Lifeward Ltd (LFWD) 2015 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the ReWalk Robotics third-quarter 2015 results conference call. (Operator Instructions) As a reminder, this call is being recorded.

I would now like to introduce your host for today's conference, Investor Relations for ReWalk Robotics, Lisa Wilson. Please go ahead, ma'am.

Thank you, Mallory. Good morning and welcome to ReWalk Robotics' third-quarter 2015 earnings call. This is Lisa Wilson of In-Site Communications, Investor Relations for ReWalk. With me on today's call are Larry Jasinski, Chief Executive Officer, and Kevin Hershberger, Chief Financial Officer of ReWalk.

This morning, the Company issued a press release detailing financial results for the three months ended September 30, 2015. This 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 for the next two weeks. You will find the dial-in information in today's press release. The archived webcast will be available for one year on the 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 November 5 of 2015. 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?

Lisa, thank you. Good morning, everyone. Thank you for joining us.

This morning, we issued our financial results for the third quarter of 2015. I am pleased to report our significant and positive progress in executing our commercial strategy and expanding our development plans. We placed 23 systems in Q3, up sequentially from 12 units placed in Q2. The growth was driven by reimbursement successes and the number of paid claims.

We continue to see strong demand for the ReWalk devices, evidenced by our growing pipeline of qualified leads. We successfully launched ReWalk 6.0 Personal in July and are pleased with the initial results and the positive feedback from users in the broader medical community. ReWalk 6.0 is a major advance forward in exoskeletal technology, offering users a better walking experience.

Our topline sequential growth during Q3 was a direct result of the efforts to build our reimbursement pipeline, expansion into new rehabilitation and training centers, and international growth. We saw strength in the US market, where 12 units were placed, with seven personal units covered by insurance. Outside the United States, we placed 11 systems and received three favorable insurance decisions in Germany.

Helping individuals obtain positive coverage decisions from their insurance providers is an important focus for us as we look to build ReWalk's commercial presence. To date, we have successfully secured approvals for 20 of 24 completed claims, or a success rate of 83%. Expanding our claims pipeline remains a priority as we look to drive growth in 2016.

During the third quarter, we increased our reimbursement pipeline by 68%. We now have 99 claims with pending insurance decisions in our direct markets, compared to 59 at the end of Q2. In the US, we have 46 pending claims, up from 25 at the end of Q2, and we have another 53 insurance claims pending in Germany.

During Q3, we saw a record level of insurance success so far, with a total of 10 favorable insurance decisions, including sales, rentals, and rental conversions to purchases.

ReWalk remains at the forefront of our industry. We now have more than 180 units placed throughout the world, with almost half being used by individuals in their homes and communities. During the third quarter of 2015, we added more than 200 qualified leads to our growing pipeline for a total of 620 qualified leads this year.

We are working to transition these qualified leads through the initial clinical screening, refer them to training centers for evaluation and to trial a ReWalk system. We expect many of those that ultimately trial the system will successfully complete training and submit insurance claims in the months ahead.

Importantly, we strengthened our leadership team so that we could accelerate the execution of our strategic plan to grow the business. Deborah DiSanzo joined our Board of Directors in September. She is currently General Manager, Head of IBM's Watson Health, and the former CEO of Philips Healthcare and a respected industry leader. With her depth of reimbursement and global operational expertise, she will provide valuable insights to the ReWalk team as we continue to build upon our reimbursement successes and expand our global footprint to bring the hope of walking again within the reach of more individuals around the world.

I would also like to take a moment to thank Dr. Amit Goffer for his distinguished service to ReWalk. Dr. Goffer will retire as our President and Chief Technology Officer on November 18. Amit's vision and innovation in pioneering the ReWalk technology allowed the dream of walking again to become a reality for individuals around the world with spinal cord injuries.

We have learned from ReWalkers that Dr. Goffer's pioneering work fundamentally changed their health and their life experience. We appreciate Amit's many years of dedicated service and the solid foundation he's built for our employees, the ReWalk community, and shareholders.

Amit's vision and leadership helped build ReWalk Robotics into the leading exoskeleton company in the world. With our next-generation system now in the market, a broadening awareness and acceptance of exoskeletons in the marketplace, progress on the reimbursement front, and a goal of further penetrating existing and new markets, our outlook for the long-term growth of the business remains positive.

I'd now like to turn the call over to Kevin to discuss our Q3 financial results. Kevin?

Thank you, Larry. Our revenue was $1.2 million for the third quarter of 2015, almost double our Q2 revenue of $610,000. Of the 23 units placed during Q3, 12 were placed for personal use. We are very happy with the progress we have made since receiving FDA clearance and beginning commercialization efforts in the United States a year ago.

During the third quarter of 2014, upon launch of our personal devices in the United States, ReWalk experienced strong initial growth, placing 27 systems and achieving revenue of $1.5 million. The prior-year quarter benefited from heightened demand from individuals eager to purchase a personal system using their own finances, strong interest from rehabilitation centers, and the expansion of our geographic footprint.

Our business looks very different today. More than half our sales are for personal units for community use, and the majority of these are being paid for by insurance providers.

Sequentially, our revenue increase compared to the second quarter of 2015 is a direct result of our focus on establishing and expanding reimbursement coverage in the United States and structuring our reimbursement efforts in Europe to mirror the success we have achieved in the US. We remain encouraged with the interest and the growth in our pipeline of leads and insurance submissions, which we believe will build our revenue base going forward.

During Q3, we recorded a gross profit of $87,000 compared to a gross profit of $331,000 during Q3 2014, reflecting lower production volumes and additional manufacturing costs associated with transition to the ReWalk Personal 6.0. We continue to see strong ASPs in our direct markets, especially with insurance reimbursements.

R&D expense decreased to $1.3 million for the third quarter of 2015 compared to $5.2 million in Q3 2014. In the 2014 period, we recorded a $4.1 million noncash stock-based compensation charge related to the IPO.

SG&A expense grew to $5.1 million during the third quarter of 2015 compared to $3 million during the same period in 2014, driven by market development activities, including investment in our reimbursement team and marketing activities related to the launch of the ReWalk Personal 6.0, and the cost of being a public company.

Net loss was $6.4 million for both the third quarter of 2015 and the third quarter of 2014. On a non-GAAP basis, net loss for the third quarter of 2015 was $5.9 million compared with net loss of $3.5 million in the prior-year quarter.

As of September 30, we had $25.1 million in cash and no debt. As part of the normal course of business, we periodically explore financing alternatives available to us. On October 1, we filed a shelf registration allowing us to issue securities up to $100 million in proceeds to be used for general corporate purposes. We will update you as appropriate should we enter into any material financing arrangements.

And with that, I will turn the call back over to Larry.

Thank you, Kevin. ReWalk Robotics is the world's leading exoskeleton company. Our objective is to establish programs and infrastructure that will support long-term, sustained growth. Our reimbursement team has been working hand in hand with insurers to educate them on the health and economic benefits of wearing exoskeletons in general, and the ReWalk system in particular. During the third quarter, the majority of our personal units were paid for by private commercial insurers on a case-by-case basis, with seven paid for by new insurers that had not previously covered a system.

To date, 19 commercial insurers have provided favorable insurance coverage on a case-by-case basis. We anticipate the number of approvals per insurer will rise in the months ahead. We expect the foundational work our teams have done and continue to do to support each individual claim will also reduce the time it takes to get a positive coverage decision and over time lead to broader, favorable policy decisions.

Earlier this year, we outlined a series of publications and studies with various independent research groups to collect data on the economics of life in a wheelchair. This expansive effort will be the broadest effort to utilize data from the largest US domestic and international databases. This effort also included using the clinical results of the ReWalk Personal device to quantify the impact of lower-limb paralysis and the health benefits of ambulation.

The scope of these studies include detailing the incidence and cost per incidence of co-morbidities in SCI patients post-surgery and inpatient rehabilitation; quantifying, in real dollars and quality-adjusted life years, what the economic impact of spinal cord injury is in the health care system; and utilizing the data to show clinical and economic benefits of ambulation over a five-year period.

We are on track with the publications and are in the process of finalizing the design of the studies and selecting participating centers. We expect to see the first peer-reviewed publication as early as Q1 2016. These studies will be added to our growing body of data supporting the potential secondary health benefits of wearing a ReWalk device and should provide added support for reimbursement submissions.

Our goal with these efforts is to continue to educate the broader market, and insurers more specifically, about the benefits of wearing the ReWalk exoskeleton.

We have also been working closely with the Veterans Administration to support their efforts to provide the ReWalk device to all qualified veterans. We are very encouraged by the VA's recent announcement that will conduct a large-scale, multi-center, community-based exoskeleton assisted-walking study. The trial will be focused on the quality of life and the health benefits from walking again. It is highlighted in the 2015-2016 edition of The Year in Veteran Affairs & Military Medicine.

As the only system cleared by the FDA for community use, the ReWalk system will be central to the study. The VA is currently in the process of setting up the centers and securing equipment for the study.

The study is occurring in parallel with additional VA plans to provide units for veterans. And we continue to work with the VA to support establishing a standard operating procedure for individuals that are located in areas that will not be included in the study.

As we continue to demonstrate the benefits of our devices and build interest in ReWalk systems, it remains critical that we expand our training programs and centers of excellence to accommodate the growing demand for our devices. We are in eight of the top 10 rehabilitation centers in the United States and added 13 new training centers worldwide in Q3. These foundation-building activities are essential and will enable us to move an increasing number of individuals through our pipeline as we continue to grow the number of ReWalkers in our communities.

During Q3, Sunrise Medical -- a part of the national HealthSouth clinic chain -- became one of our key new centers. We are excited about this new partnership with a leader in rehabilitation medicine. One of their first patients was a young man. He simply stood up, walked out the door with his mother and father. His mother exclaimed, I thought he was taking a couple of steps; I had no idea that he was going to walk, much less out the door.

This is one of many examples of the life-changing experiences individuals all over the world recount when they see a ReWalker in action. And it's why we continue to do the important work of expanding our footprint of centers around the world.

We are very encouraged by the progress we made establishing the commercial foundation for our business, particularly in the US, where we received FDA clearance for our device just over one year ago. While our progress in Europe has been largely driven by the pace of reimbursement, we continue to build our foundation.

In Germany, during Q3, we have implemented a reimbursement support structure and process similar to the US to build the necessary framework required to move our claims processing forward.

At the recent REHACARE conference in Dusseldorf, with over 45,000 attendees, we added a significant number of leads from SCI individuals. We also held extensive meetings between the key insurers, the eight ReWalkers that attended the meeting on our behalf, and our management team. We continue to work with the patients to enable them to purchase a ReWalk device and to educate the payers on the benefits of the system, and we are now seeing a positive trend towards coverage in Germany. Three systems were cleared as rentals by insurers, with commitments to purchase if the trial use is successful.

Turning now to R&D, our primary product, the ReWalk 6.0, is the most advanced personal exoskeleton on the market today. The enhanced design simply allows better walking because it better matches the size and the anatomy of each individual user. It has software for an ideal gait pattern, and it offers an overall walking experience that is better than any known product in development today.

The first buyer of the 6.0 has used his system to pick apples while walking in an apple grove. And now that the hockey season has started, he plans to stand up so he can watch the entire rink when his son plays. This individual bought a system with his own funds after using the ReWalk in a rehab center.

Another ReWalker I spoke with received commercial insurance reimbursement, and he began his journey walking again in Q3. As a single father with two young sons, he finds the chance to walk again to be a life-changer -- not only for him, but also for his children. He plans to take his boys to the zoo for a nice, long walk very soon.

ReWalk has an extensive commitment to R&D to drive development of this industry and to lead expansion for the use of exoskeleton technology on a global basis. Taking advantage of our first-to-market position, our R&D team will continue to develop major advances for technologies that will address spinal cord injury, as well as focus on functional product designs for additional clinical applications.

We are confident in our ability to remain at the forefront of the wearable exoskeleton market and look forward to updating you on our progress.

Thank you for your support. With that, I'd like to open the call for questions. Operator, if you could please go ahead with the questions.

(Operator Instructions) Matt Taylor, Barclays.

This is actually Young Li in for Matt. Thanks for taking our questions.

So I guess a question about the favorable reimbursement decisions that you got this quarter. Can you talk about, I guess, on average, when were they filed, and how long did it take to get approval?

We have learned -- we have had a great range overall. We've had some approved as quickly as a month and many are nine months. But generally, most of the things that drove our success in Q3 were about six months ago. And our target is to try to shorten that time frame. So we see a lot of our activity, frankly, that occurred specifically in late Q1, early Q2, resulted in a good level of success in the latter part of Q3.

Okay, great, thanks. And I guess a question on the VA with the large-scale study; how many VAs are involved, and do you have a rough estimate of how many units you might be able to sell through that study?

Well, the study includes 10 centers. And the VA will set that up at the pace that they are able to here, with the majority of them occurring this year and the balance next year. The study is intended to have 160 subjects. So the potential number of units that they will need will be a combination of what they have for the study itself and, of course, the individuals who successfully complete the study will be eligible for units. So this is in excess of 200 potential users and 200 potential veterans that will benefit as a result of this study.

All right, great. Thank you so much.

Raj Denhoy, Jefferies.

I wonder if I could just explore the sales funnel a little bit. I think last quarter, you started giving us some metrics around it. And I think last quarter, you talked about roughly 400 leads that you viewed as qualified. 140, if memory serves, were sort of at the later stages, and then 59 of those had moved to where you had submitted insurance claims.

And so when you look at the 10 insurance claims that you got this quarter, that you received favorably this quarter, how many of those were in that 59 that you had submitted?

Well, all of them came out of the 59 that we had had submitted previously. The cycle of time for most of them varied. So some of those came from Q1, and some of them came from Q2. But most were back in Q1.

Okay. So what I was just trying to get at in terms of -- and I think the previous question kind of got at this, too, but just trying to explore how qualified these leads truly are, right? And so when they do get to the point of being submitted to insurance, are there still points where they might fall out or where there are points where insurance companies might not pay for them?

And again, it's really just trying to understand, as you've now started to qualify these leads to a higher degree and moving through the funnel with more scrutiny, how many of these do you ultimately expect will generate sales, and over what time period?

Well, I'll break it into three categories. We have the qualification of the group, we've got the claim, and we've got the result.

At the back end, I noted we have 20 of 24 cases that have a decision made. So we had 83%, which is higher than our original estimates in terms of getting a successful outcome. So the data, when we get it, through the insurance companies so far has been a pretty good number.

Working our way back as to how many of those individuals in the leads, which now total 620, will make it into the claim process, we need a little more time and data to really have predictable numbers. And I think that is a metric that, once we get about three or four quarters into this measurement system, is something we will track very closely and provide information on.

Right. So the 99 that you have now submitted, right, and so those should at some point over the next two to three quarters, at least 80% of them by this math you just gave us, 80% of those could reasonably be expected to turn into commercial sales?

We agree; that's very reasonable.

And again, that period of over maybe two to three quarters, is that a fair time period?

Yes, it seems to be a cycle of about two quarters from point of submission, although some come earlier. And we've had a few come in a few weeks, but most of them are a little longer.

Okay. And then just lastly, on the rental versus sales insurance coverage, I apologize; I didn't quite catch that, but you're saying that some of the insurance coverage you are receiving is for rentals of the system that may ultimately turn into sales versus outright sales?

So, Kevin has that.

Yes, so we had about -- we had four rentals in the quarter. And we had four rentals in the quarter. We also had two previous-quarter rentals that, one was sold, one was an extension of the rental. So we've had pretty good success so far with that model, getting into the reimbursement process and then ultimately getting paid.

Okay, okay. And again, rentals and leases, those are -- you mentioned that you are working on some financing side of things. So are those sort of the same, or do you view those differently?

We do -- we look at those a little bit differently. The rentals we look at on a very short-term basis. Insurance providers have asked for that, to get the patient in and trial the device on a longer-term, usually a quarter or two quarters, if they are using the device, before they make the decision.

We've looked at leasing, and we talked with various partners. The insurance providers aren't really looking for the long-term lease at this point in time. We have maybe one that (technical difficulty) very favorable price for the Company. So we'll continue to look at that to grow the market, but it doesn't seem to be a significant demand at this point.

Okay, very good. I'll leave it there; nice progress. Thank you.

(Operator Instructions) Bill Plovanic, Canaccord.

Can you just -- you know, there's a lot of numbers been thrown around, and just can you clarify the sales funnel? How many are in the funnel and then how many are officially submitted and in the insurance process, or whatever the terminology you use is, in I guess the first couple of minutes of the call?

Certainly; I'll outline where we stand as of the end of Q3. We have a total of 99 pending claims as of the end of the quarter. 46 of those are in the United States, 53 are in Germany. An important measurement looking backward for everything that we have gotten paid for, we have seen 20 of 24 where a decision has been made, or 83% paid, where we have decisions. I can't tell you whether that will continue with the 99, but there's -- it's a reasonable base. So those are the pending claims.

Specifically, the new claims during Q3 that are included in that 99 were 40, with 21 of those in the US and 19 of those in Germany.

And then overall, what is the broad funnel that's kind of getting ready to be submitted? So I think you have a broader number as well that you provide.

Well, we have a total number of leads in the pipeline of 620. And that is the group that is speeding into and so far has 99 that have made it through every step of qualification. So that is funneling down.

We would like to get better predictability out of the 620 or the total lead number as to how many are going to make it through. But we need a little more time, I think, on that one, because as we look over the quarters, we see a lot of variety. But generally, once we've got a qualified lead, they meet all the criteria, it's mostly a matter of working your way through a medical exam and other things that you can't get in the initial qualification.

So I think if you give us the next two quarters, you'll start to see us taking that lead pipeline and giving you the same kind of metrics we're giving you on the claims pipeline now.

Okay, so the 620 funnels down to the 99; that's kind of the way it looks?

Yes. Yes, there's a little -- the 620 is current available leads; 99 is current available pending claims. And of course, it's always a constantly moving number. We get new submissions and new leads every day, but that's generally the driving numbers.

And then as we think about the study and the participation from the VA, would those be Company funded? Is it discounted rate that you'd provide any additional units for the study? How should we think about that?

The Company has no involvement relative to funding. These will be strictly purchased units by the VA. It's independent of ReWalk. So we believe it's particularly helpful where this is an independent study.

We have no control over how they're conducting the study, but it was approved through the processes and effective as of the budget year October 1.

The numbers, I had given a little bit before. The intent is 10 centers that will buy systems and use those for evaluation. And then the number of subjects that are planned are 160. And if those 160 are successful, they would be eligible to get units funded by the VA. And presently, the ASP has held as our current ASP; there has been no change.

To lever Raj's question, how many -- the VA owns units. I understand that, upon completion, that some of those patients could purchase units or would be eligible. But two questions: One, how many units does the VA need to buy to conduct that study? And two, when would it be complete that you would start to see the benefits of those that complete and are successful start the purchasing process?

Well, the policies and processes of the VA are the VA's. So I am speaking with what I think they will be doing and what they have budgeted. But the intent is for the VA to bring in a total of 60 units, I believe, between the 10 centers to be used as evaluation and training units. And it is my understanding in the way they've set up the study design that they will pay for the units for a person who is successful in the study.

So the total potential number is above 200 systems at the VA. And the patients who successfully complete the study would likely purchase from ReWalk. So the VA would be funding all of it.

And again, when would you -- when is that study expected to complete?

It's a multiyear study. So it will occur over three years. It will be starting -- well, it is approved at this point. The pace at which they complete their IRB approvals and study setup is a function of the Veterans Administration and not of ReWalk, since it's not our study. But they are in the process right now of putting things together. This is all approved and underway at this time.

Okay, so they need 60 units between the 10 centers, but I'm sure they already have some in-house now. Is that fair to say?

They do have a number of units, but they are going to be using the latest technology. So the current systems in the VA will not be the ones used in the study. The ones used will be our latest and best version available on the market today, the ReWalk 6.0.

Great, that's very helpful.

And then last question. As you see the successes you had, is there one thing, or what specific things are the payers looking at in terms of making those decisions? So, like, what are the three top three most important discussion points with payers when they purchase a system for a patient?

The question we get the most -- there's only one that dominates, because I believe the benefits of walking again are so well accepted. They really look more at utilization. Can this person and will this person use it enough to get those benefits?

And then the second secondary questions usually are more environmental, because they've got to look at where the patient lives, what their home is like. So there's a little bit of examination of -- it ties to utilization, but are they in a situation where they will have no difficulty using it? So it's mostly functional questions that we get as opposed to specifics on clinical.

And then the third category is looking at our data. But I think the insurers seem to have well accepted, walking is a very beneficial activity in terms of health. But what we would like to do on a national basis is what we described: the large-scale studies we're focusing in terms of economic benefits, both that we measure in our own study, as well as in what we can get from data that exists in databases and published starting in Q1 next year. That is probably the third category. But that's more of a national rather than a case-by-case approach.

Okay. And to ask the same question a different way, so you had a success with 20 of 24; four were not successful. What was the pushback on those four?

The four that did not succeed were individuals where the claim was denied for a variety of reasons. And in each of those cases, the individuals did not elect to challenge it at this time. So we didn't get as much information because they didn't challenge it, yet, anyway.

Okay. And then my last question, I do promise -- I know I have a string of them here. But just remind us, what is the total number of training centers you have in the US today? And then what is that number globally?

The training centers added in the quarter was 13. But to give you a global number, we have about 117 worldwide -- 68 US, about 20 in Germany, and 29 rest of world.

That's all I had; thank you.

Thank you. At this time, I'm showing no further questions. I will now hand the call back to Larry Jasinski for any further remarks.

Well, I simply thank everybody for their interest and the time that they invested in discussing ReWalk this morning, and I hope everybody has a very good day. So, thank you.

Ladies and gentlemen, thank you for participating. This does conclude today's program. And you may all disconnect. Everyone, have a great day.