LifeWatch AG

EANS-Adhoc: LifeWatch announces results for the third quarter 2010 as well as additional news (with document)

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3-month report/LifeWatch Q3 2010 Results


• LifeWatch reports loss for the third quarter 2010; revised outlook for 2010; • CEO Brent Cohen has left LifeWatch with immediate effect; • CMS to introduce a nationally binding reimbursement rate of USD 738 for ACT services in the US taking effect from January 1, 2011; • Complete Media Release, Letter to Shareholders and presentation for the third quarter 2010 availabe at

Neuhausen am Rheinfall / Switzerland - LifeWatch AG (SIX Swiss Exchange: LIFE), the leading wireless remote cardiac and medical patient monitoring service provider in the U.S., today announces results for the third quarter 2010 and gives a revised outlook for 2010. At the same time, LifeWatch is announcing that CEO Brent Cohen has left the company with immediate effect due to differences in opinion over the operational and strategic direction. Furthermore, health policy authority CMS yesterday announced the introduction of a nationally binding reimbursement rate of USD 738 for ACT services. The new reimbursement rates will take effect from January 1, 2011.

Third Quarter 2010 Financial Highlights are as follows:

• Revenues of USD 19.5 million, a 42.6% decrease year-on-year

• LBIT and LBITDA of USD 2.9 million and USD 1.3 million, respectively

• Net loss of USD 3.2 million

    • Positive operating cash flow of USD 0.3 million, the 10th quarter in a row
      of positive operating cash flows

    • Cash, cash equivalents, marketable securities and structures of  USD  42.1
      million on September 30, 2010

    • ACT enrollments of 18,184, a 9.8% decrease year-on-year

    • NiteWatch Home Sleep Test enrollments of 546, a 12.4%  decrease  from  the
      prior quarter

    • New and amended commercial contracts during the quarter: 28 ACT  contracts
      (14.2 million covered lives) and  12  NiteWatch  contracts  (24.8  million
      covered lives)

    • Revising our 2010 outlook to USD 85 - 87 million of revenue, USD 7.5 - 8.5
      million of LBIT, 75,500  -  77,500  ACT  enrollments  and  1,900  -  2,100
      NiteWatch enrollments

The last twelve months have been marked by significant changes in the market
for remote cardiac monitoring services. While we have endeavored to adapt and 

adjust to the new operating environment, certain issues are beyond our control and have adversely affected our business more than anticipated. Management is making every effort to mitigate the impact of those industry and other operational challenges.

Management changes:

We have also to report the departure of Brent Cohen, who has decided to leave the company at short notice. For the immediate future, Yacov Geva has agreed to act as interim CEO in addition to his responsibilities as Chairman.

National Reimbursement Rate of USD 738:

On November 2, 2010, the Centers for Medicare & Medicaid Services (CMS) set national pricing guidelines for payment code 93229, which is the CPT payment code used by Medicare for payment for our ACT service. The national pricing will go into effect on January 1, 2011 and will establish a reimbursement rate of USD 738. While it is still too early to fully appreciate the impact of this announcement, we believe this development will have a positive effect on our discussions with insurance carriers and strengthen our negotiating position on the Reimbursement Denial issue.

Reimbursement Denials:

The Reimbursement Denial issue in particular has had a significant impact on our recent financial results including sales and cost of goods sold. Unfortunately, the original estimate for the impact of lost business was not clearly understood when first discussed the issue during our Q1 2010 investor conference. With two full quarters of history under our belt of operating with Reimbursement Denials, it became apparent that substantial more of our enrollments were affected than originally estimated. The company is appealing rejected claims by insurance carriers and while the process is lengthy, we have already begun to see positive signs from our efforts.

Sales force:

The impact of Reimbursement Denials and the decrease in the number of sales representatives have adversely affected enrollment growth and revenues. Sales training and marketing programs have been developed and implemented but the short term impact of these programs on revenues has been limited. We believe the current management change with the hiring of Stephen Zielinski as Senior Vice President of Sales and the initiatives currently underway will prove successful. Stephen Zielinksi is a veteran of the cardiology industry and has over 20 years of relevant experience including 13 years in senior sales positions at Boston Scientific in the Peripheral Vascular and Cardiology Divisions.