Tom McNaughton - Chief Financial Officer Jim McGorry - President and Chief Executive Officer Saverio La Francesca - Executive Vice President and Chief Medical Officer

Ram Selvaraju - Rodman & Renshaw Research Laura Engel - Stonegate Capital Partners

Thank you. Good morning everyone and thank you for joining our call.

This is an exciting time for Biostage and we are very pleased to be able to share with you some significant 2016 accomplishments and our plan to transition from a preclinical company to a clinical stage company in 2017. Jim McGorry, our CEO; and Dr.

Saverio La Francesca, our EVP and Chief Medical Officer, are also on the call this morning. Earlier this morning we reported our Q4 and fiscal year 2016 earnings results and update on our recent operational progress and commentary on our expected near-term milestones.

As a preclinical biotechnology company we are measured more against progress towards achieving our strategic milestones and a bit less on our quarterly P&L. And we have a lot to talk about today regarding the very significant progress we made during 2015 and upcoming milestones for 2017.

Therefore I’ll first give an overview of our Q4 and full year 2016 financial results, and then turn the call over to Jim. Jim will walk you through the Company’s recent developments and lay out our 2017 plans and milestones to illustrate how Biostage will transition to a clinical stage company this year.

Saverio will then present to you some comments on our preclinical data, after which Jim will wrap up our prepared comments and we will open the call to questions. So let me get started.

We reported a Q4 2016 net loss of $3.3 million or $0.20 per diluted share compared with a $2.3 million net loss or $0.17 per diluted share for Q4 2015. The year-over-year change was attributable primarily to greater spending on outsourced preclinical studies.

Our full year 2016 net loss was $11.6 million or $0.73 per diluted share compared to $11.7 million or $1.05 per diluted share for fiscal 2015. Increased R&D spending in 2016 was essentially offset by a $2.6 million year to year decrease in stock-based compensation expense resulting in a small year-to-year change in net loss.

At year-end 2016 we had a $2.9 million balance of cash on hand. In February 2017, we closed an $8 million public offering.

The offering’s proceeds will be used primarily to fund our effort to file an IND in the third quarter of this year. We believe that our cash on hand will fund the operations through September, a critical time point, and it gives us the runway to file the IND.

I’ll now turn the call over to Jim.

Thank you, Tom. Good morning everyone.

2016 was a significant year for Biostage. We built the foundation and capabilities to transform to a clinical stage company.

In 2016 we made significant improvements in our operational, clinical and regulatory functions at Biostage and we further validated the work with industry experts to ensure proper alignment with our IND. These activities give us great confidence leading up to our upcoming IND.

We are well positioned for a transformational year in 2017 and I know companies like to overuse the word transformational. And as a note I have 12-year-old twin boys.

So I really know what transformational looks like. But what has not changed or transformed at all is the problem.

The clear unmet medical needs for patients suffering from esophageal cancer and kids born with a gap between their upper and lower esophagus. These unmet medical needs and problems is what our technology addresses.

And our preclinical data continues to suggest we have groundbreaking alternatives in treating these patients. Our operational and clinical study results give us confidence that we are pivoting in the right direction towards a clinical translation.

In this presentation, I will highlight our 2017 strategic imperatives and show a roadmap of our interrelated activities. You will hear from Dr.

La Francesca that we develop meaningful data and first of its kind data on our Cellframe technology. He will share with you these new results.

These data are robust and reproducible. The consistent production of tissue growth and regeneration along with our operational and regulatory improvements sets the stage for a clear pivot for Biostage to a clinical stage company in 2017.

Let me highlight in more detail where we came from in 2016 and where we are going in 2017. Our beacon points to one clear goal advance our technology into humans.

The orphan designation we received in 2016 underscores the scientific validity of our platform. We are doing groundbreaking work and other regulatory and scientific validation of our esophageal implant in both pediatric and adults underscores our progress.

We will expand our process through a renewed and purposeful commitment through strategic collaborations with hospitals, doctors, biotech and medtech. The timing is now right for these further collaboration and additionally we will increase our external communication so we can bring our shareholders, collaborators and future patients along on the journey.

Okay, how are we going to do all this? We are going to do this by staying focused on our strategic imperatives.

These four strategic imperatives all support our transformational shift to becoming a clinical stage company. You can have development without collaborators.

You can’t advance the regulatory activities if you do not build the required foundation, and finally we must have the capital runway to operate. We are aligned on all of these necessary requirements.

Our Biostage team has clear goals and a collective eye on our objective, file an IND in Q3 and emerge in 2017 as a clinical stage company. By doing so, we believe we will substantially increase our value and move closer to translate our exciting technology.

Now let me share with you the roadmap of how and when we intend to implement these activities. Let me build on these four strategic imperatives and give you that roadmap for 2017.

But first please know our entire team at Biostage has a strong sense of urgency. We use the phrase at times the patient is waiting, and every one of our employees knows and understands the important work we are doing, and we understand the critical nature of that work.

Our cash carries us through Q3 and the filing of our IND. Additionally we will continue to explore all ways to extend our financial runway by exploring all strategic financial options.

As we continue to advance our clinical development and meet key data and regulatory milestones the value of our company should increase. New collaborations with doctors, hospitals and biotech, which we are focused on in 2017 should hopefully add further value and validation of our technology.

Everything we are doing is to ensure we are advancing our technology towards the clinic. We believe these activities and collaborations will result in continuous news flow.

As such, we are committed to sharing these updates with you throughout the year. Now let me turn the presentation over to Dr.

La Francesca, who will show you new and exciting data on our Cellframe technology. Saverio?

Thank you Jim, and hello everyone. I would like to give an update on our preclinical studies and highlight some recent and very significant data.

In general, the ongoing animal studies keep confirming that the data is very robust as their regenerative process has been highly reproducible in terms of the progression of tissue growth and the timeline of it. In other words, in all of the [Indiscernible] of the large animals that we have operated on we have been able to achieve the reconstruction of the esophageal integrity and continuity.

Furthermore, the time scale of the stages of the regenerative process has been consistent, from the early reconstruction of the esophageal tube to the fundamental regrowth of the inner epithelial layer. For this reason, we believe that the Yucatan mini-pig, a large animal model, with weights ranging from 50 to 80 kilograms is predictable of clinical conditions that require the repair of the esophageals after a surgical resection or because of a congenital malformation.

Currently, we have two GLP status ongoing. The GLP status, as everyone knows, are required by the FDA for the IND submission.

These animals will provide data for both esophageal examination and mechanical testing. Some of the animals have already produced some of these data at earlier time points.

Other studies are about to be initiated. One study will define the trait of the cells that we [Indiscernible] and the cells will be tagged with a fluorescent product.

This study will also help define the mechanism of action for our Cellspan implant. Another study will provide more data on mechanical testing at different time points as requested by the FDA.

We do also have a very recent and remarkable update as in our non-GLP study two animals have now reached a follow up of more than one year after the implantation of the Cellspan scaffold. These animals are outright healthy, on a regular solid diet and have now gained significant weight.

This is to our knowledge the only instance where such a successful long follow-up has been achieved in any attempt that use tissue engineering approaches. You can see in the endoscopic images attached to the presentation and taken just three days ago that we have a full reconstruction of the esophagus with strikingly undistinguishable in their epithelial layer.

Altogether the current data makes us extremely confident as the human clinical use of our implant is quickly approaching. Let me just make a final, but again remarkable update.

As we have said before, the unmet need in the pediatric population is something that my colleagues and [patients] remind us all continuously. To that end in collaboration with Connecticut Children's Medical Center we have developed a specific animal model that reproduces the pediatric population.

In piglets with a weight of just 4.5 kilos we have been able to again obtain esophageal regeneration after a surgical resection. But noticeably we have seen that the newly regenerated segment also does grow in size circumferentially as the piglets grow.

Indeed the animals are now around 14 kilos. In conclusion, during my three year work at Biostage we have developed the Cellframe technology that has proven and able to trigger the body's regeneration in a very consistent way in a very reproducible animal model.

We are now in the exciting final phases readying for IND submission. I will pass this now to Jim for this closing comments.

Thank you, Saverio. It is great to see the actual pictures and the progress of the data.

We will continue to update this data as the data becomes available. 2016 set the stage for a successful 2017.

We have solved many difficult issues to build that foundation and as mentioned on our roadmap the next 100 days are important as we advance our IND studies and execute on our collaborations. I look forward to reporting our progress in May at the American Academy of Thoracic Surgery, the 100th anniversary of the Thoracic Surgery meeting that will take place in Boston.

I also had the pleasure of going with Saverio to the Society of Thoracic Surgery in January, and see firsthand the comments from surgeons and scientists about the progress we have made with our technology. We have built that foundation and now we are interfacing with scientists, surgeons and collaborators to advance into the clinic in 2017.

I have learned that you can't rush biology, and moreover we have tapped into the ability of the body to heal itself, and we are learning everyday about the unique biology in the esophagus and we look forward to reporting on the mechanisms of action, the things that Saverio talked about, our cell fate and our biocompatible Cellspan implant. We thank our shareholders for your support and look forward to keeping you updated on our progress as we transition to a clinical stage company in 2017.

Operator, we would now like to open the call for questions.

Thank you very much for taking my questions. I wanted to ask about some clarification regarding a commentary made in the presentation concerning mechanistic assessments, could you tell us specifically what these mean that the FDA asked for in your pre-IND conversation, and then secondly I wanted to ask about the scope of the IND itself and whether or not this would specifically allow you to start clinical studies in esophageal atresia or whether you expect that to be a secondary step as it were?

Hi, Ram, thank you. I will have Saverio comment on the mechanism.

We are continuing to better understand that mechanism and I will let Saverio comment on that, then on the indications and I will address those further areas. So Saverio on the mechanism, sir.

Ram, I am assuming you are referring to mechanical testing.

Yes, the mechanical testing study, correct.

So, we have obviously planned some mechanical testing. Mechanical testing can range from tensile strength to a burst test and the FDA has required us just different timelines, and that is one of the reasons that we need to conduct some more animal testing just because the timeline requested us – the FDA requested us that we conduct those testings at different timelines.

So we are very confident as we have done some of those testing again already, and truth be told obviously the in vivo that data is the most important one, and we never had any issue in vivo. So we are pretty much very confident about the mechanical testing.

As far as the indication, the IND for esophageal atresia will be a separate one because it is just a different – entirely different disease, not just because it is pediatric truth to be told Ram, just because it is a different disease. So the FDA in a Phase 1 they hardly mix different diseases that have a completely different, if you will, I guess pathology.

So Ram, Jim here, and dovetailing on Saverio’s points. First let me comment that the orphan designation that we received was a broad orphan designation.

That orphan designation expanded from congenital abnormalities to the adults. So it covers the full pediatric as well as the adults.

When we – originally when we spoke to the FDA on our pre-IND they looked at our technology clearly as a platform, but they also commented that the foundation work that we are doing will serve all of the indications starting with the esophagus as well as future. Let me then comment, as Saverio said, we do see the pediatric atresia as a different IND, but it does lever some of the same information we are seeing now as we have data on both.

The other thing that I will underscore are a few things in pediatric atresia. One, I mean it is amazing to have to work with the children, and I have worked with a childrens oncology group in this area before in acute lymphoblastic leukemia and with it the you seeing the congenital abnormality is not cancer.

It's a congenital abnormality to the regenerative properties in the kids are also very strong. And three is we also mentioned within our release, that that indication looks like it can also make the company eligible for a priority review voucher.

So, just a couple of things, why we see opportunities in adults and other things on the platform which we do not feel are currently valued right now and we were making substantial information as Saverio showed in the piglets with our collaboration, our joint collaboration with Connecticut Children’s Medical Center. Thank you for your question.

Thank you.

Good morning. Thanks for taking my question.

I just wondered, looking for what -- what detail can you provide at this point as any as far as the study design specifically maybe the patients who are looking to enroll and how easy it will be to find those patients for this Phase 1 study?

So Laura, thank you. So, that's a good focusing on new drug within our pilot or our Phase 1 as we refer to.

First of all, the other big good comment is that in our submission in our pre-IND discussion we're only talking about with our discussion with the FDA in this Phase 1-6 patient. So, it’s a very focused area.

I actually know who working with one of the top standards in the country and arguably the world Mayo Clinic and were working in Saverio's partner and collaborator with the Chief of Surgery at the Mayo Clinic, Dr. Dennis Wigle.

And as we submitted the synopsis of that protocol in the pre-IND, it was focused on an early esophageal cancer referred to in stage as a T2 N0. Its small, its small incision and then where there is no nodal involvement.

And currently with that, a patient has to go through that large resection of that cancer and then pulling up the stomach or putting the colon in place. And we believe our technology can prevent and actually from the patient to go into that very intensive surgery.

So, that’s the patient population we are currently meeting again at the American Academy of Thoracic Surgery and further collaborators that you will hear from us that we will further add to that to help us better understand that patient population.

Okay. And links wise, we're looking at the picture screen on 61 days out on the pig.

What would you expect as far as being able to get some data or share some information from initial results on this human trials?

I'm trying to better the question.

This is as far as the link that the study once enrolled, how would the data you could share with this tree compared to the timing on the data you've been able to share with the pre-clinical studies on the pigs?

So, let me comment and then turn it on over to Saverio that he can comment further. First of all, as I've underscored into the presentation, we will continue to update our progress both on adults and pediatric and the bronchus throughout the year.

We're going to continue to do that. Irrespective if back on the current area, so think about it this way as a tube.

If you have to take out a piece, and I mean not just a side or sliver, you have to take out a portion 4cm, 6cm. there is nothing there, there is a gap between that area.

And that's what we're focused on right now. And we have done that in every animal that Saverio has worked on.

Receptive, taking out that portion, nothing exists. And the current way to do that what the problem is use other if you will conduits of the body.

And so, as we continue to be able to highlight those pre-clinical data, we will continue to keep people informed. We hopefully believe and we'll be happy to get, it will be a happy day for us as we said to transform to a clinical stage company.

And we will keep you and others informed of our progress when we get to that point. Saverio, any thoughts here?

Sure. Well, the 251 days a picture is there to show what we have now as our to be told as in all the cases, the long-term is the most important data.

That’s where entire thing fail and that's why today we're so excited and then being able to show this. Now that having been said, I could tell you that if I show you a picture at a 150 days, there is no difference between a 150 days and a 251 days.

So, when you were mentioning what we're going to give Investor Day, so we don’t have that timeline, but theoretically we can show that a patient has already reached a rate that's early as three weeks and that a full epithelium is going to be there may be a three months. Obviously, we will have to figure that out.

It's a little early and also this is going to be done in collaboration with the host that our there's going to be doing the clinical trial.

Okay, great. Well, great, I appreciate the information, looks to be an exciting year and I will get back in the queue.

Thank you.

Hi guys, thanks for taking my question. I just wanted to follow-up a little on the pediatric esophageal atresia.

First of all, thank you for sharing more information on that. Very exciting.

Connecticut Children’s of course and Dr. Christine Finck, preeminent institution and pioneers in this area in the pediatric regenerative medicine.

But are there any other major institutions or physicians who have since approached to you that want to get involved in this and can you name any of them if so and how close would this be? Second, how long do you think it would be before you are in a position to file an IND for this and or be in a position to have a compassion that use application?

Thank you.

So, thanks Ray, and thanks for being a share holder to the company for a long time. So, we appreciate your support.

And so, you see the two areas that we're going down. You see if you will a high class problem that we have.

We have a platform. We have other indications that our technology works in, most spoken esophagus and then in the trachea and the bronchus.

We're advancing in one week when Saverio's leadership in the last few years looked at all of them. With that data we saw within the esophagus and that’s why we're doing the esophagus.

We're following the data. And so, that's what we're seeing.

But then again Dr. Christine Finck Ph.D.

M.D, we started to see great work coming out of Connecticut Children, I will say that when we go to the American Academy of Thoracic Surgery, that will be both pediatric and adult, we will be meeting with other physicians and clinicians. And I'm not at the moment in a position to be able to comment on this specific institution.

But we have been approached now by some of the top institution in the United States and the word around pediatrics. In Boston which we know very well in our backyard, one of the most preeminent institutions are in Boston, Cincinnati, no doubt and so look we are discussing with at least undisclosed institutions right now to try to put together those collaborations, those areas that build on the work that we are doing and that Dr.

Finck is doing to advance the pediatric piece. You brought up the other question of compassionate use or other ways of this area.

We are not going to comment on that right now. But what I think it's interesting is physicians want they want a solution to these problems that they are seeing and we are getting a lot of interest in doing that but what we have learned is you need to do the work first.

You need to be able to have that work, the safety work that full area that compliments the IND and that's exactly what we are doing.

Thank you.

Thank you. Just a follow-up regarding the timing of a potential additional IND for the esophageal atresia indications.

Could you give us a sense of whether that's something that we could expect to see in 2018 and if so approximately when in 2018 and also whether there would be some cost savings associated with filing the second IND given that you expect to fall the first one this year. Thank you.

So, I will comment Ram, and then turn it over to Dr. La Francesca.

And so, we said originally when we were looking at our area that 2018 is when we were focused on the pediatric atresia. We are continuing to be able to look at that and evaluate that right now.

But 2018 is the time frame. And so, we are continuing to be able to work on that.

We believe that there will be cost savings because the CMC work, the foundation work, the things that we have put in place and that characterization of ourselves and all of the micro structure of our scaffold all works into pediatric. And then in pediatrics, if there's a note and why it's interesting in pediatric to an adult, as you might recall our scaffold did remove after a three week period that scaffold is removed.

The challenge with children is as they grow then you would have to go back for another area or back if it was a totally implantable device. And so, that is why I think it works for those for those kids, it's looked on as a great option and that's why there is tremendous interest into that area.

Saverio, further thoughts?

Sure. Well I don't think anyone has a timeline here on top of future ahead.

But let's put it this way for a second and I guess especially in our product. There are two things you want to keep in mind.

One is that actually works, when I continued animal model is that are reproducible. We have enough data and I think we know that that is the case.

Then you have the other part which is you have got to put in place the regulatory framework and all the qualitative systems in place to actually develop the product. Now, as we are doing all these re-data as we have said, that is going to be exactly the same for the pediatric capitation.

So, I believe I actually made it, be a service buyer that is that what's required that the most time and actually the most capital. The actual research in the animal study is not quite as fetched as time consuming.

So, I think that I would like to put it this way, so I am very looking forward to the side of a substitution for our second instead of the Chief Medical Officer. I can tell that I am getting the lot of pressure for my colleagues and from patients' family all the time.

As Jim said, we are trying to keep it straight, do the work first, and but sort of we're clear. We have developed the product, what we are doing now is a very important regulatory work, quality work and so on and so forth.

Thank you.

Thank you.

Yes, thank you operator. And so look, you can see why we are excited, it's varied talks about the product.

You can see the pieces of the regeneration in that space where you see and it's hard to really look up, nothing existed there at one time. That is the biologic response where the body is using its natural way to heal itself and that's the stuff that we've tapped into, that's why we are excited and that's why we are transitioning into a clinical stage company.

We thank you for your support and we will continue to be able to update you on our progress in 2017. Thanks much.