ReWalk Robotics Ltd.
Q1 2018 Earnings Call Transcript

Published: 14 May 2018

[Operator:]

Good day ladies and gentlemen and welcome to the First Quarter 2018 ReWalk Robotics Ltd Earnings Conference Call. [Operator Instructions] I'd now like to turn the call over to Ilanit Allen, you may begin.

[Ilanit Allen:]

Thank you, Michelle. Good afternoon, and welcome to ReWalk Robotics First Quarter 2018 Earnings Call. This is Ilanit Allen at In-Site Communications, Investor Relations for ReWalk. With me on today's call are Larry Jasinski, Chief Executive Officer and Ori Gon, Chief Financial Officer of ReWalk. This afternoon, the company issued a press release detailing financial results for the three months ended March 31, 2018, which can be accessed through the Investor Relations section of the ReWalk website at rewalk.com and you can also access the webcast of this call from there. 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, forecast, 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. A telephone replay of the call will be available shortly after completion of this call in the next two weeks. You will find the dial-in information in today's press release. The archived webcast will be for one year on company's website rewalk.com. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on May 10, 2018. 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 Jasinski:]

Thank you, Ilanit. Good afternoon, everyone and thank you for joining us. Today, I'd like to provide you with a brief update on the progress in our business since our last call and then I'll turn the call over to Ori to review our financial results. I am pleased to report that as of April 30, 2018 ReWalk shareholders have approved our March 5, 2018 agreement with Timwell Corporation Limited, its affiliates and RealCan Ambrum Healthcare Industry Investment Partnership Enterprise. With this approval, we will receive an initial investment of $5 million and are now moving ahead with our plans to establish a joint venture in China between RealCan Ambrum and ReWalk by mid-year. Once established, ReWalk will receive an additional investment of $10 million. As a reminder, this JV will be focused on establishing and building the market for ReWalk and restore exoskeletons in China. The JV will be funded by RealCan and other Chinese entities. ReWalk will contribute technology and maintain a 20% ownership position in the JV. Under the terms of this agreement, the JV has committed to minimum purchases of approximately $1.25 million of ReWalk products in 2018, followed by $4 million in 2019 and $8 million in 2020. These minimum levels continue to grow each year. The other major initiatives that is targeted to be completed between year-end 2018 and the end of Q1 2019 is the establishment of manufacturing, based in China for the restore product lines that will be focused on reducing product cost. Once this is completed on or by March 31, 2019 at the latest, an additional investment of $5 million will be made In ReWalk. In total, the direct investment in ReWalk Limited will be $20 million. The JV will be funded separately as I just discussed. I'm also pleased to announce that Ning Cong from Ambrum Capital who led the investment team will join our Board of Directors upon closing of the transaction. Ning's financial expertise in the Asian markets and her extensive connections in China will serve us well as we implement our strategic plans and facilitate our efforts to expand the reach of ReWalk's products to China. As we have noted in the past, there is a very large need in the Chinese market for lower limb rehabilitation and mobility aids. And we're excited about the potential of our technology to address the needs of these individuals, including those affected by stroke. The stroke incident rate in China is estimated to be 2.4 million people each year. RealCan is a strong partner with deep knowledge and reach within China and we're optimistic about our opportunity to build a solid foothold in the region through our joint efforts. Before I discuss the quarter, I'd also like to mention some recent changes to our Board of Directors. In addition to the upcoming appointment of Ning Cong, we've appointed Yohanan Engelhardt as a member of our Board and Chair of the Audit Committee. Yohanan is a seasoned Financial Executive with more than 30 years of experience, largely as a CFO, who's financial acumen and expertise will be invaluable as we continue to build ReWalk's controls and structure and expand our product portfolio. I'd like to thank Deborah DiSanzo, who departed the Board this week to focus on the increasing demands of her position at IBM for her many years of council and leadership. On behalf of the management team and other Board Members I'd like to extend our deepest appreciation for her thoughtful guidance and contribution in helping ReWalk bring mobility to individuals with lower than disabilities. With that, I'll turn to review of our first quarter 2018 results. Revenue totaled $1.6 million above our estimates for the quarter. We placed 23 units during the quarter, eight of which were for the VA. The VA study remains on track with 65 of the planned 160 patients' enrolled to-date. The VA has decided to expand the number of centers participating in the study. We obviously think this is a very positive news allowing greater access to veterans and ensuring the study is completed on time. We'll be able to share more in coming months. With regard to the SOP, the VA has indicated the veterans that going to an independent facility via choice and is an option. However, the policy is not yet been widely promoted. We hope to see improvement on this front in the future. We continue to make progress with reimbursement. We have previously discussed the issue of a new reimbursement code with the MDD in Germany to acquire systems for the parallelized community. This provided coverage or individual systems, but did not provide the financial support for training on the system. By the end of the second quarter a new code will be established and issued to reimburse training on the ReWalk systems. This will enable reimbursement for the training that is needed to successfully use the system and shorten processing time that will pave the way for patients in Germany who have been awaiting training and drive our growth in the market. In the US year to date, we have submitted 15 proposals to establish a policy with multiple commercial payers and intend to file additional proposals in Q2 with many of the 42 payers that have already improved reimbursement for parties on a case-by-case basis. We intend to submit about 50 proposals for coverage policy this year with various insurers leveraging our expanded data set. We intend to continue to pursue coverage decisions and will update the market as that unfolds. We are also refining our case-by-case coverage strategy to include a greater focus on the patient driven process rather than a provider driven focus. This will take advantage of an aspect of the Affordable Care Act that limits internal review times to 30 day cycles. And if necessary, provides the right to appeal funded by the payer and an external review by an independent physician specializing in spinal cord injury, whose decision is binding. We believe this should shorten review timelines, allow for more direct patient involvement, improved understanding of the clinical benefits of the technology and ultimately result in more favorable coverage decisions. This model has been successfully used in over 20,000 patients with other medical devices that do not have defined codes. With regard to Restore soft exo-suit for stroke patients, we have begun our clinical study to support our FDA submission. The study will be conducted at leading rehab centers, which include the Shirley Ryan AbilityLab in Chicago formerly RIC, a Rehabilitation Institute of Chicago; the Institute for Rehabilitation and Research in Houston, known as TIRR; the Kessler Foundation Research Center in New Jersey; the Stroke Research and Recovery Institute at Spaulding Rehabilitation Hospital in Boston and MossRahab Stroke, a neurological disease center near Philadelphia. Each of these current centers are identified within the top 10 rehab hospitals according to the 2017 US News & World Report Ranking. Each center has received IRB approval and we're excited to have begun with our first two clinical study participants in March at the Spaulding Rehabilitation Hospital in Boston, where the study is being led by a team of researchers from Boston University's Sargent College of Health and Rehabilitation. The clinical trial will assess the safety of the resource system during the training in stroke patients in rehabilitation setting. We expect to enroll 40 patients each participating in seven training sessions at the designated stroke research centers, and in positive study data and the timing of FDA and CE clearance, we plan to commercialize the Restore for stroke patients in the United States and Europe in the first half of 2019. We are still in the early stages of determining our timeline in China and we'll update you as appropriate. To recap our key objectives

[Ori Gon:]

Thanks, Larry. Q1 revenue was $1.6 million, up sequentially from $1.5 million in Q4, 2017. This reflects placement of 23 units of which eight were purchased for the VA clinical study. In Q1 2017, our revenue totaled $2.5 million, largely due to the 20 units purchased by the VA during that quarter for its clinical study. During Q1 of 2018, 14 units were placed in the US, seven were in our direct market in Europe and two were in our other market. During the quarter, we had six new rental purchase units placed and three previously rented units convert to a purchase. We currently have 26 open trials including 17 active rentals and nine claims that have completed their trial period and are awaiting a final insurance decision. As of the end of the first quarter of 2018, we had 261 pending insurance claims relating to coverage for ReWalk, compared to 194 at the same time last year and reflecting an increase of 39 claims since the end of the year. This number represents approximately $18 million in potential revenue. Gross margin improved to 43.2% during the first quarter compared to 42% in the prior year quarter, mostly driven by sales mix and lower product costs. Total operating expenses for the quarter decreased to $6.5 million compared to $6.7 million in Q1, 2017. We remain committed to reducing our year-over-year operating expenses by up to 10%. Net loss for the first quarter was $6.3 million compared to a net loss of $6.4 million in the first quarter of 2017. We ended this quarter with $8.8 million in cash. This does not include the addition of $5 million in gross proceeds related to our investment agreement with Timwell. With that I'd like to open the call for questions. Operator, please go ahead with the instructions.

[Operator:]

[Operator Instructions] Our first question - actually, we don't have any questions at this time. I'd like to turn the call back over to Larry Jasinski, CEO for any closing remarks.

[Larry Jasinski:]

I appreciate everyone's time this afternoon. And I look forward to providing information to any of the analysts with questions or other individuals as we put information on our progress out in the market. So thank you for joining us today and have a great day.

[Operator:]

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