Q1 2020 Earnings Call
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Excuse me, ladies and gentlemen. This is the operator today's conference is scheduled to begin momentarily until that time. Your line is what I can be placed on me. It's a cold. Thank you for your patience.
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Right I think you're clear to start.
Okay.
Hello, Good morning, everyone and welcome to Rewalk Robotics first quarter 2020, adding.
He said already gone Rewalk, Chief Financial Officer, and with me on todays call you Larry just in the <unk> Chief Executive Officer.
This morning, and the company issued a press city detailing financial results for the three months ended March 31st 2020.
The spread city and the website. This call can be accessed through the Investor Relations section of the real website at Www Dot Rewalk Dot com.
Before we get started I would like to remind everyone that any statement made on today's conference call is that expected belief expectation projection volcker anticipation or intent regarding future events and the company's future performing maybe considered forward looking statement as defined by the private Securities Litigation Reform Act. These forward looking statements.
Based on information available to you what management as of today and involve risks and doesn't.
Including those noted in this mornings press release in Rewalks filings with the efficacy.
Such forward looking statements I'm not guarantees of future performance actual results may differ materially from those projected in forward looking statement.
Rewalk, specifically disclaims any dental obligation to update these bode well what are these statements except as required by.
Definitely play up the color would be available shortly after the completion of this call.
Find did that information today's press.
Yeah, I'll kind of what that would be available on the company's website at www Dot dot com.
Well the benefits of those who maybe listening to the replay or a couple webcast. This quarter was held and recorded on May 28 2020.
Seems Dan Rewalk may have made announcements related to the topics discussed. So please reference the company's most recent <unk> leases and actually see fight.
And we did during the call it over to Rewalk CEO marriage isn't.
Eric.
Thank you Laurie.
Good morning, everyone and I appreciate your time and interest.
The first quarter and activities you may had significant progress in targeted areas and whats substantially impacted by the general shut down from cold in 19.
Here are the key activities that occurred so far in 2020.
First successful execution of coverage contracts with the number one rated and another top five insurer in Germany, which had been publicly disclosed.
Additional contracts with other SH I have also become active although the group's did not make public announcements.
There was also completion of a binding offer placed installed within the procurement system with the national Social health insurance coverage in Germany.
And we now have expanded later stage talks with multiple other groups that are seeking similar type contracts.
Second modification of our agreement with Harbor universities Vials design laboratory to expand their focus and resources to develop a tele health remote home therapy excess.
Third editorials publish on the restored technology in the UK and clinical value and results further publications from Harvard on Exosome technology, along with upcoming publication of the results from the clinical trial conducted for FDA clearance.
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Fourth.
Our C.M.S. application for consideration upgrading a level to health care common procedures coding system generally knows it picks code for the Rewalk exoskeleton now has a public hearing scheduled for June 1st.
Instead.
We have successfully added two new product groups via distribution agreements that will be initiated at the start of Q3.
Next regarding our revenue financial operations in more detail in the five points highlighted a moment ago.
The effective coordinate the of the Golden 19 pandemic on our business in revenue insignificant because our products require in person contact to complete the sales process.
It includes delivery at the system in conducting training in some cases, which we did not continue during this locked down period.
The company established and maintained extensive policies for the safety of our customers and employees entirely in conjunction with local governments.
Revenue was limited to 760000, as we were not able to deplete the delivery of several units during March due to the locked down.
We resumed shipping delivery and training of Rewalk personal systems in May and are now completing the pending Q1 orders along with additional new orders in Germany and in many parts of the United States.
Looking forward the insurance contracts in Germany will impact revenue as well.
Users gain access to the clinics for hands on evaluation and training.
We had 98 ending German claims at the end of the quarter with 35 of them we have contracts.
We also see a positive trends the number of potential da patients as we now have activities 26, new potential users as we are no longer competing for patients with the VA is 160 patients multi site randomized clinical trial to investigate home use of the Rewalk exoskeleton, which is nearing completion.
Sci growth year over year in both regions in 2020 can occur depending on the coven 19 conditions.
The restore product was proceeding to capital approval processes in approximately 50 clinics at the time of the shutdown.
The status of any approvals and where the capital budgets in general are affected are presently unknown.
As we are waiting guidance, it's clinics we open.
We anticipate that in many cases capital spending will be reduced due to the financial impact on the operations of these clinics.
We've also taken steps to ensure our financial stability during the crisis, which included implementing short term and purchasing work reduction programs and specific regions.
Reducing the number of employees and subcontractors, mainly in the research and development segment.
And also looking closely in our inventory procurement to make sure we have the right amount support our sales.
Year to date, we have completed many activities that will impact 2020 sales and long term growth.
There are five specific areas that we've really focused on.
One executed contracts with technocrat can Hausa teekay.
And Deutsche Angus Stalin Cancun House DAK, along with other groups. It's cover in total over 20 million Germans.
Also a binding offer has been placed uninstalled within the procurement system 36, insurances under Doidge Docetaxel aka units of down the German accident, social insurance, DG, UBI, which covers 83 million Germans.
Each of the agreements are built on the government code for coverage of the Rewalk personal system and are the key element, but potentially making Ella exoskeletal walk in the standard of care for germs with paralysis.
Teekay is rated as the leading statutory insurer in Germany UK as the third largest did you. The covers workers this along with schoolchildren firefighters and other essential elements in terms of side.
Two.
The I'm going to co that has demonstrated the need for technology from conditioned to manage therapy options in the patients home setting and separate from the clinic.
CMS has responded by expanding the listing services, which can be provided via tele health to include existing physical and occupational therapy codes, such as gait training for example.
Harvard's Bio design laboratory has fundamental research and designs for home use and we've modified our collateral collaboration agreement to utilize these technologies in a low cost home based design that can be managed by the clinician remotely.
Three the publications on the value in effects of the restore system have expanded this growing base of scientific support is essential to deplete market acceptance in understanding this technology.
For.
In December we submitted an application for us picnics code.
These codes are commonly used for dealing with Medicare and Medicaid along with private insurers. This continues to progress in the public hearings for this application will be held on June onest.
More than half of the target market for the Reorg six mono relies on Medicare and Medicaid and this will start the process of increasing access for these individuals.
And.
With the expansion of the U.S. sales team, we have sought to add synergistic products to our offering to service our home based customers expand our clinic relationships and to grow our revenue.
As part of this strategy, we have completed agreements to distribute two additional product categories as of July one 2020.
We will offer the mylan functional electrical stimulation notice Fps cycling rehab and home products and the Meditouch, we have glove leg arm and balance systems to our us customers.
These match our primary call points.
Our needed by our customer base in Egypt innovative design elements that match the rework mission.
Our progress in each of these areas our key strategic elements for the development of these new markets, well I would payment and access to innovative technologies.
For the company they are the pathway to initiate growth in 2020 and beyond.
Next I'd like to turn the call over to Ori for financial review.
Sorry.
Thanks, Eric our Q1 revenue was 760000 dollar and as Larry mentioned it was affected by the Cobiz 19 pandemic.
Obsessive bulk of our transactional normally finalizing the rig four weeks of the quarter. So the clinic shutdown in March impacted our ability to potentially close we throw rentals and sale.
We were also not able to complete the delivery of several other rewalk personal 6.0 devices during the quarter.
The revenue split by product the following our person of 6.0 product at a target of 714000 dollar and the rehab install device at a $46000.
On the reimbursement side, we had on your rents on approval then for conversion of previously rented unit during the first quarter.
At the end of the quarter, we had 13 active Sci rental and seven restored trials. This rental pipe and represents one of the halfway done dog in revenue.
Our total number of pending influence cases was 115 at the end of that quarter with 98 up than in Germany, and 17 in the U.S.
Compared to 145 at the end of 2019.
The usfive valid private insurers and do not include that be opportunities.
The reduction impending insurance payments compared to previous quarter is because we were we are no longer pursuing a field when commercial payers in the us as we shifted our focus to there'll be a walk us call an outstanding broader covered through CMS.
Our gross margin in the first quarter of 2020 was 49% compared to 59% in the prior year quarter. This decrease is due to the reduced revenue generated this quarter from our remote presence of 6.0 device.
Regarding the operating expenses, our Q1 2020, opex decreased by 500000 dollar or 11% compared to the prior year quarter and remained flat compared to the previous quarter. The decrease compared to the glided quarter was mainly in the R&D segment due to the completion of the regulatory developments.
Then on our restore device.
I would also like to described several steps we have taken to reduce our spending and cash burn due to the copied 19 impact.
As we completed our main R&D project in the second part of 2019, we have decided to focus our meaning R&D intended I read both into product maintenance.
This allowed us to reduce some personnel and subcontracting.
We have also reduced employee spending which opened programming certain locations and we do you know consulting spend we have looked carefully and adjusted in several areas.
The different steps that we have taken are anticipated to result in lower operating expense of approximately 300000 dollar per quarter with some of it taking effect in the second quarter and what effect will be showing into third quarter.
We have also applied to government funding programs. One was already received with a unit payment protection program loan.
400000 goal.
To recap the quarterly results our net loss for the first quarter were $3.8 million compared to a net loss of $4 million into first quarter without 19, our non-GAAP net loss for the first quarter 2020 assets up 19 remained flat at $3.6 million.
We ended the quarter Weve $16.6 million in cash and our short term bank. So sorry, I will show up on loan Bhutan was $5.7 million.
With that I'd like to turn the call back to Larry for some final remarks.
Thank you Laurie.
I'd like to provide additional detail in each of the driving factors recreation of these new markets and in establishing this industry.
So part one.
The pathway for broad and well defined coverage has been key limiting factor for those seeking the benefits of walking once again rewalk has been leading in Seoul company pursuing insurance coverage for home based exoskeleton walking.
The past started in Germany, and the recent results there came from years of effort in by establishing data and systems.
We have made three public announcements, where the companies were identified one is teekay, which covers 10.6 million Germans has been boated Germany's best Health insurance company for 13 years in a row and has moved slipped later because first payment under the contract during the first quarter.
The second is DAK distillate and is the third largest sunshine country provide insurance for 5.6 million people.
Its history dates back to 17, 75, making DAK Germanys oldest health insurance company.
Third as DGD, which comprised of 36 different did you then member and insurers and covers nearly 83 million Germans against work related commuting school accidents and other occupational diseases.
These new policies will allow any eligible beneficiary with a spinal cord injury Sci to seek procurement of Rewalk 6.0 exoskeleton system.
They will help set the standard for exoskeleton procurement in Germany.
A quote for Mr., Thomas Bodmer Board member DAK doesn't it.
His quote the advantages of this highly innovative supply have convinced us.
Quality of this complex care is important to us this is where the contract comes into play by clearly describing in regulating the interaction between the manufacture physio therapists in orthopedic technicians in the contract on medical aid for the first time.
In this way, we make it possible for those affected to make optimal use of exoskeletons.
Unquote.
We see these agreements having an immediate impact in two ways first and most importantly for the patients who waited for years. They will now be allowed walk again.
Second many other insurers see the benefits of well defined contracts.
Direct supply and the results the come from providing exoskeleton have also initiated contract discussions and provided systems to patients who had been waiting.
Part to.
The decision to modify the debt loads and resources with Harvard was based on significant time reviewing future needs with customers.
The changes by CMS, indeed demonstrated by coded per home therapy.
And the capacity within Harvard's bio design lab by transferring some internal existing technologies and expanding plans for clinical use.
Harbored Professor counter Walsh stated quote my lab is motivated to advance innovations that address real clinical challenges in collaboration clinicians energy partners in response to patients evolving needs.
It's clear that there is a need for remote homecare with feedback and monitoring capability for conditions.
My research team is interested to see how we can optimize our technologies to meet that need as our collaboration with retail continues on growth.
We are excited to provide more data on this program as it develops.
Prthree publications.
In April Engineering, and Medicine, biology, published walking faster and further with the soft robotic excesses in a publication based on the Boston University, and Harvard University, which focused on the improved mechanics and that axle suits facilitate faster and further overgrown walking.
Subsequently the journal of Neuroengineering and rehabilitation has completed the peer review process and accepted the materials from the restore and FDA clinical study in it will be published shortly.
Hard for CMS.
Rewalk successful application and resulting public hearing is a meaningful development and its scheduled for June Onest next Monday.
A need very consistent and defined path for supply of technology to those who seek to walk again will help offset the discriminatory case by case approach that limits the market presently.
The strategy of building a clinical database and then establishing a payment code has been a successful pathway for market development in Germany and has provided a strategic move there for the United States.
Part five.
Rewalk has evaluated multiple products from innovative companies that lack of us distribution system.
We define specific requirements and commission resources and capacity and have chosen to start with two product offerings, not specifically met all requirements.
Myles.
As a technology that is easier to use into lower cost Fps cycle for clinic in home use.
It's primarily of Sci, but can also be used within us in stroke.
Rewalk will benefit from exclusive rights under Mylans existing contract with the VA, which matches well with our VA personal and focus.
Let me touch offers unique motion sensing devices for the hand arm leg and body with interactive software games to track and assess patients. It can be used in the clinic and at home.
This is our initial entry into telemedicine and will allow a level of remote use when we can learned a great deal about this market.
Training for both product lines, we encourage you to enter sales efforts will start in the United States in Q3.
The challenges of creating highly innovative design engineers, establishing new markets impermissible.
If we examine what has been accomplished in terms of the trends towards broad rewalk six little coverage for Germany, and the United States.
Clearance and marketing of the first robotic propulsion design for stroke.
Our ability to leverage and grow our distribution profile with well matched innovative products.
Our financial operating structure that is meaningfully improved in our path to be able to eliminate our debt by Q1 2021.
We have reasons to be optimistic about achieving our goal of establishing a sustainable and profitable entity.
Our company now has the capacity to provide clinics with Rewalk exoskeleton answers medical injury.
Restore for stroke rehab and MPS cycle for multiple indications and upper and lower body technologies for motion demonstrating.
In parallel we are well positioned to provide rewalk exoskeletons for community in lifestyle use that as growing reimbursement support offer an at the cycle for whom exercise and offer home based systems promotion bounce training.
For the future. We have also refocused our efforts with harbored to develop remote therapy lower like systems that could be management condition, which are economical provide propulsion and allow improved walking.
In short, we are providing solutions that offer meaningful value to the clinics and are enabling the future direction of home therapy in the industry may expanding the clinicians choices for home rehabilitation at everyday community use.
Thank you very much for joined US today I'd like to turn the call over to questions. At this stage operator. Please go ahead with the instructions.
Thank you at this time, if you like to ask an audio question. Please press star followed by the number one on the telephone keypad.
Once again that is star one to ask an audio question.
And your first question from the line Mr Obama.
Hi, This is our came from let's say range.
Good morning, Alright, okay.
Okay. Okay.
Okay.
Yes.
A couple of quick questions.
Regarding the CMC meeting on June 1st.
Mrs coming up pretty soon here, what else does CMC need to do it for that can provide.
The dollar amount.
Matt.
Well the the first step is issuing a temporary code and this public hearing is really the session where.
They will go over their recommendations they will hear the comment from our company from some of our clinicians and one of our users.
And they will hear other public comment.
Either for against establishment of this new code.
So their decision will follow shortly after.
The pricing and cycles of.
Establishing CMS codes.
Have varied a little bit, but generally they match the calendar year for the government, which starts in October of this year.
So you are anticipation is if they elect to establish a code.
Independent, we'll see how we do on Monday June 1st.
Than pricing would be something that would be addressed probably after that in the contracting phase.
So we don't have specific control as to when they would established pricing.
But that into cycle time, which we'd get to address it.
So specifically would that be floor.
The year, Tony Tony will know that.
Total.
Well the cold it would be October of 2020, so it'd be really effective forward.
Relative to pricing it will probably happen more in negotiations in Q4 in Q1 next year.
So.
We are basically looking in a nine month type cycle.
Okay. Okay. That's good and then.
Regarding the gentleman insurance contracts.
Has since then still announced.
Bundle a half ago.
I'll walk so.
What additional color provided in the sense.
As the companies are opening up.
Post.
Over 19 have you seen.
Yes.
And any outflow off product. So some of this insured lives under the gentleman contract.
Yes, specifically almost every unit, we're we've been placing.
Here.
From the ones that were left over from Q1, we didnt get to deliver and the early ones are almost entirely within these contracts.
And what I really like about them is several of these are patients that have been leading one person particular does a lot of social media had been laid it almost four years and from the time that the contract was established at the time. She had her unit at home was only a couple months.
So.
The actions that we're expecting in this quarter in the coming quarters are going to be very much driven by the contracts, we do expect them to expand.
Our biggest short term risk is.
Access to the clinics.
As long as clinic stay open and we can get in and they can get trained and they can get their delivery.
We will have some good progress.
But.
We can't be certain as to.
How the market access will be just yet anywhere in the rural debt fulfilled.
Okay and then.
Okay.
Well what is.
Could you provide some additional commentary on the on the via Brian and our How's that.
How is the trial.
Gotcha.
Continuing to progress.
Anything in terms of data or publications from them.
Well the BA.
Did complete enrollment they enrolled 161 patients.
With the target 160 that was good.
They finished the follow up my understanding. There's this is from discussions with the centers on approximately 125 of them and then the others are in a bit of a holding pattern because they havent been doing the follow up.
During the cold period.
So the pace at which they get the key.
Centers open.
We'll have an impact on when they finished the data and we have no control over this so they may elect to publish on 125, where everything's complete where they may finish the other 35 and then published.
So we originally expected them to be publishing around somewhere around year end Q1 next year.
Can't tell us covance going slow that down or not.
Okay and then the last question from is.
This new Mehdi touched products.
What sort of synergies should we expect.
Also.
Now that they can do some other patients can handle some of the telling helped operations.
Does it does that.
Provide.
On the smell.
Additional help in terms of placements.
On on the product.
I think both of the two companies that we have brought in.
Are really going to be synergistic because the same call point, we're not going anywhere that we haven't gone before.
So whether it's where we're selling the stroke product.
For the ankle it's the same group that in the clinic that we're working with.
The bigger difference with the many touch line is.
We also offer a home based unit.
That can either be provided by the clinic or bought from us directly.
So many touch.
Has some very unique elements, there that that flow rather nicely on the Mylan product line.
The reason is a particularly good fit for us is.
They have a contract already in place with the.
Okay, and we will be the distributor for all of the Ace in the United States and that will be our primary focus. These the exact same patients were trying to solve realex too and in the end we tend to learn that.
Some of our patients don't qualify they don't have bone density sufficient for example, but they wouldn't qualify for.
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Spike where they may be able to improve the bone density and get back into Rewalk, you never know, but the same patients the same labs the same clinics.
So we think both these product lines will offer us an improvement in both clinic sales and at home sales.
As we work in them.
Very good. Thank you very much like good luck on Sarkis.
Thank you.
And at this time there no further questions.
Yes.
Okay.
Well enough I'd like to close in session now first of thank you for everyone who join for observing the progress with these new markets.
We look forward to providing further announcements or press releases as things develop and conducting our to Q2 earnings call in a few months. So pleased launcher, claiming that again, thanks, everybody and have a good day.
Thank you. This does conclude today's meeting you may now disconnect.
Okay.