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

03.11.2010

• 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 http://www.irlifewatch.com/

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.

Service Enrollments:

Enrollments for our ACT service were down 9.8% to 18,184 during Q3
2010 compared with 20,164 enrollments in Q3 2009. The decline in
enrollments was primarily due to the impact of Reimbursement Denials.
NiteWatch enrollments declined 12.4% sequentially to 546 enrollments
in Q3 2010 from 623 enrollments in the prior quarter. The launch of
our NiteWatch service was poorly executed and resulted in enrollments
for the quarter below expectations. Total enrollments from ACT,
NiteWatch, Event Monitor and Holter grew at a 1.3% rate to 59,027
enrollments in Q3 2010 from 58,270 enrollments in Q3 2009.

NiteWatch Launch:

The ramp up of our NiteWatch service has not met our expectations
with Q3 2010 enrollments below plan. While we continue to believe
that the market is strategically important and attractive to the
Company, our initial planning and execution are now being updated.
The company signed 12 new commercial contracts covering 24.8 million
lives during Q3 and a total of 53 new contracts covering 40 million
lives year-to-date. This includes our signing in September of a
national provider contract for NiteWatch with Aetna.

Operating Improvements:

In last quarter´s media release and presentation, we discussed
various operational initiatives undertaken by LifeWatch to streamline
processes and activities with an estimated annual savings potential
of USD 10 million. We are on track to reach our goals for most of the
efficiency initiatives, with a number of them such as cell phone
activation/deactivation and reduction in personnel, already meeting
annualized target savings. The company is aggressively reviewing all
legacy processes with a view to conduct business more efficiently.

Revenues:

Revenues decreased 42.6% to USD 19.5 million in Q3 2010 from USD 34.1
million in Q3 2009. The decrease in revenues was primarily due to
Reimbursement Denials, the overall reduction in reimbursement rates
and an increase in the allowance for estimated price reductions and
contractual adjustments.

Gross Profit:

Gross profit was USD 9.4 million in Q3 2010 with a margin of 48.0%,
compared with USD 22.2 million with a 65.2% margin in Q3 2009. The
decrease in gross margin is largely attributable to the decrease in
average selling prices and the impact of Reimbursement Denials.

Operating Expenses:

The Company´s operating expenses for the third quarter of 2010 are
broken down as follows:

• Research and Development (R&D) expenses were USD 1.3 million or 6.9% of
total revenues, compared with USD 0.8 million or 2.3% of total revenues in
Q3 2009

• Sales and Marketing (S&M) expenses were USD 5.0 million or 25.8% of total
revenues, compared with USD 6.2 million or 18.2% of total revenues in Q3
2009

• General and Administration (G&A) expenses were USD 5.9 million or 29.9% of
total revenues, compared with USD 6.5 million or 19.0% of total revenues
in Q3 2009

Operating Profit:

LBIT was USD 2.9 million, compared with EBIT of USD 8.8 million with
a margin of 25.8% in Q3 2009. LBITDA reached USD 1.3 million,
compared with EBITDA of USD 10.4 million with a margin of 30.6% in Q3
2009.

Net Income:

Net loss for the third quarter of 2010 was USD 3.2 million, compared
with net income of USD 7.3 million recorded in Q3 2009. Fully-diluted
loss per share was USD 0.25 in the third quarter of 2010 compared
with fully-diluted earnings per share of USD 0.55 reported for the
third quarter of 2009.

Revised 2010 Outlook:

In response to the third quarter results and our expectations for the
near future, we have revised our outlook for 2010 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.

About LifeWatch AG:

LifeWatch AG, headquartered in Neuhausen am Rheinfall and listed on
SIX Swiss Exchange (LIFE), Switzerland, is the leading healthcare
technology and solution company, specializing in advanced telehealth
systems and wireless remote patient monitoring services. LifeWatch
services cater to individuals, ranging from high-risk and chronically
ill patients, to consumers of health and wellness products. LifeWatch
has subsidiaries in the United States, the Netherlands, Japan, the
United Kingdom, Switzerland and Israel. LifeWatch AG is the parent
company of LifeWatch Services Inc., a leading US-based cardiac
monitoring service provider, and manufacturer of telecardiology
products. LifeWatch has also introduced a new program for Home Sleep
Testing of Obstructive Sleep Apnea (OSA) patients under the brand
name NiteWatch. For additional information, please visit
www.lifewatch.com.

This press release includes forward-looking statements. All
statements other than statements of historical facts contained in
this press release, including statements regarding future results of
operations and financial position, business strategy and plans and
objectives for future operations, are forward- looking statements.
The words "believe," "may," "will," "estimate," "continue,"
"anticipate," "intend," "expect" and similar expressions are intended
to identify forward-looking statements. LifeWatch AG has based these
forward- looking statements largely on current expectations and
projections about future events and financial trends that it believes
may affect the financial condition, results of operations, business
strategy, short term and long term business operations and
objectives, and financial needs. These forward-looking statements are
subject to a number of risks, uncertainties and assumptions. In light
of these risks, uncertainties and assumptions, the forward-looking
events and circumstances described may not occur and actual results
could differ materially and adversely from those anticipated or
implied in the forward- looking statements. All forward-looking
statements are based only on data available to LifeWatch AG at the
time of the issue of this press release. LifeWatch AG does not
undertake any obligation to update any forward-looking statements
contained in this press release as a result of new information,
future events or otherwise.

THIS PRESS RELEASE IS NOT BEING ISSUED IN THE UNITED STATES OF
AMERICA AND SHOULD NOT BE DISTRIBUTED TO UNITED STATES PERSONS OR
PUBLICATIONS WITH A GENERAL CIRCULATION IN THE UNITED STATES. THIS
PRESS RELEASE DOES NOT CONSTITUTE AN OFFER OF SECURITIES OF LIFEWATCH
AG OR ANY OF ITS SUBSIDIARIES FOR SALE IN THE UNITED STATES OR AN
INVITATION TO SUBSCRIBE FOR OR PURCHASE ANY SECURITIES OF LIFEWATCH
OR ITS SUBSIDIARIES IN THE UNITED STATES. IN ADDITION, THE SECURITIES
OF LIFEWATCH AG AND ITS SUBSIDIARIES HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR
DELIVERED WITHIN THE UNITED STATES OR TO U.S. PERSONS ABSENT
REGISTRATION UNDER OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE UNITED STATES SECURITIES LAWS. ANY PUBLIC
OFFERING OF SECURITIES TO BE MADE IN THE UNITED STATES WILL BE MADE
BY MEANS OF A PROSPECTUS THAT MAY BE OBTAINED FROM LIFEWATCH AG OR
ITS SUBSIDIARIES, AS APPLICABLE, AND WILL CONTAIN DETAILED
INFORMATION ABOUT THE ISSUER AND ITS MANAGEMENT AS WELL AS FINANCIAL
STATEMENTS OF THE ISSUER.

Attachments with Announcement:
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ots Originaltext: LifeWatch AG
Im Internet recherchierbar: http://www.presseportal.de

Further inquiry note:

For further information please contact:

Woo Kim, Senior Vice President of Strategy and Business Development, LifeWatch

Tel +1 847 813 4299 | Fax +1 847 813 24 48 | Email wkim@lifewatch.com

Sensus Investor and Public Relations GmbH, Zürich:

Tel +41 43 366 55 11 | Fax +41 43 366 55 12 | Email lifewatch@sensus.ch

Branche: Healthcare Providers
ISIN: CH0012815459
WKN: 1281545
Index: SPI, SPIEX
Börsen: Frankfurt / Open Market / XETRA
Berlin / free trade
SIX Swiss Exchange / Main Standard