Larry Jasinski - Chief Executive Officer Ori Gon - Chief Financial Officer

Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2019, ReWalk Robotics Ltd. Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Mr. Ori Gon, Chief Financial Officer. Thank you, please go ahead sir.

Thank you, Jimmy. Good morning, and welcome to ReWalk Robotics' Third Quarter 2019 Earnings Call. This is Ori Gon, ReWalk's CFO. With me on today's call is Larry Jasinski, Chief Executive Officer of ReWalk. This morning the company issued a press release detailing financial results for the three and nine months ended September 30, 2019. This press release and a webcast of this call can be accessed through the Investor Relations section of the ReWalk website at www.rewalk.com. 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, focus, 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. The archived webcast will be available on the company's website within the Investors section. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on November 13, 2019. 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.

Thank you, Ori. Good morning everyone and thanks for joining us. The third quarter was the first full quarter of commercialization of the ReStore Exo-suit for stroke rehabilitation following FDA and CE clearance. During this quarter we were able to place units and most importantly, we have developed a strong pipeline as we look forward into 2020. Regarding the ReWalk 6.0 Spinal Cord Injury product, a public tender has been published in the German Government’s Federal Gazette most finalized in sort of a shorter sales cycle and higher levels of placements as we look forward into 2020. Let me start with a summary of our third quarter results. We had a total of $1.2 million in revenues, which was as result of 17 units placed, 12 of them were ReWalk Personal 6.0, five were ReStore products. The ReStore design culminates three years of development at ReWalk that was preceded by five years of fundamental research by Harvard's Wyss Institute and multiple clinicians. In this first quarter of introducing the product, we're planning broad and wide scale acceptance of the value this design offers. We have also learned that it is so unique and disruptive compared to other therapies that progression to purchase is guided by hands on use. Here's an email from a recent clinic soon to be buyer. “We even did some recording in our lab and we found that in the assistive mode, her propulsive ground reaction force, GRF, was clearly increased while breaking GRF was decreased. During 20 to 30 minute training sessions several system modes were tested and they both like most, a fairly low assistant level of 30 to 40 percent. They also mentioned, using the device to an early rehab after stroke could have helped them to learn walking more quickly. We now have…

Thanks Larry. I would like to start by providing some additional details regarding our top line results. During the third quarter we placed a total of 17 units, out of which 12 where ReWalk SCI units and the five were from our new ReStore device. The geographical split of the 12 placed SCI units was the following: 9 units placed in Europe and three in the U.S. The five ReStore devices were all placed in the U.S. Now, let’s break out the units by sales and rentals. With the SCI product we had seven year rent to purchase units placed and five direct purchases. We also had five previously rented devise, convert to a purchase during the quarter. The beak down of the ReStore place in this quarter shows four direct purchases and one rental. At the end of the quarter, we had 18 open trials, including 13 active rentals and five plans that have completed those trial periods and are awaiting a finally insurance decision. This five plans represents approximately $1.8 million in potential revenue. Our total pending insurance claims relating to coverage for ReWork SCI products was 143, and we are working to process these plans within the payer systems. If we take a look at our gross margin, we see that our third quarter 2019 gross margin was 53% compared to 47% at the prior year quarter. This improvement is also shown in our nine month figures with 54% in 2019 compared to 45% in 2018. Main reasons for this increase is higher ASP and euro cost related to inventory right offs. On the expense side, the 2018 sales quarter operating expenses were $3.7 million compared to $4.9 million in the prior year period. The reduction was driven mainly by reduced R&D expenses and sales and marketing…

Thanks Ori. Last quarter I summarized key measurements for the remainder of the year, as we have now transitioned primarily to commercial activities. Today I am going to update our status with these key measurements for the rest of the year. So they are sales growth with ReWalk SCI line based on completing contracts with at least two German insurers. The results: we are on track to secure these German contracts. Second, demonstrating market acceptance and penetration of ReStore in more than 40 accounts and building a strong pipeline for 2020 placements. We will certainly have 40 in line, the number of completed PO's maybe a bit less. Third, broad distribution and presentation of supporting my papers on the value proposition for the Soft Suit. This is under way along with peer review papers in process. Fourth, continuing support of the U.S. VA and ongoing engagement with national regional U.S. Insurers to ensure broader reimbursement coverage. The VA continues to progress in its randomized study on ReWalk. We remain on target with about 140 patients now enrolled out of the 160 planned. Our expanded U.S. sales team will be able to increase our time and focus on VA patients as the enrollment for the randomized trial is completed. Our additional reasons are aligned with these key centers that have been in the study and that are well set-up for training and supplying patients going forward when the focus of the VA moves from the study to every day patient needs and care of the Spinal Cord Injury community. And fifth, China. During the third quarter we have continued discussions with Timwell/RealCan on a modified working arrangement. Although we continue to discuss, we have increased our interaction with alternatives as the delay has left us uncertain of their capacity to complete this important initiative. To close today, the advent of contracts for the supply of the ReWalk system in Germany and the positive results of the centers that acquired the restore for stroke rehabilitation, are the basis for our shift to a commercially driven company. We look forward to reporting the progress in each of the coming quarters. I will now turn the call back to the operator for Q&A.

Thank you. [Operator Instructions] Our first question comes from Swayampakula Ramakanth with H.C. Wainwright. Your line is now open.

Thank you. Thank you for taking my questions. Can you hear me clearly?

Yes, we can, I can. Hi R.J.

Okay, Hi Ori, hi Larry. In the start of the call you were talking about how you expect the sales cycle to shorten from here in Germany. So what has been the current sales cycle time, and how short would it become in the future?

R.J., this is Larry. The sales cycle in Germany has been very broad. It’s ranged from nine months to three years in some cases, because of the lack of certainty both in the code and of the process. This cycle should bring it down to months. So we believe we're going to take a lot of those patients who have been waiting so long and take care of them and then we will be able to give a cycle that was so predictable and it should be three to six months on average.

So, you said, I’m understanding that this is some sort of the legislation that had passed. So from the legislation to execution, do you expect any lag time or is it pretty much a done deal; it's just paid for processing from here, for these patients who have been waiting for so long.

It’s going to be relatively quickly. We already see movement of patients because this is gone so far. So, there won’t to be a long lag time. It will take a few months to get all these patients in the line and then after that it will get predictable. I think we'll be able to give numbers that you actually will be able to accurately predict one into the other.

And was that 40 patients that were waiting in Germany or waiting for this insurance to take a look of the whole process. I though you gave that number, is that correct what I have?

Okay, I’m going to, could you repeat that or Ori, go for it, yeah.

I think you try to see what was the number of patients, with the payers that is going in the pipeline right.

Yes, yes sir.

So we need 30, we have 30 pending patients within the group of payers that are included in this tender. So that will be even a little bit faster, because they are already – you know they have already passed the trial, and they are already qualified for units, so they should be the first in line with this group of payers.

Okay, perfect! And then for ReStore, you know it’s great that you placed five units in the U.S. and all of those five are direct sales. But also you had suggested that there are certain accounts who are looking for flexible model source of funding. So if you had these flexible models at this time, you know how many more and the five units that you’ve placed could you have gotten by this time?

Well, as we had indicated, we’ve had about 25 other accounts and negate the intent to purchase and they're just – we’re working through the processes with them, so we have clinical volume at the Director of Research level. So we are now working with purchasing and the exact time in which purchasing is a little less clear. Some of them are trying to do it immediately, through the rent to purchase type models and some of the others are focused a little more on putting in the capital cycle which may start in January or may start in April, but we anticipate the majority are going to come pretty quickly.

Okay, and also, sorry to jump back and forth but on the SCI device, you know you had said that there are certain units which are – about seven units have been sold on a rental basis, but what has been your rent to direct purchase conversion rate?

So, I can take this. So normally our conversion rate to-date is 60% to 70%. The reason I'm saying it’s a range, because what we do is when a device is ending, a rental, it’s going to be immediately converted, right, sometimes it takes some time, and its why we segregate between the rental, the active rentals and the pending insurance claims. So the pending insurance claims are somewhere in between of close one and maybe lost in some cases. So this is why it’s still a range, but it’s about 60% to 70%.

And I would add, we do loose some for other reasons, but they can come back and I’ll be specific. One of the patients we have, our indication for U.S. requires the weight to be under 100 kilos or 220 pounds and the patient at the time that he went in was much less than that, not much less, 90s. Right now he's at about 105 or so. So he has to lose some weight so he may come back into the system, but yeah, we deal with that or other things that change in their life that sometimes delay them, is the best way to describe it we hope.

Okay, thanks. The last question from me is you're talking about the VA trail and now you have 140 of the 160 patients that need to be enrolled. So based on the momentum in terms of enrollment rate, you know what’s your expectations there for getting the enrolment done, and also, you know potential when could we expect the data from this study. I would imagine this is something which you are watching very closely, so that you are [cross talk] investment.

They have enrolled on average of about three a month and that's ramped up a little more recently, it’s been a little higher, closer to 4 or 4.5. So with the 20 remaining, that was reported to us, about a month ago. So if they stay consistent they’ll finish somewhere around year-end, early next year, you know January, February-ish. Now that also means those three or four patients from us, may well be available to us in the SOP, where we have not been selling products so much, because they are all going to study, and they already have their product. So that will help us on the revenue side. So your question on the data, the data’s totally controlled by the DA, so it's harder for us to speak for them. We do know they would complete the follow up data six months after the last patient. So if that occurs right around the beginning of next year, that they would have their follow up data around the middle of next year and their plans for publication again are not publicly stated, but we would expect them to be available around the end of next year.

Perfect! Thank you, Larry and Ori, for taking all my questions. I appreciate that.

Okay, thank you. I appreciate the time.

Thank you. And I'm showing no further questions in the queue at this time. I'd like to turn the call back to Larry Jasinski for any closing remarks.

Thank you very much Jimmy, and for everybody who attended, thank you for joining and if you have other questions please visit the company. Have a wonderful day! Thanks.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.