ReWalk Robotics Ltd.
Q3 2019 Earnings Call Transcript

Published: 13 Nov 2019

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2019, ReWalk Robotics Ltd. Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions].I would now like to hand the conference over to your speaker today, Mr. Ori Gon, Chief Financial Officer. Thank you, please go ahead sir.

[Ori Gon:]

Thank you, Jimmy. Good morning, and welcome to ReWalk Robotics' Third Quarter 2019 Earnings Call. This is Ori Gon, ReWalk's CFO. With me on today's call is Larry Jasinski, Chief Executive Officer of ReWalk.This morning the company issued a press release detailing financial results for the three and nine months ended September 30, 2019. This press release and a webcast of this call can be accessed through the Investor Relations section of the ReWalk website at www.rewalk.com.Before we get started I would like to remind everyone that any statements made on today's conference call that express a belief, expectation, projection, focus, anticipation or intent regarding future events and the company's future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act.These forward-looking statements are based on information available to ReWalk management as of today, and involve risks and uncertainties, including those noted in this morning's press release and ReWalk's filings with the SEC.Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. ReWalk specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law.The archived webcast will be available on the company's website within the Investors section. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on November 13, 2019. Since then ReWalk may have made announcements related to the topics discussed. So please reference the company's most recent press releases and SEC filings.And with that, I'll turn the call over to ReWalk's CEO, Larry Jasinski. Larry.

[Larry Jasinski:]

Thank you, Ori. Good morning everyone and thanks for joining us. The third quarter was the first full quarter of commercialization of the ReStore Exo-suit for stroke rehabilitation following FDA and CE clearance. During this quarter we were able to place units and most importantly, we have developed a strong pipeline as we look forward into 2020.Regarding the ReWalk 6.0 Spinal Cord Injury product, a public tender has been published in the German Government’s Federal Gazette most finalized in sort of a shorter sales cycle and higher levels of placements as we look forward into 2020.Let me start with a summary of our third quarter results. We had a total of $1.2 million in revenues, which was as result of 17 units placed, 12 of them were ReWalk Personal 6.0, five were ReStore products.The ReStore design culminates three years of development at ReWalk that was preceded by five years of fundamental research by Harvard's Wyss Institute and multiple clinicians. In this first quarter of introducing the product, we're planning broad and wide scale acceptance of the value this design offers. We have also learned that it is so unique and disruptive compared to other therapies that progression to purchase is guided by hands on use.Here's an email from a recent clinic soon to be buyer. “We even did some recording in our lab and we found that in the assistive mode, her propulsive ground reaction force, GRF, was clearly increased while breaking GRF was decreased. During 20 to 30 minute training sessions several system modes were tested and they both like most, a fairly low assistant level of 30 to 40 percent. They also mentioned, using the device to an early rehab after stroke could have helped them to learn walking more quickly. We now have the confidence to purchase”.Scheduling and conducting a patient trial is a predictor of the path to a sale. We have seen this pattern in almost every trial conducted to-date. The timeline to final purchase is defined by each clinics capital models, but early data appoints to widespread adoption. So here is an outline of our activities to-date.First, let's discuss customer activity. We have identified and initiated contact with over 400 accounts and they are currently in different stages of the sales cycle. Within this number, there are approximately 25 accounts that have successfully conducted patient use sessions. These accounts have stated that they want a device and we are currently working with them on a financial proposal to place units.Our pipeline is diversified and consists of inpatient, as well as outpatient clinics along with VA sites. The clinical value and cost effective model we have to restore is generating opportunities. The model and need for a patient session will lessen greatly as the device becomes more widely used and those accounts adding multiple systems will also increase our pace.For example, our early customers have already commented on the need to share the device among multiple settings, such as inpatient, outpatient and wellness therapy areas. We feel this multi-setting usability and the devices applicability to a broad range of clinics patients will result in clinic seeking multiple units beneath their needs.Second, let's explore what we're learning about the sales cycle. Even at the low price point and the monthly lease level of 1,100 to 1,300 a month, most accounts plan this as a capital purchase. Our first focus has been to document and place this properly within the accounts capital plans. We have developed all supporting materials for our sales force to assist them in the process.We've also added additional sales reps with extensive capital sales experience. In parallel, as many accounts recognize an immediate value, they’ve asked and we are working with them on flexible models such as when to purchase for early replacement.Third, what we’re hearing from clinics. One of the ReStore places in Q3 came from Moss Rehab, which is one of the five leading rehabilitation centers that co-led a national clinical study of the ReStore in 2018. The other centers in that study are also in process of additional studies and working through the procurement process.Moss’s study was led by Dr. Alberto Esquenazi, the Chief Medical Director at Moss Rehab. He said the following about this new placement. “We at Moss Rehab are very excited to be among the first places in the U.S. where ReWalk, ReStore is available for clinical use. This is the second time Moss Rehab and ReWalk have collaborated and bringing to the clinic technologies that are at the forefront of rehabilitation care, where patients and clinicians have provided input and the manufacturer has listened and produced clinically relevant therapeutic interventions. With this new device, we look forward to improving gate training for many patients after stroke”.Fourth, let's look at the development of the sales channel. The reaction to-date supports expansion of our field sales team and increasing the number of experienced capital sales representative. We have added new team members, with extensive experience in completing capital cycle sales to broaden coverage. We would have doubled our U.S. team by year-end, and have successfully recruited the skills, we sought. We will keep looking at other potential additions to the team, but will also be careful with our spend level.Fifth; clinical data from the FDA settings and new research from the leading research centers. The primary data from the study is anticipated to be published in Q4, an additional gate-map data from the study has been submitted for publication now. The more encouraging result is that our 36 patients have completed all study activities, the majority increased their walking speed from the first to the seventh visit.There are at least four centers that have initiated new studies. One, will compare the therapeutic benefits of excessive assisted therapy versus a traditional therapy approach. The second will focus on the profile of stroke patients that is, this design is best suited to.A third, is looking at the operational and economic benefits from using the Exo-suit program. And the fourth will compare a long term gate training of an Exo-suit compared to a traditional AFO. We're encouraged with the ongoing studies and we are positive that the results of these studies will support more clinics decisions to place a unit in their facility.Finally, our expectations in the future for the ReStore device based on this first quarter of field interaction is positive from our customers, with our patients and with the data that remains consistent with all of our prior studies and design goals. We continue to see this as a widespread main-street system for the market place.Next, I would like to discuss Spinal Cord Injury device progress. There was a major announcement in the German Federal Gazette in October. Let me read the key elements.Techniker Krankenkasse, Barmer and DAK-Gesundheit have joined forces to form ARG Contracts Exoskeletons. One of the aims of the health insurance funds is to conclude contracts with suitable companies in accordance with 127(1) SGBV for the supply of AIDS for their insured persons.ARG Contract Exoskeletons intends to conclude new contracts for the supply of its injured persons with exoskeletons, product type 23-29-01 of the list of registered AIDS. Within the scope of this announcement, Techniker Krankenkasse is a sole contact for interested service providers on behalf of the affirmation health insurance funds and is authorized to issue, accept and perform all legal transactions, declarations and legal acts required for the conclusion of contracts in accordance with the German Social Quote.This publication signals a major change and once finalized it will expand the use and placement of exoskeletons for paralyzed individuals across Germany. It defines all details of supply, moves replacement to occur directly between the insurer and ReWalk and simply will allow the backlog of patients to get systems for their everyday use.The level of detailed defined, the direct placement without third parties and defined policies with these leading insurers will allow qualified patients ready access to our ReWalk systems as a standard of care. These groups in the tender process are covering 25 million lives and we currently have 30 pending patient cases with them in our pipeline.In Q3 we have seven new positive reimbursement decisions and a total of 17 additional cases that are currently in a paid trial period or a pending a decision which are expected to convert into the next three to six months.I'd also like to share with you a summary of the survey as we perform the 27 of our German customers regarding their usage patterns with the device, as well as the main benefits they have walking in our system. The results are ratification that we have the right solution for this population.We found that 78% of the users use the system at a high frequency to reach the published threshold for its health benefits, 65% use them independently, 69% use it outside for general walking. These results show that the insurance provided systems to everyday users with proper patient selections, 24/7 reporting service and regularly used patterns will allow the patient to achieve the benefit show in the clinical studies.The health and economic value of enabling walking once again has a meaning to society and these users. In parallel, the data will also continue to expand as we see two larger scale publications in 2020 on the experiences with home use.I'd like to finish this section with the VA story, about [Inaudible] along with more representatives will increase our VA focus as they complete their enrollment in the study in the next few months.The first veteran to get a system over five years ago has had many health challenges from her various illnesses and paralysis, but she’d never stop walking. Well, in the past 15 months she had walked more than 200 miles in training and everyday use.On Sunday, November 4, she completed 26.5 hours of walking, to travel every inch of 26.2 miles as she became the first paralyzed U.S. veteran to walk across New York City marathon finish line.While the system worked perfectly, in some cold conditions and some sizeable builds in Central Park, the real story was the determination of a veteran to complete a path she pursued regardless of the training, cold, endurance and any fatigue she may have had. Congratulations to Retired Sargent Theresa Hannigan Vereline.With that, I'll turn the call over to Ori to review the financial results. Ori.

[Ori Gon:]

Thanks Larry. I would like to start by providing some additional details regarding our top line results. During the third quarter we placed a total of 17 units, out of which 12 where ReWalk SCI units and the five were from our new ReStore device. The geographical split of the 12 placed SCI units was the following

[Larry Jasinski:]

Thanks Ori. Last quarter I summarized key measurements for the remainder of the year, as we have now transitioned primarily to commercial activities. Today I am going to update our status with these key measurements for the rest of the year.So they are sales growth with ReWalk SCI line based on completing contracts with at least two German insurers. The results

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Swayampakula Ramakanth with H.C. Wainwright. Your line is now open.

[Swayampakula Ramakanth:]

Thank you. Thank you for taking my questions. Can you hear me clearly?

[Larry Jasinski:]

Yes, we can, I can. Hi R.J.

[Swayampakula Ramakanth:]

Okay, Hi Ori, hi Larry. In the start of the call you were talking about how you expect the sales cycle to shorten from here in Germany. So what has been the current sales cycle time, and how short would it become in the future?

[Larry Jasinski:]

R.J., this is Larry. The sales cycle in Germany has been very broad. It’s ranged from nine months to three years in some cases, because of the lack of certainty both in the code and of the process. This cycle should bring it down to months. So we believe we're going to take a lot of those patients who have been waiting so long and take care of them and then we will be able to give a cycle that was so predictable and it should be three to six months on average.

[Swayampakula Ramakanth:]

So, you said, I’m understanding that this is some sort of the legislation that had passed. So from the legislation to execution, do you expect any lag time or is it pretty much a done deal; it's just paid for processing from here, for these patients who have been waiting for so long.

[Larry Jasinski:]

It’s going to be relatively quickly. We already see movement of patients because this is gone so far. So, there won’t to be a long lag time. It will take a few months to get all these patients in the line and then after that it will get predictable. I think we'll be able to give numbers that you actually will be able to accurately predict one into the other.

[Swayampakula Ramakanth:]

And was that 40 patients that were waiting in Germany or waiting for this insurance to take a look of the whole process. I though you gave that number, is that correct what I have?

[Larry Jasinski:]

Okay, I’m going to, could you repeat that or Ori, go for it, yeah.

[Ori Gon:]

I think you try to see what was the number of patients, with the payers that is going in the pipeline right.

[Swayampakula Ramakanth:]

Yes, yes sir.

[Ori Gon:]

So we need 30, we have 30 pending patients within the group of payers that are included in this tender. So that will be even a little bit faster, because they are already – you know they have already passed the trial, and they are already qualified for units, so they should be the first in line with this group of payers.

[Swayampakula Ramakanth:]

Okay, perfect! And then for ReStore, you know it’s great that you placed five units in the U.S. and all of those five are direct sales. But also you had suggested that there are certain accounts who are looking for flexible model source of funding. So if you had these flexible models at this time, you know how many more and the five units that you’ve placed could you have gotten by this time?

[Larry Jasinski:]

Well, as we had indicated, we’ve had about 25 other accounts and negate the intent to purchase and they're just – we’re working through the processes with them, so we have clinical volume at the Director of Research level. So we are now working with purchasing and the exact time in which purchasing is a little less clear. Some of them are trying to do it immediately, through the rent to purchase type models and some of the others are focused a little more on putting in the capital cycle which may start in January or may start in April, but we anticipate the majority are going to come pretty quickly.

[Swayampakula Ramakanth:]

Okay, and also, sorry to jump back and forth but on the SCI device, you know you had said that there are certain units which are – about seven units have been sold on a rental basis, but what has been your rent to direct purchase conversion rate?

[Ori Gon:]

So, I can take this. So normally our conversion rate to-date is 60% to 70%. The reason I'm saying it’s a range, because what we do is when a device is ending, a rental, it’s going to be immediately converted, right, sometimes it takes some time, and its why we segregate between the rental, the active rentals and the pending insurance claims. So the pending insurance claims are somewhere in between of close one and maybe lost in some cases. So this is why it’s still a range, but it’s about 60% to 70%.

[Larry Jasinski:]

And I would add, we do loose some for other reasons, but they can come back and I’ll be specific. One of the patients we have, our indication for U.S. requires the weight to be under 100 kilos or 220 pounds and the patient at the time that he went in was much less than that, not much less, 90s. Right now he's at about 105 or so. So he has to lose some weight so he may come back into the system, but yeah, we deal with that or other things that change in their life that sometimes delay them, is the best way to describe it we hope.

[Swayampakula Ramakanth:]

Okay, thanks. The last question from me is you're talking about the VA trail and now you have 140 of the 160 patients that need to be enrolled. So based on the momentum in terms of enrollment rate, you know what’s your expectations there for getting the enrolment done, and also, you know potential when could we expect the data from this study. I would imagine this is something which you are watching very closely, so that you are [cross talk] investment.

[Larry Jasinski:]

They have enrolled on average of about three a month and that's ramped up a little more recently, it’s been a little higher, closer to 4 or 4.5. So with the 20 remaining, that was reported to us, about a month ago. So if they stay consistent they’ll finish somewhere around year-end, early next year, you know January, February-ish. Now that also means those three or four patients from us, may well be available to us in the SOP, where we have not been selling products so much, because they are all going to study, and they already have their product. So that will help us on the revenue side.So your question on the data, the data’s totally controlled by the DA, so it's harder for us to speak for them. We do know they would complete the follow up data six months after the last patient. So if that occurs right around the beginning of next year, that they would have their follow up data around the middle of next year and their plans for publication again are not publicly stated, but we would expect them to be available around the end of next year.

[Swayampakula Ramakanth:]

Perfect! Thank you, Larry and Ori, for taking all my questions. I appreciate that.

[Larry Jasinski:]

Okay, thank you. I appreciate the time.

[Operator:]

Thank you. And I'm showing no further questions in the queue at this time. I'd like to turn the call back to Larry Jasinski for any closing remarks.

[Larry Jasinski:]

Thank you very much Jimmy, and for everybody who attended, thank you for joining and if you have other questions please visit the company. Have a wonderful day! Thanks.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.