Q2 2020 Rewalk Robotics Ltd Earnings Call

Well, well Biotics limited earnings conference call.

At this time, all participants are in listen only mode.

After the speakers presentation, there will be a question answer session.

That's the question during the session when expressed star then one of your telephone.

Hard to supposed to suits Me Press Star, then Cmos, which an operator.

At the end the call over to Oregon. Please go ahead.

Thank you Michelle.

Good morning, and when it comes to Rewalk Robotics second quarter 2020 earnings call should already gone Rewalk, Chief financial officer, and wouldn't be on todays call. It leverages in dozens King Chief Executive Officer.

This morning, the company each with a press release detailing financial results for the three and six months ended June 30020.

Brett studies and a webcast of this call it can be accessed through the Investor Relations section of the Rewalk website at Www Dot Rewalk Dot com.

Before we get started I would like to remind everyone that any statements made on todays conference call that express and belief expectation projection focused anticipation or intent regarding future events and the company's future performance, maybe considered forward looking statement as defined by the private Securities Litigation Reform Act.

These forward looking statements are based on information available to Rewalk management adds up to date and involve risks and uncertainties, including those noted in this morning's recipes and rewalks filings with the FCC.

Such forward looking statements are not guarantees of future performance actual results may differ materially from those projected into forward looking statements Rewalk, specifically disclaims any intent obligation to update these forward looking statements except as required by law.

Telephone replay up the color would be available to show the up the completion of this caught you will find a dial in information in today's press ladies.

Okay webcast will be available on the company website at Www Dot Rewalk Dot com.

For the benefit of those who maybe listening to the replay Oh archived webcast. These called wasn't held and recorded on August 12, 2020 seems Dan and Rewalk may have made announcements related to the topics discussed. So please reference the company's most recent press releases and FCC fighting.

And with that I'll turn the call it over to Rewalk CEO, Larry just asking Eric.

Thank you very good morning, everyone.

We are satisfied with our second quarter results and the progress we have made with key initiatives in 2020 as they are beginning of the fundamental change in the industry into Rewalk robotics.

The advent of meaningful reimbursement pathways is the transition point to true penetration of a significant market.

We have relied on case by case battles over the past few years as we expanded the evidence to support the safety and value of walking again for the paralyzed community.

With an established insurance based infrastructure with the German government and multiple German insurers, we can know demonstrate the results of the new structure.

In the United States, a pathway has been established with the government through the center of Medicare and Medicaid services decision to issue the first ever distinct billing code for an exoskeleton as a result of the Rewalk application.

The first measure of success is operating in supplying rewalk systems for spinal cord injury individuals through the contracts to establish a part of the share.

Oh systems placed in Germany. This quarter were process through these new agreements.

Well, we have limitations under capacity in training and access due to the cobot virus, we were still able to place ate systems exclusively under the contracts in Germany in the second quarter.

This demonstrates to users and to clinicians that there is now a clear and well defined path for medically qualified patients to utilize the rewalk 6.0 system to improve their quality of life and to walk in their community.

In parallel we are actively at advanced seem to complete multiple additional contracts during 2020.

In the United States, a process be a formal application to create a distinct category for billing and payment for the Rewalk exoskeleton started in 2018.

After an extensive review of the data provided on the Rewalk device in May 2020, the government issued a preliminary decision that a code the issue.

Process, then progress to public hearings, which included a presentation by the company.

Presentation by medical experts on the need for this coverage of this technology.

Statements given by paralyzed party, who represented many in the community followed by questions from the panel that was charged with the decision.

In July 2020 be Hicks picks level to code K, one 007, which identifies and describes it exoskeleton device was issued to facilitate insurance claim submissions and processing.

Dakotas effective October Onest 2020.

Over the past six years, our company in the industry has relied on case by case battles to provide systems to users. During this period, we placed close to 600 Rewalk systems.

This lot establishment of community experienced by paralyzed individuals widely walking.

Expanded the base a published data.

Allowed clinicians to understand the value and safety every walking and allowed rewalk to build an infrastructure support that was capable of expansion.

You Essen, Germany populations include over 350000 paralyzed individuals.

From that population, we will target 45000 individuals that we believe best qualified with the criteria for the Rewalk system.

Until now we have not been able to achieve meaningful market penetration as economic resources in terms of insurance policy coverage had not yet shifted to this technology.

We have now entered the beginning of that shift in Germany, and anticipate that the United States will follow the process from a code to coverage contracts in a pathway that is similar to Germany in the coming 12 to 24 months.

We are now on the doorstep to market penetration after years of efforts.

Now, let's turn to specific results from Q2 2020.

14, Sci personal systems for home use replaced in the quarter for revenue of 1.668 million.

Restore activity was limited to existing clinics due to the shutdown or limited operations due to cold it.

Restore data for my multi center clinical study an additional publication from Harvard's exit Cert research and a we feel based publication American experience each published in Q2.

Our overall margin was at 61.3%.

Operating expenses were reduced to 3.574 million.

Operating loss was reduced to 2.552 million.

We continue to pay down our long term debt and will completely eliminated over the next three quarters.

CMS issued a payment code in July for the Rewalk exoskeleton.

Training was completed for our July 1st launch of the many touch systems for therapy in the hands arms and legs and overall balance.

Training was completed for our July 1st launch of the mild cycle system for home and clinic exercise of the spinal cord injury community.

Our next like to turn over the call to Ori for a financial review.

Thanks, Larry.

Our Q2 revenue was $1.7 million compared to $900000 into via the quarter and 800000 dollar in the previous quarter.

This quarter, we delivered several units that we could not completing the first quarter due to cold with restrictions as Larry mentioned, the rehab product have generated limited revenue due to the Colby thinking effect during the quarter.

On the reimbursement side, we had.

Five new rental approval and six conversions previously rented unit during the second quarter.

At the end up the quarter, we had well Sta rental and in addition, Holy Stone trials remained active these rental pipeline represent $1.3 million in revenue.

I will talk a number of FDIC pending insurance cases was 98 at the end of the quarter compared to 115 at the previous quarter.

89 of the current cases in Germany, and nine using the U.S.

I will see a FDIC pipeline has currently 40 candidates are we chose great potential as V.A. clinic stuff to real.

Our quarterly gross margin in its second quarter of 2020 was 61.3%.

0.6% increase compared to our prior best quarter.

This is a small but very important milestones as it shows that we have the ability to get to the level of margin, we want to achieve and showing people medical device company, which is to be around 65% margin.

As we completed our unit cost reduction at this stage the gross margin increase is coming mainly through higher Asap.

This quarter, we sold 15 unit and the average selling price was 89000 dollar not including rental or warranty deferral and other fees.

This is compared to $79000 into vitally important.

Now, let's take a look at the operating expenses.

Our second quarter operating expenses lend any $3.6 million compared to $4.7 billion into part of the quarters and 4 million both in the previous quarter.

The main decreased compared to the second quarter 2019 was in the RMB as we completed there we've told development and clinical trials in 2019.

The current quarter results represent our lowest operating expenses since we became public.

Although some of this is affected by Cobiz 19, especially due to travel to the 600 and several initiatives we took to reduce our spending during the spirit, we all expecting to keep our opex at this range and of course, we remain 11 flexible to acquire changes in this aspect in the future.

To recap the quarterly result, our net loss for the second quarter was $2.9 million, which marks the first quarter. Our net loss is lower than a $3 million since we became public and chose our overall operational focus this is compared to a net loss of $4.6 million into second quarter 2019.

Our non-GAAP net loss for the second quarter 2020 was $2.7 million.

Compared to a non-GAAP net loss of $4.2 million into second quarter of 2019.

We ended the quarter with $14.1 billion in cash and our long and short term loan balance was $4.8 million as of June 32020.

The cash balance does not include additional $9 million effect with the rate we closed in July.

With that I'd like to turn the call back to Larry for additional remarks.

Thanks, sorry.

I'd now like to discuss the activities within each of our four product franchises and then close with an outline of the key objectives for the second half of 2020.

I'll start with Rewalk system for community use.

Targeting next 12 to 24 months. We currently have 89 German submitted insurance cases in the U.S.. We have 143 qualified patients in the pipeline covered by different payers and 40 qualified BA patients.

The pace of success with processing these will be determined by the insurance payment process.

We believe that the German case debentures, where we already have contracts to move forward reasonably quickly and the contracts. We expect to add in 2020 will drive many of our 2021 placements.

Our current German contracted coverage includes 83 million lives with 36 payers in the public arena through DGP for workplace and other public groups for injuries.

Along with 20 over 20 million covered lives through commercial insurers.

We personally in contract negotiations with groups covering that additional 39.6 million lives and expect to end the year with commercial contracts covering approximately 70% of all German cases.

The process of expanding placements and infrastructure will be deliberate over the next 24 months, but it represents a fundamental change in the manner in which the Rewalk exoskeleton is provided for home and community use in everyday life.

Use cases for the VA and workers compensation will advance it's cold it allows the markets to reopen.

The majority of the remaining total within the Medicare Medicaid and private payers groups will depend on our progress with pricing contracts and policies in 2020 and 2021.

The pathway with the centers for Medicare and Medicaid services has multiple steps.

The establishment of a specific code from the Rewalk application has been able to stages of establishing the CMS fee schedule or pricing for the code.

I mean coverage by government and private Payors.

And setting policy all in a manner that was similar to our experience in Germany.

We have also apply for accreditation to be recognized as a supplier who meets the quality standards set forth by CMS, an important step in our goal of achieving Medicare coverages and facilitating billing for Rewalk devices.

We have the personnel and supporting materials in place to move forward within our existing team and network.

These steps to seeking coverage policies will occur over the next one two years and if we have continued success. It will change the landscape for those who are medically quality food, who wish to begin rewalk in their community and everyday life.

In parallel Rewalk has the largest database of Sci community users worldwide and specifically within the VA.

As these been built over the last six years, we have a database of medical experience and we'll be able to build effectiveness use data and economic data from this space that we will seek to publish in the early part of this cycle.

Second I want to move onto our second franchise the restore system.

The results of the multi site clinical study conducted a five of the leading US centers were published in June.

Primary outcome measure of this study was safety, but several secondary outcome measures were also explored.

Rewalk achieved the safety related expectations and promising results such as a majority of that participants increasing their walk in speeds by a clinically meaningful margin in just five treatment sessions.

These improvements in such a short timeframe are encouraging and we eagerly anticipate results of longer term intervention and exploring a further endpoints in studies that are currently being conducted.

We also had a publication in neuro rehabilitation times from restore customer in the UK.

In this editorial the lead clinicians noted using restore led to better gate biomechanics.

Which in turn led to increases in walk in distances.

Faster walking speeds and greater confidence to walk.

Importantly for the clinic business models. The therapists also note that traditional gait training often requires two therapist.

In the effort is extensive by the therapy team.

The store allowed them to reduce the need for the second therapists, which can lead to reduction in the clinics labor costs.

Launch of the restore system and many of the capital planning applications were paused body onset of the coated volumes.

While the initial centers have had good results. They have had limited numbers of patients.

We continue to see limited activity within the clinics and expect the effective launch will not restart in full until 2021.

Our focus will be on be continuing studies, establishing educational content to inform the market.

And working with selected national accounts to build data on effectiveness and economic value.

Longer term, we may pursue a CPT code for robotic stroke therapies.

For our third franchise with many touch rehab systems for home and clinic use.

We have completed training and are launching the product during Q3 as clinics reopened.

This rehab glove leg arm and balance system will apply to the stroke segment, we serve as well as other redev needs.

We expect this product to be synergistic with our restore stroke lunch and also to be an attractive product for the growth of home Tele health rehabilitation, particularly with concerns or cold or other viruses clinics.

The launch will be limited by the capital equipment cycle and the access to clinics and we are exploring the direct to patient acquisition pathway.

And our fourth franchise, our Mylan systems for exercise in the clinic and at home.

The functional electrical stimulation product known as Fps complements our LCR offering as any rewalker.

Can also benefit but they home based cycle for exercise.

This home exercise can help with conditioning to complement the use of rewalk into community at work.

This product has been placed on the Rewalk federal supply schedule FSS with the BA and is under contract for supply to any qualified veterans.

It does not fall under the capital equipment requirements for the VA, many workmens compensation groups.

The product is easier to use and it's simple design is less expensive than existing therapies.

We expect this line to gain some reasonable home penetration along with being an effective product for the clinic.

It should also help increase rehab leads for Rewalk as we build the reimbursement system.

Well to conclude today here are key measurements and objectives for the remaining six months of 2020.

Number one expansion of contracts in Germany.

With four contracts in place to cover over 20 million lives. We are seeking to add two to four more contracts by year's end.

Number two.

With CMS achieve accreditation.

Established pricing and initiate interaction or contracts that we target for closure in 2021.

Third.

Expansion of data with Rewalk through use of medical records and experience now that we have a database of users with longer term use of over three years.

Fourth.

Expansion of supporting data for restore through targeted strategic locations utilizing the system.

Fifth.

And effective relaunch of restore once clinics reopened at a higher level.

And six measurable placements of miles cycle and many touch.

Yes.

In conclusion, we are encouraged by the Q2 revenue results that we achieved through the contracts in the last few weeks of the quarter as the clinics partially reopened.

As we achieved growth in all four product categories through contracts and excess.

I have a level of margin improvement.

Expense management to further reduce our operating burn and complete paying off all debt in the next recorders.

We can now sees the pathway to achieve breakeven.

To profitable operations.

Thank you very much for your time and interest today.

And I'd like to turn the call over for questions. At this stage. So operator, if you could move forward with the instructions.

Good day.

As a reminder to ask a question you wanting to press Star then one on your telephone withdraw your question plus the sound key please standby become topics una roster.

Our first question comes from Swayampakula Ramakanth H.C. Wainwright Your line is open.

Thank you.

Okay from Pennsylvania.

Good morning, Larry.

Uh huh.

Congratulations obviously this is.

This is one of the best quarters.

You folks.

And then ours, but both on the.

Topline and also on <unk>.

Gross margin.

Uh huh.

So.

No you.

Spillover from the first quarter into the second quarter.

How should we think about you know walk sort of.

Backlog, you could be having into the third quarter, though is that anything of that sorry.

Just to see.

Just to think off that is amongst the top line.

The next to half of that.

Both Orient I can answer.

We placed almost everything that we wanted to in Q2, so there's not a specific backlog of patients it didn't make it in.

But the clinics are operating at a reduced rate still so we're just not moving as fast as we'd like.

And our expectations in Q3 in Q4 or that the clinics are going to stay at least at the current levels.

So we will be able to place a number of products, but it's going to be some variation and.

What cobot may or may not do too so thats the risk we have.

And I think we gave the general numbers on a on what we have out there there's a German contracts will move nicely the wells will be a little bit slower.

Sorry, anything you'd add.

Yeah, just on the Q2 question RK.

So this quarter you know we had approximately 300000 dollar.

That we wanted to quit completing Q1, what could not do that you do that you know shutdowns and locked down we had in different regions. So that that's also something that kicked in this quarter and as Larry mentioned there you know we competed everything we wanted to compete in the second quarter. So it can the you know we don't have any.

Yeah.

Same type of.

Deferral. This quarter you know we have our normal regularity now warranties, some some rent goes and stuff like that but that that in the ordinary course of.

Business I would say.

Okay.

And then on the.

On the question in terms of Germany.

Hey systems being placed during the second quarter.

I think most of these obviously on the day nature I mean the.

Current contracts that you have.

What target alone in terms of working with this different organizations that you could apply.

Good day 89 systems that are still pending in the pipeline.

Well all the units all eight that we place we're under our contracts, which was very encouraging exactly what we hoped for.

And as we we do have for other groups were talking to that.

Also.

I hope we will complete this year until they are signed there not side. So we've got to be careful on that for timing.

If you took that group of 89.

I believe 83 of the ball within contracted groups that we either currently have or the for that we're late stage negotiations so that that pipeline does tie nicely to this whole contracted effort.

And what will be really important for us longer term is keeping that pipeline filled.

And getting patients into it or anything you'd add there.

Yeah, I think that Oh, we don't have yet a lot of data as you know contracts completed and an announced the into first quarter, but we do have we do see the the cases and to submissions in the approvals coming in a much more orderly fashion I would say.

In general all of the conversions, we had over the last.

Quarter over three to four months since we announced that were generally between first placement and conversion where in the range up to two in average two quarters three quarters, depending on the on the timing too for the trial itself for the rent thought in the training itself, which is.

Still a three to six month process, but could also be added that to be.

First of all slower, but so I think that's that's also a good good.

Point to see that we.

Don't feel a lot of the suddenly cases, a big paused them and not being approved or not being moved through the process I would say.

Because.

The profit is not be fine. So now it's much smoother.

But we will have but I think we will have more you know more.

They got to providing the next coming quarters in a more organized away.

Above that.

Okay, maybe a little more I can be a little more specific on the ones. It's a 35 of the 89 are the companies that currently have contracts and 40 rate or with the new groups that were talking about so the 89 that I believe accounts for 83 of them.

Okay. So actually I. Thanks for all this color.

Thank you.

And also.

All of this.

89.

I don't know.

Yeah.

If you want to do this.

Publicly but in the sense do you know how many are in child bases are how many are just.

Kind of basically starting off that application.

In the is done walk, where he was saying and if I understood it correctly.

Yeah, Yeah trials can be anywhere between two and see three quarters before they can get converted.

Totality.

Is that normal.

In Germany.

In the contracting phrase when we application goes in we have taken the patient through medical qualification and an initial trial will be unit that they can stand and and and be comfortable and we know that they physically can manage the product training comes after that and that's usually either.

Rental or purchase depending on how well they do.

In the specific group.

So of the.

89 applications.

That is more definitive those that have gone into the application process and then there's a subset of them that are already in training at this time.

Which is I don't have well civic number it's but it's in the total number.

It's a it's 12, Larry and RK.

We have 12 active.

Rentals in Germany currently.

Being conducted and paid for you see the you know we get payment for the rental fees.

Yes.

Then.

Okay.

The 16 units.

That was sold at an average price of 89, Okay. I think thats the statement I picked up and you know from from what you folks are saying earlier, so do that.

No because different contracts run differently.

The contact.

Make up most of these.

89 cat pricing in the sense.

<unk>.

In Germany on units.

At a little bit other lower price point than what you would.

To what it would be.

Either with the V.

The U.S. in the U.S. when it finally come you know.

Got it gets going here.

I'm just trying to understand.

How we should think about this eightnine cabotage plays.

So I can explain a little bit so first of all so we sold 15 units during the quarter.

10 of them a write some Germany in five in the U.S. now when I'm, referring to the 89000, daughter, what type of what we're doing is we basically take only the revenue you know.

From the salt from the sold units you know we're picking out all the you know a rental.

Fees and warranty deferrals and service fees and stuff that dollar Mora, not specifically benefit to the transaction the conversion or the say.

And.

What we see generally is I would say more left the same <unk> be currently in a in Germany and also in the U.S. as we had some nice increasing in this region as well.

And that's a that generally the conversion the average conversion price.

Did I think is a is something that we should also expect.

In in if you're in 2018, we made to.

Approximately two years ago, we made a change to the swap price leaf and included a five year warranty and then took an increase at that point.

You know took the market that is going to be time, but now I think its oh, let's stabilized.

The contracts also a.

Good at this a this aspect and.

So I think the 94 the conversion.

On average right is something that a that makes sense and obviously there are some warranty deferrals that we have to do accounting wise, and and you know and and rental fees that sometimes fall within the quarter or may be stopped in the prior quarter. So it's all part of the.

Of the transaction, but but generally the price itself for the conversion is this idea.

Okay.

And then coming to the V.

You know.

Would you.

Some commentary on the marquee or so Kansas.

That seems seems to be.

Pending approval at this point you know how much how should we think about those units.

Obviously the to be a you already have accord.

So how.

Uhhuh, what sort of the timeline no can we expect on that.

Well I can answer that two parts. The a number of patients that had been flowing into us with interest since the study accrual was completed has increased significantly. So that's why you see it the total of about 40.

That are there other processing them is not moving along very well, primarily because of the virus and the BA clinics is simply not really reopened.

Sort of level.

So until those clinics open sort of building a number of patients.

And most of them are forecasting reopening in Q4.

But theyve gone a little slower than the private clinics, they've been more cautious with their patient population.

So we anticipate we'll see some placements as the year goes on and a lot of and probably will fall into next year.

So.

Again in the V. two would be the same process right now.

The two to three quarter time point in terms of them getting the device and getting trained and finally converting is that how it works our NVH that limit on day by day.

Trained.

There will be a mix the majority of will be a little longer process. Like you described a sub group of them for example patients who participated in the clinical studies that are already trained.

Well get their units more quickly.

So you've got roughly 80 patients that fall into that category and the subset of those fall under the 40, but generally speaking.

A new lead candidate I would assume a six month cycle type of thing is going to be the norm.

Okay. Thank you I'll step aside.

And then come by.

Come back later, thank you. Thank you for taking my questions circuit.

Thanks.

Again to ask a question. Please press Star then one.

There are no further questions like the turn the call back over to Larry just lynskey for any closing remarks.

Thank you Michelle and for everybody who joined us today.

Appreciate the time. Please stay tuned are ongoing publications that our data and have a great day. Thank you.

Ladies and gentlemen. This concludes today's conference call. Thank you for participating May now disconnect everyone have a great day.

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