NEW YORK (TheStreet) -- A company that serves 54 customers may not appear to be the most thriving business at first sight, but when those 54 customers are paraplegics who are now able to walk on their own, the company that provides them with that capability means the world.
ReWalk (RWLK) - Get Report , founded in 1997 by an Israeli quadriplegic, Dr. Amit Goffer, makes an exoskeleton that helps paralyzed individuals walk. Last June, the device finally got approval from the Food and Drug Administration. Shortly after that, the company went public on the NASDAQ, raising $31.3 million. Since opening for trade at a price of $30, shares have dropped nearly 40% to $16, but that isn't fazing ReWalk's CEO Larry Jasinski one bit.
TheStreet chatted with Jasinski to learn more about the company, its IPO, and what the future looks like for medical wearable devices. Here is the lightly edited interview.
Rebecca Borison: Why did you decide to take ReWalk public?
Larry Jasinski: The main reason was the size of the opportunity that we have come to see in this space of wearable robotic skeletons, exoskeletons or other types. We felt the public arena was a good pathway for us to bring in the size and type of funding that were best for our long-term growth strategy. The size of the round and the ability to grow in the future is attractive in the public markets. It was a relatively smooth IPO, and we've done well since. It puts us in a capital situation to help build an industry.
RB: What events helped make the IPO possible?
LJ: We received our FDA clearance on June 26 last year. That was a clearance that was very important for the industry, because the FDA defined the path for all exoskeletons. They defined them as class 2 devices, and [said] that we are the only device that has class 2 clearance for use in rehabilitation in the U.S. and for use in the community in the U.S. That was a significant element for allowing us to really pursue this market, where [paraplegics] are trained in a rehabilitation center but can go home and use it every day.
The other major event I'd point out is we are a company that is an expert in R&D and distribution, but we weren't a company in manufacturing, and we reached an agreement with a company called Sanmina(SANM) - Get Report , which is one of the largest medical device manufacturers in the world. We transferred all our production to them. We completed that transfer middle of last year around the FDA timing. That gave us a high quality product and the capacity to meet demand.
RB: How did going public help further the business?
LJ: The funding from the IPO gave us a comfortable level to build the distribution infrastructure by adding salespeople, training people, mechanics or technicians for service, and then a reimbursement team. Those four groups of people will allow us to take care of customers and drive this market. If you're someone who's injured from a spinal cord injury and can't walk, we can help from a clinical end to determine if someone is a candidate. If they are a candidate, we can get them to a training center. If they successfully train, we will help them with reimbursement, help them process it through the German or U.S. marketplace. And we continue to take care of the product when they're home. They have someone that can come to their house and service the product when they need, just like a car. That infrastructure was extremely important for us.
RB: Have you had luck getting insurance companies to cover the device?
LJ: The cost of the device is less than the amount of money [paraplegics] save medically in terms of expenses, but they still need insurance to get this paid for. We were fortunate to get the VA [Medical Center] in the Bronx to pay for these. We have now got four different insurers in Germany to make positive decisions on a case-by-case basis. We have gotten three insurers in the U.S. to do the same thing. The small reimbursement organization we built, they know how to take a claim and apply to different groups. We're early. We only had approval six months ago, but that'll be a driver. If we can help people get this paid for, that's how we will build significant volume and a new industry.
RB: Are you optimistic that more insurance companies will back the device in the near future?
LJ: I think it's going to grow on a month-by-month basis, but it'll be case by case for probably two to three years. If you look at some other sizable companies in their early days, this is not an unreasonable strategy to build a sizable business in the hundreds of millions of dollars. It just takes time to get a national decision. Our job is to keep providing published scientific data that shows the benefits of the product. That is something we're conducting in multiple ways around the world.
RB: What sort of studies have been done to support the use of ReWalk?
LJ: Groups such as the VA funded their own research because they found this so important in taking care of servicemen who were injured. The VA Bronx data has been presented in a number of places like the American Academy of Physical Medicine and Rehabilitation. From a company point of view, we have done a clinical study as part of our FDA trial, and we will do further studies that are much more focused on economic benefits.
RB: How does ReWalk actually save paraplegics money in the long-run?
LJ: In a general sense there are two major areas of savings. The first one is in medications that individuals no longer require, the most significant of which is pain medication. As the body gets stronger in the core, the frequency and requirement of pain medication such as oxycontin lessens and many people have eliminated it altogether. There are other medications that are patient specific. Diabetics can use less insulin, people who have had significant issues with the GI tract are able to use less or no medication because they're walking again, so their body begins to work.
The second area is reduction in expenses for complications related to spinal cord injury. On a broad scale we tend to see an increase in muscle type tissue and a decrease in fat tissue. This improvement in metabolism generally makes the body work better. Treatment for a pressure sore in the U.S. costs $79,000 on average. Beyond that, there are some other benefits that are also seeming to be avoided, things like how often do they wind up with fractures. We need more data but the frequency of fractures is less. Maybe it's because they're walking more. That's the kind of data we'll keep building.
RB: Are there any other companies coming out with similar devices right now?
LJ: There are three other companies that see the same opportunity we do -- Parker Hannifin(PH) - Get Report , Cyberdyne, and Ekso Bionics. We think it's good to have multiple people in the space to drive the technology. We're fortunate to be the leader -- at present no other device has the approval for legal clearance in the U.S. Although we anticipate Parker Hannifin will gain clearance in the U.S. soon. Long term this industry will support multiple companies, and it will help grow the business. Parker Hannifin is a good two years behind us, but they've done some clinical studies and they will come along. They're one of the larger multi-billion dollar companies, and it's interesting they chose to enter the space.
Pre-IPO, one of our largest investors was Yaskawa Electric Corporation. They are the largest maker of robots in the world. They believe that a big part of their growth will be in personal robots whether they're for medical or personal needs. If you look at a Parker Hannifin and a company like ours that has significant partnership with Yaskawa, you see leaders in robotics believing in the space or at least placing a bet on it.
RB: Are you feeling pressure from investors and analysts now that you've gone public?
LJ: We get a lot of questions from investors and analysts. So far we've had pretty good answers, so I rather enjoy it now. In the future maybe some days will be less that way, but right now it's a vibrant growing industry that I think there's a lot of interest in. We're a high curiosity factor with high potential. The interaction with Wall Street has been quite pleasant at this stage. Analysts ask good questions, and they help me measure how we're running our business. Some of the things they ask are thought-provoking, and it's important to educate them about what this is.
RB: Does the falling price of your stock worry you at all?
LJ: Our main focus and belief is as long as we continue to grow the business, the stock will work fine over time. That's really what we have to do. This is an industry that will be very large some day. The Wall Street Journal pegged it as a $2 billion industry, so we're trying to keep our heads down and build the industry instead of being too worried about the short term. On the whole, we're pretty satisfied with where we are.
RB: How do you measure the growth of the company?
LJ: We look at measurements of where are we adding training capacity. Globally we added 15 training centers in the fourth quarter, including Spalding. Remember, this is a new industry. We look at how many people are using it in everyday life, how many people can walk in their kitchen, use it at work. We have a mother who went trick or treating with her daughter -- she dressed up as Catwoman. Since the FDA cycle we've added 35 people [who use ReWalk], and globally the current number that are using this at home is 54. Those are the numbers -- is it getting adopted and as long as we show that, it'll show a pattern of where the industry can go.