reimbursement.

The issue that’s come up after the fact, after some of these contracts have been signed is that centers in these trials have begun to see increasingly, I will say negative results regarding reimbursement for devices, even if they are approved or actions they approved even if they are able to get reimbursed under CMS, some of these private insurance companies and Blue Cross Blue Shield is one of them has come back and refused to pay.

And it becomes a big issue, because centers get very concerned, especially under the Affordable Care Act, they get very concerned about things like follow-up visits.

So, if a patient is involved in the study for 5 years and they are coming back on a monthly basis, the procedural costs are one thing, but who is going to pay, are they going to be able to get reimbursed every time that patient comes back, while they are enrolled in the trial.

So that’s the concern and there has been increasing number of rejections by private insurance companies, it’s not that all of them will windup rejecting to provide reimbursement for the procedure or follow-up care, but it’s definitely come up the latter in the finance departments in these hospitals and they have come back to us and in some cases wanted to ask to basically agree to provide reimbursement for all this on an uncapped basis.

So, companies, I don’t know any companies that can do that over a long period of time and we certainly don’t want to sign ourselves up that have patient costs of $200,000, $250,000. We’d never be successful doing that.

So, in most cases, we have been able to go back and negotiate at least some limits, but it’s becoming more of an issue us as some of these sites come back to us after the fact..

Thanks.

And then on the FDA, last quarter you said that you had submitted something this quarter, you repeated that and said you hope to have an answer by the end of the year, you probably don’t want to give us the detail of what’s going on between you and the FDA on that right now, but is it fair to say that conversations are ongoing and that they are aware and paying attention to your submission?.

The short answer is yes..

Okay..

So, we have had an open dialogue, we feel as confident as you are going to feel when working with the FDA that we will be able to report on this by the end of the year or early next year, but yes, we are definitely in discussions with them and feel good about it.

And I think Kim may want to add – is it Kim or Molly that wants to add one more thing about reimbursement? Kim..

Yes, this is Kim. Hi, Tom. Good morning..

Hi, Kim..

So, may be one more comment on the request for some site to renegotiate their contract due to private payer issues. We have actually been successful in negotiating many of these contracts through to an agreeable amount. It’s just only a say a small proportion where they are asking for almost an uncapped expense.

So, I think we are working through the issues and I also think too because some of these Medicare penalties are now been established and put into place, it just raises the level of the awareness at the C-suite side of the institutions that we need to look at this long-term, but certainly we are pretty confident that moving forward with our therapy, we can offer an alternative that addresses, if you will, one of the biggest concerns on the payer side.

That’s actually what our ultimate goal is. So, I am glad that we have been able to negotiate that through. And then the second point about the conversations with the FDA, I am feeling very good FDA wants to work with us. So, I am open to hear back. I am anxious for the day. We can finally finish that conversation..

And Tom, one thing about enrollment since you mentioned it, I mean not only have the enrollment numbers gone up, but the number of patients that have been coming in to the clinics to visit with the doctors is going up dramatically.

So, what it tells us is that more and more sites now are beginning to figure out the type of patients that are most appropriate for this therapy or that they think are most appropriate.

So, the volume of patients is clearly the up substantially over what we saw in the early part of year and we really expect that to continue, especially as we get on more and more centers..

Okay, thanks. That’s it for me..

And our next question or comment comes from the line of Jan Wald with Benchmark. Your line is now open..

Thank you. Good morning everyone. I guess, just following up what Tom has asked about enrollment, it seems as if I guess the – I guess one question would be do you see a slowdown in – you have more patients, more volume, which we also – you also have more issues with the payer side.

Do you see that’s slowing you down at all or do you think the volume is going to more than make up for whatever happens with the private payers?.

No, I don’t think it’s going to slow us down. I mean, what it’s done is, it’s delayed having certain centers up and running that we expected to have, but for the sites that are up and running now, no, I don’t see that impacting us at all..

And you see the – just see the private payer challenge as something that can be rectified quickly or is this something that’s going to take – what they really want is that do you think you are going to get from the trial in order to make the decision as it is a long-term or is it a short-term phenomena?.

Well, I guess it depends on what you define short-term as. I mean do I expect maybe to answer it differently do I expect that private pay insurers are going to come back and in most cases pay for all these procedures, the answer is no. I think for firms like Blue Cross and Blue Shield, they seem to be fairly consistent at not wanting to pay.

And I think in the end what’s going to happen is they are going to continue that stance until the device is commercially available and approved. While other traditional insurers for whatever reason will continue to pay. I just think that firms like Blue Cross and Blue Shield are not going to do that. And I don’t expect that to change.

So it doesn’t – it really doesn’t impact our enrollment. What it impacts is the revenue that we had hoped to generate implanting some of these patients.

It will be less than what it was before, but again when you look at our revenue projections at least through the clinical trial they are not so dramatic that they are going to have a material impact on our operating plans..

Just in terms of enrollment in where hospitals aren’t enrolling you said you are going to find replacement centers, how long is that going to take and actually how big a drag on enrollment is that likely to be?.

I don’t think it is going to be significant. As Kim said, there is a handful of centers that we have been dealing with this where we haven’t been able to come to an agreement. So if that number is three or four, is that approximately will….

Yes, that’s correct. And we have a pipeline of other centers that really want to work with us and we just have to move them through the process in a systematic manner..

And I think we have said before it’s taking us about six to eight months to get a center from the time they say move forward activated and ready to implant.

So it’s a handful of centers, but it is frustrating when you get to the point where you got all the paperwork signed off, you have done all the training you are ready to activate and it’s hold on.

We want to make sure that you guys are willing to cover these costs moving forward, it just delays things, but I don’t – as I said in my prepared remarks, I don’t think it’s going to have any long-term impact at all.

I just think it’s for some of the sites that we hope to have up and running, it just delays the ability to get them ready to implant patients..

And you don’t see yourselves having to add more centers than you had thought you would need in order to complete the trail on time?.

No, I mean, the FDA has given us the ability to bring on 40 centers. And we are obviously wanting to get 40 centers up onboard as soon as possible, but we have not yet considered going beyond 40.

So when we look at our – if you just look at the last quarter enrollment, our projections for finishing this trial were based on half a patient per site per month.

If you look at the 12 sites that enrolled patients, so 12 sites enrolled 14 patients and if you do the quick math on a monthly basis that’s four times of the patient per site per month and our projections were five times or a half a patient per site per month. And some of those centers have just come on board.

So we are getting very, very close and may even windup surpassing with those projections were for enrollment per site per month..

Okay.

Just one last question on the clinical front, you have some (indiscernible) you pointed to some issues over there, do you think that timeline is going to change at all?.

So, we really think that if you go back in time, what we said is we are going to be providing data every chance we get at meetings. So next year especially Q1 and Q2, we really expect to start seeing implants coming from Europe. I still think you are going to have meaningful data by the middle of next year on those patients.

We haven’t gone back and said well, we think we are going to get the 50 patients and 50 patients isn’t any magic number.

We wanted to do 50 patients because most of the centers in Europe feel that companies – especially companies like ourselves, early stage companies are go to Europe they kind of learn about the device but they really want to do any true research.

And if you are going to go out to European sites and tell them you want to do a study of 20 patients they are probably not going to be all that enthusiastic, but 50 patients is a nice sizable number. And we think we will have meaningful data by the middle of next year..

Okay.

And one last question from the implantable you cut out on the – during the course of if you can address the fully implantable device I apologize, but any update, anything you can say about that at it this point?.

Yes. Regarding the fully implantable system I mean the progress on the pump continues. So really our goal is to able to get that pump down to I will say a pacemaker size device.

All the clinical work that we have down that concluded in Q2 basically demonstrated that the device provides a level of output that we want and the device obviously was able to last for three months. What we need do is downsize that and then accelerate the TET system or the wireless powerless system.

So we will be doing in Q4 all the work that we are doing now is really to prepare ourselves to test the full system in animals in a chronic environment early next year. So in the past, what we have done is just focused on the pump, because we felt that had the longest timeline for development.

The TET system we feel does not since we are using an already established and proven therapy that was used years ago for cardiovascular indications. So I think what you should expect to see Q1 of next year is a plan a little bit more defined plan about timelines, but the next step is for us to test the entire system in a chronic animal environment..

Thank you very much and congratulations on the enrollment..

Thanks Jan..

And our next question or comment comes from the line of Josh Jennings with Cowen. Your line is now open..

Thanks a lot. Good morning gentlemen.

Just first Dave you called out in the press release as well as in your prepared remarks just this one of our your principal investigators working with centers that are identifying patients, but have been unsuccessful in consenting them, can you just give a little bit more color around the issues there and how this is going to – kind of how this principal investigator is to going to help them clear that hurdle?.

And so I mean this happens in all trials. You have sites that don’t really actively pursue any patients and then you have sites that pursue the patients, but maybe the presentation to the patient they have a hard time convincing the patient to consent.

So in this situation we have had for example there is one center that has 10 patients that have come in and the principal investigator there has not been able to convince any of the 10 patients to move forward in the trial. And those situations really talk to more about how the therapy is being presented.

And unfortunately the company isn’t able to be there while the discussion with the physician and the patient is going on. So these are the types of things that we discuss with our principal investigators on a regular basis.

And when we start to see things like this happen we obviously – what we want to do is get the PIs involved to have a discussion to learn a little bit more about how they are presenting it, why the patients are turning them down. But we have some sites that have 80% conversion rate.

So why are certain centers more successful than others, we really believe it’s in the presentation to the patient. So Dr. Abraham is going to be having discussions with the principal investigators at a handful of these centers that have identified patients but been unsuccessful in getting them to move forward.

So I can’t tell you how they are presenting it to the patients, because when we have discussions with the physicians they are obviously going to feel that they are presenting it in a proper way. But Dr. Abraham is going to help us with that situation and reaching out for these centers to hopefully be able to get some of these patients to consent, so..

Great. Thanks.

And just in terms of the enrollment piece at individual centers, have you seen centers where patients have been randomized for C-Pulse implant once they have had that experience of the implant and some follow-up here that enrollment accelerate to that particular center or is that not actually taking place?.

I will let Molly – since Molly is here I will let her address that..

Hi, Josh. This is Molly. Good morning..

Good morning..

I absolutely have seen that I think in clinical trials it’s always that first patient is the hardest to come by and may be convinced to have the treatment.

Once the patients experience the therapy and investigators are seeing some of the results they are more enthusiastic about presenting to future patients and thus we see increased enrollment at those centers. So we have to – we believe that once they get the first implant under their belt, we will see increased rates of consent..

I mean, hey Josh, we really are seeing the increased enthusiasm amongst the sites, I mean, just yesterday, Molly sent me an e-mail about one of our new centers in St. Louis and the physician has a Facebook page and he has got our inclusion/exclusion criteria posted on his Facebook page, so..

And to your point, Dave, actually our therapy development manager over there also sent me a video of him just sitting down with about 15 or 20 colleagues of heart failure cardiologists, general cardiologists explaining the therapy.

So, in many cases, our investigators are very enthusiastic and they really want to get this off the ground that their center has been fined, patients that they feel they can help. So, we are actively seeing that across the board..

Great. And then my last question is just on the interim analysis, any thoughts or anything you can share about the expected statistical panel that might incur with the interim look and that’s it for me? Thanks a lot..

Hi. Good morning, Josh. It’s Kim Oleson. So, the question is if we are allowed to do the interim analysis, what’s the penalty of taking one peak at the data partway through the study? So, the method that we have outlined for the FDA actually at the interim look, you are going to have to achieve a very aggressive threshold.

If we are not able to achieve that threshold, the compelling efficacy at a midway point in the study, then the overall penalty we pay at the end of the study actually is quite marginal. So, that’s the reason why we move forward with the plan that we did actually looking forward to hearing back from the FDA and their thoughts on our plan..

Alright, great. Thanks a lot..

And our next question or comment comes from the line of Jason Mills with Canaccord Genuity. Your line is now open..

Hi, guys. This is actually Jeff Chu filling in for Jason.

Can you hear me okay?.

Yes..

Great. Just wanted to follow-up on Tom and Jan’s questions regarding the private payer challenge, you mentioned this was kind of noticed or at least having in a handful of centers.

And I am assuming you are hearing from your activated sites, I am wondering if you are also hearing concerns or any pushback from sites that have agreed to participate in the trial, but have not been activated?.

Can you repeat that you are kind of coming across a little bit muffled?.

Sure, not a problem.

I was just wondering about the private payer challenge that you are experiencing at a handful of your centers, are you also hearing any concerns or pushback from sites that have agreed to participate in the trial, but not yet activated, just trying to get a sense of if you encountered any challenges and finding any replacement centers for these sites?.

No, no..

No, this is Molly and we are feeling a lot of enthusiasm from the centers we are approaching. We are going out and trying to get as Dave mentioned up to that 40 centers as quickly as possible and I am not seeing or hearing any of those challenges that we feel..

And as Kim said, keep in mind we have got a pipeline of centers. We have said before we have 30 some centers that were waiting to be activated. So, in the past, we have said 35, so if we are down to 31, we still have a ton of centers that are in the pipeline ready to be activated and available to implant..

Yes. And this is Kim. One final comment on that, Jeff, is that this is not a unique issue for C-Pulse therapy. We are seeing this across if you will the entire investigational medical device sector.

And so just working through the issues, providing the information that sites need, again, I am feeling pretty good, we have actually been able to successfully negotiate through and partner with centers to move forward in the study..

Great.

And just one last question on the consent rate, I am wondering and I am sorry if I missed this, but if you could quantify the number of patients and how does this factor into kind of your forward expectations in terms of the number of implants?.

So, what was the first part of that question?.

I think he is looking for the hit rate of…..

Yes. So, what I had said earlier was if you look at the 12 sites that enrolled patients, it was an enrollment rate of four-tenths of a patient per site per month. And our models had been built on half a patient per site per month.

So, as we continue to increase enrollments every quarter, I really do believe we will get to that half a patient per site per month. I mean, we are already – we are extremely close to that as it is.

And as I said in my prepared remarks, I mean what Molly is seeing out in the field and what our people are seeing out in the field is a significant increase in the number of patients that are being identified. The only exception to that and I will argue with anyone over this is Q4.

I really believe that if you have a device that’s an emerging technology and use LVADs as an example. If you need an LVAD, it’s usually a decision that you are going to make with limited time. So it is many times a life and death situation.

And it’s not one that you can easily just say well, I will wait until after Christmas or after Thanks Giving to think about doing this. Ours is not that type of therapy.

It’s an elective therapy, not that these patients have long expected life spans, but if you are a patient and you have to make a decision about possibly being in the hospital over the holidays or coming back in January I think the majority of the patients, not all of them and I – its not like we think oh gosh we are not going to have any enrollments in Q4.

I just don’t expect the same trajectory. And when you look at last December or last Q4, we had one patient enrolled in the study, while that was with many fewer sites. I just think Q4 is always going to be a quarter where the holidays and vacations, physician vacations could come into play.

But I am certainly not trying to insinuate that gosh we are not going to see any enrollments or anything like that, but beginning next year we really expect to continue to see the momentum that we have seen from Q2 to Q3..

Great, thanks for the additional color. That’s it for me. I will back in queue..

Our next question or comment comes from the line of Suraj Kalia with Northland Securities. Your line is now open..

Good morning everyone. Dave my apologies, I jumped in a little late on the call. I just wanted to revisit your commentary about Dr. Abraham working with some patients from a consent perspective. I guess I am just curious if you could elaborate a little more and my apologies if I missed some of your commentary there.

What specifically is holding back patients if they are in the queue and I am very curious how you see that being extrapolated in a real world scenario in commercial launch?.

So it is a little different that what you just mentioned Suraj. It’s not Dr. Abraham working with patients, its Dr. Abraham working with the principal investigators on how they are presenting the therapy to patients.

So we want to get a better understanding of why some sites, you have a center that’s got 10 patients that have come in which is a nice volume of patients and none of them have consented. And I think as you look at sites like that the conclusion not only from ourselves but Dr. Abraham and Dr.

Camacho is that there is something else going on in the presentation of the therapy to the patients and because we are not able to be present for that, we can’t respond to that with 100% certainty. But Dr.

Abraham and Camacho really feel that this is a situation where and Bill in particular might be helpful in talking to the principal investigators about how they are presenting it. And the reasons that patients have turned down the therapy and it’s not something we haven’t commented on before.

We track every patient that gets presented in the trials some of them feel they are not sick enough. Some of them feel that gosh they don’t want to have a surgical procedure. Some of them don’t want to carry a bag around or have an exit site infection. It’s the same things that you will hear patients that are identified for LVAD say.

And I think the clinical trial and commercial launch I don’t always think those two coincide with each other, because you have patients that realize they are participating in a clinical trial and it’s a “experimental therapy” when its commercially available there is obviously going to be data there that substantiates the use of the therapy.

And I think there is less resistance by patients once the device is approved. So I don’t think it’s necessarily apples-to-apples once we get through commercialization that some of these issues will come up.

As patients hear more and more about the benefits of the therapy I think there is going to be more acceptance of it and more interest in moving forward.

And as Molly said these sites that I am taking about that haven’t enrolled once they get a patient enrolled who has been implanted with the device and they see that the therapy is really helping these patients, I think their presentation of the therapy to patients will be much improved as well.

Because now they will have their own experience, positive experience to talk about and share with other patients..

Thank you for taking my questions..

Our next question or comment comes from the line of Steven Lichtman with Oppenheimer & Company. Your line is now open..

Thanks. Hi, guys.

I apologize if I missed this in the beginning, but in terms of the centers that you have renegotiated the ones that we are concerned on the private payer side, what does that mean exactly? So, they are still not getting reimbursed, but they – you are not responsible for uncapped expenses, what is that – in that group, what is that renegotiation mean? Thanks..

Yes. So, the short answer is yes, that’s what it means. It means that we have gone back to them. It doesn’t mean that they won’t be reimbursed.

It means that if they try to get reimbursed and it’s rejected by private insurance, then the company typically agrees to provide up to a certain dollar amount for each procedure and even in some cases what we have negotiated with centers is that look, let’s take a look at the first 4 patients, 5 patients that get implanted, let’s see what the actual costs are, and let’s see if we have to make an adjustment hopefully downward with respect to that, but this is kind of a, what I would call, more of an insurance policy for the sites to say, okay, if for some reason, we are rejected by private insurance that we won’t be out $20,000, $25,000 for this procedure that the company will be willing to at least cover some of these costs.

So, it’s a way to move any barriers or concerns about them enrolling, allow them to enroll, allow them to know that they will receive certain percentage of reimbursement from the company, although again we want those numbers capped. So, that’s what’s happened in just about all these cases..

Yes, and this is Kim. So, Steven there is one more point, many of these centers are not familiar with what C-Pulse therapy is. So, on the reimbursement side, the contracting sites that we have had to go back provide more information for comparators to what reimbursement profiles would look like for an LVAD device.

And I think that’s really been helpful. So, first, partner a little bit more closely with them. That’s allowed us to move forward in many of these cases..

So, it’s the minority of cases where you would at this point look to potentially replace some centers, where that negotiation hasn’t happened?.

That’s right, Steven. Again, it’s a minority, but we think for fair balance, it’s appropriate to be open and share with you that life is not always as easy as we would like..

Got it.

And then I guess just lastly the visibility on Germany reimbursement remind us sort of the next steps and when we could – what’s your comfort level is and when we could hear on that front?.

And so, we – Steve, we actually have to get the submission in by tomorrow, I think it is October 31 and that’s standard. It’s the same process every year. And then February 1, you get notified what your status is, what the decision on your status is.

And no matter what I think, I am never going to say that I am confident about reimbursement until we get it. So, when you hear me say that I am confident it means we have it. So, I am not going to handicap where we are. We think we have a better argument this year than we had last year. We got the submission done, the paper worked on fairly early.

We were out gathering support from centers like we do every year. So, it’s kind of business as usual although I feel we have a stronger economic argument this year, than we have had in the past. So, we will see..

Got it, great. Thanks guys..

And our next question or comment comes from the line of Sean Lavin with BTIG. Your line is now open..

Hi, everyone. It’s actually Karen Koski in for Sean. Couple of questions.

Did you say earlier in the call that you expected the reimbursement issues to be more of a headwind for sites that have or have not started enrolling patients?.

I don’t know if I said either of those two things.

What we were mentioning is that some of the centers that we expected to have on board by now 3 or 4 of these centers have come back and continued to have discussions with us on anything from large sums of money, then when I talk about large sums of money wanting us to cover $100,000 or $200,000 or uncapped costs.

I mean, those are centers that we expected to have on board now and those are things that we feel as a company we just can’t agree too.

So, what that means is we have got to go out and replace 3 or 4 centers and in some cases the discussions aren’t over yet, but we have got a pipeline of centers that are just waiting to be activated and enable to enroll. And this just cuts us back three or four centers that we thought we would have onboard.

So was it a huge issue, no but in most cases these things are coming back after they have been activated and asking us to renegotiate.

And when they do that most of them are unwilling to take any private insurance patients, they will cover Medicare, but Medicare is a smaller population of patients for us because the average age of these patients is under 65.

So it’s not I don’t want to make this a huge issue other than to say we may have to replace a handful of sites that we expected to have onboard at this time. Not a major issue, but again something that just that drops us down in terms of the number of sites that we had..

But I guess given the sites that would have had the denial so far would be the ones that are currently enrolling patients.

So why wouldn’t that be kind of a major headwind in those existing centers, the ones that have actually had been announced?.

Can you repeat that question again?.

I mean for a center to have a denial, they would have had to have enrolled the patients.

So why isn’t that a more of a major headwind in those existing centers?.

We are talking about centers that haven’t even – that haven’t enrolled any patients that have said okay, we are activated now or we are waiting to be activated, but our finance departments come back and we are not going to enroll anyone. They haven’t even been denied by private insurance..

That’s exactly right..

And currently this is Molly after two documented denials, so let’s say a patient was out of one of our centers on the East Coast. The patient has Blue Cross and Blue Shield of that state.

If they went ahead and they applied for coverage and after two documented denials, at that point our clinical trial agreement kicks in and we would pay for that planned or procedural cost. So that’s the costs we are talking about having to renegotiate with some of these centers..

Yes. And Karen, this is Kim. So those centers that have raised this after the fact have not yet enrolled. So again we are sensing it’s a shift in the concern about a lot of these Medicare penalties coming into play and then hospitals wanting to manage their overall perception of risk.

So as we gain more experience and as we continue to work with these centers we will be able to gather the data so that they can be actually informed decisions. So again it’s only a handful of centers, but most of them we have been able to work through except for a few..

And to Kim’s point, we just recently published our heart failure feasibility results and with a lot of these centers getting more concerned about budgets I think we have a very good story to tell even up to the C-suite that in our 20 patients in our feasibility trial, zero patients were re-hospitalized in that 30 days for worsening heart failure.

So to that point we want to go – our therapy development team and speak more with the C-suite about C-Pulse being a therapy option for those patients that they are being penalized on. So we think we are in a good working order there..

Okay.

So, it’s not fair to think that maybe enrollment was a little bit lighter the last couple of quarters because of reimbursement issues?.

No..

No..

Okay.

And then just assuming it takes a few quarters to work itself out, how do you expect your cash burn to be impacted whether it will be increased personnel, finding these new sites etcetera, if at all?.

Well, I think from a quarterly standpoint, you have seen our cash burn going from mid-5 to low – to mid-6 per quarter. And so I think that if we are looking at what happens if we are a quarter or two out you are looking at that kind of cash burn rate that it takes to sustain the company through those periods..

Okay, fair enough. Thank you so much and congrats on the increased enrollments..

Thanks..

(Operator Instructions).

Alright. Andrew thanks. I think we are pretty much wrapped up here. So, thanks to everyone for joining us today in our conference call. And Dave and I are certainly available if anybody has any follow-up calls. And thanks so much for you interest in the company and being on our call today..

Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program and you may now disconnect..