ReWalk Robotics Ltd.(Nasdaq:RWLK), which has developed a system for giving people with lower body paralysis mobility, announced late last week a financing round based on a shelf prospectus for raising $7.2 million. The money was raised a $1.05 per share, a 24% discount on Friday morning's share price. The share plunged 14.8% to $1.15 on Friday, pushing ReWalk's market cap down to $25.3 million. The National Securities Corporation underwrote the offering.
The financing round following the publication of ReWalk's financial results a week ago, following which the share price rose slightly. Rewalk's revenue grew 46% to $6.2 million in the first nine months of 2017, compared with the corresponding period last year. This is still low for a US medical equipment company, but is nevertheless not a negligible sum. The company lost $20 million in January-September, including $12.9 million in the third quarter.
The company will probably allocate a substantial proportion of the amount raised to funding the upcoming clinical trial of its product for treatment of stroke. The trial is scheduled to begin in 2018 and finish towards the end of the year, with launching of the product planned for late 2018-early 2019.
The market for stroke victims is much larger than the market for lower body paralytics, although the customers in the market are less suitable for using the device. The ideal customer for the device is someone with a strong upper body free of paralysis who is highly motivated to return to normal life (something that is more difficult for a person who has suffered cognitive damage). ReWalk plans to adapt its product to this market. The device is slated for later use in additional markets: patients with multiple sclerosis, Parkinson's Disease, etc)
Potential market up to several hundred million dollars
The product for stroke will be sold mainly for rehabilitation in clinics, not as a home product that is part of the patient's independent way of life. In its conference call following the publication of its financial reports (which did not attract much attention from investors, in comparison with its previous conference calls), the company said that there were 2,000 clinics in the US. The price of the product is expected to be less than that of the home product for paralytics' mobility - $20,000, compared with $70,000. According to the company, each clinic is likely to purchase several machines, so the potential market amounts to tens of millions to a few hundred million dollars. ReWalk may also develop a home product.
ReWalk's home product for limb paralytics has been less successful than expected, due to problems in ease of use, and especially in insurance indemnification. ReWalk has not managed to collect sufficient information showing that its product has a positive effect on the patients' health, beyond the emotional boost it gives them.
The business model for selling to clinics is simpler; there is no need to educate a challenging market, which is necessary for selling a home device. The product's effectiveness can be compared with that of existing devices for which insurance companies are already providing indemnification. The disadvantage of this situation is that it is more difficult to differentiate a product used in clinics from other products bringing the patient to a vertical position.
Published by Globes [online], Israel Business News - www.globes-online.com - on November 19, 2017
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