December 30, 2015      

U.S. market opportunity about $5.5 billion

Since its IPO in September of 2014, ReWalk Robotics (NASDAQ:RWLK) and its $77,000 wearable robotic exoskeleton have been chasing a potential market of 273,000 people who have spinal cord injuries.
ReWalk got a bit closer this December 17 when the Department of Veterans Affairs announced that it will now start paying for the exoskeleton for eligible paralyzed veterans.

Previously, in June of 2014, ReWalk?s device also became the only exoskeleton approved by the Food and Drug Administration (FDA). Other exoskeleton manufacturers, Ekso Bionics, Rex Bionics, Parker Hannifin, and US Bionics are still without FDA approval for home use. ReWalk?s system received EU approval in 2012.

ReWalk says that the VA’s decision means that veterans with spinal cord injuries can seek referral and evaluation at training centers around the country. Once an individual receives training, they’ll be considered for a personal unit to use outside the center.

rewalk stair climb

Dr. Ann Spungen, who led VA research on the device, told AP that the announcement represents a major shift in policy: ?The research support and effort to provide eligible veterans with paralysis an exoskeleton for home use is a historic move on the part of the VA because it represents a paradigm shift in the approach to rehabilitation for persons with paralysis.?

ReWalk CEO Larry Jasinski, calling the VA announcement “a landmark in national policy,? might also feel a lot better now about ReWalk having a good shot a finally turning a profit.

In response to the announcement, ?shares rose 83 percent to $11 at the close in New York,? reported Bloomberg, ?the biggest single-day jump since their September 2014 debut.

?Shares went as high as $13.59 on the next day (November 18), representing gains of more than 105 percent. The stock had fallen from a peak of $37.15 just days after the initial public offering as the Israeli company struggled to build a market for the device that is strapped onto paraplegics to power their knees and hips and provide support as they walk again.?

Prior to the announcement, shares traded below $8. Over the last 52 weeks, shares of ReWalk have traded between $5.55 and $23.50. That high end came at the beginning of the year. Shares have steadily declined throughout 2015.

?ReWalk was a hot 2014 IPO that has since fizzled: dropping to $12, below the initially guided range of $14 to $16. Shares doubled from their IPO and traded above the $40 mark at one point,? reported Seeking Alpha.

?The big risks here are obviously valuation and unprofitability. The company trades with a market cap north of $100 million despite never hitting $10 million in annual sales. The company also is not profitable and had a net loss of $5.9 million in the third quarter. As of September 30th, the company had $25.1 million in cash and no long-term debt.?

Canaccord Genuity analyst William Plovanic said there is a large untapped market for ReWalk devices, with a U.S. market opportunity of about $5.5 billion.

Barclays analyst Matthew Taylor, who has an equal weight, or neutral, rating on ReWalk Robotics stock, said in a research report that the VA department’s announcement was “a positive surprise” but added,

“Implementation will be slow, and (we) do not anticipate the announcement will lead to significant incremental revenue in 2016.”

There are 42,000 U.S. veterans who have lost the use of their legs. ReWalk has estimated that about half would be eligible for the system, said the Bloomberg report.

“Net-net, we continue to view ReWalk as furthest along in the robotic exoskeleton market,” added Taylor. “While we are excited about the technology and view the VA announcement as great for patients, we think the exoskeleton market will take time to grow, given the business model is resource-intensive and there is a lack of broad reimbursement.”

“We note that ReWalk ended the Q3 with $25 million in cash, which at the current burn rate would imply about 3 to 4 quarters of cash. Given the announcement, we are raising our 2017 revenue estimate to $21 million from $18 million and our price target to $11.”

This deal marks the first national coverage policy in the U.S. for qualifying individuals with spinal cord injury. Insurance coverage has been an area of success for ReWalk, but also one of its biggest opportunities. By getting the U.S. Department of Veteran Affairs on board, ReWalk could be at the early start of insurance companies covering these rather pricey walking aids.

Paralyzed patients who’ve tested it out say they are thrilled by the latest development.

“I’m just so excited; I wish I had it on. I could just jump up and down,” Robert Woo told CBS News. “It’s a great leap forward for a lot of us who are confined to wheelchairs.”

Although the ReWalk exoskeleton was developed for people paralyzed from the waist down due to certain spinal cord injuries, the company said it intends to target markets for multiple sclerosis, affecting 400,000 people in the U.S., as well as additional markets including those for stroke, quadriplegia and cerebral palsy.