ReWalk shows momentum; VA study orders drive the Q1/16; maintain BUY and $16 PT

We maintain our BUY rating on ReWalk Robotics following Q1/16 results. ReWalk reported solid revenues of $2.1M in the quarter against CG and consensus expectations of $1.5M and $1.6M respectively. ReWalk demonstrated the third quarter of Q/Q growth in unit placements with 32 units in the Q1/16 vs our expectation for 28. Strong unit placements were driven by a 20-unit sale to the VA to support the 160-patient multi-center trial that is expected to begin in the Q4/16. We are encouraged by growing patient demand and believe ReWalk has laid a strong foundation for reimbursement and market development. We look for continued execution in 2016 on a case-by-case basis to educate payors, add clinical/economic data, and secure positive reimbursement decisions.

Additionally we are encouraged by both the growth in the pipeline of qualified leads and third-party coverage progress, particularly with respect to the 37 qualified leads in the Veterans Administration following the positive coverage decision in Q4/15. That said, we believe sales will continue to be lumpy for the next 12-24 months as the investments in reimbursement and infrastructure made in 2015 begin to drive sales momentum.

Net, net we continue to be positive on the name long term as we believe in the benefits of exoskeleton technology, and in ReWalk’s differentiated product and first-mover position in the space.


Bullish: ReWalk placed 20 units in the VA to support the multi-center trial; management highlighted a positive coverage decision by a US private payor; lead generation and pipeline continue to grow as RWLK ended the Q1 with 1,000+ qualified leads and 94 insurance claims.


Bearish: Sales momentum is encouraging but uncertainty into converting claims to purchases makes modeling a moving target; opex expected to increase due to ongoing investments in infrastructure and reimbursement; financing overhang from the expectation that ReWalk will need an additional financing in the next 12 months.


Other key takeaways

·         VA purchased 20 additional ReWalk units (for a total of 26 to date) for the study expected to begin in the H2/16 – the study will be a prospective, multi-site study at 10 sites and enroll 160 patients over four years.

·         Management highlighted a positive coverage decision by a private payor that went into effect in the Q1 – the name of the payor was not disclosed.

·         ReWalk has over 1,000 qualified leads and 94 pending claims as of the Q1/16, not including 37 qualified leads in the VA pipeline.

Valuation We maintain our price target of $16.00 based on a 3.3x EV/sales multiple applied to our 2018 sales estimate of $59.0M. We assume cash of $21.8M, $10.1M in debt, and 12.3M shares outstanding.

Kyle Rose | Analyst |  Canaccord Genuity Inc. (US) | |  1.847.864.1139

Josh Sandberg

Josh Sandberg is the President and CEO of Ortho Spine Partners and sits on several company and industry related Boards. He also is the Creator and Editor of OrthoSpineNews.

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