UPDATED: VA signs on to ReWalk Robotics' exoskeleton device for paralyzed veterans

ReWalk's exoskeleton system--Courtesy of ReWalk

ReWalk Robotics ($RWLK) has stumbled a bit since launching an IPO last year, with shares taking a hit amid widening net losses and investor skepticism regarding its flagship exoskeleton device. But now the company is celebrating a milestone in its quest to find an expanded market for its product as the U.S. Department of Veterans Affairs (VA) has signed on to its technology.

The VA will pay for the company's ReWalk device for paralyzed veterans with spinal cord injuries and is rolling out a plan to train staff at a dozen VA centers to be able to use the product, The Associated Press reports. ReWalk, which was approved by the FDA in June 2014 and runs at about $77,000, consists of a fitted metal brace that supports the knees and upper back; motors at the hips, knees and ankles; a tilt sensor; and a backpack that holds a computer and power supply. Regulators require an assistant to be nearby while a patient uses the device.

About 42,000 veterans are paralyzed, but only a fraction of them qualify for an exoskeleton, according to the AP story. The device comes with certain height and weight requirements and is made for paraplegics, but not for quadriplegics.

Veterans over the summer sent letters to the VA to push the agency to fund ReWalk, but the adoption rate was slower than some expected. The VA first vetted the device through research, evaluating the system on 45 paralyzed veterans who fit the height and weight requirements for the product. The studies found that paraplegics who used the exoskeleton as little as four hours a week for three to 5 months had better bowel and bladder function, less back pain and fatigue and improved sleep.

"I guess people who have been watching the research were very anxious and had expectations this would suddenly happen once FDA approval came out, but we were still building the infrastructure to support this great device," VA spokesman Jim Connell told the AP.

VA funding comes at a critical moment for Yokneam, Israel-based ReWalk, as it struggles to gain momentum more than a year after making its Nasdaq debut. The microcap company has a market value of less than $75 million ahead of the recent VA news and is still trying to find its footing, especially regarding reimbursement.

It's a challenge to get insurers to accept ReWalk's more than $70,000 price tag. And even though "there are so many patients clamoring to get access to this device" there is still "not enough clarity as to how the reimbursement question will be solved," Barclays analyst Matthew Taylor said earlier this year.

But ReWalk is working hard to spur more widespread adoption of its device and cash in on a market potentially worth "billions of dollars," CEO Larry Jasinski told Bloomberg in March. More than 80 treatment centers use the company's device globally, with half of those centers located in the U.S. 

"A lot of it is we need to demonstrate that the market is real," Jasinski said at the time. "I can't forecast a future stock price, but I can forecast that if we make this a multi-dollar business, the stock price will come along. There is no comparable category for us, which makes it a little harder."

The latest development with the VA represents a "significant milestone" for ReWalk on its quest to gain market share, Jeffries analyst Raj Denhoy said in a note to clients. The VA's decision unlocks a "$2 billion market opportunity" for the company and "creates a strong precedent for other payors to follow," Denhoy said. 

Still, ReWalk faces some competition in the field as companies roll out related devices. Ekso Bionics markets a self-contained, full-body robotic walking suit with mechanical braces and crutches and supplies its device to rehab centers in the U.S., Europe and South Africa. Rehabilitation specialist AlterG is also forging ahead with its bionic leg product, bringing in $15 million in debt in July to develop its mobility assistance device.

ReWalk's shares jumped almost 90% to $11.16 in early morning trading upon news of the VA deal.

- read the AP story

Editor's note: This article was updated with a comment from an analyst note.