Dave Rosa - President and Chief Executive Officer Claudia Drayton - Chief Financial Officer Kimberly Oleson - Senior Vice President, Clinical Affairs.

Josh Jennings - Cowen and Company Jason Mills - Canaccord Genuity Kyle Bauser - Piper Jaffray Suraj Kalia - Northland Securities Jan Wald - Benchmark Company Steven Lichtman - Oppenheimer.

Good day ladies and gentlemen and welcome to Sunshine Heart's First Quarter 2015 Earnings 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 call is being recorded.

Before we get started, I would like to remark briefly about 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 possibility that the company’s clinical studies do not meet their enrollment goals, meet their endpoints or otherwise fail, that the 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 its products successfully in the EU, and other risk factors described under the caption "Risk Factors" and elsewhere in its filings with the Securities and Exchange Commission.

By providing this information, the company undertakes 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 the cautionary statements and discussion of risk factors included in our press release issued today, our latest 10-K subsequent reports 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 Web site at www.sunshineheart.com.

With that said, I would now like to turn the call over to Dave Rosa, Sunshine Heart’s President and Chief Executive Officer. Sir, please go ahead..

Thanks, operator. Good morning, everyone and thank you for attending Sunshine Heart’s first quarter 2015 results teleconference. With me today is Claudia Drayton, Sunshine Heart's Chief Financial Officer. As many of you know on the March 6th, we commenced the temporary pause in COUNTER HF study enrolment.

This was accordance with our study protocol where we agree to pause enrollment but more than three of the first 20 subjects in the treatment arm passed away for any reason, as well as the work with the FDA to establish a plan to resume enrollment.

Since then we have provided FDA with safe documentation regarding the four patient deaths and that the deaths were adjudicated by an independent Clinical Events Committee as being not device or therapy related. Furthermore, the independent Data Safety Monitoring Board or DSMB overseeing safety in the COUNTER HF study recommended continuing the study.

Upon review of the findings, the FDA and their communication to us did not indicate concern regarding device safety and requested submission of minor protocol changes prior to granting us approval to resume enrollment. We also expect to hear from the FDA today regarding feedback on our submission.

Clearly resolving the temporary pause in the COUNTER HF study enrolment was our top priority during the quarter and remains our most important initiative. We are pleased with the progress made with the FDA to enable us to resume enrolment.

Our proposed minor protocol modifications will enhance an overview of robust protocol and should increase the likelihood of study success. Based on recent discussions with the FDA, we’ve remained confident that we will be able to resolve this matter within 30 days.

We submitted the requested minor protocol changes to the FDA on April 22nd and we expect approval to reinitiate the study by May 23rd.

The most significant updates provided to the FDA include details up on our proposal to incorporate a position, subject, election committee into the study to ensure the patients meet the study entry criteria and address the targeted population that would most likely benefit from receiving C-Pulse therapy.

The new committee will be comprised of cardiology heart failure experts and cardiothoracic surgeons familiar with the therapy. We have also provided additional entry criteria designed to optimize patient selection. That criteria include provisions to exclude subjects with severity [ph] of disease, severe right heart failure and severe renal disease.

We are holding a COUNTER HF study investigator meeting will be held on May 7 to May 8 to prepare for resumption of trail enrollment.

I feel that’s important to point out that prior to pausing study enrollment, COUNTER HF has enrolled eight patients in the quarter and was on phase to enroll the total of 20 patients as an additional 50 patients were being evaluated in March. This would have resulted in the largest enrolment number to-date.

In addition, the company activate two new centers in Q1 bringing the total number of activated sites 23. We are also pleased to report that there have been zero exit site infections in the study to-date.

During the first quarter, the European based OPTIONS HF post-market study continued to advance and we are pleased to report that two additional patients were implanted during the trial period bringing the total number of implants under the European study to 14.

Integral to this milestone is that it marks the first implant performed at the German Tübingen site. Germany remains a key country as part of Sunshine Heart’s overall European strategy for both the OPTIONS HF study and features commercialization plans.

Furthermore with the initial patients in the study achieving the milestone of 18 months of therapy, only two of 14 patients have had reported exit side infections to-day. I’d like to provide an update on the fully implantable C-Pulse Heart Assist System.

During the quarter, we continued to achieve meaningful progress in advancing this next generation system. The key highlight was the first acute animal experiment with the complete fully implantable system with successful power transfer through the skin to activate the pump.

I’d also like to briefly mention that in terms of expanded opportunities beyond congestive heart failure, we have initiated a research program with Dr. Mark Slaughter and the Jewish Hospital of Louisville, Kentucky for the treatment of Pulmonary Arterial Hypertension.

We also submitted the paper to the European society of cardiology demonstrating hemodynamic changes with the C-Pulse therapy both on and in the off position demonstrating the effects on the peripheral circulation through reductions in peripheral resistance.

The case report was also submitted to the heart failure society association that had both the C-Pulse therapy and CardioMems Heart Failure device implanted.

During an interruption in C-Pulse therapy, the CardioMems device recorded hemodynamic variability and an increase in heart failure symptoms while conversely improvement in the hemodynamic and heart failure conditions were improved with the C-Pulse therapy as measure by the CardioMems system.

On the corporate development front, we continued to bolster a leadership team with the appointment of Claudia Drayton as Chief Financial Officer. Prior to joining Sunshine Heart, Ms. Drayton spent fifteen years at Medtronic, a global leader in the medical device industry.

During her tenure, she held multiple senior managerial finance positions culminating with an assignment in Europe serving as Chief Financial Officer of the Peripheral Vascular Business from 2010 to 2012 and, most recently, as Chief Financial Person and Senior Finance Director of the Integrated Health Solutions Business.

Another key milestone during the first quarter was the closing of a loan and security agreement with Silicon Valley Bank for proceeds of up to $10.0 million. I will now turn the call over to Claudia Drayton, Sunshine Heart's Chief Financial Officer to provide an update on first quarter earnings and other financial metrics..

Thanks Dave. Good morning, every. This morning we released our unaudited financial results for the first quarter of 2015. I’ll walk you through a few of the financial highlights. Our result for the three months ended March 31st, 2015 includes reinvestment revenue of $59,000 which is comparable to the revenue recorded in the same period in 2014.

All revenue is for implant built under out U.S. COUNTER HF pivotal study which we’re able to invoice to hospitals and clinics that are eligible for reimbursement by Medicare, medicate or private insurance company.

However as many private insurance companies and certain governmental institutions have a non-coverage policy for experimental or investigational procedures, we now able to get reimbursement for all of our implant procedures. Since all activities are conducted under clinical studies in the both the U.S.

and Europe, we record all cost associated with their devices directly to research and development expense has incurred. We expect to continue to do so until such time as we began to using devices to commercial sales in the Europe or the U.S.

Operating expenses on an actual point base has totaled 7.9 million for the first quarter of 2015 as compared to 6.4 million for the first quarter of 2014. Excluding equity compensation costs, non-GAAP operating expenses in the first quarter of 2015 totaled 6.2 million compared to 5.7 million in the first quarter of 2014.

The increase over the prior year results, it’s a result from increased cost related to our fully intangible device, increased clinical research expenses related to the U.S. pivotal study and the European most market study and increased prior purchases related to the manufacture of the C-Pulse System which as previously stated are expense to R&D.

Equity compensation costs included in operating expenses totaled approximately $900,000 in the first quarter of 2015 compared to approximately 700,000 in the first quarter of 2014.

The amount of equity compensation records every quarter is directly related to a timing and structure of equity awards granted during the period as well as fluctuations in our stock price also [indiscernible] in some pieces are timing that works best. We expect equity compensation expense to continue to fluctuate based upon these factors.

On an as reported basis, our net loss was $7.1 million or $0.40 per share for the first quarter of 2015 as compared to $6.3 million or $0.38 per share for the first quarter of 2014.

Excluding equity compensation expense, non-GAAP net loss in the first quarter of 2015 was 6.2 million or $0.35 per share compared to 5.6 million or $0.33 per share in the first quarter of 2014.

Cash used in operating activities totaled $7.1 million in the first quarter of 2015 compared to $6.7 million in first quarter of 2014 with the increase driven primarily by increased clinical and R&D expenses. During the quarter, we took some important steps to improve the liquidity of the company.

First as we previously announced, we entered into a debt agreement with Silicon Valley Bank for proceeds of up to $10 million.

$6 million was funded at closing, an additional $2 million became available upon the announcement that the FDA had granted us approval for interim analysis and the remaining $2 million will be available upon our enrollment of the 100 patients in the U.S. COUNTER HF study on or before September 30, 2015.

At this point, we have chosen not to exercise our option to borrow the $2 million that became available upon the FDA granting us approval for interim analysis or we may choose to do so in the future. The second step we undertook to strengthen our balance sheet was to utilize our aftermarket or ATM facility.

During the first quarter of 2015, we sold approximately 1.2 million shares and raised approximately $7 million. We ended the first quarter with approximately $37 million in cash and $60 million in debt.

At the end of the quarter, we had 18.2 million shares outstanding in an addition of 2.9 million shares for outstanding stock options and restricted stock units. Going forward for the remainder of 2015, we expect to see modest growing revenue in the United States ones the current study pause and we are able to resume patient enrolment into the trial.

As we have previously stated, we have not modeled any revenue from implants in Europe in 2015. We expect our quarterly operating expenses in cash burn will be at the same or higher levels of our comparable periods last year as we continue to support our studies in the United States and Europe. We continue to invest in our fully implantable system.

We expect a minimal impact to our cash burn from the temporary pause in enrollment as we anticipate to be up and enrolling patients again very shortly. During the remainder of 2015, we expect to continue to make selective use of our equity ATM facility when and if we deem appropriate.

We believe that the combination of the ATM and debt facility should provide us the sufficient capitals through 2016 assuming no acceleration to the fully implantable C-Pulse development time line. With that I will now turn the call over back to Dave..

Thanks Claudia. This concludes our prepared remarks, and I’ll now turn the call over to the moderator to commence the Q&A portion of this call..

Thank you. [Operator Instructions] Our first question comes from the line of Josh Jennings with Cowen and Company. Your line is open. Please go ahead..

Thanks and then good morning. Dave, I just wanted to start off, I think you are making nice progress against to restart the travel in the U.S. and you had some strong number you’ve reported, they for expectation for 1Q enrolment.

I am just wondering about that - those incremental 12 that were set to be enrolled in 1Q and then to be evaluated in March I think 50, what happens to those patients and then can they be recaptured?.

Good question Josh. So we actually have been trying to keep in touch with the status of the patients and the number kind of fluctuates. So in short, two day ago, the number - end of last week, the number was about 20 patients were still in play and as of the end of yesterday, it was 26.

So that’s less than play from the 49 that were still hanging out there.

So the short answer is we’ll move better as we get close but the numbers that reports on what happened to the patients is there’s been a number of patients that have died on the last couple of months, there’s been patients that have gone on elevate, there’s been patients that have gotten better, but and there’s also patients that are still waiting to be implanted.

So right now the number is in the mid-20s..

Okay, thanks.

And just in terms of this, assuming that you do get back into the clinic or you allowed to move forward on that May 23rd day, what are the steps that the centers have to take, could there be any delays in term so them ramping up enrolment again?.

So the centers are going to have to go back and get IRV approval given that these are minor changes. We’re going to preset this actually on the center - sorry May 8th, in an effort to get them to expedite the review of the protocol changes with their IRV. So I really think is probably going to take them about four weeks to get their IRV to come back.

I mean it may vary with some other sites. We have four to five centers that are part of work, so ones we get that approval from more of five of them will become active. So - but that’s what we’re expecting.

I mean this is one of the questions that we have for every center that’s in the trial now as what’s the process that we have to go through but we’ll be prepared to hand them a packet of information as soon as the FDA grants us approval..

Great and last question from me, just on OPTIONS HF trial in Europe, 14 enrolled now, can you just take about anything that you and how it can do to accelerate the pace and then any download of clinical results, anytime throughout the backend of 2015 on those European patients that we should be expecting this year? Thanks a lot, Dave..

Yes, so when you look at Q1, we actually lost five patients to calcium. And I don’t believe that to-date we’ve had five patients in all the trials that we’ve been working on that we have lost due to calcium. So it was kind of an odd situation we were actually expecting to post higher numbers.

I think the overall sense is that Europe is starting to pick up and what’s nice is we have some new additional centers that are coming on board. So I think we just need to keep pushing things forward at the sites. I mean we have eight implanting centers but literally 15 sites that in total that are referring.

So I do expect these numbers to increase overtime but we are definitely going to be very careful especially given the U.S. experience regarding the patients that we allow them to trail. We want to make sure that they meet criteria that there is not patients that are being in essence force into the trial because there is no other options.

But patients are out there and Q1 we would have quite a bit more and it is not doing for the calcium issue..

Thank you. Our next question comes from Jason Mills with Canaccord Genuity. Your line is open. Please go ahead..

Thank you, operator. Good morning Dave, Good morning, Claudia.

Can you hear me okay?.

Yes, sure..

Perfect. Dave, I’ll start with the modest change in the algorithm, you’ll be presenting in a few days to your investigators that it’s interesting and I am just curious what your expectations are for screening, how it may augment screening given the change in the algorithm right heart failure and renal disease and couple with the other ones.

And whether or not you could perhaps give us an idea of how this refine the targeted patients population, I know it’s still quite a large, but if you could just give us your assessment, so that’ll be helpful..

Sure. So really the committee - well first of all, we are trying to add any additional processes to screening. Obviously we want to keep screening moving quickly.

So we currently were as of prior to presenting this position committee to FDA, we had an internal review process, so there were people in our clinical department that would review all the forms, make sure that the patients met criteria.

And if there was any data in the year that may have suggested the patient might not be appropriate, then what we would do is we would contact our PIs and then the PIs would review it, make some comments and move forward.

So that the reason why we are moving to this is number one, we instead of having to go back our PIs after we do an internal review, we’re just going straight to a group of five physicians that have participated in our trial, implanted our device and know the right patients for this to be implanted in.

And really the most important thing is to make sure that patients with comorbidities that maybe not even be extracted to live a few years are not included in the trail. It needs heart failure all have comorbidities. And we just want to make sure that a life expectancy outside heart failure is at least two years.

So the way we expect this to work is the way it’s worked in trails, they use these physicians, committees, they meet ones a week or as needed review the information and if there is anything that would appear in the spirit of the trail not appropriate then they would go back to the physician and have a discussion about it.

So I really don’t think that it’s going to change much. I mean severe renal failure should have always been an exclusion and a physician who had patients with severe renal valve failure. Even though we said if you have a bad valve you have to get the values fixed, the main way results heart failure.

So I think the good news out of all this is, we got to see even though this weren’t related to the devise or the therapy, we get to see what was happening here and early on in the trial have a late really address it moving forward..

Thanks Dave, it’s helpful. And then I get a lot of questions with folks interested in the interim analysis.

I know last quarter’s conference call, there was good bit of detail, give one form here, I thought it would be helpful to give you an opportunity to summarize ones again the key aspects of the interim analysis, what specifically you’ll be looking for what sort of triggers a positive outcome et cetera just so that we all have it straight on that front?.

Yes Jason. Operating - excuse me, the expert on this Kimberly Oleson, so just give us a minute to grab here. I mean she is the person that has put the submission in and can you speak to it much better than I can..

Okay..

So we’ll get back to that question..

Great, let me just ask a few housekeeping and I’ll get back in queue then you can answer whenever Kim gets in, it’s helpful..

Sure..

Just two quick other follow-ups, the first acute animal experiments conducted in the quarter is exciting. What are the next steps there? And then secondly just as the segment as well, any update of progress report you can give us on reimbursement in Germany? Thanks Dave..

Sure, thank you. So in terms of the fully implantable system, really the next step is do a few more acute animal experiments and then to get the system in a position where we can start doing some chronic animal valuation this year.

So we still - our goal is still we in demand by the end of next year, and I can tell you that myself and the rest of the team is very excited about how that’s been going. So second question on reimbursement on Germany.

We consultant that we view as we are setting up the call with him next week to have a discussion on strategy even though we’re not going to be able to submit until October.

So long story short on that is nothing is really changed beyond what we said last quarter and that was that there were additional hospitals that had submitted using different procedural terms for reimbursement with our devise.

So next year what we are going to do is we’re going to send out information to all the centers that supported us and even though that didn’t, but that have heart failure programs and let them know that we are submitting for reimbursement and what the codes are.

So that’s kind of next steps, but we’re going to start with our discussions now to make sure we’re prepared for when we have to submit in October..

Perfect, thanks Dave..

Thank you. Our next question comes from line of Tom Gunderson with Piper Jaffray. Your line is open. Please go ahead..

Hi good morning. This is actually Kyle on for Tom. I know you’ve been introducing new marketing materials that are going through IRBs for helping to tender screening subsequently enroll patients in addition to Dr. Abraham Helping Centers that were having difficultly enrolling patients.

Did you notice earlier in the quarter these practices gaining more traction and do you expect the screen’s enroll rate perhaps move faster 20% mark that’s you’ve talked about previously ones been able to go back online?.

Yeah, I do think so. I still think there is a strong level of enthusiasm, so people always ask well, how our sites reacting for this. And if you go back and even perspective sites, if you go back and look at how many centers that we have that are participating in the meeting, we have 25.

And I said earlier that as of Q1, we had 23 centers that were activate, 19 of the 23 centers that are activated are going to be represented at this meeting and six centers that are not even activate are attending. So I do think that there is still strong level of interest in the trial.

I do think that our biggest challenge is in the presentation of the therapy, the physician’s presentation of the therapy to patients. And using these tools are certainly going to help. So the short answer is yes, I think ones they get incorporated that we should be better than one of every five patients..

Okay, great, thanks.

And then also with the HRS Conference coming up, are there any sessions of interest that you’ll be highlighting or presentations that will show new data on C-Pulse or CP2?.

Yes, so there is going to be presentation at HRS and I don’t remember the title of the submission that we had but it is clinical data regarding the performance of the therapy..

Great, thanks, I’ll get back in queue..

Sure..

Thank you. Our next question comes from the Suraj Kalia with Northland Securities. Your line is open. Please go ahead..

Good morning, everyone. Thank you taking my questions. So Dave my apologies just been trying between couple of calls.

One other things that caught by attention was this pilot project on Pulmonary Arterial Hypertension, I don’t know if you already talked about, my apologies again if there is redundant questions, but I love to understand what signals have you all seen, even any idea about the NOAs because it’s pretty interesting that this is popped up now and we all know PH is a huge opportunity, any color would be great?.

Sure. So obviously we’re still on the early stages of this but there’s always be a thought process that the manipulation or massaging of the pulmonary artery would help reduce pulmonary hypertension. And we’ve actually filed IP in the space as well.

And as we’ve gone out and done more and more research, it seems like there are other companies that are working on the same sort of concept. And obviously what we do when we are around the aorta is we’re referred what is pumping the aorta but we believe that the same sort of thing will occur when a rod is place around the pulmonary artery.

Now there will have to be some changes to the technology from its current format but use of a rap and the manipulation, messaging what everyone call it we believe is going to have an impact. But obviously this is still early on. I think as the year goes by, we’ll have more and more to report and hopefully it will continue to be exciting for us.

And I am going to interrupt you for the second. We have Kim Oleson, Kim is actually offsite right now, but Kim if you can hear me, the question was just, could you go back through the interim analysis and talk about what is going to evaluated in the interim analysis and just a general overview again..

Hi good morning. This is Oleson. Okay perfect the question that was asked the general concept of interim analysis. And remember the interim analysis is to design to look at about cohort which is 190 for randomize option which have been powered for 12 months of June plan.

So as that point of time in the study we’ll just be preparing primary at the end point three good forms of control and then evaluating on our more rigorous statically threshold whether or not we [indiscernible].

The choice to get to that 12 months is pretty [indiscernible] we ensure the design and the assumptions that we need, and I am very excited that FDA grants us approval to move forward with this study..

Any other question regarding interim analysis? Okay, thanks Kim..

You’re welcome..

Thank you. And our next question comes from the line of Jan Wald with Benchmark Company. Your line is open. Please go ahead..

Thank you very much. I guess most of my questions have been answered but ones maybe you could talk a little bit about is, when should you get approval to start from the FDA ones get the IOB process, how should we think about the schedule for the trial going forward.

And is there - do you anticipated delay on the other hand or you are going to be able to make up some time better enrolment rate, how should we think about the trial going forward?.

I think what you need to think of it is an interruption of about three to four months. Now when we get back and we start enrolling again, what you obviously hope for is that enrolment continues in the past that it did before.

Question it, will it take a month to get the size back up and running and that’s what I - I think it’s going to be somewhere in that category but we’re going to get a better idea at the end of this week where this site stand. And hopefully we get the FDA to approve this before May 23rd.

The FDA told this late last week the primarily reviewer said that in her opinion we had met all the requirements or all the request that they had and that had sent a submission to two of the medical reviewers and that we would hear back from them today.

So my expectation is that that most they might be asking for clarifications on some other things that are in there but beyond that we really don’t expect any surprises.

So then it’s really a site by site basis and how quickly they can get back up to speed and having at least 25-26 patients in queue tells me that they centers are still keeping these patients warm.

There are some centers that obviously are waiting and this is new sites they are looking to come onboard are waiting for the FDA to give us thumps up to continue before they put any more work in, but that’s not the majority that’s just the minority. So I think I can answer that question much better after we get back up and running.

But when you look at enthusiasm for intent there for attending the investigator meeting and that we still got about 25-26 patients in play, it’s absolutely encouraging..

Okay, thank you very much..

Sure..

[Operator Instructions] Our next question comes from the line of Steven Lichtman with Oppenheimer. Your line is open. Please go ahead..

Thank you.

Dave, just in terms of the new committee that you’ve proposed that will meet weekly, I think you talked how will certainly improve, further improve the screening process in terms entry criteria, you also anticipate it should have a positive effect in terms of speed of the process and speed of enrolment, just curious if you envision that as well..

Well I think it will take us longer - I am sorry shorter to get an answer. Instead of our internal group reviewing and then having to send it on to Dr. Abraham and Dr. Camacho, here we are just taking one step. And not all the physicians need to present from this committee, we have to have surgical and cardiology representation.

But with the number of people that have committed to do this, we don’t see that is being an issue. So I think that when you look at the process we have now and actually as a step having to go back to these positions and now more or less we’ve removed one other step, so we should be able to respond quicker, get these patients randomized much faster.

And that’s really one of the important things that we talked about probably a year ago and that is not allowing a lot of time to pass in between enrolment and randomization because we want to get these patients especially the ones that go to the treatment arm implanted as soon as possible.

The longer they wait, the more likely they are to get even sicker and become less appropriate for the trial. And just look at the last 60 days where there’s been 25 you know 20 some patients that have either gotten worse, most of them gotten worse, some of them died and handful have gotten better.

So I think it should speed things up and hopefully have an impact on numbers as well..

Got it.

And then just secondly, the number of activity say it’s 23 to get another five will be attending later this week, remind us how many sites you anticipate ultimately being activated and when you think you can get to that number?.

And so by the end of the year, we’re somewhat - we expect to be somewhere between 32-25 sites. We have 32 sites now in total that are either activated or committed to participate.

They all come on at different points between now and the end of the year, so that’s more or less where we expect to be and there are six centers that are not activated that are attending this meeting, which you know again I think is an extremely positive sign for us that we’ve got people who haven’t even been activated that are being represented.

And right now we got over 50 some people attending the meeting, so more sites have more than one person attending..

Great, thanks Dave..

Yeah, thank you..

I am showing no further questions. I would now like to turn the call back to Dave Rosa for any further remarks..

I just want to thank everyone for attending the call and for the questions and have a good day. Thanks..

Ladies and gentlemen, thank you for participating in today conference. This does conclude the program and you may all disconnect. Everyone have a great day..