EANS-Adhoc: LifeWatch returns to profitability in Q2 2010 and reaffirms its outlook for the year

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3-month report/LifeWatch AG

29.07.2010

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 Second Quarter 2010. The following link will take you
to the complete press release and to the Letter to Shareholders Q2
2010: http://www.irlifewatch.com/

Second Quarter 2010 Financial Highlights are as follows:

• Positive operating cash flow of USD 3.4 million, the 9th quarter in a row
of positive operating cash flows;

• Cash, cash equivalents, marketable securities and structures of USD 44.1
million on June 30, 2010, the 9th quarter in a row of increasing balances;

• Revenues of USD 23.3 million, a 3.9% increase from the prior quarter and a
31.4% decrease year-on-year;

• Positive EBIT and EBITDA of USD 0.1 million and USD 1.6 million,
respectively;

• Net income of USD 1.9 million, a return to profitability after one loss-
making quarter;

• ACT enrollments of 19,507, a 7.5% decrease from the prior quarter and a
4.3% increase year-on-year;

• NiteWatch Home Sleep Test enrollments of 623, a 107.7% increase from the
prior quarter;

• Reaffirming our 2010 outlook of USD 100 - 105 million of revenue, USD 1 -
3 million of EBIT, 88,000 - 92,000 ACT enrollments and 6,000 - 7,000
NiteWatch enrollments;

LifeWatch continues to acquire new customers with its innovative
products, a clear value proposition, productivity enhancing features
and a dedicated team of professionals. LifeWatch placed increased
emphasis on improving its sales and marketing organization during the
second quarter of 2010. LifeWatch recently hired four seasoned
executives, with experience from HP Medical, Metronic, and other
leading healthcare institutions, to establish a marketing group to
support the sales organization and lead our efforts in product
development. We expect that these additions will have a substantial
impact on product awareness, the quality of marketing collateral, new
product development, internal and external communications and overall
sales growth.

On June 25, 2010, the Center for Medicare and Medicaid Services (CMS)
announced that cardiac telemetry would remain carrier-priced for
2011. This news does not have a negative impact on LifeWatch´s
business. On the commercial insurance carrier front, LifeWatch has
made significant strides in addressing the reimbursement denial issue
having secured several favorable rulings on individual patient
appeals.

Enrollments:

Enrollments for our ACT service were up 4.3% to 19,507 during Q2 2010
compared to the 18,697 enrollments in Q2 2009 and down 7.5% compared
to the 21,099 enrollments in the prior period. The sequential decline
in enrollments was primarily due to the efforts to reduce the number
of ACT enrollments where there was no reimbursement. However, a
process to appeal these non-reimbursed enrollments is being
aggressively managed and has yielded positive early results. Our
NiteWatch service remains in its early stages of development but grew
107.7% sequentially to 623 enrollments in Q2 2010, in line with our
expectations, from 300 enrollments in the prior quarter. Total
enrollments from ACT, NiteWatch, Event Monitor and Holter grew
modestly at a 2.6% growth rate to 60,147 enrollments in Q2 2010 from
58,651 enrollments in Q2 2009.

Revenues:

Revenues decreased 31.4% to USD 23.3 million in Q2 2010 from USD 33.9
million in Q2 2009. The decrease in revenues was primarily due to a
reduction in average selling prices and the impact of reimbursement
denials on Q2 2010. Additionally, revenues in Q2 2010 increased 3.9%
from the prior quarter revenues of USD 22.4 million.

Gross Profit:

Gross profit was USD 11.9 million in Q2 2010 with a margin of 51.0%,
compared with USD 20.2 million with a 60.0% margin in Q2 2009. The
decrease in gross margins is largely attributable to the decrease in
average selling prices and the impact of reimbursement denials on Q2
2010. Also, gross profit showed an increase in Q2 2010 compared with
the prior quarter figure of USD 9.1 million with a 40.8% margin. The
sequential increases in gross profit and gross margins were largely
attributable to the Company´s efforts at reducing the cost of
providing service through decreases in communications costs and
improvements in supply and distribution expenditures.

Operating Expenses:

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

• Research and Development (R&D) expenses were USD 1.4 million or 5.8% of
total revenues, compared with USD 0.8 million or 2.3% of total revenues in
Q2 2009;

• Sales and Marketing (S&M) expenses were USD 5.2 million or 22.4% of total
revenues, compared with USD 6.5 million or 19.1% of total revenues in Q2
2009;

• General and Administration (G&A) expenses were USD 5.2 million or 22.2% of
total revenues, compared with USD 5.8 million or 17.0% of total revenues
in Q2 2009

R&D expenses increased due to an increase in personnel-related costs as

LifeWatch continued to invest in the development of future services.
The decrease in S&M expenditures was mainly due to a reduction in
overall sales force compensation in line with current reimbursement
environment dynamics. G&A expenditures decreased mainly due to a
decrease in bad debt expenses and lower professional services fees.
Additionally, LifeWatch has been implementing efficiency initiatives
and the positive benefits thereof have begun to show in the Q2 2010
results and will continue to be impactful during the course of the
next 12 months.

Operating Profit:

EBIT was USD 0.1 million with a margin of 0.5%, compared with EBIT of
USD 7.2 million with a margin of 21.3% in Q2 2009. EBITDA reached
USD 1.6 million with a margin of 6.8%, compared with EBITDA of USD
8.9 million with a margin of 26.1% in Q2 2009.

Net Income:

Net income for the second quarter of 2010 was USD 1.9 million,
compared with net income of USD 5.0 million recorded in Q2 2009.
Fully-diluted earnings per share were USD 0.14 in the second quarter
of 2010 compared with fully-diluted earnings per share of USD 0.38
reported for the second quarter of 2009. The Q2 2010 figures
represent a return to profitability from the losses generated in the
prior quarter.

2010 Outlook:

The last few months have seen LifeWatch coping with the turbulence
caused by the dynamic reimbursement environment and historic
healthcare reforms in the U.S. The Company has also undergone
significant management and operational change. The second quarter of
2010 represents a positive step in the development of the Company as
we record a sequential increase in revenues and a return to
profitability. LifeWatch expects the positive momentum to continue
and reaffirms our outlook for 2010 of USD 100-105 million of
revenues, USD 1-3 million of EBIT, 88,000 - 92,000 ACT enrollments
and 6,000 - 7,000 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.

end of announcement euro adhoc
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ots Originaltext: LifeWatch AG
Im Internet recherchierbar: http://www.presseportal.de

Further inquiry note:

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