REWALK ROBOTICS LTD.
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PART II |
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PART IV |
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| F -1 |
i
Definitions and Introduction
Our legal and commercial name is ReWalk Robotics Ltd. As of January 29, 2024, we began doing business as “Lifeward”. We are a company limited by shares organized under the laws of the State of Israel and were founded in 2001. In September 2014, we listed our shares on theThe Nasdaq Global Market, and in
May 2017, we transferred our listing to theThe Nasdaq Capital Market. We have irrevocably appointed Lifeward, Inc. (formerly ReWalk Robotics, Inc.) as our agent to receive service of process in any action against us in any United States federal or state court. The address of ReWalk Robotics,Lifeward, Inc. is 200 Donald Lynch Blvd., Marlborough, Massachusetts 01752. As used herein, and unless the context clearly indicates otherwise, the terms “ReWalk”, “the Company”“Lifeward”, the “Company”, “we”, “us”, “our” or “ours” refer to ReWalk Robotics Ltd. Ltd. DBA Lifeward and its subsidiaries.
Special Note Regarding Forward-Looking Statements and Risk Factors Summary
This annual report on Form 10-K or (“annual report,report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, that are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, potential market opportunities and the effects of competition. Forward-looking statements may include projections regarding our future performance and, in some cases, can be identified by words likesuch as “anticipate,” “assume,” “believe,” “could,” “seek,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “future,” “should,” “will,” “would” or similar expressions that convey uncertainty of future events or outcomes and the negatives of those terms. These statements may be found in this sectionthe sections of this quarterlyannual report titled “Part I,I. Item 2.1. Business,” “Part I. Item 1A. Risk Factors,” “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this quarterlyannual report. These statements include, but are not limited to, statements regarding:
our expectations regarding future growth, including our ability to increase sales in our existing geographic markets, expand to new markets and achieve our planned expense reductions;
our management’s conclusion, and our independent registered public accounting firm’s statement in its opinion relating to our accompanying consolidated financial statements, that there is a substantial doubt as to our ability to continue as a going concern;
our ability to maintain and grow our reputation and the market acceptance of our products;
our ability to achieve reimbursement from third-party payors for our products;
our expectations as to our clinical research program and clinical results;
our expectations as to the results of the Food and Drug Administration’s (“FDA”), potential regulatory developments with respect to our mandatory 522 postmarket surveillance study;
the outcome of ongoing shareholder class action litigation relating to our initial public offering (“IPO”);
our ability to repay our secured indebtedness;
our ability to improve our products and develop new products;
our ability to close periodic issuances of our ordinary shares to, and to form a joint venture in China with, Timwell Corporation Limited;
the risk of substantial dilution resulting from the periodic issuances of our ordinary shares to Timwell Corporation Limited;
the significant voting power and de facto voting control Timwell Corporation Limited will acquire;
our ability to maintain adequate protection of our intellectual property and to avoid violation of the intellectual property rights of others;
our ability to gain and maintain regulatory approvals;
our ability to secure capital from equity and debt financings in light of limitations under our effective registration statement on Form S-3, the price range of our ordinary shares and conditions in the financial markets, and the risk that such financings may dilute our shareholders or restrict our business;
our ability to use effectively the proceeds of our offerings of securities;
our ability to maintain relationships with existing customers and develop relationships with new customers;
the impact of the market price of our ordinary shares on the determination of whether we are a passive foreign investment company; and
our compliance with medical device reporting regulations to report adverse events involving our products and the potential impact of such adverse events on ReWalk’s ability to market and sell its products
The preceding list is not intended to be an exhaustive list of all of our statements. The statements are based on our beliefs, assumptions and expectations of future performance, taking into account the information currently available to us. These statements are only predictions based upon our current expectations and projections about future events. There are important factors that could cause our actual results, levels of activity, performance or achievements to differ materially from the results, levels of activity, performance or achievements expressed or implied by the statements. In particular, you should consider the risks provided under
These factors include those listed in “Part I. Item 1A. Risk Factors"Factors,” including those factors summarized below.
our expectations regarding future growth, including our ability to increase sales in this annual report.our existing geographic markets and expand to new markets;
our ability to maintain and grow our reputation and the market acceptance of our products;
our ability to achieve reimbursement from third-party payors or advance Centers for Medicare & Medicaid Services (“CMS”) coverage for our products;
our ability to regain and maintain compliance with the continued requirements of The Nasdaq Capital Market and the risk that our ordinary shares will be delisted if we fail to regain and maintain compliance with such requirements;
our ability to successfully integrate the operations of AlterG, Inc. into our organization, and realize the anticipated benefits therefrom;
our ability to have sufficient funds to meet certain future capital requirements, which could impair our efforts to develop and commercialize existing and new products;
our ability to leverage our sales, marketing and training infrastructure;
our ability to grow our business through acquisitions of businesses, products or technologies, and the failure to manage acquisitions, or the failure to integrate them with our existing business;
our expectations as to our clinical research program and clinical results;
our ability to obtain certain components of our products from third-party suppliers and our continued access to our product manufacturers;
our ability to improve our products and develop new products;
our compliance with medical device reporting regulations to report adverse events involving our products, which could result in voluntary corrective actions or enforcement actions such as mandatory recalls, and the potential impact of such adverse events on our ability to market and sell our products;
our ability to gain and maintain regulatory approvals and to comply with any post-marketing requests;
the risk of a cybersecurity attack or incident relating to our information technology systems significantly disrupting our business operations;
our ability to maintain adequate protection of our intellectual property and to avoid violation of the intellectual property rights of others;
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the impact of substantial sales of our shares by certain shareholders on the market price of our ordinary shares;
our ability to use effectively the proceeds of our offerings of securities;
the impact of the market price of our ordinary shares on the determination of whether we are a passive foreign investment company;
market and other conditions, including the extent to which inflation or global instability may disrupt our business operations or our financial condition or the financial condition of our customers and suppliers, including the outbreak of war between Israel and Hamas and the ongoing tension between China and Taiwan; and
other factors discussed in “Part I. Item 1A. Risk Factors.”
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur.
These statements may also be found in the sections of this annual report titled “Part I. Item 1. Business,” “Part I. Item 1A. Risk Factors,” “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this annual report.
You should not put undue reliance on any forward-looking statements. Any forward-looking statement in this annual report speaks only as of the date hereof. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this annual report, to conform these statements to actual results or to changes in our expectations.
Where You Can Find Other Information
Our principal executive offices are located at 3 Hatnufa Street, Floor 6, Yokneam IlitIllit 2069203, Israel, and our telephone number is +972 (4) 959-0123. Our website is www.rewalk.comgolifeward.com. Information contained, or that can be accessed through, our website does not constitute a part of this annual report and is not incorporated by reference herein. We have included our website address in this annual report solely for informational purposes. Information that we furnish with or file with the Securities and Exchange Commission or the SEC,(the “SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to, or exhibits included in, these reports are available for download, free of charge, on our website as soon as reasonably practicable after such materials are filed or furnished with the SEC. The SEC also maintains a website at www.SEC.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Our SEC filings, including exhibits filed or furnished therewith, are also available on the SEC’s website at SEC.gov. You may obtain and copy any document we furnish to or file with the SEC at the SEC’s public reference room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the SEC’s public reference facilities by calling the SEC at 1-800-SEC-0330. You may request copies of these documents, upon payment of a duplicating fee, by writing to the SEC at its principal office at 100 F Street, NE, Room 1580, Washington, D.C. 20549.this website.
iii
PART I
ITEM 1.BUSINESS
Overview
We are an innovativea medical device company that is designing, developingdesigns, develops, and commercializingcommercializes life-changing solutions that span the continuum of care in physical rehabilitation and recovery, delivering proven functional and health benefits in clinical settings as well as in the home and community. Our initial product offerings were the ReWalk Personal and ReWalk Rehabilitation Exoskeleton devices for individuals with spinal cord injury (“SCI Products”). These devices are robotic exoskeletons that allow individuals with mobility impairments or other medical conditions the ability to stand and walk once again. We have developed and are continuing to commercialize ReWalk, an exoskeleton designed for individuals with paraplegia that usesuse our patented tilt-sensor technology and an on-boardonboard computer and motion sensors to drive motorized legs that power movement. Additionally,These SCI Products allow individuals with spinal cord injury (“SCI”) the ability to stand and walk again during everyday activities at home or in the community. In March 2023, we are developingreceived clearance of our premarket notification (“510(k)”) from the U.S. Food and intendDrug Administration (“FDA”) for the ReWalk Personal Exoskeleton with stair and curb functionality, which adds usage on stairs and curbs to commercializethe indication for use for the device in the United States (U.S.). The clearance permits U.S. customers to participate in more walking activities in real-world environments in their daily lives where stairs or curbs may have previously limited them when using the exoskeleton for its intended, FDA-indicated uses. This feature has been available in Europe since initial CE Clearance, and real-world data from a cohort of 47 European users throughout a period of over seven years consisting of over 18,000 stair steps was collected to demonstrate the safety and efficacy of this feature and support the FDA submission.
We have sought to expand our product offerings beyond the SCI Products through internal development and distribution agreements and acquisitions. We have developed our ReStore Exo-Suit device, which we began commercializing in June 2019. The ReStore is a powered, lightweight soft suit exoskeleton, designed to support mobilityexo-suit intended for use during the rehabilitation of individuals suffering from otherwith lower limb disabilities due to stroke. During the second quarter of 2020, we finalized and moved to implement two separate agreements to distribute additional product lines in the United States. We are the exclusive distributor of the MYOLYN MyoCycle FES Pro cycles to U.S. rehabilitation clinics and for the MyoCycle Home cycles available to US veterans through the Veterans Health Administration (“VHA”) hospitals. In the second quarter of 2020, we also became the exclusive distributor of the MediTouch Tutor movement biofeedback systems in the United States; however, due to unsatisfactory sales performance of the MediTouch product lines, we terminated this agreement as of January 31, 2023. We refer to the MediTouch and MyoCycle devices as our “Distributed Products.”
On August 11, 2023, we made our first acquisition to supplement our internal growth when we acquired AlterG, Inc. (“AlterG”), a leading provider of Anti-Gravity systems for use in physical and neurological rehabilitation. Our AlterG Anti-Gravity systems use patented, National Aeronautics and Space Administration (“NASA”) derived differential air pressure (“DAP”) technology to reduce the effects of gravity and allow patients to rehabilitate with finely calibrated support and reduced pain. AlterG Anti-Gravity systems are utilized in over 4,000 facilities globally in more than 40 countries. We will continue to evaluate other products for distribution or acquisition that can broaden our product offerings further to help individuals with neurological injury and disability.
We are in the research stage of ReBoot, a personal soft exo-suit for home and community use by individuals post-stroke, and we are currently evaluating the reimbursement landscape and the potential clinical impact of this device. This product would be a complementary product to ReStore as it provides active assistance to the ankle during plantar flexion and dorsiflexion for gait and mobility improvement in the home environment, and it received Breakthrough Device Designation from the FDA in November 2021. Further investment in the development path of the ReBoot was paused in 2023 pending determination regarding the clinical and commercial opportunity of this device.
Our principal markets are primarily in the United States and Europe with some lesser sales in Asia, the Middle East and South America. We sell our products primarily directly in the United States, through a combination of direct sales and distributors (depending on the product line) in Germany, Canada, and Australia, and primarily through distributors in other markets. In markets where we sell direct to consumers, we have established relationships with clinics and rehabilitation centers, professional and college sports teams, and individuals and organizations in the SCI community, and in markets where we do not sell direct to consumers, our distributors maintain these relationships. We have primary offices in Marlborough, Massachusetts, Fremont, California, Berlin, Germany and Yokneam, Israel, from where we operate our business.
We have in the past generated and expect to generate in the future revenue from a combination of clinics and rehabilitation centers, commercial distributors, third-party payors (including private and government payors), professional and college sports teams, and self-pay individuals. While a broad uniform policy of coverage and reimbursement by third-party commercial payors currently does not exist in the United States for exoskeleton technologies such as stroke, multiple sclerosis, cerebral palsy, Parkinson's diseasethe ReWalk Personal Exoskeleton, we are pursuing various paths of reimbursement and elderly assistance.support fundraising efforts by institutions and clinics, such as the VHA policy that was issued in December 2015 for the evaluation, training, and procurement of ReWalk Personal Exoskeleton systems for all qualifying veterans living with SCI across the United States.
We have also pursued updates with the CMS to clarify the Medicare coverage category (i.e., benefit category) applicable for personal exoskeletons. In 2022, the National Spinal Cord Injury Statistical Center (“NSCISC”) reported that CMS is the primary payor for approximately 57% of the SCI population which are at least five years post their injury date, with Medicare representing a majority of this percentage. In July 2020, following a successful submission and hearing process, a code was issued for ReWalk Personal Exoskeleton, which may be used for purposes of claim submission to Medicare, Medicaid, and other payors.
On November 1, 2023, CMS released the Calendar Year 2024 Home Health Prospective Payment System Final Rule, CMS-1780-F (“Final Rule”), which was adopted through the notice and comment rulemaking process. The Final Rule includes a policy confirming that personal exoskeletons are included in the Medicare brace benefit category, as of January 1, 2024. Medicare personal exoskeleton claims with dates of service on or after January 1, 2024 that are billed using HCPCS code K1007 are assigned to the brace benefit category. CMS reimburses items classified under the brace benefit category using a lump sum payment methodology.
On November 29, 2023, CMS included the “ReWalk Personal Prosthetic Exoskeleton System” in the HCPCS public meeting where it solicited feedback on a preliminary payment determination of $94,617 for HCPCS code K1007. The preliminary payment determination was made by CMS by applying a “gap filling” process, which was used in light of CMS determining that the code describing the technology has no fee schedule pricing history and that lower extremity exoskeletons incorporate “revolutionary features” that cannot be described by or considered comparable to any other existing code or combination of codes. As part of gap-filling, CMS utilizes verifiable supplier or commercial pricing information and adjusts this pricing information according to a deflation and update factor methodology. In applying this formula to the K1007 code describing the ReWalk Personal Exoskeleton, CMS says that it relied on information about average prices from 2020 market transactions for which CMS had data.
CMS solicited information on updated verifiable market transactions from ReWalk, as well as any other makers of similar bilateral, lower limb exoskeletons, to “ensure that the Medicare payment amount for this code accurately reflects the full market of devices that would be classified in this code.” We participated in the HCPCS meeting process on November 29, 2023 to provide additional information to help ensure that the final payment determination accurately reflects current pricing information related to the market of lower-limb exoskeleton devices, including the current ReWalk Personal Exoskeleton. A final Medicare payment determination is expected from CMS in first quarter of 2024 with an April 1, 2024, effective date.
In Germany, we continue to make progress toward achieving coverage from the various government, private and worker’s compensation payors for our SCI products. In September 2017, each of German insurer BARMER GEK (“BARMER”) and national social accident insurance provider Deutsche Gesetzliche Unfallversicherung (“DGUV”), indicated that they will provide coverage to users who meet certain inclusion and exclusion criteria. In February 2018, the head office of German Statutory Health Insurance (“SHI”) Spitzenverband (“GKV”) confirmed their decision to list the ReWalk Personal Exoskeleton system in the German Medical Device Directory. This decision means that ReWalk is listed among all medical devices for compensation, which SHI providers can procure for any approved beneficiary on a case-by-case basis. During the year 2020 and 2021, we announced several new agreements with German SHIs, including TK and DAK Gesundheit, as well as the first German Private Health Insurer (“PHI”), which outline the process of obtaining our devices for eligible insured patients. We are also currently working with several additional SHIs on securing a formal operating contract that will establish the process of obtaining a ReWalk Personal Exoskeleton for their beneficiaries within their system. Additionally, to date, several private insurers in the United States and Europe are providing reimbursement for ReWalk in certain cases.
ReWalk Personal Exoskeleton and ReWalk Rehabilitation Exoskeleton
Development of ReWalkour SCI Products took over a decade and was spurred by the experiences of our founder, Dr. Amit Goffer, who became a quadriplegic due to an accident. Current ReWalk designs are intended for people with paraplegia, a spinal cord injuryan SCI resulting in complete or incomplete paralysis of the legs, who have the use of their upper bodies and arms. We currently offer two products:products in this category: the ReWalk Personal Exoskeleton and the ReWalk Rehabilitation.Rehabilitation Exoskeleton. The ReWalk Rehabilitation Exoskeleton is substantially similar to the ReWalk Personal Exoskeleton system except that it is currently designed for everyday use by paraplegic individuals at home and in their communities, and is custom fitted for each user. ReWalk Rehabilitation is currently designed for use by paraplegia patients insold with multiple sizes of our adjustable parts to allow different users the clinical rehabilitation environment, where it provides valuable exercise and therapy. It also enables individualsability to evaluate their capacity for usingtrain within a clinic.
The ReWalk Personal in the future. In 2011, we launched ReWalk Rehabilitation for use in hospitals and rehabilitation centers in the United States and Europe. We began marketing ReWalk Personal in Europe with CE mark clearance at the end of 2012 and received U.S. Food and Drug Administration, or FDA, clearance to market it in the United States in June 2014. Additionally, we have received regulatory approval to sell the ReWalk device in other countries. In the future we intend to seek approval from the applicable regulatory agencies in other jurisdictions where we seek to market ReWalk.
ReWalkExoskeleton is a breakthroughnovel product that canseeks to fundamentally change the health and life experiences of users. Designed for all-daydaily use, ReWalkthe device is battery-powered and consists of a light, wearable exoskeleton with integrated motors at the joints, an array of sensors and a computer-based control system to power knee and hip movement. ReWalkThe user controls the device movement using a combination of user inputs on the wrist-worn controller, as well as through subtle weight shifts in the user’s center of gravity. A forward tilt of the upper body is sensed by the system, which initiates the first step. Repeated body shifting generates a sequence of steps that results in a functional walking speed.body. Because the exoskeleton supports its own weight and facilitates the user’s gait, users do not expend unnecessary energy while walking. WhileThe ReWalk does not allow side-to-side actuation, users are able to turn by shifting their weight to the side. ReWalkPersonal Exoskeleton also allows users to sit, stand and depending on local regulatory approvals, climb and descend stairs. Usestairs and curbs. In March 2023, the FDA cleared the ReWalk Personal Exoskeleton for use on stairs is not cleared by the FDA in the United States. ReWalk users are able to independently operate the devices, and most are able to put on and remove the devices by themselves. Our safety guidelines and FDA specifications, however, requirecurbs, allowing users to be accompanied byparticipate in walking activities in more real-world environments in their daily lives and experience more opportunities to enjoy the health benefits of walking.
● ReWalk Personal Exoskeleton: intended for everyday use at home, at work or in the community with a trained companion. We began marketing ReWalk Personal Exoskeleton in Europe with CE mark clearance at the end of 2012. We received FDA clearance to market the ReWalk Personal Exoskeleton in the United States in June 2014. ReWalk Personal Exoskeleton units are all manufactured according to the same mechanical specifications. Each unit is then permanently sized to fit the individual user and the software is configured for the user’s specifications by the rehabilitation center, clinic, or distributor. We are currently offering our 6th generation device (6.0) with current research and development for our 7th generation device (7.0).
● ReWalk Rehabilitation Exoskeleton: the current offering for clinics who wish to implement exoskeleton training is composed of our Rewalk Personal Exoskeleton unit along with multiple sizing of different parts, enabling multiple patient use. The ReWalk Rehabilitation Exoskeleton provides a valuable means of exercise, training, and therapy. Use of the ReWalk Rehabilitation Exoskeleton in the clinic also enables individuals to evaluate their capacity for using the ReWalk Personal Exoskeleton in the future. | | ReWalk Personal Exoskeleton |
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Additionally, we have received regulatory approval to sell the ReWalk Personal Exoskeleton device in other countries. In the future we intend to seek approval from the applicable regulatory agencies in other jurisdictions where we may seek to market ReWalk Personal Exoskeleton. For more information about the safety of using our SCI products see “Part I, Item 1A. Risk Factors—Risks Related to our Business and our Industry— Defects in our products or the software that drives them could adversely affect the results of our operations.”
Overview of Spinal Cord Injury
Spinal Cord Injury
The spine is the central core of the human skeleton and provides structural support, alignment, and flexibility to the body. The spinal cord, housed inside the bones of the spinal column, is a complex bundle of nerves serving as the main pathway for information connecting the brain, and nervous system. Spinal cord injury is a serious medical condition that occurs as a result of physical damage to the nerves of the spinal cord, resulting in a loss of function, such as mobility or feeling. In most people who have spinal cord injury, the spinal cord is intact. Spinal cord injury is not the same as back injury, which may result from pinched nerves or ruptured disks. Even when a person sustains a break in a vertebra or vertebrae, there may not be any spinal cord injury if the spinal cord itself is not affected. There are two types of spinal cord injury – complete and incomplete. In a complete injury, a person loses all ability to feel and voluntarily move below the level of the injury. In an incomplete injury, there is some functioning below the level of the injury.
Upon medical examination, a patient is assigned a level of injury depending on the location of the spinal cord injury. Cervical level injuries cause paralysis or weakness in both arms and legs and is referred to as quadriplegia. Sometimes this type of injury is accompanied by loss of physical sensation, respiratory issues, bowel, bladder, and sexual dysfunction. Thoracic level injuries can cause paralysis or weakness of the legs (paraplegia) along with loss of physical sensation, bowel, bladder, and sexual dysfunction. In most cases, arms and hands are not affected. Lumbar level injuries result in paralysis or weakness of the legs (paraplegia). Loss of physical sensation, bowel, bladder, and sexual dysfunction can occur. The shoulder, arm, and hand functions are usually unaffected. Sacral level injuries primarily cause loss of bowel and bladder function as well as sexual dysfunction.
Clinical Evidence
Published clinical studies demonstrate ReWalk’sindicate the ReWalk Personal Exoskeleton’s ability to deliver a functional walking speed. In addition, our experience working withcertain potential secondary health benefits have been reported by healthcare practitioners and ReWalk users, including reports by study participants,participants. Although these benefits have not been established as well as recently releasedconclusive clinical data suggest that ReWalk may have the potential to providein randomized controlled trials, these reported secondary health benefits. These potential benefits may include reducing pain and spasticity, improving bowel and urinary tract function, enhancing metabolism and physical fitness, and reducing hospitalizations and dependence on medications, as well as emotional and psychological benefits. Because of these potential secondary medical benefits, weinclude:
| ● | improved bowel and urinary tract function; |
| ● | increases in joint range of motion for the hip and ankle joints; |
| ● | improved sleep and reduced fatigue; |
| ● | increase in oxygen uptake and heart rate as a result of walking as opposed to sitting and standing; |
| ● | ability to ambulate at a speed greater than 0.4 meters per second, which is considered to be conducive to outdoor related community ambulation; and |
| ● | reduced hospitalizations. |
We believe that ReWalkusing our SCI Products may have the ability to reduce the lifetime healthcare costs of individuals with spinal cord injuries, making itwhich we believe will make our SCI Products economically attractive for individuals and third-party payors. While we believe that ReWalkusing our SCI Products could potentially offer significant advantages over competing technologies and therapies, disadvantages include the time it takes for a user to put on ReWalk,the device, the slower pace of ReWalkthe device compared to a wheelchair, the training required by the user and companion to use the device, the weight of ReWalkthe device when carried, which makes it more burdensome for a companion to transport than a wheelchair, and the requirement that users be accompanied by a trained companion.
As of December 31, 2017, we had placed 116 units in use at rehabilitation centers
Market Opportunity
Current and 317 personal units innear-term market opportunities include providing a home or community use, compared to 112 units and 214 units, respectively, as of December 31, 2016. Furthermore, 44 of the units we placed during the year ended December 31, 2017 were paidsolution for by insurance reimbursement compared to 51 units during the prior year period. In the near future, we intend to continue focusing on our reimbursement efforts, with our streamlined staffing, by pursuing insurance claims on a case-by-case basis, managing claims through the review process, and investing in efforts to expand commercial reimbursement coverage. As of December 31, 2017, there were 224 pending insurance claims relating to coverage for our product, compared to 199 as of December 31, 2016.
Our initial commercialization efforts focused on penetrating rehabilitation centers, hospitals and similar facilities that treat patients with spinal cord injuries to become an integral part of their rehabilitation programs and to develop a broad based training network with these facilities to prepare users for home and community use. According to the National Spinal Cord Injury Statistical Center, 87% of persons with spinal cord injuries are sent to private, non-institutional residences (in most cases, their homes) after hospital discharge. As our business has developed, we have shifted our commercialization efforts to marketing ReWalk Personal with insurance companies, physicians and physiotherapists as a standard of careSCI that can be used routinely at home, work or in the community, and we expect sales of ReWalk Personal to account for the substantial majority of our revenues in the future. Our principal markets are the United States and Europe. In Europe we have a direct sales operation in Germany and workclinic and/or home settings. For persons with distribution partners in certain other major countries.
We have in the past generated and expect to generate in the future revenues from a combination of third-party payors, self-payors, including private and government employers, and institutions. While a broad uniform policy of coverage and reimbursement by third-party commercial payors currently does not exist in the United States for electronic exoskeleton technologies such as ReWalk, we are pursuing various paths of reimbursement and support fundraising efforts by institutions and clinics. In December 2015, the Veterans’ Administration, or the VA, issued a national policy for the evaluation, training and procurement of ReWalk Personal exoskeleton systems for all qualifying veterans across the United States. The VA policy is the first national coverage policy in the United States for qualifying individuals who have suffered spinal cord injury. As of December 31, 2017, we had placed 17 units as part of the VA policy and continue to work with the VA to accelerate the pace of implementation of this policy. We also support users submitting requests to their commercial insurance companies to pay for the ReWalk Personal device.
Additionally, to date, several private insurers in the United States and Europe have provided reimbursement for ReWalk on a case by case basis.
In 2017 we unveiled our lightweight “soft suit” exoskeleton Restore system designed for an initial indication for stroke patients, and announced our plans to begin clinical studies in the first quarter of 2018 in preparation for the later submission of applications for regulatory clearance. We created the Restore system through our ongoing collaboration with Harvard University’s Wyss Institute for Biologically Inspired Engineering, pursuant to which Harvard licenses to us intellectual property relating to lightweight “soft suit” exoskeleton system technologies for lower limb disabilities, as we develop, introduce and commercialize products under the license. For more information on the Restore system, see “Future Products”. For more information on the collaboration with Harvard, see “Research and Development-Research and Development Collaborations.”
Recent Developments
In early 2018, the National Association of Statutory Health Insurance Funds, the governing body of German statutory health insurance (SHI) listed the ReWalk Personal 6.0 Exoskeleton System in the German Medical Device Directory (the “MDD”), which SHI providers can procure for any approved beneficiary on a case-by-case basis.
Secured worker’s compensation reimbursement in Italy.
Five top rehabilitation centers in the United States. received institutional review board approval for ReWalk’s Restore clinical study in stroke patients, with patient enrollment planned to begin in the first quarter of 2018.
Gross margin increased to 40% in 2017 as compared to 13% in 2016.
On March 6, 2018, we entered into an investment agreement for a private placement of 16,000,000 of our ordinary shares to Timwell Corporation Limited, a Hong Kong entity (“Timwell”), in exchange for total aggregate proceeds of $20 million (at a price of $1.25 per share). Timwell will make the investment in three separate tranches, with the third tranche expected to close by December 31, 2018 and no later than April 1, 2019. In connection with its investment, Timwell will receive board appointment rights. Pursuant to the investment agreement, we also agreed to collaborate with an affiliate of Timwell in forming a joint venture in China for the purposes of assembly, registration, operations, sales and marketing of our products in China (including Hong Kong and Macau) and to grant to the joint venture, in accordance with the terms of an agreed form of license agreement, an exclusive license for certain Company-owned or Company-controlled patent rights marks and a non-exclusive sublicense for certain Company-controlled know-how. The closing of the various tranches is subject to specified closing conditions, including the requisite approval of the transaction by our shareholders under rules of The NASDAQ Stock Market LLC (“Nasdaq”) and Israeli law, the formation of the joint venture with an affiliate of Timwell, the signing of the license agreement and a supply agreementSCI, reduced physical activity and the successful productionpredominance of certain ReWalk products, among others. For more information, see “Part I. Item 1. Business-Timwell Investment Agreement and Related Transactions.”
Overview of Spinal Anatomy and Spinal Cord Injury
Spinal Anatomy
The spine is the central core of the human skeleton and provides structural support, alignment and flexibilityseated activities can lead to the body. It consists of 24 interlocking bones, called vertebrae, which are stacked on top of one another. The spine is comprised of five regions, of which there are three primary regions: cervical, thoracic and lumbar. In addition, there is also the sacral region, or sacrum, a triangular-shaped bone and the coccyx, or “tailbone,” the bottom portion of the spine.
The spinal cord, housed inside the bony spinal column, is a complex bundle of nerves serving as the main pathway for information connecting the brain and nervous system. The spinal cord is divided into 31 segments that feed sensory impulses into the spinal cord, which in turn relays them to the brain. Conversely, motor impulses generated in the brain are relayed by the spinal cord to the spinal nerves, which pass the impulses to muscles and glands. The spinal cord mediates the reflex responses to some sensory impulses directly, without recourse to the brain, for example, when a person’s leg is tapped, producing the knee jerk reflex.
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Spinal Cord Injury | |
Spinal cord injury is the result of a direct trauma to the nerves themselves or damage to the surrounding bones and soft tissues which ultimately impacts the spinal cord. Spinal cord damage results in a loss of function, such as mobility or feeling. In most people who have spinal cord injury, the spinal cord is intact. Spinal cord injury is not the same as back injury, which may result from pinched nerves or ruptured disks. Even when a person sustains a break in a vertebra or vertebrae, there may not be any spinal cord injury if the spinal cord itself is not affected. There are two types of spinal cord injury – complete and incomplete. In a complete injury, a person loses all ability to feel and voluntarily move below the level of the injury. In an incomplete injury, there is some functioning below the level of the injury.
Upon examination, a patient is assigned a level of injury depending on the location of the spinal cord injury. Cervical level injuries cause paralysis or weakness in both arms and legs and is referred to as quadriplegia. Sometimes this type of injury is accompanied by loss of physical sensation, respiratory issues, bowel, bladder, and sexual dysfunction. Thoracic level injuries can cause paralysis or weakness of the legs (paraplegia) along with loss of physical sensation, bowel, bladder, and sexual dysfunction. In most cases, arms and hands are not affected. Lumbar level injuries result in paralysis or weakness of the legs (paraplegia). Loss of physical sensation, bowel, bladder, and sexual dysfunction can occur. The shoulder, arm, and hand functions are usually unaffected. Sacral level injuries primarily cause loss of bowel and bladder function as well as sexual dysfunction.
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| Image of Separated Spinal Cord of an Adult |
Market Opportunity
Confinement to a wheelchair can cause severe physical and psychological deterioration, resulting in bad health, poor quality of life, low self-esteem, and high medical expenses. In addition, the secondary medical consequences of paralysis can include difficulty with bowel and urinary tract function, osteoporosis, loss of lean mass, gain in fat mass, insulin resistance, diabetes, and heart disease. The cost of treating these conditions is substantial. The National Spinal Cord Injury Statistical Center, or the NSCISC estimates that complications related to paraplegia cost approximately $500,000 in the first-year post-injury, excluding indirect costs such as lossesloss in wages, fringe benefits, and productivity, approximately $500,000 in the first year post-injury and significant additional amounts over the course of an individual’s lifetime. Further, secondary complications related to spinal cord injury can reduce life expectancies for spinal cord injury, or SCI patients. The young average age at time of injury and significant remaining life expectancy, the likelihood of living at home, and the lifetime cost of treatment highlight the need for an out-of-hospital solution with demonstrated health and social benefits.
The NSCISC estimates as of 2017according to its 2023 SCI Data Sheet that there were 285,000are 302,000 people in the United States living with spinal cord injury or SCI, with an annual incidence of approximately 17,50018,000 new cases per year. Approximately 44,000According to the VHA data there are approximately 42,000 of such patients who are veterans and are eligible for medical care and other benefits from the VA.VHA, out of which the VHA states that 27,000 veterans are receiving SCI treatment annually. With 24 VA25 VHA spinal cord injury centers designated SCI/D Hub locations, the VAVHA has the largest single network of spinal cord injury care in the United States.
The University of Alabama-Birmingham Department of Physical Medicine and Rehabilitation operates the NSCISC, which maintains the world’s largest database on spinal cord injury research. Since 2010,2015, motor vehicle crashes have been the leading cause of reported spinal cord injury cases (38%), followed by falls (31%(32%), acts of violence (14%(15%) and sports injuries (9%(8%). 81%Approximately 79% of spinal cord injuries occur among the male population. According to NSCISC data, upon hospital discharge, 87% of persons with spinal cord injuries are sent to private, non-institutional residence (in most cases, their homes prior to injury).
Based on information from a 2016the 2022 annual report published by the NSCISC, 40.6%40% of the total U.S. population of SCI patients suffered injuries between levels T4 and L5. ThreeFour published ReWalk trials for SCI patients had an aggregate screening acceptance rate of 79%50% considering all current FDA limitations, resulting in an estimated 33%20% of the total population of SCI patients beingcan be considered as candidates for current ReWalk products.Personal Exoskeleton or ReWalk Rehabilitation Exoskeleton according to the device instructions for use. For important qualifying information about this determination, see “Part I.I, Item 1A. Risk Factors-TheFactors—Risks Related to our Business and our Industry—The market for medical exoskeletons, isincluding soft exo-suit devices, remains relatively new and unproven, and important assumptions about the potential market for our current and future products may be inaccurate.”
Regarding the potential market for the lightweight soft suit exoskeleton, designed to support mobility for individuals suffering from other lower limb disabilities such as stroke and multiple sclerosis, according to American Heart Association, seven million Americans have suffered a stroke, with 795,000 new incidences expected each year. Physical limitations after stroke vary from case to case, but approximately 60% of these individuals will have lower limb disability, which could require them to seek additional assistance in walking.
The Multiple Sclerosis Foundation estimates that more than 400,000 people in the United States and about 2.5 million people around the world have multiple sclerosis. About 10,000 new cases are diagnosed annually in the United States. Research indicates that approximately 75% of patients with multiple sclerosis experience clinically significant walking disturbance, and 89% of patients with moderate Expanded Disability Status Scale (EDSS) scores (4.0-5.5) had walking disability. Individuals with of less than EDSS 4.0 generally do not need a robotic mobility aid, while individuals with EDSS 7.0 are generally restricted to a wheelchair. Multiple sclerosis is a progressive disease, as approximately one-third of multiple sclerosis patients end up with full paralysis while two-thirds remain able to walk, though many will need an aid, such as a cane or crutches, and some will use a scooter or wheelchair due to fatigue, weakness or balance problems, or due to a need to conserve energy.
Our Solutions
Designed for all-day use and worn over the clothes of users, ReWalk consists of a light wearable exoskeleton with integrated motors at the joints, an array of sensors and a backpack or waist pack that contains the batteries and the computer-based control system. The control system utilizes proprietary algorithms to analyze upper-body motions and trigger and maintain gait patterns and other modes of operation (such as stair-climbing and shifting from sitting to standing), leaving the user’s hands free for self-support and other functions. Because the exoskeleton supports its own weight, users do not expend unnecessary energy while walking. Safety measures include crutches, which provide additional stability, fall protection, which lowers users slowly and safely in the event of a malfunction, and the secure “stand” mode, which automatically initiates if the user does not begin walking within two seconds. ReWalk is also equipped with maintenance alarms, warnings and backup batteries. The rechargeable batteries are easily accessible and can be recharged in any standard power outlet. Upon completion of training, which generally consists of approximately 15 one-hour sessions, most users are able to put on and remove the device by themselves while sitting, typically in less than 15 minutes.
As discussed above, current ReWalk designs are intended for people with paraplegia who have the use of their upper bodies and arms. We currently offer two ReWalk products: ReWalk Personal and ReWalk Rehabilitation. For a breakdown of our revenues from sales of each of ReWalk Personal and ReWalk Rehabilitation, see “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations."
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| | ReWalk Personal 6.0 |
• ReWalk Personal: intended for everyday use at home, at work or in the community. We began marketing ReWalk Personal in Europe with CE mark clearance at the end of 2012. We received FDA clearance to market ReWalk Personal in the United States in June 2014. ReWalk Personal units are all manufactured according to the same mechanical specifications. Each unit is then permanently sized to fit the individual user and the software is configured for the user’s specifications by the rehabilitation center, clinic or distributor.
• ReWalk Rehabilitation: designed for the clinical rehabilitation environment, ReWalk Rehabilitation has adjustable sizing enabling multiple patient use. ReWalk Rehabilitation provides a valuable means of exercise and therapy. It also enables individuals to evaluate their capacity for using ReWalk Personal in the future. We began marketing ReWalk Rehabilitation for use in hospitals, rehabilitation centers and stand-alone training centers in the United States and Europe in 2011. ReWalk Rehabilitation units are all manufactured according to the same mechanical specifications and are equipped with adjustable sizing for multi-patient use and, software which can be configured for the user’s specifications.
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Our experience working with health care practitioners and ReWalk users, including reports by study participants, as well as recently released clinical data suggest that ReWalk has the potential to provide secondary health benefits. These benefits include reducing pain and spasticity and improving bowel and urinary tract function, body and bone composition, metabolism and physical fitness, as well as reducing hospitalizations and dependence on medications. Because of these secondary medical benefits, we believe that ReWalk has the ability to reduce the lifetime healthcare costs of individuals with spinal cord injuries, making it economically attractive for individuals, healthcare providers such as hospitals and rehabilitation centers, and third-party payors.
We anticipate that the next generation of ReWalk will be a structural exoskeleton similar to our existing ReWalk devices, with a range of improvements including additional functionality, more efficient drive mechanism, slimmer profile and lighter body, as well as other improvements.
Future Products
In June 2017, we unveiled the Restore, and in October 2017, we announced the start of pre-clinical testing on the system to study its safety and use in the rehabilitation setting for the mobility needs of stroke patients. We created the Restore system through our ongoing collaboration with Harvard University’s Wyss Institute for Biologically Inspired Engineering. A prospective clinical trial with the Restore system is targeted to begin in the first quarter of 2018, and we aim to commercialize the system for use by stroke patients in Europe and the United States in the first half of 2019, subject to the timing and receipt of CE mark and FDA clearance, respectively. We have not yet applied for these clearances and intend to apply by the third quarter of 2018. Obtaining clearance could involve an extensive and time-consuming process and delay commercialization beyond our planned timetable, and we cannot make any assurances regarding the ultimate timing of FDA or CE mark clearance or commercialization of the products. For more information on the clearance processes, see “Part I, Item 1. Business—Government Regulation”.
The Restore transmits power to key joints of the legs with motor-driven cable technologies, applying software and mechanics similar to the technologies employed in the currently-marketed ReWalk structural exoskeleton systems. The system is designed to allow a user’s unimpaired leg to adjust and assist the leg with mobility impairments affected by stroke. The exoskeletal suit consists of a lightweight fabric-based structure that wraps around the waist and supports an actuator with a motor, computer and cable, along with sensors attached to a stable point on the user’s calf and footplate in the user’s shoe. This design transfers force in a controlled manner, enabling both powered plantarflexion, or bending to decrease the angle between the sole of the foot and the back of the leg, and powered dorsiflexion, or bending to decrease the angle between the upper surface of the foot and the front of the leg. We believe that the Restore system’s soft, lightweight material will facilitate a natural walking pattern for patients using the device, and provide advantages to stroke rehabilitation clinics as compared with other traditional therapies and devices, by minimizing setup time, maximizing session productivity and reducing staffing requirements, staff fatigue and the risk for potential staff injuries. The prospective clinical trial on the Restore system, targeted for the first quarter of 2018, is intended to assess the safety of the Restore system during gait training in stroke patients in a rehabilitation setting. Based on the proposed study design, we anticipate that the study will involve 40 patients each partaking in seven training sessions at five designated stroke research centers, with first patient enrollments occurring in the first quarter of 2018.
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| | ReWalk Restore |
• ReWalk Restore : This soft suit exoskeleton is aimed for individuals who have suffered a stroke. We intend to commercialize use of the Restore system by stroke patients in Europe and the United States after receiving CE mark and FDA clearance, respectively, to market the device. In the long term, we also intend to develop and commercialize this lightweight soft suit exoskeleton for individuals suffering from other lower limb disabilities such as multiple sclerosis, cerebral palsy, Parkinson's disease and elderly assistance.Third-Party Reimbursements
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Third-Party Reimbursements
United States
In the United States rehabilitation centers generallyU.S., individuals typically obtain a ReWalk Personal Exoskeleton for home use through third-party medical coverage. For an individual who suffered an SCI through a work-related incident, workers’ compensation insurance can be a source of funding to purchase the ReWalk Rehabilitation unit and then charge patientsdevice. Similarly, for ReWalk therapy on a per-session basis. These institutionsU.S. veterans, an individual may then seek reimbursement from insurance companiesbe covered by the VHA for each session.the purchase of the device regardless of whether the SCI occurred during active military service.
In December 2015,2014, the VAVHA issued a national policy or standard operating procedure (“SOP”) for the evaluation, training, and procurement of ReWalk Personal exoskeletonExoskeleton systems for all qualifying veterans across the United States.States and U.S. Territories. The VA policyVHA SOP is the first national coverage policy in the United States for qualifying individuals who have sufferedare living with spinal cord injury. In June 2018, the VHA updated the SOP, in part, to expand training options for individuals who could not complete the mandatory training due to excessive distance/drive times from a VHA-designated site. As of December 31, 2023, we had placed 42 units as part of the VHA policy. The VHA accounted for 12% of our total revenue for the year ended December 31, 2023.
We continue to work with the VHA to both accelerate the pace of implementation of the current VHA policy nationally, and to again expand opportunities for veterans to gain access to assessments, training, and devices in facilities outside VHA’s traditional spinal cord injury “hub and spoke” infrastructure. Community-based, non-VHA clinics are also being leveraged to allow veterans to be trained closer to their homes, while still being reimbursed by the VHA as part of the VHA’s Community Care Network program.
Successful commercialization depends in significant part on adequate coverage and reimbursement from third party payors, which may include government payors (such as Medicare and Medicaid programs in the United States), managed care organizations, and private health insurers. In general, each third-party payor decides which devices will be covered and reimbursed, establishes reimbursement and co-pay levels and sets conditions for coverage and reimbursement.
While no broad uniform policy of coverage and reimbursement for electronic exoskeleton medical technology exists among commercial insurance payors in the United States, reimbursement may be achievedevaluated by the payor on a case-by-case basis. To date, payments for the ReWalk Personal deviceExoskeleton have been made primarily through case-by-case determinations by third-party payors, including commercial insurers in the United States, by self-payors and donations and, to a lesser extent, through the use of funds from insurance and/or accident settlements.
Generally, commercial insurance companies do not currently cover or provide broad reimbursement policies for any personal medical exoskeleton products, including ReWalk Personal, and coverage determinations are limited to case-by-case decisions.
As of December 31, 2017,2023, we had 8121 cases pending in the United States for private insurance and CMS coverage decisions.
According to the NSCISC 2022 annual report, approximately 57% of the spinal cord injury population received primary coverage from Medicare and Medicaid within five years after their injury date, with Medicare representing the larger primary payor.
In order to be covered and reimbursed by Medicare, the ReWalk Personal Exoskeleton must, among other things, be classified into an applicable Medicare benefit category. In addition, appropriate codes describing the technology must also be established to facilitate billing and claims processing.
In December 2019, we submitted the first application for a unique code to describe the ReWalk Personal Exoseleton and, in July 2020, a unique code was issued for ReWalk Personal Exoskeleton. On November 1, 2023, CMS released the Final Rule, which was adopted through the notice and comment rulemaking process. The Final Rule includes a policy confirming that personal exoskeletons are included in the Medicare brace benefit category Medicare personal exoskeleton claims with dates of service on or after January 1, 2024 that are billed using HCPCS code K1007 will be assigned to the brace benefit category. CMS reimburses items classified under the brace benefit category using a lump sum payment methodology.
On November 29, 2023, CMS included the “ReWalk Personal Prosthetic Exoskeleton System” in the HCPCS public meeting, where the agency had proposed a preliminary payment determination of $94,617 for HCPCS code K1007. The preliminary payment determination was made by CMS by applying a “gap filling” process, which was used in light of CMS determining that the code describing the technology has no fee schedule pricing history and that lower extremity exoskeletons incorporate “revolutionary features” that cannot be described by or considered comparable to any other existing code or combination of codes. As part of gap-filling, CMS stated that it relied on information about average prices from 2020 market transactions for which CMS had data. In the agenda describing the preliminary payment determination, CMS noted that it would welcome information on updated verifiable market transactions. We participated in the HCPCS meeting process to provide additional information to help ensure that the final payment determination accurately reflects current pricing information related to the market of lower-limb exoskeleton devices, including the current ReWalk Personal Exoskeleton. A final Medicare payment determination is expected from CMS in first quarter of 2024 with an April 1, 2024, effective date.
For more information about coverage and reimbursement risk factors, see “Part I.I, Item 1A. Risk Factors-RisksFactors—Risks Related to Ourour Business and Our Industry-We may fail to secure or maintain adequate insurance coverage or reimbursement for ReWalk by third-party payors….our Industry.”
As part of our plan for growth, we intend to continue working with both national and regional commercial insurance companies, health care practitioners, physicians, researchers, and the SCI community to support efforts to demonstrate the benefits and the caseof our SCI Products. In addition, we plan to securepursue potential coverage policies with third party payors based on supportive data and appeal rulings that have deemed exoskeleton devices a “medically necessary” under the standard of care for individuals with SCI. As part of this ongoing initiative, during 2017 we submitted a proposal to a large U.S. national insurance provider for a broader coverage policy for the ReWalk Personal device. While we believe there was support for a change, the insurer was unable to reach internal consensus and therefore elected not change its existing non-coverage policy. We will continue to work with this insurer and others on coverage policies. We have already submitted data to three additional U.S. commercial insurance groups for policy review and, ourOur efforts in the future will be focused on submitting applicationscontinued education of third-party payors through data application, supporting clinical trials to a substantial numberdemonstrate the clinical benefits of nationalusing the SCI Products, working with advocacy groups, ongoing communication as well continuing to seek greater clarity regarding Medicare coverage and regional insurance providers and workers' compensation groups for policy review.reimbursement standards applicable to the ReWalk Personal Exoskeleton.
In the future, we will pursue coverage through the Centers for Medicare and Medicaid Services, or CMS. While we believe that a positive response from CMS may broaden coverage by private insurers, we cannot currently predict how long it would take for us to receive a decision from CMS, but we believe that other sources of payment will be sufficient to support our business.For more information, see “Part I. Item 1A. Risk Factors-Risks Related to Our Business and Our Industry-We may fail to secure or maintain adequate insurance coverage or reimbursement for ReWalk by third-party payors…”
Western Europe
Reimbursement for ReWalk in Europe varies by country and historically certain third-party payors have provided reimbursement for our products in certain cases in Germany and Italy.
We initially focused our European efforts in Europe in Germany where we continue to make progress toward achieving ReWalk coverage from the various government, private, and worker'sworkers’ compensation payers.payors. Specifically:
• In September 2017, Barmer confirmed it will provide ReWalk systems to all qualifying beneficiaries. Barmer provides insurance coverage for nearly ten million people in Germany, as a member of the German Statutory Health Insurance network and one of the most significant national insurers in the country. Exoskeletons will be provided to users that meet certain inclusion criteria and assessment by the German Health Insurance Medical Service (Medizinischer Dienst der Krankenversicherungen) before and after training. Barmer has already begun processing claims with users entering training for in-home use of an exoskeleton.
| ● | In September 2017, the German insurer BARMER confirmed it will provide ReWalk systems to all qualifying beneficiaries. BARMER provides coverage for nearly nine million people in Germany, as a member of the SHI network and one of the most significant national insurers in the country. Exoskeletons are provided to users that meet certain inclusion criteria and assessment by the German Health Insurance Medical Service (Medizinischer Dienst der Krankenversicherungen) before and after training. We remain in discussion with BARMER regarding a contract based on their 2017 decision. |
| ● | In September 2017 Germany’s national social accident insurance provider, DGUV, indicated that the DGUV’s member payors, including the health insurance association Berufsgenossenschaft (also known as BG) and state insurers, will approve the supply of exoskeleton systems for qualifying beneficiaries on a case-by-case basis. DGUV is comprised of 36 different insurers, which provide coverage for more than 80 million individuals in Germany. Per the agreement, eligible individuals go to BG clinics for evaluation as a part of the procurement. In May 2020 the DGUV agreed to a binding offer to the evaluation, training, and supply of the ReWalk Personal Exoskeleton to qualified individuals. |
| ● | In February 2018, the GKV-Spitzenverband (Central Federal Association of (the) Statutory Health Insurance Funds) confirmed its decision to list the ReWalk Personal Exoskeleton system in the German MDD, a comprehensive list of all medical devices which are principally and regularly reimbursed by German SHI and PHI providers. The ReWalk Personal was added to the official German list of medical aids, code number 23.29.01.2001, in June 2018. This decision means that ReWalk Personal Exoskeleton is listed among all medical devices for compensation, which SHI providers can procure for any approved beneficiary on a case-by-case basis. |
| ● | During the year 2020 we announced several new agreements with SHIs such as TK and DAK-Gesundheit and others as well as the first PHI that chose to enter into an agreement with us that outline the process to obtaining a device for eligible insured patients. |
| ● | In March 2021 we entered into a contract with BKK Mobile Oil health insurance to supply ReWalk’s Personal Exoskeleton to eligible persons in Germany. |
| ● | In June 2020, BARMER appealed the decision of the State Social Court, which ordered the supply of the SHI’s insured SCI person with ReWalk. The State Social Court ruled and deemed ReWalk as the medical aid which will directly compensate the plaintiff’s disability. BARMER initially appealed this ruling with the Federal Social Court (Bundessozialgericht), but later, in November 2022, withdrew its pending case and accepted the prior ruling from the state court that exoskeletons are considered as a direct disability compensation. This outcome means that an eligible insured person with spinal cord injury (SCI) in Germany has a legal basis for the supply of an exoskeleton as an orthopedic aid for direct disability compensation. Patients in Germany who are covered under these contracts and policies must be medically evaluated for their eligibility to use the ReWalk Personal Exoskeleton device. If medically qualified, the patient, along with his or her physician, must apply for coverage of the device. If a patient is found eligible and medically fit to use our ReWalk Personal Exoskeleton device, we first enter into a rental agreement which allows the patient the necessary period to train on how to use the device which usually takes between 3 to 6 months and then after approval from the insurer the patient receives a personal device to use at home or in the community. We are currently working with several additional SHIs and PHIs on securing a formal operating contract that will establish the process of obtaining a ReWalk Personal Exoskeleton for their beneficiaries within their system. |
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• In September 2017 Germany’s national social accident insurance provider, DGUV, signed a confirmation letter with ReWalk, stipulating that the DGUV's member payers, including the health insurance association Berufsgenossenschaft (also known as BG) and state insurers, will approve the supply of exoskeleton systems for qualifying beneficiaries on a case-by-case basis. DGUV is comprised of 35 different insurers, which provide coverage for more than 70 million individuals in Germany. Per the agreement, eligible individuals will go to BG clinics for evaluation as a part of the procurement.
• In February 2018 the GKV, confirmed its decision to list the ReWalk Personal system in the German MDD, The MDD is a comprehensive list of all medical devices which are principally and regularly reimbursed by German social health insurance (“SHI”) providers. This decision means that ReWalk Personal will be listed among all medical devices for compensation, which SHI providers can procure for any approved beneficiary on a case-by-case basis.
Patients who are covered under these policies must be medically evaluated for their eligibility to use the ReWalk Personal device. If medically qualified, the patient, along with his or her physician, must apply for coverage of the device. We expect that these payers will establish processes for patients to be evaluated, trained and procure a ReWalk Personal device over the coming months, making the process to receive a device more routine for a qualifying individual. Patients who are not covered under Barmer's or the BG's policies stated above must apply for coverage to use ReWalk. If such patient is denied, then such patient must appeal the decision in court, relying on supporting documentation from a health care provider and other medical evidence. As of December 31, 2017,2023, there were 14149 insurance cases pending in Germany, including 40 insurance cases pending with Barmer and the BG.Germany. We believe that our recent coverage decisions and the existing claims will eventually lead other German insurers to provide coverage on a broad scale.broader scale, but this is not guaranteed. For more information, see “Part I, Item 1A. Risk Factors-WeFactors—Risks Related to our Business and our Industry— We may fail to secure or maintain adequate insurance coverage or reimbursement for ReWalkour products by third-party payors including the VA, which risk may be heightened if insurers find ReWalkthe products to be investigational or experimental or if new government regulations change existing reimbursement policies. Additionally, such coverage or reimbursement, even if maintained, may not produce revenue that is high enough to allow us to sell our products profitably.”
We continue to support clinical research and academic publications, which we believe will further support the case for coverage.
We arehave distribution agreements in several European countries where we also pursuinghad success with reimbursement by private insurers and worker’s compensationcompensation. One of the examples was achieved in various European countries.March 2018, when the Italian Ministry of Labor and Social Policy’s statutory insurance corporation put in place a coverage policy that will provide exoskeleton systems for all qualifying beneficiaries. This policy, the first of its kind in Italy, provides individuals with spinal cord injury access to obtain their own ReWalk Personal Exoskeleton device so that they can stand and walk again. Since the initiation of coverage, we have supplied 10 units through our Italian distributor to individuals covered by this policy.
Other Funding Sources
In addition to being funded by third-party payors, including private insurance plans, government programs such as the VA,VHA, and Worker's Compensation,workers’ compensation plans, ReWalk Personal Exoskeleton is also funded by self-payers.self-payors. This includes individuals who purchase ReWalk with funds from legal settlements with insurance companies or third parties.
AlterG Anti-Gravity System
The DAP technology that underpins our AlterG Anti-Gravity systems was originally developed by researchers at the NASA Moffet Field Research Center to help astronauts maintain their muscle strength and Developmentbone density during extended periods in space outside of the effects of earth’s gravity. The DAP technology was used to create a pressurized bubble that could exert pressure on an astronaut while exercising to simulate the impact of gravity. While the technology ultimately was never implemented by NASA, it also had promise for use on earth.
We are committed
The DAP technology was modified by the founders of AlterG, Inc. for the opposite purpose of using the buoyancy of a pressurized air chamber to investinguniformly reduce gravitational load and body weight. With subsequent product development, the initial AlterG Anti-Gravity system design was supplemented with other complementary features. Our current models utilize a precise air calibration system which modulates the air pressure supporting the user 100 times a second to ensure precise and consistent weight displacement that allows for modification of the pressurized support in one-percent increments of each user’s weight. Additionally, the AlterG systems can be fitted with cameras for live video monitoring and pressure sensors that track the user’s gait pattern.
Our proprietary Stride Smart software can provide real-time data and analytics so that the user can watch and self-correct gate abnormalities. Clinicians also can simultaneously read and respond to five gait assessment key performance indicators (“KPIs”). The five KPIs include:
| ● | weight-bearing symmetry; |
| ● | cadence (stepping frequency); and |
The Stride Smart software provides clinicians with clear, objective data with which to assess, adjust, and modify a robust researchpatient’s rehabilitation progress. Since Stride Smart collects and development programpresents patient gait data automatically, clinicians can focus their efforts rehabbing the patient and selecting the data most useful to enhance our current ReWalk productstheir gait analysis and to develop our pipelinecorrection recommendations.
Based on usage patterns and feedback of new and complementary products, andclinicians, we believe that ongoing researchthe AlterG Anti-Gravity system provides a versatile tool for the rehabilitation of lower extremity injuries and development efforts are essentialconditions. By treating a broad range of conditions and facilitating faster recovery times, the AlterG Anti-Gravity system enables rehabilitation clinics the opportunity to our success. Our researchgain more referrals, increase the throughput of the facility, and development team consistsimprove the productivity of both in-house and external staff, including engineers, machinists, researchers, marketing, quality, manufacturing, regulatory and clinical personnel, who work closely together to design, enhance and validate our technologies. This research and development team conceptualizes technologies and then builds and tests prototypes before refining and/or redesigning as necessary. Our regulatory and clinical personnel work in parallel with engineers and researchers, allowing us to anticipate and resolve potential issues at early stages in the development cycle.staff.
We plan to focus our research and development efforts in the future by continually improving and expanding our functional technological platform, specifically, in the shorter term, by developing a lightweight “soft suit” exoskeleton device that will assist patients who had stroke or multiple sclerosis, and in the longer term by developing our next generation of ReWalk with design improvements, and building upon our technological platform to address new medical indications that affect the ability to walk including cerebral palsy, Parkinson’s disease and elderly assistance.
We conduct our research and development efforts at our facility in Yokneam, Israel. We believe that the close interaction among our research and development, marketing and manufacturing groups allows for timely and effective realization of our new product concepts.7
Our researchWe offer a range of AlterG Anti-Gravity systems depending on the needs and development efforts have been financed,budget of each customer as follows:
FIT – This is the entry-level and most affordable model of anti-gravity system. In addition to the standard DAP technology, the FIT also includes live video monitoring. The treadmill is equipped to run at up to 12 miles per hour (“mph”) in part, through funding fromforward and 3 mph in reverse with a maximum incline of 15 degrees;
VIA – The mid-range model has the Israel Innovation Authority, or the IIA (formerly known as Officefeatures of the Chief ScientistFIT, plus the inclusion of the Stride Smart analytics and the AlterG Assistant; and
PRO – The PRO is our top-of-the-line model for sports medicine applications with utilization by professional and collegiate athletes. The PRO includes all the features of the VIA, plus several additional features that add durability and accommodate elite user performance. The treadmill is a high-performance slat belt design equipped to run at up to 18 m.p.h in forward and 10 m.p.h in reverse.
In addition to sales of the Israel MinistryAlterG Anti-Gravity systems, we also provide consumables and services that support the utilization of Economy), and from the BIRD Foundation. From our inception through December 31, 2017, we received funding totaling $1.77 million frominstalled base. For example, the IIA and $500 thousand fromAlterG systems require the BIRD Foundation. Our research and development expenses, net were approximately $6.0 million, $9.0 million and $5.9 million forusers to wear proprietary shorts that zip the fiscal years ended December 31, 2017, December 31, 2016 and December 31, 2015, respectively. For more information regarding our research and development financing arrangements and expenses, see “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Components of Our Statements of Operations - Operating Expenses," "—Liquidity and Capital Resources” and “—Grants and Other Funding.”
Research and Development Collaborations
On May 16, 2016, we entereduser into the Research Collaboration Agreement, or Collaboration Agreement,air chamber to create the seal to retain the air that pressurizes the chamber. With frequent use, these shorts need to be periodically replaced. Additionally, we maintain a network of approximately 40 contract service engineers who perform the installation, maintenance, and repair work. As the Exclusive License Agreement12-month assurance warranties expire, we market extended service contracts which can provide a recurring revenue base that can grow with Harvard, or Harvard License Agreement. Under the Collaboration Agreement, we and Harvard agreed to collaborate on research regarding the development of lightweight soft suit exoskeleton system technologies for lower limb disabilities, which are intended to treat stroke, multiple sclerosis, mobility limitations for the elderly and other medical applications. Under the Collaboration Agreement, we must pay Harvard quarterly installment payments to help fund the research. Subject to the termssize of the Collaboration Agreement, we and Harvard are required to report our respective research results and findings to each other on a regular basis. The Collaboration Agreement governs ownership of the research results and inventions generated in performance of the research collaboration, and provides us the option to negotiate with Harvard for a license to certain new inventions of Harvard conceived in performance of the collaboration.installed base.
The Collaboration Agreement will expirepotential market for AlterG Anti-Gravity systems is large and fragmented with several types of facilities that treat patients with conditions who could benefit from rehabilitation using partial weight displacement. According to the MedPAC 2021 Report, there are approximately 1,150 inpatient rehabilitation facilities in the U.S. These facilities treat patients with a range of conditions including stroke, lower extremity fractures, joint replacements, neurological conditions and brain injury, cardiac conditions, and other types of orthopaedic conditions. Depending on May 16, 2021. Subjectthe specific details of each case, many of these patients are candidates for therapy using partial weight displacement. Globally, we estimate that there are approximately 3,500 inpatient rehabilitation facilities that are comparable in budget and quality of care to payment of a minimum funding commitment under applicable circumstances, we may terminatethose in the agreement if there is a loss of Harvard’s principal investigator or if we do not believe that we have or can secure sufficient funding to proceed. The Collaboration Agreement may also be terminated by either Harvard or us due to a material uncured breach by the other party or upon termination of the Harvard License Agreement.U.S.
Under the Harvard License Agreement, we are granted an exclusive, worldwide royalty-bearing license under certain patents of Harvard relating to lightweight “soft suit” exoskeleton system technologies for lower limb disabilities, a royalty-free license under certain related know-how and the option to obtain a license under certain inventions conceived under our joint research collaboration. Harvard retains the right to practice the patents for research, educational and scholarly purposes. We are required to use commercially reasonable efforts to develop products under the license in accordance with an agreed-upon development plan and to introduce and market such products commercially. In addition to an upfront fee and royalties on net sales, we are obligated to pay Harvard certain milestone payments upon the achievement of certain product development and commercialization milestones. We also agreed to reimburse Harvard for expenses incurred in connection with the filing, prosecution and maintenance of the licensed patents.
The Harvard License Agreement will continue in full force and effect untillargest potential market for the expiration of the last-to-expire valid claim of the licensed patents. We may terminate License the Agreement for any reason upon 60 days’ prior written notice, while Harvard may terminate the Agreement if we do not obtain requisite insurance, becomes insolvent or fail to meet certain development milestones. The Harvard License Agreement may also be terminated by Harvard or us due to the other party’s material uncured breach.
The Collaboration Agreement and Harvard License Agreement contain, as applicable, customary representations and warranties and customary enforcement, indemnification and insurance provisions. For further discussion of the Collaboration Agreement and Harvard License Agreement, see Note 9 to our consolidated financial statements in “Part II. Item 8. Financial Statements and Supplementary Date.”
In September 2013, we entered into a strategic alliance with Yaskawa Electric Corporation (“Yaskawa”), pursuant to which, among other arrangements, Yaskawa can apply its expertise in product and quality improvements to ReWalk and assist in marketing, distributing and commercializing on an exclusive basis our products in Japan, China and other East Asian countries. Yaskawa is a global leader in the fields of industrial robotics and automation. While we have not engaged in joint initiatives with Yaskawa to date, we believe that this relationship may provide us with opportunities for product improvement and increased product offerings in the future. In connection with the closing of the first tranche of the private placement of our ordinary shares to Timwell, weAlterG Anti-Gravity are required to amend our exclusive distribution agreement with Yaskawa to terminate the distribution rights granted to Yaskawa in China (including Hong Kong and Macau). For more information on the Timwell private placement, see “Part I. Item 1. 1. Business-Timwell Investment Agreement and Related Transactions,” and for more information regarding our relationship with Yaskawa generally, see “—Sales and Marketing” and “Part III. Item 13. Certain Relationships and Related Transactions, and Director Independence.”
Clinical Studies
Multiple clinical studies,outpatient clinics, some of which are published in peer-reviewed journals, have been carried outnational and regional affiliations and most of which are independent facilities. According to establish the effectivenessIBIS World website (which tracks the number of physical therapy rehabilitation centers), there are approximately 44,000 outpatient clinics in the U.S. These facilities treat patients with less severe conditions than inpatient facilities with a greater mix of patients skewed towards lower extremity fractures, joint replacements, and benefitsother types of ReWalk for individuals with spinal cord injuries. Certainorthopedic conditions. Globally, we estimate that there are over 100,000 outpatient clinics based on scaling of population and standard of living that there are over 100,000 outpatient clinics. One other major segment of the benefits tested include:market for AlterG systems consists of professional and elite level sports teams, including major university and college sports programs. These teams use the AlterG Anti-Gravity system to assist their players in maintaining higher levels of fitness and accelerating the recovery time from sports-related injuries. Based on our internal estimates of the market, we believe that there are approximately 1,400 sports programs in the U.S. who are potential AlterG customers. Globally, we estimate this figure to be greater than 4,000 teams.
reduced pain;
ReStore Exo-Suit In June 2017 we unveiled our lightweight exo-suit ReStore system designed initially for rehabilitation of stroke patients. The patented soft exo-suit technology was originally developed at Harvard University’s Wyss Institute for Biologically Inspired Engineering (“Harvard”), where it also underwent initial clinical testing that demonstrated potential to improve walking for stroke survivors. ReWalk and Harvard entered into a multi-year research collaboration agreement in 2016 which provides ReWalk license to intellectual property relating to lightweight exo-suit system technologies for lower limb disabilities and provides access to future innovations that emerge from this collaboration and may be relevant to additional stroke products or other therapies. The development and regulatory clearance process for ReStore took us approximately three years. We received FDA clearance for ReStore in June 2019 and CE clearance in May 2019. Following the regulatory clearances, we began to commercialize the ReStore product. For more information on the collaboration with Harvard, see “Research and Development-Research and Development Collaborations.” | | ReStore Exo-Suit |
The ReStore product consists of a soft, fabric-based design that connects to a lightweight waist pack and mechanical cables that help lift the patient’s affected leg in synchronized timing with their natural walking pattern. The lightweight structure wraps around the waist and supports an actuator with a motor, computer, and cable, along with sensors attached to a stable point on the user’s calf and footplate in the user’s shoe. This design provides targeted mechanical assistance to the patient’s ankle during forward propulsion (plantarflexion) and ground clearance (dorsiflexion), two key phases of the gait cycle. The ReStore system is designed to provide advantages to stroke rehabilitation clinics and therapists as compared to other traditional therapies and devices by enabling the therapist to specifically target and train for improved bowelpropulsion symmetry, which is a key contributor to improved walking speed and urinary tract function;efficiency for patients recovering from stroke.
reduced spasticity;
increasesPublished clinical trials using the soft exo-suit design on stroke patients have shown varying levels of improvements, with the main ones being improved walking speed, improved propulsion symmetry, reductions in joint rangecompensatory behaviors including paretic hip hiking and circumduction as well as reduction in metabolic burden associated with post stroke walking. There are additional studies on-going with the ReStore device that examine the improvement in walking speed following training with the soft exo-suit as well as comparing the results of motiontraditional training with soft exo-suit training.
The main market for ReStore is rehabilitation clinics with a stroke therapy program or clinics that would like to broaden their stroke presence. This product is marketed and sold directly to rehabilitation clinics for use during the hiptreatment of their patients which is generally reimbursed by commercial and ankle joints;
improved sleepgovernment payors. During the second half of 2019 we expanded our sales and reduced fatigue;
increasemarketing presence in oxygen uptakethe United States to accelerate product penetration after receiving FDA and heart rateCE clearance. These efforts were adversely impacted by the COVID-19 pandemic, as clinics and hospitals shifted resources and attention during the pandemic. During 2023, new research has been published on the clinical efficacy using ReStore in stroke rehabilitation and we see this technology as a result of walking as opposed to sitting and standing;
ability to ambulate at a speed greater than 0.4 meters per second, whichbuilding block for future portfolio development. Geographically, the ReStore system is considered to be conducive to outdoor related community ambulation; and
reduced hospitalizations.
Although study participants and other ReWalk users have reported the secondary health benefits listed above, currently there is no conclusive clinical data establishing any secondary health benefits of ReWalk.
Community Engagement and Education
We devote significant resources to engagement with and education of the spinal cord injury community with respect to the benefits of ReWalk. We actively seek opportunities to partner with hospitals, rehabilitation centers and key opinion leaders to engagecommercially available through our direct sales teams in research and development and clinical activities. We also seek to support educational and charitable organizations with fundraising and outreach programs. We believe that our success has been, and will continue to be driven in part by, our reputation and acceptance within the spinal cord injury community.
Sales and Marketing
We market and sell our products directly to third party payers, institutions, including rehabilitation centers, individuals and through third-party distributors. We sell our products directly in Germany and the United States and primarily through distributorsGermany.
Stroke incidence rate in our other markets. In our direct markets,the United States is approximately 800,000 incidences per year and the survival rate is approximately 80%. Of this stroke population, 80% are left with some type of lower limb disability. This patient population seeks treatment in one of the approximately 1,600 primary and comprehensive inpatient, outpatient, and rehabilitation clinics providing therapy to stroke patients. With the clinical evidence we have established relationshipsto date on ReStore, its unique design and its cost-effectiveness compared to other products, we believe the ReStore soft exosuit has an opportunity to be adopted by clinics for use in therapy of their stroke patients. However, we also recognize that the process to achieve that might be long and will likely only occur once national or regional healthcare providers include the device within their stroke therapy programs. We also believe that to accelerate adoption, further clinical evidence is required as well as continued education on the new ReStore design and its unique advantages compared to current therapies and products.
As of December 31, 2023, and December 31, 2022, we had placed 42 and 33 ReStore units, respectively.
ReBoot Product
We are also in the research stage of ReBoot, a soft exoskeleton for stroke home and community use, and are currently evaluating the reimbursement landscape and the potential clinical impact of this device. This product would be a complementary product to ReStore, and it received Breakthrough Device Designation from the FDA in November 2021. The ReBoot is a lightweight, battery-powered exo-suit intended to assist ambulatory functions in individuals with reduced ankle function related to neurological injuries, such as stroke. The ReBoot is a customizable personalized device intended for home and community use with an estimated market of approximately 400,000 annual stroke patients who require walking assistance after being discharged home. Further investment in the development path of the ReBoot was paused in 2023 pending further determination about the clinical and commercial opportunity of this device.
Sales and Marketing Activities
With added resources from the AlterG acquisition, we have created a U.S. commercial team that we believe has the capacity and capabilities to support a broad range of physical and neurological rehabilitation products for use in facilities, the home and the community. As part of this integration, we have rebranded our company under the name Lifeward, to emphasize our commitment to pioneering a portfolio of innovative technologies to empower the pursuit of life’s ambitions in the face of physical limitation or disability. For the sake of clarity, we will continue to use the ReWalk name to designate our line of Exoskeleton products and the AlterG name to describe our line of anti-gravity systems.
In the U.S., our commercial efforts are direct sales focused generally on rehabilitation centers, hospitals, rehabilitation clinics, and similar facilities that treat patients who could benefit from offerings within our portfolio of products. We market our facility-based products, such as the AlterG and the spinal cord injury community, andMyoCycle Pro to these institutions for their use in providing care to their patients. We also market our indirect markets, our distributors maintain these relationships. Sales ofhome-based products, such as the ReWalk Personal Exoskeleton or MyoCycle Home, to physicians and physical therapists for referrals to individuals who could benefit from these devices as part of a home-based activity regimen that elevates the health and wellness of these individuals. Additionally, some sales of the ReWalk Personal Exoskeleton or MyoCycle Home are also generated primarily from the patient base at our rehabilitation centers, referrals through the spinal cord injury community and direct inquiries from potential users. The VA accounted for 35.2%users through our different marketing efforts. Beyond healthcare facilities, we also market our AlterG systems to professional and 33.3%college sports teams who use the systems to help their athletes recover from lower extremity sports injuries.
Outside the U.S., our distribution varies depending on the product and the geographic market. We market our ReWalk Personal Exoskeleton product directly in Germany and primarily through third-party distributors, who maintain the customer relationships, in our other markets. We market our AlterG systems directly in Canada and Australia, and in other territories utilize a network of our total revenues for the years endedover 40 third-party distributors who generally have exclusivity in their respective geographic territories.
As of December 31, 20172023, we had placed 131 ReWalk Rehabilitation Exoskeleton units in use at rehabilitation centers and 2016, respectively.598 ReWalk Personal Exoskeleton units in a home or community use, compared to 128 ReWalk Rehabilitation Exoskeleton units and 572 ReWalk Personal Exoskeleton units as of December 31, 2022. We estimate the installed base of AlterG systems is over 6,000 installed units worldwide as of December 31, 2023. With the anticipated finalization of the Medicare payment rates for exoskeletons which will be effective April 1, 2024, we intend to aggressively target the eligible Medicare customer base for growth while also continuing to focus on expanding commercial and other reimbursement coverage. Additionally, with our increased direct sales resources and distributor network, we also expect to greater penetrate the base of facilities which could utilize AlterG systems for rehabilitation of their patients.
We have established centers of operations in Marlborough, Massachusetts, Berlin, Germany and Yokneam, Israel, to manage sales in North America, Europe, and the rest of world, respectively.10
Services and Customer Support
Our centers of operations in Marlborough, Massachusetts and Berlin, Germany coordinate all customer support and product service functions for North America and Europe, respectively, through dedicated technical service personnel who provide product services and customer support through training to healthcare providers and support to product users.
Competition
The market in which we operate is characterized by active competition and rapid technological change, and we expect competition to increase. Competition arises from providers of other mobility systems and prosthetic devices.devices used in the clinic and/or home settings.
We are aware of a number ofseveral other companies developing competing technology and devices, and some of these competitors may have greater resources, greater name recognition, broader product lines, or larger customer bases than we do.
Our principal competitors in the medical exoskeleton market consist of Ekso Bionics (OTC:(NASDAQ: EKSO), Rex Bionics Pty, Cyberdyne (Tokyo Stock Exchange: 7779), Parker Hannifin (NYSE: PH)FREE Bionics, DIH (formerly known as Hocoma), Hocoma, AlterG,Wandercraft, and Bioness.Bioness (acquired by Bioventus (NASDAQ: BVS). The competitors’ products may also compete with the ReStore soft exo-suit, as well as manual forms of gait training which do not involve robotic assistive devices.
We believe that our ReWalk Personal deviceExoskeleton possesses key competitive advantages over these companies,companies’ products, such as our tilt-sensor technology that provides a self-initiated walking experience, six degrees of freedom which enable a more natural gait, and faster functional walking speed, the ability to support its own weight, and broad user specifications. In addition, ReWalk Personal Exoskeleton is the firstonly medical exoskeleton cleared bywith FDA and CE clearance for use on stairs and curbs, which greatly improves the FDA for personalability to use the device in the United States.everyday real-world environments.
We believe that our RestoreReStore soft exo-suit device will have keyhas several competitive advantages over the products of our competitors, including a lightweight soft-suit, of approximately 4 kilograms, a design that facilitates a natural, functional walking pattern mimicking the movement of a healthy leg,through flexible materials, sensors, and powered plantarflexion in addition toas well as dorsiflexion, making it the only solution of its type of which we are aware to supportof that supports such movement.movements, achieving that with a lower cost and weight than rigid exoskeletal devices.
In addition, we compete with alternative devices and alternative therapies, including treadmill-based gait therapies, such as those offered by Hocoma, AlterG,Tyromotion, Boost, Aretech, BTL, and Reha Technology. Other medical device or robotics companies, academic and research institutions, or others may develop new technologies or therapies that provide a superior walking experience, are more effective in treating the secondary medical conditions that we target or are less expensive than our current or future products. Our technologies and products could be rendered obsolete by such developments.
We may also compete with other treatments and technologies that address the secondary medical conditions that ReWalk seeks to mitigate.
Community Engagement and Education
We devote significant resources to engagement with and education of the spinal cord injury community with respect to the benefits of our SCI Products, as well as for our ReStore device. We actively seek opportunities to partner with hospitals, rehabilitation centers and key opinion leaders to engage in research and development and clinical activities. We also seek to educate and gain support from organizations such as patient advocacy groups and clinician societies with the goal of promoting adoption of exoskeleton technology from patient, clinician, and payor communities. We believe that our success has been and will continue to be driven in part by our reputation and acceptance within the spinal cord injury community.
To date, multiple advocacy groups have issued public endorsements of the ReWalk Personal Exoskeleton, including leading United States-based national organizations such as the United Spinal Association and the Dana and Christopher Reeves Foundation, as well as others. In addition, the National Institute for Health and Care excellence in the United Kingdom (also known as “NICE”), has issued a public announcement regarding the ReStore device.
Services and Customer Support
Our centers of operations in Marlborough, Massachusetts, Fremont, California, and Berlin, Germany coordinate all customer support and product service functions for North America and Europe, respectively, through dedicated technical service personnel who provide product services and customer support through training to healthcare providers and support to product users.
Research and Development
We are committed to investing in a robust research and development program to support our current product line and to potentially develop our pipeline of new and complementary products, and we believe that ongoing research and development efforts are essential to our success. Our research and development team consists of both in-house and external staff, including engineers, machinists, researchers and marketing, quality, manufacturing, regulatory and clinical personnel, which we employ as efficiently as possible meet our current and future needs, and who work closely together to design, enhance, and validate our technologies. This research and development team conceptualizes technologies and then builds and tests prototypes before refining and/or redesigning, as necessary. Our regulatory and clinical personnel work in parallel with engineers and researchers, allowing us to anticipate and resolve potential issues at early stages in the development cycle. Our level of research and development investment depends on our available resources, business plans, and future needs. For more information, see “Part I, Item 1A. Risk Factors — Risks Related to Our Business and Our Industry — Our future growth and operating results will depend on our ability to develop, receive regulatory clearance for, and commercialize new products and penetrate new product and geographic markets.”
We are working on product design improvements and expanded labeling for the ReWalk Personal Exoskeleton product which we plan to launch following obtaining regulatory clearance and approvals. In the longer term we are conducting research for our next generation exoskeleton with design improvements and advanced robotic technologies as part of the Human Robot Interaction Consortium research program. New medical indications impacting the ability to walk that we may pursue include multiple sclerosis, cerebral palsy, Parkinson’s disease, and elderly assistance.
We are also developing new generations of anti-gravity systems utilizing our DAP technology. We plan to introduce a new model of the AlterG system in mid-2024 that reduces the cost of manufacturing which in turn will allow us to make it more affordable for independent rehabilitation clinics, thereby expanding the potential market opportunity. Additionally, we are evaluating other applications for DAP technology to create entirely new rehabilitation systems for our facility-based customers.
We conduct our research and development efforts mainly at our facility in Yokneam, Israel. We believe that the close interaction among our research and development and manufacturing groups allows for timely and effective realization of our new product concepts.
Our research and development efforts have been financed, in part, through funding from the Israel Innovation Authority (formerly known as Office of the Chief Scientist in the Israel Ministry of Economy) (the “IIA”). From our inception through December 31, 2023, we received funding totaling $2.6 million from the IIA. For more information regarding our research and development financing arrangements, see “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and “—Grants and Other Funding.”
Research and Development Collaborations
On April 1, 2022, we entered a research and development cooperation agreement with several companies and universities in the Human Robot Interaction (“HRI”) Consortium, part of the IIA’s MAGNET incentive program. This incentive program provides grants for R&D collaboration as part of a consortium comprised of private businesses and leading academic centers. The goals of the HRI consortium are to “develop advanced technologies aimed at providing robots with social capabilities, enabling them to carry out various tasks and effective interactions with different users in diverse operational environments.” The total program has a budget of NIS 57 million, which includes funding for research and development grants to help drive technological innovation. The Consortium is a 3-year program which has allocated NIS 1.745 million to fund ReWalk-specific projects over the first 18-month period of the program. As of December 31, 2023, the Company spent total funds in the amount of NIS 1.571 million which has allocated for the first 18-month period. In November 2023, we entered the second 18-month period of the program, the Consortium has allocated NIS 1.336 million to fund ReWalk-specific projects over the second 18-month period. As a member of the HRI Consortium, we collaborate with several universities to develop advanced technologies aimed at improving the human-exoskeleton interaction. This research collaboration with top researchers in the fields of robotics, behavioral sciences and human-computer interaction will seek to make the use of exoskeletons easier and more natural to promote wider adoption of the technology.
On May 16, 2016, we entered into the Research Collaboration Agreement (“Collaboration Agreement”) and the Exclusive License Agreement (“Harvard License Agreement”) with Harvard. Under the Collaboration Agreement, we and Harvard agreed to collaborate on research regarding the development of lightweight soft suit exoskeleton system technologies for lower limb disabilities, which are intended to treat stroke, multiple sclerosis, mobility limitations for the elderly and other medical applications. Under the Collaboration Agreement, we paid Harvard quarterly installment payments to help fund the research. Subject to the terms of the Collaboration Agreement, we and Harvard were required to report our respective research results and findings to each other on a regular basis. The Collaboration Agreement governed ownership of the research results and inventions generated in performance of the research collaboration and provided us the option to negotiate with Harvard for a license to certain new inventions of Harvard conceived in performance of the collaboration. The Collaboration Agreement concluded on March 31, 2022.
Under the Harvard License Agreement, we have been granted an exclusive, worldwide royalty-bearing license under certain patents of Harvard relating to lightweight “soft suit” exoskeleton system technologies for lower limb disabilities, a royalty-free license under certain related know-how and the option to obtain a license to certain inventions conceived under our joint research collaboration. Harvard retains the right to practice the patents for research, educational and scholarly purposes. We are required to use commercially reasonable efforts to develop products under the Harvard License Agreement in accordance with an agreed-upon development plan and to introduce and market such products commercially. In addition to an upfront fee and royalties on net sales, we are obligated to pay Harvard certain milestone payments upon the achievement of certain product development and commercialization milestones. We have also agreed to reimburse Harvard for expenses incurred in connection with the filing, prosecution, and maintenance of the licensed patents.
The Harvard License Agreement will continue in full force and effect until the expiration of the last-to-expire valid claim of the licensed patents, or it is terminated in accordance with its terms. We may terminate the License Agreement for any reason upon 60 days’ prior written notice, while Harvard may terminate the License Agreement if we do not maintain requisite insurance or become insolvent. The Harvard License Agreement may also be terminated by Harvard or us due to the other party’s material uncured breach.
The Harvard License Agreement contains, as applicable, customary representations and warranties and customary enforcement, indemnification, and insurance provisions. For further discussion of the Collaboration Agreement and Harvard License Agreement, see Note 10 to our consolidated financial statements for the fiscal year ended December 31, 2023 included elsewhere in this annual report.
Intellectual Property
Protection of our intellectual property is important to our business. We seek to protect our intellectual property through a combination of patents, trademarks, confidentiality, and assignment agreements with our employees and certain of our contractors and confidentiality agreements with certain of our consultants, scientific advisors and other vendors and contractors. In addition, we rely on trade secrets law to protect our proprietary software and product candidates/products in development.
In addition to ReWalk'sour portfolio of issued patents and pending patent applications, the Company licenseswe license certain patented and patented pending technology from a third party as described above under the "Research“Research and Development"Development” section.
As of February 1, 2018,December 31, 2023, we have five11 issued patents in the United States and ten19 issued patents outside of the United States, as well as 2813 pending patent applications in various countries around the world for our technology includingin the United States, China, and Europe. For our patents associated with DAP and other AlterG technology, we have 25 issued patents in the United States and Europe. As such,21 patents issued outside the United States, as well as 10 pending patent applications for anti-gravity associated technology in the United States.
In the United States and Europe, we have apparatus patent claims in the United States and Europe covering aspects of ReWalkboth our exoskeleton and our anti-gravity products and similar devices or systems, which use a pluralityfocus on protecting our products in terms of sensors to empower tilt-sensor technology. In addition, in the United Statesstructural characteristics and Europe,functionality. Moreover, we also have method patent claims covering certain methods of user activationoperation and control of systems such as ReWalk, including by sensing the user's torso lean or weight shifts. While our apparatus claims focus on protecting ReWalk in terms of its physicalexoskeleton and structural characteristics, we believe that our method claims,anti-gravity products, which protect the process behind how ReWalk is controlled by the user, provide additional protection for our tilt sensor technology. We do not currently license any of the technology contained in our currently commercialized ReWalk and AlterG products, other than with respect to technology that is generally publicly available, but we may do so in the future.
Patents filed both in the United States and Europe (as well as other countries) generally have a lifeterm of 20 years from thetheir earliest effective filing date. Asdate, although they can be slightly longer depending upon a local jurisdiction’s rules and laws. For example, the oldest of our issued patents relating to our tilt-sensor technology was filed in May 2001 our patents on that technology do not beginin the United States and would typically expire in May 2021. However, this patent actually expired in April of 2023 due to expire until May 2021.patent term adjustment (PTA) of 689 days for delays in examination by the United States Patent and Trademark Office.
We currently hold a registered trademark in the United States, Europe, Israel, and Israelthe United Kingdom, for the mark “ReWalk”“ReWalk.” We currently hold a registered trademark in United States, Europe and the United Kingdom for the mark “ReStore”. We are in the process of registering the mark “Restore”currently hold a registered trademark in the United States, Europe, Israel, and the United Kingdom for the mark “Alter G.” We have also recently sought trademark registration of “Lifeward” in the United States, Europe, and Israel.
The employment agreement of our founder and former President and Chief Technology Officer, Dr. Amit Goffer, provides that a patent pending relating to a standing wheelchair is his individual property and that he may independently engage in the development of a standing wheelchair. The agreement also provides that we and any of our affiliates or successors have the royalty-free right to the exclusive use in the field of exoskeletons of any intellectual property developed by Dr. Goffer, alone or jointly with others (whether or not as part of the development of a standing wheelchair and whether or not developed through a company), while he is our employee, consultant or board member and for three years thereafter. Mr. Goffer retired from serving as our President and Chief Technology Officer on November 18, 2015, and as a member of our board of directors on December 3, 2015. For more information, see “Part III. Item 13. Certain Relationships and Related Transactions, and Director Independence.”
We cannot be sure that our intellectual property will provide us with a competitive advantage especially as some of our older patents begin to expire, or that we will not infringe on the intellectual property rights of others. In addition, we cannot be sure that any patents will be granted in a timely manner or at all with respect to any of our patent pending applications. For a more comprehensive discussion of the risks related to our intellectual property, see “Item“Part I, Item 1A. Risk Factors—Risks Related to Our Intellectual Property.”
Government Regulation
U.S. Regulation
Our medical products and manufacturing operations are regulated by the FDA and other federal and state agencies. Our products are regulated as medical devices in the United States under the Federal Food, Drug, and Cosmetic Act, or the FFDCA, as implemented and enforced by the FDA. The FDA regulates the development, testing, manufacturing, labeling, storage, installation, servicing, advertising, promotion, marketing, distribution, import, export, and market surveillance of our medical devices.
Premarket Regulatory Requirements
Unless an exemption applies, each medical device commercially distributed in the United States requires either a substantial equivalence determination underFDA clearance of a 510(k) premarket notification, submission, or an approval of a premarket approval application (PMA)., or issuance of a de novo classification order. Under the FFDCA, medical devices are classified into one of three classes—Class I, Class II or Class III—depending on the degree of risk associated with each medical device and the extent of control needed to provide reasonable assurance of safety and effectiveness. Classification of a device is important because the class to which a device is assigned determines, among other things, the necessity and type of FDA review required prior to marketing the device. Class I devices are those for which reasonable assurance of safety and effectiveness can be assured by adherence to general controls that include compliance with the applicable portions of the FDA’s Quality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and non-misleading labeling, advertising, and promotional materials. Class I also includes devices for which there is insufficient information to determine that general controls are sufficient to provide reasonable assurance of the safety and effectiveness of the device or to establish special controls to provide such assurance, but that are not life-supporting or life-sustaining or for a use which is of substantial importance in preventing impairment of human health, and that do not present a potential unreasonable risk of illness of injury.
Class II devices are those for which general controls alone are insufficient to provide reasonable assurance of safety and effectiveness and there is sufficient information to establish “special controls.” These special controls can include performance standards, postmarketpost-market surveillance, and patient registries and FDA guidance documents.registries. While most Class I devices are exempt from the 510(k) premarket notification requirement, most Class II devices require a 510(k) premarket notification to be marketed in the U.S. As a result, manufacturers of most Class II devices are required to submit to the FDA premarket notifications under Section 510(k) of the FFDCA requesting classification of their devices in order to market or commercially distribute those devices. To obtain a 510(k), a substantial equivalence determination for their devices, clearance, manufacturers must submit to the FDA premarket notifications demonstratingdemonstrate that the proposed device is “substantially equivalent” to a predicate device already on the market. A predicate device is a legally marketed device that is not subject to premarket approval, or PMA, meaning, (i) a device that was legally marketed prior to May 28, 1976 (pre-amendments device) and for which a PMA is not required, (ii) a device that has been reclassified from Class III to Class II or I, or (iii) a device that was found substantially equivalent through the 510(k) process. If the FDA agrees that the device is substantially equivalent to a predicate device currently on the market, it will grant 510(k) clearance to commercially market the device. If the device is not “substantially equivalent” to a previously cleared device, the device is automatically a Class III device. The device sponsor must then fulfill more rigorous premarket approval requirements or can request a risk-based classification determination for the device in accordance with the “de novo”“de novo” classification process, which is a route to market for medical devices that are low to moderate risk but are not substantially equivalent to a predicate device.
Devices that are intended to be life sustaining or life supporting, devices that are implantable, devices that present a potential unreasonable risk of harm or are of substantial importance in preventing impairment of health, and devices that are not substantially equivalent to a predicate device are placed in Class III and generally require approval of a PMA, unless the device is a pre-amendment device not yet subject to a regulation requiring premarket approval. The PMA process is more demanding than the 510(k) premarket notification process. In a PMA, the manufacturer must demonstrate that the device is safe and effective, and the PMA must be supported by extensive data, including data from preclinical studies and clinical trials. The PMA must also contain a full description of the device and its components, a full description of the methods, facilities and controls used for manufacturing, and proposed labeling. Following receipt of a PMA, the FDA determines whether the application is sufficiently complete to permit a substantive review. If the FDA accepts the application for review, it has 180 days under the FFDCA to complete its review of a PMA, although in practice, the FDA’s review often takes significantly longer, and can take up to several years.one year or even longer.
Clinical trials are almost always required to support PMAs and are sometimes required to support 510(k) submissions. All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s investigational device exemption, or IDE, regulations that govern investigational device labeling, prohibit promotion of the investigational device, and specify recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. If the device presents a “significant risk,” as defined by the FDA, the agency requires the device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials. The IDE will automatically become effective 30 days after receipt by the FDA, unless the FDA denies the application or notifies the company that the investigation is on hold and may not begin. If the FDA determines that there are deficiencies or other concerns with an IDE that require modification of the study, the FDA may permit a clinical trial to proceed under a conditional approval. In addition, the study must be approved by, and conducted under the oversight of, an Institutional Review Board, or IRB, for each clinical site. If the device presents a non-significant risk to the patient, a sponsor may begin the clinical trial after obtaining approval for the trial by one or more IRBs without separate approval from the FDA, but must still comply with abbreviated IDE requirements, such as monitoring the investigation, ensuring that the investigators obtain informed consent, and labeling and record-keeping requirements.
In June 2014, the FDA granted our petitionrequest for “de novo”“de novo” classification, which provides a route to market for medical devices that are low to moderate risk, but are not substantially equivalent to a predicate device, and classified ReWalk as a Class II powered exoskeleton device subject to special controls. The ReWalk is intended to enable individuals with spinal cord injuries to perform ambulatory functions under supervision of a specially trained companion, and inside rehabilitation institutions. The special controls established in the de novo classification order for all powered exoskeleton devices include the following: compliance with medical device consensus standards; clinical testing to demonstrate safe and effective use considering the level of supervision necessary and the use environment; non-clinical safety and performance testing, including durability testing to demonstrate that the device performs as intended under anticipated conditions of use; a training program; and labeling related to device use and user training. The special controls of this de novo order also apply to competing powered exoskeleton products seeking FDA clearance.
In June 2019, the FDA issued a 510(k) clearance for ReStore, which means that the device can be marketed in the U.S. ReStore is intended to be used to assist ambulatory functions in rehabilitation institutions under the supervision of a trained therapist for people with hemiplegia or hemiparesis due to stroke. ReStore complies with special controls for powered exoskeletons as described above. In order for us to market ReStore and ReWalk, we must comply with both these special controls as well as general controls, including controls related to quality, facility registration, reporting of adverse events and labeling. Failure to comply with the general and special controls could lead to removal of ReStore or ReWalk from the market, which would have a material adverse effect on our business.
In June 2022, we submitted a 510(k) premarket notification for ReWalk Personal Exoskeleton seeking to enable the stairs functionality and add uses on stairs and curbs to the indication for use for the device in the US. In March 2023, the FDA issued the 510(k) clearance.
For more information, see Part I.“Part I, Item 1A. Risk Factors-Risks Related to Government Regulation-We are subject to extensive governmental regulations relating to the manufacturing, labeling and marketing of our products, and a failure to comply with such regulations could lead to withdrawal or recall of our products from the market.”
Postmarket
Expedited Development and Review Programs
FDA’s Breakthrough Devices Program is a voluntary program offered to manufacturers of certain medical devices and device-led combination products that may provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions. The goal of the program is to provide patients and health care providers with more timely access to qualifying devices by expediting their development, assessment and review, while preserving the statutory standards for marketing authorization.
The program is available to medical devices that meet certain eligibility criteria, including that the device provides more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions, and that the device meets one of the following criteria: (i) the device represents a breakthrough technology, (ii) no approved or cleared alternatives exist, (iii) the device offers significant advantages over existing approved or cleared alternatives, or (iv) the availability of the device is in the best interest of patients. Breakthrough Device designation provides certain benefits to device developers, including more interactive and timely communications with FDA staff, use of post market data collection, when scientifically appropriate, to facilitate expedited and efficient development and review of the device, opportunities for efficient and flexible clinical study design, and prioritized review of premarket submissions.
Post-Market Regulatory Requirements
After a device is cleared for marketing, and prior to marketing, numerous regulatory requirements apply. These include:
establishment registration and device listing;
| ● | establishment registration and device listing; |
development of a quality assurance system, including establishing and implementing procedures to design and manufacture devices;
| ● | development of a quality assurance system, including establishing and implementing procedures to design and manufacture devices; |
labeling regulations that prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling;
| ● | labeling regulations that prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; |
medical device reporting regulations that require manufacturers to report to the FDA if a device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur; and corrections and removal reporting regulations that require manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FFDCA that may present a risk to health; and
| ● | FDA’s Unique Device Identification requirements that call for a unique device identifier (UDI) on device labels and packages and submission of data to the FDA’s Global Unique Device Identification Database (GUDID); |
Post market surveillance.
| ● | medical device reporting regulations that require manufacturers to report to the FDA if a device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur; and corrections and removal reporting regulations that require manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FFDCA that may present a risk to health; and |
ReWalk is required by an FDA order under Section 522 of the FFDCA to conduct a postmarket study of the ReWalk device. We launched our postmarket surveillance study with Stanford University during the second quarter of 2016. For more information on the post-market surveillance study, see “Part I. Item 1A. Risk Factors-Risks Related to Government Regulation.”
| ● | post-market surveillance. |
Our manufacturing processes are required to comply with the applicable portions of the FDA’s Quality System Regulation (“QSR”) that covers the methods and the facilities and controls for the design, manufacture, testing, production, processes, controls, quality assurance, labeling, packaging, distribution, installation, and servicing of finished devices intended for human use. In February 2024, the FDA issued the Quality Management System Regulation (“QMSR”) Final Rule to amend the QSR, incorporating by reference the international standard for medical device quality management systems set by the International Organization for Standardization (ISO), ISO 13485:2016. The rule will become effective on February 2, 2026. Until then, manufacturers are required to comply with the QSR. We actively maintain compliance with the FDA’s Quality System Regulation, 21 CFR Part 820,QSR, and the European Union’s Quality Management Systems requirements, ISO 13485:2003.2016.
As a manufacturer, we are subject to periodic scheduled or unscheduled inspections by the FDA. If the FDA believes we or any of our contract manufacturers are not in compliance with the quality system requirements, or other postmarketpost-market requirements, it has significant enforcement authority. Specifically, if the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions:
untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;
| ● | untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; |
customer notifications or repair, replacement or refunds;
| ● | customer notifications or repair, replacement, or refunds; |
recalls, withdrawals, or administrative detention or seizure of our products;
| ● | recalls, withdrawals, or administrative detention or seizure of our products; |
operating restrictions or partial suspension or total shutdown of production;
| ● | operating restrictions or partial suspension or total shutdown of production; |
refusing or delaying requests for 510(k) marketing clearance or approval of pre-market approval applications relating to new products or modified products;
| ● | refusing or delaying requests for approval of pre-market approval applications relating to new products or modified products; |
reclassifying a 510(k) cleared device or withdrawing PMA approval;
| ● | withdrawing PMA approval or reclassifying our devices; |
| ● | refusal to grant export approvals for our products; or |
| ● | pursuing criminal prosecution. |
Any such action by the FDA would have a material adverse effect on our business. In addition, these regulatory controls, as well as any changes in FDA policies, can affect the time and cost associated with the development, introduction, and continued availability of new products. Where possible, we anticipate these factors in our product development processes.
Regulation outsideOutside of the U.S.
In addition to the United States regulations, we are subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products. In particular, wethe E.U., medical devices are subject to regulationregulated by the European Union Medical Devices Regulation (EU) 2017/745 or MDR, which became applicable on 26 May 2021 and replaced the EU Medical Devices Directive 93/42/EEC, or MDD. The MDR and its associated guidance documents and harmonized standards, govern, among other things, device design and development, preclinical and clinical or performance testing, premarket conformity assessment, registration and listing, manufacturing, labeling, storage, claims, sales and distribution, export and import and post-market surveillance, vigilance, and market surveillance.
Before a device can be placed on the market in the E.U., which has directives and standards regulating the design, manufacture, clinical trials, labeling and adverse event (i.e. vigilance) reporting for medical devices. Devices that complycompliance with the MDR requirements of a relevant directive are entitledmust be demonstrated in order to bearaffix the CE conformity marking, indicating that the device conformsMark to the essential requirements of the applicable directive and, accordingly, can be commercially distributed throughout Europe.product. The method of assessing conformity varies depending on the class of the product, but normally involves a combination of self-assessment by the manufacturer and a third partythird-party assessment by a “Notified Body.” This third partythird-party assessment may consist of an audit of the manufacturer’s quality system or specific testing of the manufacturer’s product. The Notified Body issues a CE Certificate of Conformity to confirm successful completion of a conformity assessment procedure conducted in relation to the medical device and its manufacturer and their conformity with the essential requirements provided in the MDR. Under transitional provisions provided in the MDR, medical devices that had valid CE Certificates of Conformity issued under the MDD prior to May 26, 2021 and that remained valid (and not withdrawn) on March 20, 2023, can continue to be placed on the EEA market until the end of December 2027 or 2028 (depending on the class of device), provided the device’s manufacturer complies with certain requirements, including that there are no significant changes in the design and intended purpose of the applicable device. After the expiry of any applicable transitional period, only devices that have been CE marked on the basis of the MDR may be placed on the market in the EEA. We comply with the E.U. requirements and have received ta Notified Body Certificate of Conformity under the CE markMDD for all of our ReWalk systems including the ReStore device which are distributed in the E.U. This allows us to continue to apply the CE mark to our products and place them on the market throughout the E.U. during the transition period or until we have completed an appropriate conformity assessment procedure under the MDR.
Foreign sales
Following the U.K.’s exit from the E.U. (known as “Brexit”), the MDR does not apply in the United Kingdom (except for Northern Ireland, which under the Northern Ireland Protocol is bound by certain E.U. laws). The medical device legislative framework in the United Kingdom is set out in the Medical Devices Regulations 2002, as amended. These regulations are based on the previous medical device directives of the E.U. but have been amended so that they function properly now the United Kingdom is no longer part of the E.U. The Medical Devices Regulations 2002 have introduced several changes including (but not limited to) replacing the CE mark with a UKCA marking (although E.U. CE marks will be recognized potentially up until June 2030), requiring manufacturers outside of the E.U.United Kingdom to appoint a “UK Responsible Person” if they place devices on the Great Britain market and more wide-ranging device registration requirements.
Sales in other jurisdictions are subject to the foreign government regulations of the relevant jurisdiction, and in most cases, we must obtain approval by the appropriate regulatory authorities before we can commence clinical trials or marketing activities in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required to obtain a marketing authorization in the UnitesUnited States or the CE mark in the E.U. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.
The policies of the FDA and foreign regulatory authorities may change, and additional government regulations may be enacted that could prevent or delay regulatory approval of our products and could also increase the cost of regulatory compliance. We cannot predict the likelihood, nature, or extent of adverse governmental regulation that might arise from future legislative or administrative action, either in the United States or abroad.
U.S. Anti-kickback,Anti-Kickback, False Claims and Other Healthcare Fraud and Abuse Laws
In the United States, there are federal and state anti-kickback laws that prohibit the payment or receipt of kickbacks, bribes or other remuneration intended to induce the purchase or recommendation of healthcare products and services. Violations of these laws can lead to civil and criminal penalties, including exclusion from participation in federal healthcare programs. These laws apply to manufacturers of products, such as us, with respect to our financial relationship with hospitals, physicians and other potential purchasers or acquirers of our products. The U.S. government has published regulations that identify “safe harbors” or exemptions for certain practices from enforcement actions under the federal anti-kickback statute, and we will seek to comply with the safe harbors where possible. To qualify for a safe harbor, the activity must fit squarely within the safe harbor. Arrangements that do not meet a safe harbor are not necessarily illegal but must be evaluated on a case by casecase-by-case basis. Other provisions of state and federal law provide civil and criminal penalties for presenting, or causing to be presented, to third-party payers for reimbursement claims that are false or fraudulent, or for items or services that were not provided as claimed. False claims allegations under federal and some state laws may be brought on behalf of the government by private persons, “whistleblowers,” who then receive a share of any recovery.
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively, the PPACA, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes. A person or entity no longer needsmay be found to haveviolate the anti-kickback statute even absent actual knowledge of these statutesthis statute or specific intent to violate them.it. In addition, the PPACA provides that the government may assert that a claim that includes items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act. Act (“FCA”).
The PPACA also imposes new reporting and disclosure requirements on device manufacturerscivil FCA prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false or fraudulent claim for any “transfer of value”payment to, or approval by, the federal government, knowingly making, using, or causing to be made or distributedused a false record or statement material to physiciansa false or fraudulent claim to the federal government, or avoiding, decreasing, or concealing an obligation to pay money to the federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. The civil FCA has been used to assert liability on the basis of kickbacks and teaching hospitals. Device manufacturers will also beother improper referrals, improper use of Medicare provider or supplier numbers when detailing a provider of services, improper promotion of off-label uses not covered by a device’s clearance or approval, and allegations as to misrepresentations with respect to products, contract requirements, and services rendered. In addition, private payors have been filing follow-on lawsuits alleging fraudulent misrepresentation, although establishing liability and damages in these cases is more difficult than under the FCA. Intent to deceive is not required to reportestablish liability under the civil FCA. Civil FCA actions may be brought by the government or may be brought by private individuals on behalf of the government, called “qui tam” actions. If the government decides to intervene in a qui tam action and discloseprevails in the lawsuit, the individual will share in the proceeds from any fines or settlement funds. If the government declines to intervene, the individual may pursue the case alone. The civil FCA provides for treble damages and a civil penalty for each false claim, such as an invoice or pharmacy claim for reimbursement, which can aggregate into millions of dollars. For these reasons, FCA lawsuits against biopharmaceutical and device companies have increased significantly in volume and breadth, leading to several substantial civil and criminal settlements, as much as $3.0 billion, regarding certain sales practices and promoting off label uses. Civil FCA liability may further be imposed for known Medicare or Medicaid overpayments that are not refunded within 60 days of discovering the overpayment, even if the overpayment was not caused by a false or fraudulent act. In addition, conviction or civil judgment for violating the FCA may result in exclusion from federal health care programs, and suspension and debarment from government contracts, and refusal of orders under existing government contracts.
The government may further prosecute conduct constituting a false claim under the criminal FCA. The criminal FCA prohibits the making or presenting of a claim to the government knowing such claim to be false, fictitious, or fraudulent and, unlike the civil FCA, requires proof of intent to submit a false claim.
The civil monetary penalties statute is another statute under which medical device companies may potentially be subject to enforcement. Among other things, the civil monetary penalties statue imposes fines against any person who offers to provide remuneration to any individual eligible for benefits under Medicare or Medicaid that the offerer knows or should know is likely to influence the individual to order or receive from a particular provider or supplier of any item or service reimbursable under those programs.
The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) also created federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, a healthcare benefit program, regardless of whether the payor is public or private, in connection with the delivery or payment for health care benefits, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense and knowingly and willfully falsifying, concealing, or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items, or services relating to healthcare matters. Additionally, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively the “ACA”, amended the intent requirement of certain of these criminal statutes under HIPAA so that a person or entity no longer needs to have actual knowledge of the statute, or the specific intent to violate it, to have committed a violation.
The Physician Payments Sunshine Act (“Sunshine Act”) requires annual reporting, by applicable device and drug manufacturers, of covered products, payments, and other transfers of value to certain health care providers, and ownership and investment interests held by physicians and their immediate family members duringmembers.
Further, we may be subject to data privacy and security regulation by both the preceding calendar year. A numberfederal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and its respective implementing regulations imposes certain requirements on covered entities relating to the privacy, security, and transmission of provisionscertain individually identifiable health information, known as protected health information. Among other things, HITECH, through its implementing regulations, makes HIPAA’s security standards and certain privacy standards directly applicable to business associates, defined as a person or organization, other than a member of PPACAa covered entity’s workforce, that creates, receives, maintains, or transmits protected health information on behalf of a covered entity for a function or activity regulated by HIPAA. HITECH also reflect increased focusstrengthened the civil and criminal penalties that may be imposed against covered entities, business associates, and individuals, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, other federal and state laws may govern the privacy and security of health and other information in certain circumstances, many of which differ from each other in significant ways and may not be pre-empted by HIPAA, thus complicating compliance efforts.
Many states have also adopted laws similar to each of the above federal laws, which may be broader in scope and apply to items or services reimbursed by any third-party payor, including commercial insurers. Certain states also require implementation of commercial compliance programs and compliance with the medical device industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government, or otherwise restrict payments or the provision of other items of value that may be made to healthcare providers and other potential referral sources; impose restrictions on marketing practices; or require companies to track and fundingreport information related to payments, and other items of value to physicians and other healthcare providers.
If our operations are found to be in violation of any of the laws or regulations described above or any other applicable laws, we may be subject to penalties or other enforcement actions, including criminal and significant civil monetary penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government healthcare programs, corporate integrity agreements, suspension and debarment from government contracts, and refusal of orders under existing government contracts, reputational harm, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. Enforcement actions can be brought by federal or state governments, or as “qui tam” actions brought by individual whistleblowers in the name of the government under the civil FCA if the violations are alleged to have caused the government to pay a false or fraudulent claim.
To the extent that any of our products are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.
Coverage and Reimbursement
The commercial success of our product candidates and our ability to commercialize any approved product candidates successfully will depend in part on the extent to which governmental payor programs at the federal and state levels, including Medicare and Medicaid, private health insurers, and other third-party payors provide coverage for and establish adequate reimbursement levels for our products. Government authorities, private health insurers, and other organizations generally decide which products and services they will pay for and establish reimbursement levels for healthcare. Medicare is a federally funded program managed by CMS through local fiscal intermediaries and carriers that administer coverage and reimbursement for certain healthcare items and services furnished to the elderly and disabled. Medicaid is an insurance program for certain categories of patients whose income and assets fall below state defined levels and who are otherwise uninsured that is both federally and state funded and managed by each state. In the United States, private health insurers and other third-party payors often provide reimbursement for products and services based on the level at which the government provides reimbursement through the Medicare or Medicaid programs for such products and services.
In the United States, the European Union, and other potentially significant markets for our products, government authorities and third-party payors are increasingly attempting to limit or regulate the price of medical products and services, particularly for new and innovative products and therapies, which often has resulted in average selling prices lower than they would otherwise be. In the United States, it is also common for certain government and private health plans to use coverage determinations to leverage rebates from labelers to reduce the plans’ net costs. These restrictions and limitations influence the purchase of healthcare fraud enforcement.
In September 2017, membersservices and products and lower the realization on manufacturers’ sales of products. Third-party payors are developing increasingly sophisticated methods of controlling healthcare costs. Third-party payors may limit coverage to specific therapeutic products on an approved list, or formulary, which might not include all of the U.S. Congress introduced legislation withFDA-approved products for a particular indication or might impose high co-payment amounts to influence patient choice. Third-party payors also control costs by requiring prior authorization or imposing other restrictions. Third-party payors are increasingly challenging the announced intentionprice and examining the medical necessity and cost-effectiveness of medical products and services, in addition to repealtheir safety and replace major provisionsefficacy.
Federal programs also impose price controls through mandatory ceiling prices on purchases by federal agencies and federally funded hospitals and clinics. These restrictions and limitations influence the purchase of healthcare services and products. Legislative proposals to reform healthcare or reduce costs under government programs may result in lower reimbursement for our products or exclusion of our products.
Private payors often rely on the lead of the PPACA. Although this proposed legislation ultimately failedgovernmental payors in rendering coverage and reimbursement determinations. Therefore, achieving favorable CMS coverage and reimbursement is usually a significant gating issue for successful introduction of a new product.
Further, the increased emphasis on managed healthcare in the United States and on country and regional pricing and reimbursement controls in the European Union will put additional pressure on product pricing, reimbursement, and utilization, which may adversely affect our future product sales and results of operations. These pressures can arise from rules and practices of managed care groups, competition from other products, judicial decisions and governmental laws and regulations related to pass, Congress succeededMedicare, Medicaid, and healthcare reform, and pricing in repealinggeneral. Patients who are prescribed treatments for their conditions and providers performing the PPACA’s individual mandate asprescribed services generally rely on third-party payors to reimburse all or part of the U.S. Tax Cutsassociated healthcare costs. Sales of our product candidates will therefore depend substantially, both domestically and Jobs Act of 2017. Thus, in light of the stated policies of the new U.S. presidential administration, and actions of certain members of the U.S. Congress, there is uncertainty with respect to the impact, if any,abroad, on the provisionsextent to which the costs of our products will be paid by health maintenance, managed care, and similar healthcare management organizations, or reimbursed by government health administration authorities, such as Medicare and Medicaid, private health insurers, and other third-party payors.
Moreover, a payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved or that significant price concessions will not be required to avoid restrictive conditions. High health plan co-payment requirements may result in patients seeking alternative therapies. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment. Legislative proposals to reform healthcare or reduce costs under government insurance programs may result in lower reimbursement for our products or exclusion of our products from coverage. The cost containment measures that healthcare payors and providers are instituting and any healthcare reform could significantly reduce our revenue from the PPACA affecting us. Whilesale of any approved product candidates.
Healthcare Reform Measures
The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes will likely take timeaffecting the healthcare system. The United States government, state legislatures and foreign governments also have shown significant interest in implementing cost-containment programs to develop,limit the growth of government-paid healthcare costs, including price controls, restrictions on reimbursement and mayrequirements for substitution of generic products for branded prescription drugs.
The ACA substantially changed the way healthcare is financed by both governmental and private insurers, and significantly impacts the pharmaceutical industry. The ACA is intended to broaden access to health insurance, reduce or mayconstrain the growth of healthcare spending, enhance remedies against healthcare fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on pharmaceutical and medical device manufacturers, and impose additional health policy reforms.
The ACA has been subject to challenges in the courts. On December 14, 2018, a Texas U.S. District Court Judge ruled that the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. On December 18, 2019, the Fifth Circuit U.S. Court of Appeals held that the individual mandate is unconstitutional, but did not have an impactinvalidate the entire law, and remanded the case to the Texas District Court to reconsider its earlier invalidation of the entire ACA. An appeal was taken to the U.S. Supreme Court, which ruled on June 17, 2021, that the plaintiffs lacked standing to challenge the law as they had not alleged personal injury traceable to the allegedly unlawful conduct. As a result, the Supreme Court did not rule on the constitutionality of the ACA or any of its provisions.
Other legislative changes have been proposed and adopted since passage of the ACA. The Budget Control Act of 2011, among other things, created the Joint Select Committee on Deficit Reduction to recommend proposals in spending reductions to Congress. The Joint Select Committee did not achieve its targeted deficit reduction of an amount greater than $1.2 trillion for the fiscal years 2012 through 2021, triggering the legislation’s automatic reductions to several government programs. These reductions included aggregate reductions to Medicare payments to healthcare providers of up to 2.0% per fiscal year. The Bipartisan Budget Act of 2018 retained the federal budget “sequestration” Medicare payment reductions of 2% and extended it through 2027 unless congressional action is taken. On January 2, 2013, the American Taxpayer Relief Act was signed into law, which, among other things, reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
Further legislative and regulatory regimechanges under the ACA remain possible, although President Biden indicated that he intends to which we are subject, we cannot predictuse executive orders to undo changes to the ultimate content, timingACA made by the Trump administration and would advocate for legislation to build on the ACA. It is unknown what form any such changes or effect of any law would take, and how or whether it may affect our business in the future. We expect that changes or additions to the ACA or the Medicare and Medicaid programs, and changes stemming from other healthcare reform measures, especially with regard to healthcare access, financing or other legislation in individual states, could have a material adverse effect on the healthcare industry.
At the state level, legislatures may also increasingly pass legislation and implement regulations designed to control product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures.
We expect that additional federal, state, and foreign healthcare reform measures will be adopted in the impactfuture, any of potential legislation on us.which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in limited coverage and reimbursement and reduced demand for our products, or additional pricing pressures.
Environmental Matters
We are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewater discharges, noise emissions, the use, transport, management and disposal of chemicals and hazardous materials, the import, export and registration of chemicals, and the cleanup of contaminated sites. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect on us. The operation of our business and facilities, however, entails risks in these areas. Significant expenditures could be required in the future to comply with environmental or health and safety laws, regulations, or requirements.
In Israel, where our contract manufacturer produces all of our ReWalk and ReStore products, businesses storing or using certain hazardous materials (including materials necessary for our manufacturing process) are required, pursuant to the Israeli Dangerous Substances Law, 5753-1993, to obtain a toxin permit from the Ministry of Environmental Protection. In the U.S., where we manufacture our AlterG products in our Fremont, California facility, we do not utilize chemicals which require a toxic materials license. We have a hazardous waste disposal license with the County of Alameda and dispose of our expired and empty containers through a process in accordance with the license.
In the European marketplace, electrical and electronic equipment is required to comply with the Directive on Waste Electrical and Electronic Equipment, which aims to prevent waste by encouraging reuse and recycling, and the Directive on Restriction of Use of Certain Hazardous Substances, which restricts the use of sixten hazardous substances in electrical and electronic products. Our products and certain components of such products “put on the market” in the EUE.U. (whether or not manufactured in the EU)E.U.) are subject to these directives. Additionally, we are required to comply with certain laws, regulations, and directives, including the Toxic Substances Control Act in the United States and REACH in the EU,E.U., governing chemicals. These and similar laws and regulations require the testing, reporting and registration of certain chemicals we use and ship. We believe we are in compliancecomply in all material respects with applicable environmental laws and regulations.
Manufacturing
Our ReWalk includesexoskeletons, ReStore exo-suits, and AlterG Anti-Gravity systems include off-the-shelf and custom-made components produced to our specifications by various third parties, for technical and cost effectiveness.cost-effectiveness. We have contracted with Sanmina Corporation ("Sanmina"(“Sanmina”), a well-established contract manufacturer with expertise in the medical device industry, for the manufacture of all of our products. Pursuant to this contract, Sanmina manufactures ReWalkSCI Products and ReStore at its facility in Ma’alot, Israel. All ReWalk Personal units areWe manufacture the AlterG product ourselves at our facility in Fremont, California. Each product line is manufactured pursuant to the same applicable set of specifications, and all ReWalk Rehabilitation units are manufactured pursuant to another set.specifications. We place our manufacturing orders with Sanmina and other suppliers pursuant to purchase orders or by providing forecasts for future requirements. We may terminate our relationship with Sanmina or our other suppliers at any time upon written notice. Either we or Sanmina may terminate the relationship in the event of a material breach, subject to a 30-day cure period. Our agreement with Sanmina contains a limitation on liability that applies equally to both us and Sanmina.
We believe that this contract manufacturing relationship with Sanmina allows us to operate our business efficiently by focusing our internal efforts on the development and commercialization of our technology and our products and provides us with substantial scale-up capacity. We regularly test quality on-site at Sanmina’s facility and we obtain full quality inspection reports. We maintain a non-disclosure agreement with Sanmina.
We develop certain of the software components internally and license other software components that are generally available for commercial use as open sourceopen-source software.
We manufacture products based upon internal sales forecasts. We deliver products to customers and distributors based upon purchase orders received, and our goal is to fulfill each customer’s order for products in regular production within two weeks of receipt of the order.
Suppliers
We have contracted with Sanmina for the sourcing of all components and raw materials necessary for the manufacture of our ReWalk and ReStore products, although there are instances that we purchase raw materials ourselves. In addition, we directly source all components and raw materials necessary for the manufacture of our AlterG products. Components of our products and raw materials come from suppliers in the United States, Europe, China, Taiwan, and Israel, and we depend on certain of these components and raw materials, including certain electronic parts, for the manufacture of our products. To date, we have not experienced significant volatility in the prices of these components and raw materials. However, suchduring the COVID-19 pandemic several specific parts, mainly electronic parts, experienced temporary price increases which have returned to more normal levels. Such prices are subject to a number of factors, including purchase volumes, general economic conditions, currency exchange rates, industry cycles, production levels, and scarcity of supply.
We believe that our andin-house manufacturing, Sanmina’s facilities, our contracted manufacturing arrangement, and our supply arrangements are sufficient to support our potential capacity needs for the foreseeable future.
Human Capital
Employees
As of December 31, 2017,2023, we had 65108 employees (including full-time and hourly employees), of whom 27 are located in the United States, 26 were located in Israel and 12 were located in Germany. As of December 31, 2016, we had 94 employees, of whom 3674 were located in the United States, 4120 were located in Israel and 17 are located in Germany, and as of December 31, 2015, we had 87 employees, of whom 3214 were located in the United States, 39 were located in Israel and 16 were located in Germany.Europe. The majority of our employees are, and have been, engaged in sales and marketing and research and development activities. We do not employ a significant number of temporary or part time employees. The decline in total employees at the end of 2017 versus 2016 is a result of our efforts to reduce operating expenses announced in January 2017. We will continue to evaluate spending and organizational requirements as our business develops.
We are subject to labor laws and regulations within our locations mainly in the U.S. ,Germany, Germany, and Israel. These laws and regulations principally concern matters such as pensions, paid annual vacation, paid sick days, length of the workday and work week, minimum wages, overtime pay, insurance for work-related accidents, severance pay and other conditions of employment. Our employees are not represented by a labor union. We consider our relationship with our employees to be good. To date, we have not experienced any work stoppages.
Compensation and Benefits
We provide our employees with competitive salaries and bonuses, opportunities for equity ownership, and a robust employment package that promotes well-being across all aspects of our employees’ lives, including health care, retirement planning, and paid time off. We also invest in the ongoing development of our employees through our internal training programs.
Diversity and Inclusion
We value the diversity of our employees and take pride in our commitment to diversity and inclusion across all levels of our organizational structure. We encourage a diversity of views and strive to create an equal opportunity workplace, including working with managers to develop strategies for building diverse teams and promoting the advancement of employees from diverse backgrounds.
Financial Information about Geographic Areas and Significant Customer Information
The following table sets forth the geographical breakdown of our revenuesrevenue for each of the years ended December 31, 2017, 2016, 2015:2023, and 2022 (in thousands):
| | Year Ended December 31, | |
| | 2023 | | | 2022 | |
Revenue based on customer’s location: | | | | | | |
United States | | | 7,636 | | | | 2,303 | |
Europe | | | 5,044 | | | | 3,057 | |
Asia-Pacific | | | 387 | | | | 115 | |
Rest of the world | | | 787 | | | | 36 | |
Total revenue | | $ | 13,854 | | | $ | 5,511 | |
|
| | | | | | | | | | | |
| Year Ended December 31, |
| 2017 | | 2016 | | 2015 |
Revenues based on customer’s location: | | | | | |
Israel | $ | — |
| | $ | — |
| | $ | — |
|
United States | 4,598 |
| | 3,741 |
| | 2,439 |
|
Europe | 3,094 |
| | 1,144 |
| | 820 |
|
Asia-Pacific | 61 |
| | 984 |
| | 487 |
|
Total revenues | $ | 7,753 |
| | $ | 5,869 |
| | $ | 3,746 |
|
Additional discussion of financial information by reportable segment and geographic area and sales in excess of 10% of total revenuesrevenue to certain of our customers is contained in Note 1213 to our consolidated financial statements set forth in “Part II. Item 8. Financial Statements and Supplementary Data” of this annual report.
Timwell Investment Agreement and Related Transactions2023 Recent Developments
| ● | In March 2023, the ReWalk Personal Exoskeleton technology received clearance from the FDA for use on stairs and curbs in the United States, making it the only personal exoskeleton to receive FDA clearance for this indication. The clearance follows the FDA’s designation of the device as a "Breakthrough Device" in recognition of its unprecedented ability to provide ambulatory access to environments containing stairs and curbs for paralyzed individuals with SCI. |
| ● | In August 2023, we completed the acquisition of AlterG, which adds significant scale to our revenue base, extensive sales and service capabilities to our commercial team, and innovative systems that utilize DAP technology to our portfolio of rehabilitation solutions that facilitate mobility and wellness in rehabilitation and daily life. |
| ● | In November 2023, CMS released the Final Rule, which explicitly includes exoskeletons within a Medicare brace benefit category. The rule went into effect on January 1, 2024. |
Investment Agreement
| ● | In November 2023, CMS included the ReWalk Personal Exoskeleton system in the agenda for the November 29, 2023 HCPCS public meeting. The agency also proposed a preliminary payment determination of $94,617 for HCPCS code K1007 based on a “gap filling” process applied to 2020 market data. At the meeting, CMS solicited additional information for updated market transactions for use in developing a final payment determination. We participated in the HCPCS meeting process to provide additional information to help ensure that the final payment determination accurately reflects current pricing information related to the market of lower-limb exoskeleton devices, including the current ReWalk Personal Exoskeleton. A final Medicare payment determination is expected from CMS in first quarter of 2024 with an April 1, 2024, effective date. |
| ● | In December 2023, our first claim with Medicare for reimbursement for a ReWalk Personal Exoskeleton was paid; |
| ● | Record annual revenue for 2023 was $13.9 million, compared to $5.5 million in 2022, an increase of 151%. |
| ● | Our cash position remained strong with $28.1 million as of December 31, 2023, with no debt. |
On March 6, 2018, the Company entered into an investment agreement (the “Investment Agreement”) with Timwell Corporation Limited, a Hong Kong corporation (“Timwell”), pursuant to which we agreed, in return for aggregate gross proceeds to us of $20 million, to issue to Timwell an aggregate of 16,000,000 of our ordinary shares, at a price per share of $1.25, which represents a premium to the closing sale price of our ordinary shares as of March 6, 2018. Timwell will make the investment in three tranches, consisting of $5 million for 4,000,000 shares in the first tranche (the “First Tranche Closing”), $10 million for 8,000,000 shares in the second tranche (the “Second Tranche Closing”) and $5 million for 4,000,000 shares in the third tranche (the “Third Tranche Closing”). On a post-transaction basis, based on 30,006,575 of our ordinary shares outstanding as of March 5, 2018 (excluding ordinary shares issuable upon conversion or exercise of derivative securities owned by other shareholders or shares issued under our equity incentive plans and assuming no changes otherwise to our capitalization), after the First Tranche Closing, the Second Tranche Closing and the Third Tranche Closing, Timwell will beneficially own 11.8%, 28.6% and 34.8% of our ordinary shares, respectively
23
The First Tranche Closing is subject to the Company having received the approval by our shareholders of the transaction under Rule 5635 of Nasdaq and Israeli law. The Second Tranche Closing is subject to the conditions that, by July 1, 2018, (i) the Company and an affiliate of Timwell will have formed the China JV (as defined below), and (ii) by no later than 20 days after the establishment of the China JV (or as soon thereafter as possible), the China JV and the Company will have executed the License Agreement and Supply Agreement (each as defined below). The Third Tranche Closing is subject to the conditions that, by April 1, 2019, (i) the Company will have provided to the China JV product documentation, component supply access, work instructions, know-how and training, and will have defined quality system requirements necessary for rehabilitation using the Company’s Restore product, and (ii) a China-based manufacturer or agent defined by the China JV will have successfully produced the Company’s Restore product to the quality requirements defined by the Company. The Third Tranche Closing is expected to occur by December 31, 2018, before the April 2019 deadline under the Investment Agreement. The transaction is also subject to other customary closing conditions. The Company plans to include the issuance of the 16,000,000 ordinary shares to Timwell as a proposal for shareholder approval at its 2018 Annual Meeting of Shareholders.
The Company intends to use the net proceeds from the issuances under the Investment Agreement (i) primarily for (a) sales, marketing activities related to market development in our existing markets as well as expanding into China and reimbursement expenses related to broadening third-party payor coverage and (b) research and development costs related to developing our lightweight “soft suit” exoskeleton technology for various lower limb disabilities, including stroke and other indications affecting the ability to walk, (ii) with respect to any remaining proceeds for general corporate purposes.
Lock-up Period
Until 18 months following the Third Tranche Closing, subject to limited exceptions, Timwell may not sell or transfer the ordinary shares purchased under the Investment Agreement (the “Purchased Shares”) except to its affiliates, unless a majority of the directors of our board of directors (the “Board”), excluding any member of our Board nominated or designated by Timwell, approves the transfer. Following this 18-month lock-up period, except for transfers of up to 10% of the shares to third parties who are not competitors of the Company, any sale or transfer of the Purchased Shares must be pursuant to Rule 144 under the Securities Act of 1933 (the “Securities Act”) or an underwritten public offering. This restriction will terminate if any of the JV Agreement (as defined below), the License Agreement and the Supply Agreement is not executed within 12 months after the First Tranche Closing or is terminated. Timwell may also sell its Purchased Shares pursuant to any third-party tender offer for all of the Company’s ordinary shares.
Board Appointment Rights
Pursuant to the Investment Agreement, Timwell will be entitled upon the First Tranche Closing, and for so long as it maintains a 75% ownership of the Purchased Shares, to designate one nominee to our Board. Following the Third Tranche Closing and for so long as the shareholding requirements of the Purchased Shares above are satisfied, Timwell will be entitled to designate such aggregate number of members of the Board equal to the higher of (i) one, or (ii) the number of Board members affiliated with the Company’s next two largest shareholders at such time.
Standstill and Voting Agreement
Subject to certain limitations set forth in the Investment Agreement, Timwell has agreed not to acquire additional equity securities of the Company and has agreed to customary “standstill” arrangements, pursuant to which it will not take certain actions related to, or knowingly encourage others to take actions related to, business combinations, mergers, tender offers or restructurings, and will refrain from taking certain actions related to the calling of meetings, proxies, proposals, director nominations, voting trusts and other actions of shareholders. Timwell has also agreed to vote its ordinary shares in accordance with the recommendations of our Board on shareholder proposals and Board proposals relating to any change of control, election of directors, amendments to the Company’s organizational documents, director and officer compensation and certain other related matters, provided that the action does not have an disproportionate adverse impact on Timwell’s rights as a shareholder compared to the other shareholders.
Notwithstanding the above, pursuant to the Investment Agreement, Timwell will not be restricted from purchasing shares in open-market transactions after the Third Tranche Closing, so long as Timwell and its affiliates together beneficially own not more than 35% of the outstanding shares of the Company. The standstill will remain in effect for so long as Timwell beneficially owns or has rights to at least 10% of the outstanding ordinary shares of the Company, and the voting agreement will remain in effect for so long as Timwell beneficially owns or has rights to at least 5% of the outstanding ordinary shares of the Company.
Preemptive Rights
The Investment Agreement grants Timwell certain preemptive rights. Following the First Tranche Closing and as long as Timwell holds at least 75% of the aggregate of the then-Purchased Shares at any of the First Tranche Closing, Second Tranche Closing and Third Tranche Closing through the date of determination of the preemptive right under the Investment Agreement, if any, in the event that the Company proposes to offer or sell any new securities other than in a public offering, the Company must first offer Timwell the right to purchase its then-applicable preemptive pro rata fraction of such new securities as calculated based on the terms provided in the Investment Agreement.
Registration Rights Agreement
Pursuant to the Investment Agreement, upon the First Tranche Closing, the Company and Timwell will enter into the form of registration rights agreement attached as Annex A to the Investment Agreement (the “Registration Rights Agreement”), relating to registration under the Securities Act of resales of the Purchased Shares. Pursuant to the Registration Rights Agreement, Timwell and certain permitted transferees will have certain demand and piggyback registration rights with customary indemnification provisions, subject to customary cutbacks on the number of shares to be registered or offered in an underwritten offering where the managing underwriter advises that marketing factors call for a limitation on the number of shares to be registered or offered. The registration rights will terminate upon certain customary triggers, including when Timwell and certain permitted transferees could sell all of their Purchased Shares without restriction pursuant to Rule 144 under the Securities Act.
China JV, License Agreement and Related Agreements
China JV
Pursuant to terms of the joint venture framework agreement, dated March 6, 2018 (the “JV Framework Agreement”), between the Company and RealCan Ambrum Healthcare Industry Investment (Shenzhen) Partnership Enterprise (Limited Partnership), an affiliate of Timwell (“Timwell JV Party”), the Company and Timwell JV Party intend to form a joint venture company in China for the purposes of research and development, assembly, registration, import, operations, sales and marketing of the Company’s products in China (including Hong Kong and Macau) (the “China JV”). Under the JV Framework Agreement, the China JV will be owned 80% by Timwell JV Party and/or other affiliates of the Timwell and Timwell JV Party to be agreed to by the parties in the JV Agreement (“Timwell China Parties”) and 20% by the Company (which ownership by the Company will not be diluted for at least the first five years after the formation of the China JV).
The parties have agreed that they will collaborate to form the China JV by negotiating and signing a JV agreement (the “JV Agreement”), consistent with the terms of the JV Framework Agreement. Pursuant to the JV Framework Agreement, the Company will not compete with the China JV in China (including Macau and Hong Kong), and Timwell JV Party will not compete with the Company anywhere in the world.
As set forth in the JV Framework Agreement, Timwell China Parties will appoint four of the China JV’s directors and the Company will appoint one director. The initial chief executive officer and the initial chief financial officer of the China JV will be appointed by joint agreement of Timwell China Parties and the Company. The Company will have customary minority protection rights, including a requirement that board decisions on specified matters be unanimous, which will survive any public offering of the China JV to the extent permissible. There will also be restrictions in the JV Agreement on the parties’ ability to sell or transfer their shares in the China JV other than to permitted transferees. Timwell China Parties and the Company will have a right of first refusal on proposed sales by the other party, and the Company will have a tag-along right if Timwell JV Party proposes to sell its shares in the China JV. Upon a change in control of the Company, Timwell China Parties will have the right to purchase the shares in the China JV owned by the Company at fair market value. In addition, each party will have the right to purchase the other party’s shares, if the other party proposes to sell its shares to a competitor of the remaining party.
In order for the China JV to maintain exclusive rights in China (including Macau and Hong Kong) to market and sell the Company’s products and the rights to the intellectual property, the China JV will be required to make certain minimum cash payments to the Company of the following amounts: $1.25 million for the first year after formation; $4 million for the second year after formation; $8 million for the third year after formation; an amount increased annually by 15% of the preceding year’s amount for the fourth, fifth and sixth years after formation; an amount increased annually by 10% of the preceding year’s amount for the seventh, eighth and ninth years after formation; and an amount increased between 5% and 8% of the preceding year’s amount for the tenth year after formation onward.
The Company and Timwell JV Party have agreed to use reasonable efforts to form the China JV, to negotiate and execute the JV Agreement on a date that allows reasonable time to ensure the establishment of the China JV no later than July 1, 2018, and to arrange for the China JV and the Company to execute and deliver the License Agreement and the Supply Agreement within 20 days after the establishment of the China JV.
License Agreement
In conjunction with and after formation of the China JV, the Company intends to execute a license agreement (the “License Agreement”) with the China JV with terms and conditions consistent with an agreed set of key terms (the “License Key Terms”). Pursuant to the License Key Terms, the Company will grant to the China JV (a) an exclusive, royalty-bearing, non-sublicensable (except as mutually agreed), non-transferable (except as mutually agreed) license under certain of the Company’s owned intellectual property, (b) an exclusive, royalty-bearing, non-sublicensable, non-transferable sublicense under certain of the Company’s controlled (but not owned) patent rights and (c) a non-exclusive, non-sublicensable, non-transferable sublicense under certain of the Company’s controlled (but not owned) know-how, in each case, solely for use for certain products in the China JV’s business and only in China (including Hong Kong and Macau).
The term of the License Agreement will expire upon expiration of all valid claims of the licensed patents. The License Agreement will also be terminable by the Company or the China JV due to the other party’s material uncured breach and for other events, including that sublicenses under any controlled (but not owned) intellectual property will terminate upon termination of the upstream license. The License Agreement will comply with and be expressly subject and subordinate to all requirements of any upstream license agreements and requirements of applicable law and will contain customary terms and conditions mutually agreed by the parties, including diligence, confidentiality, indemnity and limitation of liability provisions.
Supply Agreement
The Company and Timwell also intend for the China JV and the Company to enter into a supply agreement consistent with an agreed form of supply agreement attached as Annex G to the Investment Agreement (the “Supply Agreement”) pursuant to which the Company will sell its products to the China JV, for resale solely in China (including Macau and Hong Kong). The Supply Agreement will set a target profit margin for the Company on the sale of its products to the China JV, and also shall specify the credit terms to be afforded to the China JV on these sales. The China JV’s rights under the Supply Agreement are conditioned on satisfaction of the minimum cash payments as are specified in the JV Agreement (as described above). The term of the Supply Agreement will be concurrent with the term of the License Agreement, subject to termination provisions and other terms to be agreed to by the parties in the Supply Agreement.
The Investment Agreement and JV Framework Agreement contain a number of representations and warranties that we and Timwell (and its affiliates) have made to each other that are customary in such transactions. Moreover, representations and warranties are frequently utilized in agreements as a means of allocating risks, both known and unknown, rather than to make affirmative factual claims or statements. These representations and warranties are made as of specific dates and are subject to important exceptions and limitations, including a contractual standard of materiality different from that generally applicable under federal securities laws. Accordingly, persons not party to the Investment Agreement or the JV Framework Agreement should not rely on the agreement for any characterization of factual information about us, Timwell or Timwell JV Party.
ITEM 1A.RISK FACTORS
Our business faces significant risks. You should carefully consider all of the information set forth in this annual report and in our other filings with the SEC, including the following risk factors which we face and which are faced by our industry. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks. In that event, the trading price of our ordinary shares would likely decline and you might lose all or part of your investment. This report also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements, as a result of certain factors including the risks described below and elsewhere in this report and our other SEC filings. See also “Special Note Regarding Forward-Looking Statements”Statements and Risk Factors Summary” on page (iii)(ii).
Risks Related to Our Business and Our Industry
We rely on sales of our ReWalk systems and related service contracts and extended warranties for our revenue. We may not be able to achieve or maintain market acceptance of our ReWalk systems or, once approved and commercialized, our lightweight soft suit exoskeleton, or to generate sufficient revenues from these current and future products.
We currently rely,may fail to realize the benefits expected from our acquisition of AlterG, which could adversely affect the price of our ordinary shares.
As discussed above in “Part I. Item 1. Business - Overview”, on August 11, 2023, we completed the acquisition of AlterG which became an indirect and wholly-owned subsidiary of the Company.
The anticipated benefits from our acquisition of AlterG are based on projections and assumptions about the combined businesses of ReWalk and AlterG, which may not materialize as expected or which may prove to be inaccurate. The value of our ordinary shares could be adversely affected if we are unable to realize the anticipated benefits from the acquisition on a timely basis or at all. Achieving the benefits of the acquisition will depend, in part, on our ability to integrate the business, operations and products of AlterG successfully and efficiently with our business. The process of integrating the operations of ReWalk and AlterG could encounter unexpected costs and delays, which include: the loss of key personnel; the loss of key customers; the loss of key suppliers; inability to properly identify, acquire or obtained required regulatory approvals; and unanticipated issues in integrating sales, marketing and administrative functions. In addition, the acquired AlterG business, products and technologies may not achieve anticipated revenues and income growth.
Further, the integration of AlterG may involve a number of additional risks, including diversion of management’s attention away from the rest of the business, which could adversely affect our results of operations. In addition, our failure to identify or accurately assess the magnitude of certain liabilities we assumed in the acquisition could result in unexpected litigation or regulatory exposure, unfavorable accounting charges, unexpected increases in taxes due, a loss of anticipated tax benefits or other adverse effects on our business, operating results or financial condition. If we do not realize the expected benefits or synergies of the acquisition, such as revenue gains or cost reductions, there could be a material adverse effect on our business, results of operations, and financial condition.
Global, regional, and local economic weakness and uncertainty could adversely affect our demand for our products and services and our business and financial performance.
Our business and financial performance depends on worldwide economic conditions and the demand for our products and services in the markets in which we compete. Ongoing economic weakness, including an economic slowdown or recession, uncertainty in markets throughout the world and other adverse economic conditions, including inflation, changes in monetary policy and increased interest rates, have resulted, and may result in the future, will rely, on sales of our ReWalk systems and related service contracts and extended warrantiesin decreased demand for our revenue. Additionally, we are developingproducts and intendservices and increased expenses and difficulty in managing inventory levels and accurately forecasting revenue, gross margin, cash flows and expenses. Ongoing U.S. federal government spending limits may continue to commercialize a lightweight soft suit exoskeleton, designed to support mobilityreduce demand for individuals sufferingour products and services from other lower limb disabilities, and aim to begin marketing an initial indication for stroke patients in the first half of 2019 after applying for and receiving mandatory regulatory clearances.We have sold only a limited number of ReWalk systems, and market acceptance and adoption depend on educating people with limited upright mobility and health care providers as to the distinct features, ease-of-use, positive lifestyle impact and other benefits of ReWalk compared to alternative technologies and treatments. ReWalk may not be perceived to have sufficient potential benefits compared with these alternatives. Users may also choose other therapies due to disadvantages of ReWalk, including the time it takes for a user to put on ReWalk, the slower pace of ReWalk compared to a wheelchair, the weight of ReWalk when carried, which makes it more burdensome for a companion to transport than a wheelchair, and the requirementorganizations that users be accompanied by a trained companion. Also, we believe that healthcare providers tend to be slow to change their medical treatment practices because of perceived liability risks arisingreceive funding from the use of new productsU.S. government and the uncertainty of third-party reimbursement. Accordingly, healthcare providers may not recommend ReWalk until there is sufficient evidence to convince them to alter the treatment methods they typically recommend, such as prominent healthcare providers or other key opinion leaders in the spinal cord injury community recommending ReWalk as effective in providing identifiable immediate and long-term health benefits.
In addition, while several private and national insurerscould negatively affect macroeconomic conditions in the United States, which could further reduce demand for our products and Europe have provided reimbursement for ReWalk in certain casesservices.
Prolonged or more severe economic weakness and uncertainty could also cause our expenses to date,vary materially from our expectations. Any financial turmoil affecting the VA maintains its coverage policy for qualifying veterans acrossbanking system and financial markets or any significant financial services institution failures could negatively impact our treasury operations, as the United Statesfinancial condition of such parties may deteriorate rapidly and German insurers Barmerwithout notice. Poor financial performance of asset markets and DGUV have issued broad coverage decisions, no broad uniform policythe adverse effects of coveragefluctuating currency exchange rates could lead to higher pension and reimbursement for electronic exoskeleton medical technology exists among third-party payors in the United States. Additionally, health insurance companiespost-retirement benefit expenses. Interest and other third-party payorsexpenses could vary materially from expectations depending on changes in the future may not deliver adequate coverage or reimbursement for our products. The VA, Barmer or DGUV may cancel or materially curtail their current policy of providing coverage in the United States for qualifying individuals who have suffered spinal cord injury, or we may not place enough units through the VA to make our sales profitable under the VA policy. Additionally, any future government measures to restrict healthcare spending could limit or eliminate our ability to provide products to, and gain revenues from insurance reimbursements. We may be unable to sell ReWalk systems on a profitable basis if third-party payors deny coverage, limit reimbursement or reduce their levels of payment, or if ourinterest rates, borrowing costs, currency exchange rates, costs of production increase faster than increases in reimbursement levels. In addition, we may not obtain coverage and reimbursement approvals in a timely manner. Our failure to receive such approvals would negatively impact market acceptance of ReWalk.
Achieving and maintaining market acceptance of ReWalk could be negatively impacted by many other factors, including, but not limited to:
lack of sufficient evidence supporting the benefits of ReWalk over competitive products or other available treatment, or lifestyle management, methodologies;
results of clinical studies relating to ReWalk or similar products;
claims that ReWalk, or any component thereof, infringes on patent or other intellectual property rights of third-parties;
perceived risks associated with the use of ReWalk or similar products or technologies;
the introduction of new competitive products or greater acceptance of competitive products;
adverse regulatory or legal actions relating to ReWalk or similar products or technologies; and
problems arising from the outsourcing of our manufacturing capabilities, or our existing manufacturing and supply relationships.
Any factors that negatively impact sales of ReWalk would adversely affect our business, financial condition and operating results.
We have concluded that there are substantial doubts as to our ability to continue as a going concern.
We have incurred accumulated losses in the amount of $131.2 million as of December 31, 2017 and further losses are anticipated in the development of our business. Those factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The financial statements have been prepared assuming that we will continue to operate as a going concern, which contemplates the realization of assetshedging activities and the satisfaction of liabilities in the normal course of business. Our auditors also included an explanatory paragraph to their audit opinion relating to our accompanying consolidated financial statements for the fiscal year ended December 31, 2017 regarding the substantial doubts about the Company's ability to continue as a going concern.
The Company intends to finance operating costs over the next twelve months with existing cash on hand, reducing operating spend, issuances under our at-the-market equity offering program (“ATM Offering Program”), other future public or private issuances of securities, including the recently signed private placement of ordinary shares to Timwell, or through a combination of the foregoing. However, we will need to seek additional sources of financing if we require more funds than anticipated during the next 12 months or in later periods, including if we cannot make our loan repayments under our loan agreement (the “Loan Agreement” or the “Kreos Loan Agreement”) with Kreos Capital V (Expert Fund) Limited (“Kreos”), or if we cannot raise sufficient funds from equity issuances, such as the ATM Offering Program. If we cannot raise the required funds on acceptable terms, we may be forced to substantially curtail our current operations or cease operations altogether. Further, external perceptions regarding our ability to continue as a going concern may make it more difficult for us to obtain financing for the continuation of our operations or require us to obtain financing on terms that are more favorable to investors, and could result in the loss of confidence by investors and suppliers. As such, our failure to continue as a going concern could harm our business, operating results and financial position and severely affect thefair value of your investment.derivative instruments. Economic downturns also may lead to future restructuring actions and associated expenses.
We may not have sufficient funds to meet certain future operating needs or capital requirements, which could impair our efforts to develop and commercialize existing and new products, and as a result, we may need to take advantage of various forms ofin the future consider one or more capital-raising transactions, Futureincluding future equity or debt financings, strategic transactions, or borrowings which may also further dilute our shareholders or place us under restrictive covenants limiting our ability to operate.operate freely.
As of December 31, 2017, we had an accumulated deficit in the total amount of $131.2 million, and further losses are anticipated in the development of our business. Those factors raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern depends upon our obtaining the necessary financing to meet our obligations and timely repay our liabilities arising from normal business operations.
We intend to finance our business by close management of our operating costs over the next 12 months withexpenses until we reach profitable operation using existing cash on hand, issuances of equity and/or debt securities, including issuances under the Company's ATM Offering Program,and other future public or private issuances of securities, including the recently signed private placementcash exercised of ordinary shares to Timwell,outstanding warrants, or through a combination of the foregoing. However,foregoing, though we may also consider additional capital raising alternatives, such as entering into a credit facility, if the foregoing alternatives are not available to us or unavailable on reasonable terms. Although we had a cash and cash equivalents of $28.1 million as of December 31, 2023, which we believe will needbe sufficient to seek additional sources of financing if we require more funds than anticipated duringfund our planned operations through at least the next 12twelve months or in later periods, including if we cannot make our loan repayments under our Kreos Loan Agreement, or if we cannot raise sufficient funds from equity issuances, such as the ATM Offering Program. In addition, due to limitations under the rules of Form S-3, which have applied to us since we filed our Form 10-K in February 2017, we may only sell up to approximately $13.7 million in primary offerings under our effective registration statement on Form S-3 (the “Form S-3”), including our ATM Offering Program, during any 12-month period while we remain subject to these limitations. As of the date of this annual report, if we have sold approximately $9.3 millionare incorrect in securitiesour assumptions, we may need to raise additional capital sooner than expected or on less favorable terms than what might otherwise be available. Raising additional capital through one or more of these alternatives may further dilute our shareholders or place us under restrictive covenants limiting our ability to operate freely.
Raising additional capital in the public markets could also entail certain downsides. Although we are currently eligible to use our Form S-3, during the last 12 months, when we were subjectare limited to these restrictions. We will recalculate the amountselling no more than one-third of this limitation if we terminate our ongoing takedown and conduct another takedown underunaffiliated market capitalization, or public float, on Form S-3 in a 12-month period unless our Form S-3.public float rises above $75 million. For more information on our inability to use Form S-3, see “Part II,II. Item 7.2, Management’s Discussion and Analysis of Financial Condition and Results of Operations-LiquidityOperations—Liquidity and Capital Resources-Equity Raises.”
To raise additional capital in the public markets, including taking into account the limitation above,Form S-3, we may be required to seek other more costly or time-consuming methods for access to capital, such as additional offerings ona registration statementsstatement on Form S-1. The preparation of a registration statement on Form S-1 is, and has in the past, been more time-consuming and costly than using Form S-3. We may also conduct fundraising transactions in the form of private placements, potentially with registration rights or priced at a discount to the market value of our ordinary shares, which could require shareholder approval under the rules of The Nasdaq Stock Market LLC (“Nasdaq”), or other equity raise transactions such as equity lines of credit. We have in the past been, and may in the future be, required to pay advisory fees to investment banks assisting us with financing transactions. In addition to entailing increased capital costs, any such transactions have historically resulted in and could result in substantial dilution of our shareholders’ interests and may also transfer control to a new investor andor diminish the value of an investment in our ordinary shares.
We may also need to pursue strategic transactions, such as joint ventures, in-licensing transactions, or the sale of our business, or all, or substantially all, of our assets.assets if our financial stability is uncertain, and we are unable to raise additional capital effectively. These private financings and strategic transactions have in the past and could in the future require significant management attention, disrupt our business, adversely affect our financial results, be unsuccessful or fail to achieve the desired results. We are in discussions routinely with such possible sources of additional funding. As another alternative,
Overall, if we cannot raise the required funds, or cannot raise them on terms acceptable to us or investors, we may choosebe forced to refinance upcurtail substantially our current operations or cease operations altogether.
We face economic and political risks associated with doing business in Taiwan, particularly due to the geopolitical tension between Taiwan and China, and in Russia that could negatively affect our business and hence the value of your investment.
Currently, we rely on third party suppliers in Taiwan for a substantial portion of the components we use in our indebtedness underAlterG products. Accordingly, our Kreos Loan Agreement, which we have considered with Kreosbusiness, financial condition and results of operations and the market price of our securities may be affected by changes in governmental policies, taxation, growth rate, inflation rate or interest rates and by social instability and diplomatic and social developments in or affecting Taiwan. In particular, the unique political status of Taiwan and its internal political movement cause sustained tension between China and Taiwan. Past developments related to the interactions between China and Taiwan, especially in relation to trade activities such as bans on exports of goods from time to time, have on occasions depressed the transactions and business operations of certain Taiwanese companies and overall economic environment. We cannot predict whether there will be escalation of the tensions between China and Taiwan, which would lead to new bans or borrowtariffs on exports or even conflict. Any conflict which threatens the military, political or economic stability in Taiwan could have a material adverse effect on our current or future business and financial conditions and results of operations.
In addition, we also sell our AlterG products in Russia. The current invasion of Ukraine by Russia has escalated tensions among the United States, the North Atlantic Treaty Organization (“NATO”) and Russia. The United States and other NATO member states, as well as non-member states, have announced new sanctions against Russia and certain Russian banks, enterprises and individuals. AlterG prior to the acquisition and Lifeward subsequent to the acquisition has remained in compliance with these sanctions by obtaining export licenses for each shipment to our distributor that serves Russia. These and any future additional funds. sanctions and any resulting conflict between Russia, the United States and NATO countries could have an adverse impact on our current operations.
Further, such invasion, ongoing military conflict, resulting sanctions and related countermeasures by NATO states, the United States and other countries are likely to lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions for equipment, which could have an adverse impact on our operations and financial performance.
We do not satisfy all requirements for continued listing on The Nasdaq Capital Market. We can provide no assurance that we will be able to comply with the continued listing requirements over time or that our ordinary shares will continue to be listed on The Nasdaq Capital Market.
As previously disclosed, on October 10, 2022, we received a notification letter (the “Bid Price Letter”) from Nasdaq that we failed to evidence a minimum closing bid price of $1.00 per share for the prior 30-consecutive business day period in contravention of Nasdaq Listing Rule 5550(a) (“Rule 5550(a)”). We were provided an initial period of 180 days to regain compliance with Rule 5550(a). On April 11, 2023, we received a second notification letter from Nasdaq indicating that we had been provided with an additional period of 180 calendar days, or until October 9, 2023, to regain compliance with Rule 5550(a). The bid price of our ordinary shares did not close at $1.00 per share or more for a minimum of 10 consecutive business days by October 5, 2023, and on October 6, 2023 we were notified by Nasdaq that, based upon our non-compliance with Rule 5550(a), as of October 5, 2023, our securities were subject to delisting unless we timely requested a hearing before the Nasdaq Hearings Panel (the “Panel”). We participated in an expedited review with the Panel, which first granted us an extension until January 31, 2024, to regain compliance with Rule 5550(a), including by implementing a reverse share split should such action be necessary to regain compliance.
We thereafter requested a further extension, through March 30, 2024, to allow for additional time for the finalization and implementation of the home health rule administrative proposal by CMS that explicitly includes exoskeletons within a Medicare benefit category. Our updated compliance plan continues to include the possible implementation of a reverse share split should such action be deemed necessary to maintain our listing on Nasdaq. On December 8, 2023, we were notified that the Panel had granted us the requested extension through March 30, 2024, to regain compliance with Rule 5550(a)(2). To do so, we must evidence a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days by March 30, 2024.
If we were to carry out these transactions usingare not successful in regaining compliance with Rule 5550(a)(2) during the extension period, our ordinary shares will be removed from trading on The Nasdaq Capital Market. Any delisting determination could seriously decrease or eliminate the value of an investment bank we previously engagedin our ordinary shares and other securities linked to assist usour ordinary shares. While an alternative listing on an over-the-counter exchange could maintain some degree of a wide range of strategic transactions,market in our ordinary shares, we could incur advisory fees determinedface substantial material adverse consequences, including, but not limited to, the following: limited availability for market quotations for our ordinary shares; reduced liquidity with respect to our ordinary shares; a determination that our ordinary shares are “penny stock” under SEC rules, subjecting brokers trading our ordinary shares to more stringent rules on disclosure and the class of investors to which the broker may sell the ordinary shares; limited news and analyst coverage, in part due to the “penny stock” rules; decreased ability to issue additional securities or obtain additional financing in the future; and potential breaches under or terminations of our agreements with current or prospective large shareholders, strategic investors and banks. The perception among investors that we are at heightened risk of delisting could also negatively affect the market price of our securities and trading volume of our ordinary shares. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with the listing requirements would allow our ordinary shares to become listed again, stabilize the market price or improve the liquidity of our ordinary shares, prevent our ordinary shares from dropping below the Nasdaq minimum bid price requirement, or prevent future non-compliance with Nasdaq’s listing requirements.
Our future growth and operating results will depend on our ability to develop, receive regulatory clearance for and commercialize new products and penetrate new product and geographic markets.
We are currently engaged in research and development efforts to address the needs of patients with mobility impairments besides paraplegia, such as stroke, and, in the future, we may engage in efforts to address these needs in patients with other conditions such as multiple sclerosis, cerebral palsy, Parkinson’s disease and elderly assistance. In 2019, we commercialized our first product for stroke patients, the ReStore Exo-Suit. For more information, see “Part, Item 1. Business—ReStore Products” above. While our Collaboration Agreement with Harvard for the design, research and develop lightweight exoskeleton system technologies for lower limb disabilities intended to treat stroke, multiple sclerosis, mobility limitations for the elderly and other medical applications successfully concluded on March 31, 2022, Harvard has licensed to us certain of its intellectual property relating to lightweight exoskeleton system technologies for lower limb disabilities. We are obligated to use commercially reasonable efforts to develop products under the license in accordance with an agreed-upon development plan and to introduce and market such products commercially.
We expect that a percentageportion of total proceeds,our revenue will be derived, in the next few years, from the ReStore soft exo-suit product, other new products utilizing DAP, and, in later years, if we choose to advance the current designs, from other potential new products, such as ReBoot, a home use device for stroke patients, or new products aimed at addressing other medical indications which affect the ability to walk, including multiple sclerosis, cerebral palsy, Parkinson’s disease and elderly assistance. As such, our future results will depend on our ability to successfully develop and commercialize such new products and to penetrate our targeted markets with our existing ReStore product in larger scale than we have done to date. We cannot ensure that we will be able to introduce new products, products currently under development or products contemplated for future development for additional indications in a timely manner, or at all, as it depends on our available resources to fund such projects, as well as our ability to conduct clinical trials and testing. While we received governmental clearance to market our ReStore product on the anticipated timetable in 2019, obtaining clearance for any other products we may develop could be an extensive, costly, and time-consuming process, which could delay any planned commercialization timelines. For more information on the clearance processes for our products, see “Part I, Item 1. Business—Government Regulation” above.
Harvard may terminate its License Agreement with us if we fail to maintain the requisite insurance or become insolvent. Any such termination of this aspect of the collaboration with Harvard could impair our research and development efforts into lightweight soft suit exoskeleton system technologies for lower limb disabilities such as the ReBoot device which is intended to be used at home by people who suffered a stroke. In addition, we may not be able to clinically demonstrate the medical benefits of our products for new indications. We have limited clinical data demonstrating the benefits of our products and we might not be able to support the economic benefits our products have for our potential customers. We may also be unable to gain necessary regulatory clearances or approvals to enable us to market new products for additional indications or the regulatory process may be more costly and time-consuming than expected, which could adversely impact us given our cash position and ongoing capital requirements.
Even if we are successful in the design and development of new products, our growth and results of operations will depend on our ability to penetrate new markets and gain acceptance and reimbursement coverage in non-SCI markets such as the stroke rehabilitation market, and, in the longer term, the home use device market for stroke-caused lower limb disability, multiple sclerosis, elderly assistance and cerebral palsy patients. We may not be able to gain such market acceptance and coverage for these indications in a timely manner, or at all.
While our new products currently under development will share some aspects of the core technology platform of our current products, their design features and components may differ from our current products. Accordingly, these products will also be subject to negotiationthe risks described in the risk factor immediately below entitled “We rely on sales of our ReWalk Personal Exoskeletons, ReStore Exo-Suits, and AlterG Anti-Gravity systems and related service contracts and extended warranties for other potentially-owed fees. Agreements governing any borrowing arrangementour revenue. We may contain covenants that could restrictnot be able to achieve or maintain market acceptance of our ReWalk, ReStore, or AlterG Anti-Gravity products, or to generate sufficient revenue from these current and future products to sustain our operations. In sum, if” To the extent we are unable to obtain additional funds on reasonable terms, it could impair our efforts tosuccessfully develop and commercialize products beyond our existing commercial product portfolio, we will not meet our operating and financial objectives.
We rely on sales of our ReWalk Personal Exoskeletons, ReStore Exo-Suits, and AlterG Anti-Gravity systems and related service contracts and extended warranties for our revenue. We may not be able to achieve or maintain market acceptance of our ReWalk, ReStore, or AlterG Anti-Gravity products or to generate sufficient revenue from these current and future products to sustain our operations.
We currently rely, and expect in the future to rely, on sales of our ReWalk Personal Exoskeleton, ReStore Exo-Suit, and AlterG Anti-Gravity systems, and related service contracts and extended warranties for our revenue. We began marketing the ReStore lightweight soft exo-suit in 2019 in the United States and the E.U. (following the receipt of FDA and CE mark clearance) to support mobility for individuals suffering from other lower limb disabilities. Several factors could negatively affect our ability to achieve and maintain market acceptance of our ReWalk, AlterG, or ReStore systems, which could in turn materially impair our business, financial condition, and operating results, as follows:
| • | ReWalk. We have sold a limited number of ReWalk systems, and market acceptance and adoption depend on educating people with limited upright mobility and health care providers as to the distinct features, ease-of-use, positive lifestyle impact, and other benefits of ReWalk compared to alternative technologies. ReWalk may not be perceived to have sufficient potential benefits compared with these alternatives. Users may also choose other alternatives due to disadvantages of ReWalk, including the time it takes for a user to put on the device, the slower pace of ReWalk compared to a wheelchair, the weight of ReWalk when carried, which makes it more burdensome for a companion to transport than a wheelchair, the required training, and the requirement that users be accompanied by a trained companion. Also, we believe that healthcare providers tend to be slow to change their medical treatment practices because of perceived liability risks arising from the use of new products and the uncertainty of third-party reimbursement. Accordingly, healthcare providers may not recommend ReWalk until there is sufficient support for the device to convince them to alter the treatment methods they typically recommend, such as expanded reimbursement coverage by payors, and/or recommendations by prominent healthcare providers or other key opinion leaders in the spinal cord injury community that ReWalk is effective in providing identifiable immediate and long-term health benefits. |
In the United States, many private third-party payors use coverage decisions and payment amounts determined by CMS as guidelines in setting their coverage and reimbursement policies. In July 2020, CMS issued a Healthcare Common Procedure Coding System Level II Code for ReWalk Personal Exoskeleton. These codes are used to identify medical products and supplies and to repayfacilitate insurance claim submissions and processing for these items. On November 1, 2023, CMS issued Calendar Year 2024 Home Health Prospective Payment System Rule CMS-1780, which explicitly included exoskeletons within a Medicare brace benefit category. The rule went into effect on January 1, 2024. However, even with a positive coverage and reimbursement response from CMS regarding a product of ours, future action by CMS or other government agencies may diminish possible payments to clinicians, outpatient centers and/or hospitals that provide training to the patients so that they can operate the ReWalk Personal Exoskeletons satisfactorily before they take them home, which would discourage access to training sites to prospective users of ReWalk Personal Exoskeletons. Additionally, any decision by CMS regarding reimbursement could influence other payors, including private insurers. If CMS declines to provide for reimbursements of our liabilitiesproducts, or if its reimbursement price is lower than that of other payors, our products may not be reimbursed at a cost-effective level or at all. Those private third-party payors that do not follow the Medicare guidelines may adopt different coverage and reimbursement policies for purchase of our products or their use in a hospital or rehabilitative setting. In addition, we expect that the purchase of ReWalk Rehabilitation Exoskeleton systems and the ReStore system, as they become due, materially harmingit is currently being sold for use in rehabilitative settings, will require the approval of senior management at hospitals or rehabilitation facilities, inclusion in the hospitals’ or rehabilitation facilities’ budget process for capital expenditures, and in the case of ReWalk Personal Exoskeleton, fundraising, and financial planning or assistance.
| • | ReStore. The ReStore system is designed to provide advantages to stroke rehabilitation clinics and therapists as compared to other traditional therapies and devices by minimizing setup time, improving patients’ clinical results during therapy, supplying real-time analytics to optimize session productivity, and generating ongoing data reports to assist with tracking patient progress Since the ReStore device is currently only indicated for use in the rehabilitative clinical setting, its market reception will depend heavily on our ability to demonstrate to clinics and therapists the systemic and economic benefits of using the ReStore device, its clinical advantage when compared to other devices or manual therapy, the functionality of the device for a significant portion of the patients that they treat and the overall advantages that the device provides to their patients compared to other technologies. Because the ReStore system is only indicated for use in a clinical setting and we received FDA approval and CE clearance in 2019, close in time to the start of the COVID-19 pandemic, the overall sales of the system have been lower than originally anticipated, as many healthcare providers and rehabilitation centers have shifted focus from the clinical setting to at-home therapies and are generally less open for introduction of new technologies such as the ReStore |
| . | AlterG. The AlterG Anti-Gravity system has broad clinical utility for treating a wide variety of lower extremity conditions where partial displacement of a patient’s weight can enable exercise which facilitates healing and recovery of improved function. The potential of the AlterG Anti-Gravity systems to achieve greater penetration of the addressable market of rehabilitation hospitals, clinics, and sports medicine practices will depend upon the continued expansion of conditions for which clinicians utilize the AlterG and the ability for greater numbers of these facilities to afford the initial capital outlay for these devices. We are developing and hope to introduce in 2024 a new, lower-cost AlterG system, which we believe will make it more affordable for smaller, independent rehabilitation clinics. However, there can be no assurance that the introduction of this product can expand the size of the addressable market or will not reduce the sales of the existing, higher-priced models. |
As a general matter, achieving and maintaining market acceptance of our current or future products could be negatively impacted by many other factors, including, but not limited to the following: contribution to death or serious injury or malfunction, results of operationsclinical studies relating to our or similar products; claims that our products, or any of their components, infringe on patent or other intellectual property rights of third parties; our ability to support financially and leverage our sales, marketing and training infrastructure, as well as our level of research and development efforts; our ability to enhance and broaden our research and development efforts and product offerings in response to the evolving demands of people with paraplegia and lower limb disability and healthcare providers; our estimates regarding our current or future addressable market; perceived risks associated with the use of our products or similar products or technologies; the introduction of new competitive products or greater acceptance of competitive products; adverse regulatory or legal actions relating to our products or similar products or technologies; and problems arising from the outsourcing of our manufacturing capabilities, or our existing manufacturing and supply relationships. Any or all of these factors could materially and negatively impact our business, financial condition.condition and operating results.
The market for medical exoskeletons, including soft suit devices, isremains relatively new and unproven, and important assumptions about the potential market for our current and future products may be inaccurate.
The market for medical exoskeletons, isincluding lightweight exo-suit devices, remains relatively new and unproven. Accordingly, it is difficult to predict the future size and rate of growth of the market. We cannot be certain whether the market will continue to develop or if medical exoskeletons will achieve and sustain a level of market acceptance and demand sufficient for us to continue to generate revenue and achieve profitability.
We obtained FDA clearance for our ReWalk Personal Exoskeleton device in June 2014. This clearance permits us to market the device for use by individuals with spinal cord injury at levels T7 to L5 and for use by individuals in rehabilitation institutions with spinal cord injury at levels T4 to L5. The FDA’sT6. We obtained FDA clearance requires users offor our ReStore system in June 2019. This clearance permits us to market the device to meet the following criteria: healthy hands and shoulders that can support crutches, healthy bone density, no skeletal fractures,be used to assist ambulatory functions in good general health, ability to standrehabilitation institutions under supervision of a trained therapist for people with a stander device, weight of less than 220 pounds/100 kilograms and height between 5 feet 3 inches and 6 feet 2 inches/1.60 meters and 1.88 meters. Additionally, the FDA clearance contraindicates psychiatrichemiplegia or cognitive conditions that could interfere with a user’s proper operation of the device and various other clinical conditions, including pregnancy, severe concurrent medical diseases, a history of severe neurological injuries other than spinal cord injury, impaired joint mobility, unhealed limbs or pelvic fractures or unstable spine, severe spasticity and significant and chronic loss of joint mobilityhemiparesis due to structural changes in non-bony tissue. stroke who can ambulate at least 1.5 meters (5 feet) with no more than minimal to moderate levels of assistance.
Future products for those with paraplegia or other mobility impairments or spinal cord injuries such as our Restore product for stroke patients, may have the same or other restrictions.
Our business strategy is based, in part, on our estimates of the number of mobility impaired individuals with physical limitations and disability and considers the incurrenceoccurrence of spinal cord injuries, strokes, lower-extremity orthopedic injury or surgery, neurological disease, and obesity in our target markets, and the percentage of those groups that would be able to use our current and future products. Limited sources exist to obtain reliable market data with respect to the number of mobility-impaired individuals and the incurrence of spinal cord injuries and strokes in our target markets. In addition, there are no third-party reports or studies regarding what percentage of those with limited mobility and/or spinal cord injuries would be able to use exoskeletons, in general, or our current or planned future products, in particular. Our assumptions may be inaccurate and may change.
The NSCISC estimates according to its 2023 SCI Data Sheet that as of 2017 there were 285,000are 302,000 people in the United States living with SCI, and that thewith an annual incidence of SCI cases is approximately 17,50018,000 new cases per year. Based on information from a 2016the 2022 annual report published by the NSCISC, 40.6%40% of the total U.S. population of SCI patients suffered injuries between levels T4 and L5. ThreeFour published ReWalk trials with respect to such eligible SCI patients had an aggregate screening acceptance rate of 79%50% considering all current FDA limitations, resulting in an estimated 33%20% of the total population of SCI patentspatients being qualified candidates for current ReWalk products.products under its medical labeling criteria. There may be other permanent or short-term factors that affect the market size such as the ability to participate in the training program, the ability to use the device in the user’s current home environment as well as available companion support. With regards to our ReStore product for stroke rehabilitation, as the indication of use is currently in rehabilitation clinics our target market is based on the number of current and future clinics who treat stroke patients. Although there are thousands of inpatient, outpatient and rehabilitation clinics providing therapy in the U.S. for example, we currently see that only a limited portion of the clinics have decided to include ReStore in their stroke rehab program. For more information on our expectations regarding these plans, see “-Our“—Our future growth and operating results will depend on our ability to develop, receive regulatory clearance for and commercialize new products and penetrate new product and geographic markets” below. For more information regarding the potential market for future products, including our lightweight soft suit exoskeleton, see “Item“Part I, Item 1. Business-Market Opportunity.”Business—ReWalk Personal and ReWalk Rehabilitation Products—Market Opportunity” above.
We cannot assure you that our estimate regarding our current products is accurate or that our estimate regarding future products will remain the same. FDA or CE mark clearance for such products, if received at all, may contain different limitations from the ones the FDA or EU has placed on the devices we currently market for paraplegia patients.paraplegia. If our estimates of our current or future addressable market are incorrect, our business may not develop as we expect, and the price of our securities may suffer.
We may fail to secure or maintain adequate insurance coverage or reimbursement for ReWalkour products by third-party payors, which risk may be heightened if insurers find ReWalkthe products to be investigational or experimental or if new government regulations change existing reimbursement policies. Additionally, such coverage or reimbursement, even if maintained, may not produce revenuesrevenue that are high enough to allow us to sell our products profitably.
We expect that in the future a significant source of payment for ReWalk systems will be private insurance plans and managed care programs, government programs such as the VA, Medicare and Medicaid, worker’sVHA, CMS, workers’ compensation plans, and other third-party payors.
In December 2015, the VAVHA issued a national reimbursement policy for the ReWalk system, which entails the evaluation, training and procurement of ReWalk Personal exoskeletonExoskeleton systems for all qualifying veterans across the United States. Additionally, in September 2017, German insurer Barmer and national social accident insurance provider DGUV each signed a confirmation and letter of agreement regarding the provision of ReWalk systems for all qualifying beneficiaries.beneficiaries and the German national social accident insurance provider DGUV indicated that its member payors will approve the supply of exoskeleton systems for qualifying beneficiaries on a case-by-case basis. However, no broad uniform policy of coverage and reimbursement for electronic exoskeleton medical technology exists among third-party payors in the United States, although reimbursement may be achieved on a case-by-case basis. To date, payments for our products, which are largely for our ReWalk systems, have been made primarily through case-by-case determinations by third-party payors (including several private insurers in the United States), by self-payors and, to a lesser extent, through the use of funds from insurance and/or accident settlements.
Generally, private insurance companies in the United States do not cover or provide reimbursement for any medical exoskeleton products for personal use, including ReWalk Personal Exoskeleton, and may ultimately provide no coverage at all. For instance, during 2017 we submitted a proposal to a large U.S. national insurance provider for a broader coverage policy for the ReWalk Personal device. While we believe there was support for a change, the insurer was unable to reach internal consensus and therefore elected not change its existing non-coverage policy. Additionally, there is limited clinical data related to the ReWalk and ReStore systems, and third-party payors may consider use of ReWalkthem to be experimental and therefore refuse to cover it. For example, Aetna has determined that certain lower-limb prostheses, including ReWalk, are experimental and investigational because there is inadequate evidenceany or all of their effectiveness.them. Additionally, the majority of independent medical review decisions to date made following the denial of ReWalk coverage have determined that ReWalk is experimental and/or investigational, citing a lack of clinical data.
ManyAs described above, in the United States, many private third-party payors use coverage decisions and payment amounts determined by the Center for Medicare and Medicaid Services, or the CMS which administers the Medicare program, as guidelines in setting their coverage and reimbursement policies. InOn November 1, 2023, CMS issued Calendar Year 2024 Home Health Prospective Payment System Rule CMS-1780, which explicitly included exoskeletons within a Medicare brace benefit category, effective January 1, 2024. CMS also solicited comment on a preliminary payment determination for the future,ReWalk Personal Exoskeleton as part of the November 29, 2023 HCPCS meeting process, and we intendparticipated to pursue reimbursement coverageprovide updated pricing information to inform CMS’s final payment determination. A final Medicare payment determination is expected from CMS. While we believe thatCMS in first quarter of 2024 with an April 1, 2024, effective date.
However, even with a positive coverage and reimbursement response from CMS will broaden coverage by private insurers, we cannot currently predict how long it would take for us to receiveregarding a decision from CMS. Even with a positive decision from CMS regarding ReWalk Personal,product of ours, future action by CMS or other government agencies may diminish possible payments to physicians, outpatient centers and/or hospitals that purchase ReWalk Rehabilitation,our products for use by their patients and possible payments to individuals who purchase the ReWalk Personal.Personal Exoskeleton for their own use. Additionally, a decision by CMS to provide reimbursement could influence other payors, including private insurers. If CMS declines to provide for reimbursements of ReWalkour products or if its reimbursement price is lower than that of other payors, ReWalkour products may not be reimbursed at a cost-effective level or at all. Those private third-party payors that do not follow the Medicare guidelines may adopt different coverage and reimbursement policies for purchase of ReWalk,our products or their use of ReWalk Rehabilitation atin a hospital or rehabilitation center.rehabilitative setting. In addition, we expect that the purchase of ReWalk Rehabilitation Exoskeleton systems and the ReStore system, as it is currently being sold for use in rehabilitative settings, will require the approval of senior management at hospitals or rehabilitation facilities, inclusion in the hospitals’ or rehabilitation facilities’ budget process for capital expenditures, and in the case of ReWalk Personal Exoskeleton, fundraising, and financial planning or assistance.
Third-party payors are developing increasingly sophisticated methods of controlling healthcare costs. These cost control methods include prospective payment systems, capitated rates, benefit redesigns and an exploration of other cost-effective methods of delivering healthcare. These cost control methods potentially limit the amount that healthcare providers may be willing to pay for electronic exoskeleton medical technology if they provide coverage at all. We may be unable to sell ReWalk systemsour products on a profitable basis if third-party payors deny coverage or provide insufficient levels of reimbursement.
Future legislation could result in modifications to the existing public and private health care insurance systems that would have a material adverse effect on the reimbursement policies discussed above. It is uncertain what impact the new U.S. presidential administration will have on healthcare spending. If enacted and implemented, any measures to restrict health care spending could result in decreased revenue from our products and decrease potential returns from our research and development initiatives.
Defects in our products or the software that drives them could adversely affect the results of Contents
our operations.A key element of our long-term business strategy is the continued leveraging of our sales, marketing, training, and reimbursement
Additionally, we expect to face significant challenges as we manage and continue to improve our sales and marketing infrastructure and work to retain the individuals who make up those networks. Newly hired sales representatives require training and take time to achieve full productivity. If we fail to train new hires adequately, or if we experience high turnover in our sales force in the future, we cannot be certain that new hires will become as productive as may be necessary to maintain or increase our sales. Likewise, following our acquisition of AlterG in August 2023 and in connection with integrating AlterG with ReWalk, each set of sales representatives had to learn how to sell new products and services. In addition, if we are not able to retain subjectexisting and recruit new trainers to our plans to cut operating expenses, and continue to recruit our network of internal trainers,clinical staff, we may not be able to successfully train customers on the use of ReWalk, ReStore, or AlterG systems which could inhibit new sales and harm our reputation. If we are unable to expand our sales, marketing, and training capabilities, we may not be able to effectively commercialize ReWalk,our products, or enhance the strength of our brand, which could have a material adverse effect on our operating results.