Larry Jasinski
Analyst · Oppenheimer. Your line is now open
Thank you, Lisa. Good morning, everyone, and thank you for joining us. In Q2, ReWalk has continued to make progress on our key strategic objectives. I'd like to outline the status of each, provide some background and Ori will then provide our financial results. Our ongoing and primary objectives for the quarter were, one, financial management of the business; two, securing reimbursement coverage to drive the business; three, expansion to a second major product group with the ReStore system; four, geographic expansion to China. First, financial management includes sales growth, expense management and capital for operations. During the second quarter, we placed 21 ReWalk units, generating total revenue of $1.8 million, up sequentially from the prior quarter. Our guidance for the year is now expected to be at the lower end of the range of $9 to $11 million. Anticipated year-over-year growth is driven by the expanding coverage and access we have seen in Q2. Our expense management efforts in Q1 are starting to be realized and will be reflected in the second half of the year. With respect to our plans to enter China and regarding our plans to augment our capital requirements, we are working to complete our transaction with Timwell to explore ways to reduce our debt and are examining pathways for additional capital. With expanding insurance coverage with ReWalk, the addition of a major new product line in 2019 with ReStore, careful expense management and sufficient capital, we are now solidifying a path to breakeven operations. Second, regarding reimbursement, the definitive result in Q2, with the expansion of coverage via the broader access with the VA based on our efforts over the past 18 months and the establishment of our coverage code in Germany based on our efforts over the past three years, each of these will begin to impact positively our revenue in Q3 and Q4. Third, regarding new product success, we're completing a second major product offering which is advanced to the stage of fully active clinical studies and preparations for both CE and FDA submissions. All five leading centers have now enrolled patients and the study will provide the supporting data for the regulatory submissions in the second half of 2018, allowing for a 2019 launch. Fourth, geographic expansion. In May, our shareholders approved the Timwell investment in a joint venture in China to provide ReWalk and the ReStore to that market. In particular, the stroke market in China has great potential and is a market that we seek to penetrate. The efforts to establish the JV have been extensive, but have not yet been completed. I'd now like to provide greater detail on these four key objectives. As our demand remains strong with 250 pending claims, achieving predictable payer coverage is needed to enable our growth. For Germany, with the MDD code for statutory health insurance and private insurance along with the DGUV guidelines, we now have coverage for approximately 90% of the paralyzed population. With this new code published, we have seen rental approvals increase to 13 approvals between June and August of 2018, up from six approvals in the prior-year period of April to September. We anticipate this will reflect in our sales for Q4. In the United States, the ReWalk exoskeleton has been an approved treatment option for veterans, and so part of the VA's SOP policy since 2015. We haven't seen broad implementation of this policy largely because it has been difficult for eligible veterans to access VA's ReWalk training facilities. With revised policy issued in June, we believe that many of the over 100 veterans we have previously identified, plus many more will be able to access the necessary training. The evaluation process will now have all veterans go through one of 23 designated spinal cord injury VA centers. Once a veteran is determined to be qualified for training and procurement of his or her own exoskeleton systems, the individual may be allowed to pursue training in one of three ways – at the applicable VA hub center, at a qualified VA hospital designated by the VA's hub and spoke program, or any qualified private rehabilitation center through the VA Veterans' Choice program. The choice is one where veterans can receive care from a community provider paid for by the VA. Through the choice program, the number of training sites available for veterans will increase by a factor of six, broadening the geographic coverage to include any of the 137 ReWalk certified private or VA centers across the US. Of course, these individuals will need to be evaluated and screened again over the coming months, but we are optimistic that many of them will be able to finally take advantage of the SOP just as retired Marine Captain Derek Herrera has. Captain Herrera who sustained his injury while conducting a combat mission in Afghanistan in 2012 was the first American to obtain a ReWalk Personal 5.0 system in 2014 following FDA clearance. This year, he worked with his local VA hospital to obtain a second ReWalk device, the ReWalk Personal 6.0. His continued usage is an example of how these devices become not only an important part of people's lives, but also an important part of managing their health. We anticipate that many ReWalkers will opt for new devices every few years as they do with wheelchairs and other assistive equipment. For US case-by-case authorizations, we have previously outlined that we have transitioned all claims from a provider-based appeal process to a patient-based appeal process due to the guarantees within the Affordable Care Act. This change in process was because of shorter timing and a defined process. The initial results are encouraging as we've already had three claims that have been approved in a much shorter cycle and anticipate an increased clearance level in Q4. For US coverage policies, we had outlined a regional effort to make 50 policy applications in 2018. We made 21 applications to date and do not yet have a final coverage policy accepted. The engagement has allowed us to educate payers and we have four of the applications with ongoing discussions. We'll continue our submissions to insurers and look forward to updating you in due course. Our expansion in China is based on the sizable opportunity we see in that market. We are committed to completing the establishment of the JV with Timwell, Ambrum RealCan. However, due to the different jurisdictions involved, continued dialogue on certain commercial points and certain technical administrative delays, the company and Timwell continue to work through and negotiate the other conditions to establish the joint venture. As a major strategic opportunity for our business, we have identified the soft exo-suit technology as a disruptive and unique advance for stroke patients. In Q2, we made meaningful strides to enhance our ReStore program for stroke patients. All five research institutes participating in the multicenter clinical study are now actively enrolling patients. There are six subjects already enrolled. Another 15 screened and we anticipate completing enrollment with 40 subjects within the next few months. Regulatory submissions will follow, and pending timing and receipt of CE Mark and FDA clearance, we anticipate having the product in the market in mid-2019. We've also begun a production setup in anticipation of the clearance. As a wrap-up, I'd like to share the story of another remarkable young man, Todd Reigelsperger. And as of July, Todd completed 550,000 steps or 275 miles of ReWalking after just two years of having his own ReWalk exoskeleton. ReWalkers can do remarkable things with the assistance of our technology and we're committed to making it accessible for all of those who are eligible. To close, the company has made meaningful progress in our key strategic objectives for financial management, reimbursement coverage, product development, and geographic expansion, which all support the long-term goals and opportunity for the company. With that, I'll turn the call over to Ori to review our second quarter 2018 financial results.
