Nancy Hecox - General Counsel John Kelley - Chief Executive Officer Michael Jebsen - Chief Financial Officer

Jeffrey Cohen - Ladenburg Thalmann Nisha Hirani - Zacks Investment Research

Greetings, and welcome to the Tenax Therapeutics' business review and update in conjunction with filing of fiscal year 2016 second quarter financial report. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the conference over to Ms. Nancy Hecox, General Counsel for Tenax Therapeutics. Thank you, Ms. Hecox. You may now begin.

Thank you. Good morning everyone, and welcome to the earnings call for Tenax Therapeutics' second quarter fiscal year 2016, which ended on October 31, 2015. The news release with our financial results and corporate update became available at 6:00 a.m. today, and can be found on the Investors section of our Web site, at www.tenaxthera.com. You may also listen to a live webcast and replay of today's call on the Investors section of the Web site. Before we begin, let me remind you that statements made on today's call regarding matters that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of these forward-looking statements include statements concerning the expected timing for the company's clinical trials, statements concerning the potential results of planned clinical trials, and future development milestones for the company's product candidates. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Risks are described more fully in Tenax's filings with the Securities and Exchange Commission. All forward-looking statements made on today's call speak only as of the date in which they were made. Tenax Therapeutics undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made. Joining me on the call today is John Kelley, Chief Executive Officer of Tenax Therapeutics, who will discuss recent company highlights. Following John, Michael Jebsen, Tenax's Chief Financial Officer will review the company's financial results for the second quarter of fiscal year 2016, after which we will open the call for Q&A. Now, let me turn the call over to Tenax's CEO, John Kelley.

Thanks, Nancy, and good morning everyone, and thank you for joining us today. We're very excited with the significant progress that we've made across the board during the last several months, and we believe the calendar year 2016 is shaping up to be a potentially transformative year for the company, with two expected late-stage data readouts for our lead candidate, levosimendan. First, I'd like to highlight the work we've been doing with our Phase 3 LEVO-CTS trial in Low Cardiac Output Syndrome, focusing on how we can increase the rate of enrollment. As of this morning, we currently have 302 patients enrolled in the trial. As you recall, on October 1, 2015, we hit our first milestone of 200 patients enrolled. So we have seen a marked increase in our enrollment pace, and are very pleased with the progress which we expect to continue. The reason for this change is several-fold. First, we have activated a total of 72 sites during the trial, which includes 10 sites in Canada. We've recently closed five sites that had not yet enrolled a patient in order to use those resources to activate other sites we believe will be more productive. As of today, there are 67 sites that are currently up and running, with several more in various stages of discussion. Many of our new sites have been very productive thus far, including, for example, the Cleveland Clinic, which joined the trial in August and already is at 12 patients enrolled. Our Canadian sites have already enrolled 23 patients, and our top enrolling site for the trial is at 28 patients. In addition, we also announced the trial protocol amendment in early October, after the FDA approved that amendment, which changed the inclusion criteria to cardiac surgery patients with a left ventricular ejection fraction of less than or equal to 35% undergoing a coronary artery bypass graft or CABG procedure, CABG and aortic valve procedure, and CABG and/or mitral valve procedure. Under the previous protocol, patients undergoing only a CABG procedure were limited to those with a left ventricular ejection fraction of less than or equal to 25%. In addition, several entry criteria were clarified to reduce inappropriate patient exclusions. We believe at the time that this protocol change would help increase the pace of enrollment. So far 62 hospitals have IRB approval for the amendment and 82 patients have been enrolled under the new protocol. We'd expect this amendment to continue influence the pace of enrollment as additional sites approve the changes in the coming months. On October 1, we hit our 200-patient milestone which as previously guided, triggered a blinded look at the event rate, which is tracking as expected. Our next expected event in the trial will be two interim analyses for futility and efficacy, after 50% and 70% of the planned primary endpoint events have been recorded. With our current increase in enrollment rate, we believe that we should see a top line readout near the end of calendar year 2016, and look forward to sharing that data with you at the appropriate time, and as we begin preparations for a new drug application, pending positive results. Turning to our septic shock program, we have been very pleased to see the continued accelerated enrollment of the LeoPARDS trial by our colleagues at Imperial College of London. The trial currently has 512 patients enrolled out of 516 total. So we would expect them to finish enrollment this month. Once the last patient is enrolled, it will be 28 days to lock the database, and we expect the top line data will be presented during the first half of calendar year 2016, though that is controlled by Imperial College of London. Just as a reminder, we provided supplemental funding to this study in August of 2014 as part of a collaboration with Imperial College London to support the accelerated enrollment and completion of the LeoPARDS trial, and in fact, they will complete enrollment six months ahead of their original planned finish date. I'd like to walk through the design of the study again briefly, and then outline the next steps from our perspective, here at Tenax. The LeoPARDS trial is designed to determine whether levosimendan reduces the incidence and severity of acute organ dysfunction in adult patients who have septic shock, as well as to evaluate the safety profile. The primary endpoint for this study is the mean SOFA score between treatment groups. That stands for Sepsis-related Organ Failure Assessment. Secondary endpoints established by Imperial College of London include oxygen delivery and cardiac output, incidence and duration of renal failure, serum bilirubin time to extubation, 28-day hospital, and three-month and six-month survival, ICU and hospital length of stay, and ICU-free days, duration of renal replacement therapy, and days free from catecholamine therapy. After our meeting with the FDA during November 2014 about this study, which included lead investigator, Dr. Anthony Gordon, the agency provided guidance on how the data might be analyzed to support a regulatory filing, and more specifically, the type of endpoint they believe would be clinically meaningful. Working with Dr. Gordon's team, we submitted a statistical analysis plan to the FDA that included an additional set of secondary endpoints that we believe fit their criteria. We believe that the study is powered to show significant difference between levosimendan and the standard of care arm on these endpoints. If positive, we believe that these data would support a regulatory filing, and we would plan to request a pre-NDA meeting with the FDA around what that path would look like. We also believe the positive data in this trial would have particular significance for both patients and the agency, because septic shock is a life-threatening condition that has very few effective treatment options, with an estimated 500,000 patients in the United States, and up to a 50% mortality rate. This past September, we were very pleased to announce that Tenax Therapeutics would be a national event partner for Sepsis Alliance in 2015, and 2016, to raise awareness of both sepsis and septic shock. In summary, we're very excited to see these results alongside Dr. Gordon and his colleagues at Imperial College London, and look forward to providing updates on the data, and potential regulatory implications during the first half of calendar year 2016. Finally, in September, we were also very pleased that James Mitchum, a highly-regarded pharmaceutical executive with extensive experience in finance and general management was elected to our Board of Directors at the annual meeting of stockholders. Before I turn the call over to Michael, I'd just like to briefly reflect on the significant progress that our team here at Tenax has made over the past calendar year. During that time, we have focused resources to our multipronged levosimendan program, build out the full LEVO-CTS trial infrastructure, and made significant progress in our enrollment trends. And we are now poised to have two late-stage readouts next year with potential regulatory implications. We continue working hard to drive value for both patients in these critical care indications, and our shareholder. And we are excited to speak with you next year around some of these important milestones. With that, I'd like to turn the call over to Michael Jebsen, our President and CFO, to go over the financials. Michael?

Thank you, John. I will begin today by summarizing our financial results for the three and six-month period ended October 31, 2015, and '14, followed by a brief discussion of our cash position and burn rate. Total operating expenses for the three months ended October 31, 2015 were 3.7 million, compared to 4.1 million in the prior year. The approximately $400,000 decrease in operating expenses for the current period was due to decreases of approximately $350,000 in general administrative costs, and approximately $40,000 in research and development costs, when compared to the same period in the prior year. Total operating expenses for the six months ended October 31, 2015 were 6.9 million compared to 6.6 million. The approximately $300,000 increase in operating expenses for the six months period was due to a decrease of approximately $435,000 in general and administrative costs, partially offset by an increase of approximately $740,000 in research and development costs when compared to the same period in the prior year. General and administrative costs for the three months ended October 31, 2015 and 2014 were 1.2 million and 1.6 million respectively. G&A expenses for the six months ended October 31, 2015 were 2.6 million compared to 3 million in the same period of the prior year. The approximately $400,000 decrease in G&A cost for the three and six months periods ended October 31, 2015 respectively were due to reductions in payroll costs and the cost incurred for legal and professional fees, partially offset by an increase in other cost. We do not anticipate any significant additional charges to our G&A cost structure, and we anticipate overall G&A cost of approximately 6 million to 6.5 million annualized. Research and development expenses for the three months ended October 31, 2015 were approximately 2.5 million compared to 2.6 million in the prior year. R&D expenses for the six months ended October 31, 2015 were approximately 4.3 million compared to 3.5 million in the prior year. The increase in R&D expenses as compared to the same periods in the prior year was due primarily to the increase in cost incurred for the progression of our Phase 3 LEVO-CTS study, partially offset by the elimination of the costs incurred for the clinical and preclinical safety studies for Oxycyte and the funding for the LeoPARDS septic shock trial, which all occurred in the same period of the prior year. For the three months ended October 31, 2015, we reported a net loss of 3.7 million or $0.13 per share compared to a net loss of 4.1 million or $0.14 per share in the same period in the prior year. For the six months ended October 31, 2015, we reported a net loss of 6.5 million or $0.23 per share compared to a net loss of 6.2 million or $0.22 per share in the same period in the prior year. As of October 31, 2015, we had cash and cash equivalents, including the value of our investments in marketable securities, totaling 40.8 million compared to 48.1 million at April 30th, 2015. Overall for the remainder of calendar year 2015 and into 2016, we expect to see increases in our quarterly R&D expenses as a result of the progression of the LEVO-CTS Phase 3 clinical study. As we finalize our site activation efforts and continue to see growth in our monthly enrollment rates, we anticipate LEVO-CTS clinical study costs of approximately 2.5 million per quarter. This increase in R&D spend will result in an overall burn rate of approximately $16 million moving forward. With our existing capital, we are well positioned with sufficient funds to complete our Phase 3 LEVO-CTS trial and carry the program through potential approval. Our clinical execution and efficient use of capital gives us the flexibility to continue to evaluate strategic opportunities for growth, including developments in our septic shock program and potential additional candidates that fit our pipeline strategy. Based on our existing capital resources and our anticipated growth in annual burn rate, we believe we have sufficient capital to fund our operations through calendar year 2017. On a separate note, I would like to remind those of who have been following our progress over the last year we will be converting to a calendar year filer beginning January 1, 2016. As a result, we'll be filing a transitional 10-K for the stub period of May 1, 2015 through December 31, 2015. And then, following that up with a first quarter 2016 for the period ended March 31, 2016. So we will have quite a few filings over the next three months, but it will transition us for more consistent filings in the upcoming years. With that, I will turn it back over to the operator for Q&A.

Thank you. [Operator Instructions] Our first question is from Jeffrey Cohen of Ladenburg Thalmann. Please go ahead. Q - Jeffrey Cohen: Can you hear me okay?

Hi, Jeff? Q - Jeffrey Cohen: So, Mike, on the spend going forward, R&D and SG&A, so it sounds like on the R&D front that there'll be a little bit of a decrease because of LeoPARDS being wrapped up very shortly, but it sounds like a slight acceleration of R&D spend as the trial continues to enroll rather well? Is that an accurate way to think about it? A - Michael Jebsen: Correct. And also to consider the offset, in the prior year, we effectively traded R&D spend from the Oxycyte programs into the LEVO-CTS. So although we're spending all of our money now on LEVO-CTS, it's not reflected in the year-over-year variance because we did incur those costs not only for LeoPARDS in the prior year, but also for Oxycyte which we are not incurring any longer. So yes, the site activation effort is really winding down. Now the focus is managing this trial and expanding the enrollment rates, which we believe at this pace will result in about 2.5 million per quarter [indiscernible] that trial. Q - Jeffrey Cohen: Okay. Got it. John, is Duke one of the centers online that's enrolling?

Yes. Q - Jeffrey Cohen: Okay. You talked about the 82 enrollees thus far that were added because of the expansion of the protocol. Is the FDA likely to look at that group separately?

Well, let me be clear with that. There are 82 patients that have been enrolled in sites that have IRB approval for the new protocol amendment. They don't all fall into the category of having a higher ejection fraction. In fact about 20% of those patients are qualifying based on liberalizing the ejection fraction from 25% up to 35%, so many of the patients are still either mitral valve and aortic valve patients, which there was no change there, or CABG patients with an ejection fraction below 25%. So, no, I don't anticipate that the FDA is going to want to necessarily look at that group separately. They approved the protocol the way it was, and it's just basically a matter of looking to see what the event rates will be. Q - Jeffrey Cohen: Okay. So how should we think about the protocol expansion as far as the pool goes from what you've seen thus far? Is it about 30% greater, or more than…

Well, we had estimated that by liberalizing the ejection fraction that we would double the size of the pool, approximately of patients that would qualify. I think what it's done, along with some other refinements that we made in inclusion and exclusion criteria it's just made it easier for the sites to identify viable patients into enrollment. And so, we've see a pickup in our enrollment rate from - we were running somewhere around 25 to 30 patients a month, and now we're running around 40 to 45 patients a month. And I think in the last 30 days, we've done 42 patients. Q - Jeffrey Cohen: Okay. So with that in mind, what does it look like if we could kind of hone in on the timeline for your interim look at 50% and 70%? Are we looking at March-April for 50%?

Well, for a 50%, we going to need to be -- again, it's based on event rate, not patients. So based on what we are currently seeing with the event rate, it's going to be somewhere between getting to 380 to 400 patients. So, 40 patients a month, I mean we should finish December probably above 310, probably close to 320. So, we should be somewhere in the March-April timeframe when we get to that number of patients. Q - Jeffrey Cohen: Right. And then, 70%?

Assuming the -- 70%, that would come I think about three months later, assuming that the event - the enrollment rate stays at about where it's at or increases slightly. Q - Jeffrey Cohen: So, probably late summer for 70%?

Yes. I mean that's safe to say. Q - Jeffrey Cohen: Okay. And we may or may not hear anything in the public domain as far as how that looks, at the interim looks?

We probably -- again just as we did at the 200-patient step, acknowledged that we've gotten there, and that you have to keep in mind that once you see the number of events, then you've got to wait 30 days until you have the complete follow up of the patient, the last patient with the event. So, we'll probably acknowledge that we're there. And if there's something remarkable about the analysis, we'll let people know. If there's not, just like we did today, we did a 200-patient look, it’s what we expect it to be. Q - Jeffrey Cohen: Got it. One more if I may, so it sounds like you've got 67 sites that are up and running, I am including the ones that you deactivated because of not enrolling. Is that the number? Now you are not focused any longer on any more enrollees, on any more enrollment sites, you are just focused on enrolling?

It is 67. We dropped five, because they weren't enrolling, and we might have one or two more that we might drop that are pretty slow enrollers, but at the same time we're looking at the possibility of adding of -- I think it's four more hospitals in Canada and I think we've got about five or six hospitals in the United States that we would like to see as part of the trial. So we'll try to keep ourselves at around 70 hospitals or slightly above. Q - Jeffrey Cohen: Okay. But generally speaking, you're clipping now at a good pace?

Yes, I think so. Q - Jeffrey Cohen: Okay. I got it guys. Thanks very much for taking the questions.

Thank you.

[Operator Instructions] Our next question is from Nisha Hirani of Zacks Investment Research. Please go ahead.

Good morning, John and Michael. Hope you are doing well. I just had a quick question. I was curious if you are continuing to evaluate other products in critical care opportunities to potentially add to the Tenax pipeline?

Yes, we are. We've looked at a few things over the past year that we did not think would be a good fit or didn't think that there is a high likelihood of success, but we continue to look at things that are brought our way, and we've actually reached out to a few folks who have discussions about possibilities of other things we could look at, and nothing that we're ready to announce though.

Okay. Good to know. Thank you. That's it from my end.

Thank you.

Thank you. We have no further questions at this time. I would like to turn the conference back over to management.

Hi, thank you. Well, everyone, I appreciate your taking the time to join us today to listen to the update. We are truly excited about the progress that we've made and our accomplishments for the past year, and we look forward to keeping you up-to-date on the exciting things to come in calendar year 2016, when we'll actually be in the calendar year 2016. So with that, I wish everybody a great holiday season and look forward to talking to you next year. Thank you.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. And thank you for your participation.