abstract-140898

Providing energy for endoscopic surgery

Creo Medical 4 October 2021 Initiation
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Creo Medical

Providing energy for endoscopic surgery

Initiation of coverage

Healthcare equipment
& services

4 October 2021

Price

171.5p

Market cap

£310m

Net cash (£m) at 30 June 2021 + offering

56.1

Shares in issue

180.9m

Free float

75.9%

Code

CREO

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(6.0)

(13.7)

2.2

Rel (local)

(3.7)

(13.0)

(16.5)

52-week high/low

234p

144p

Business description

Creo Medical is a UK-based healthcare company focusing on the development and commercialisation of minimally invasive electrosurgical devices. It has six products in the flagship CROMA platform, all of which have been CE marked and four of which have been cleared by the FDA. The company recently acquired Albyn Medical, which provides it with profitable products and a direct sales force in Europe.

Next events

Update on commercial launch

2021

Analysts

Maxim Jacobs

+1 646 653 7027

Jyoti Prakash

+91 981 880 393

Creo Medical is a research client of Edison Investment Research Limited

We are initiating coverage of Creo Medical, which is developing and commercialising minimally invasive electrosurgical devices. Its CROMA platform delivers a combination of bi-polar radiofrequency (RF) and microwave energy for the purpose of dissection, resection, ablation and haemostasis of diseased tissue. The initial focus will be on gastrointestinal (GI) procedures but will expand into soft tissues (such as the pancreas) and pulmonology. The company has had all six products within the CROMA platform CE marked and four are also cleared for use by the FDA, with the other two expected to be cleared in the coming months.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/19

0.0

(18.6)

(13.1)

0.0

N/A

N/A

12/20

9.4

(23.0)

(12.7)

0.0

N/A

N/A

12/21e

25.9

(22.7)

(12.3)

0.0

N/A

N/A

12/22e

28.4

(24.4)

(13.3)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Allowing for quicker and safer procedures

Creo Medical’s flagship Speedboat product allows for incision, dissection and coagulation to be accomplished with one device, leading to more efficient use of the surgeon’s time as there is less switching of instruments. With bi-polar RF, the current is restricted to a specific area, which should help reduce complications compared to monopolar RF, which drives energy across relatively large areas.

A large addressable market

Creo Medical products are in a large and lucrative market. Conmed estimates the GI endoscopic technologies market is approximately $3.0–3.2bn with the RF energy-based surgical device market at $2.7–2.9bn per year.

Albyn acquisition provides products and a salesforce

In July 2020, Creo Medical announced the acquisition of Albyn Medical, which commercialises products for the urology, gynaecology and GI endoscopy markets. Albyn Medical was purchased for €24.8m plus up to €2.7m in performance-related milestones. While full year revenues have not been disclosed, Albyn Medical was profitable with €1.7m in profit before tax (PBT) for FY19 and contributed £12.8m in sales to Creo in H121. Importantly, with this acquisition, Creo has also acquired Albyn Medical’s 70-person European sales and marketing team.

Valuation: £434m or 240p per basic share

We value Creo Medical at £434m or 240p per basic share using a risk-adjusted net present value (NPV) model. The vast majority of the value is attributable to the CROMA platform (especially the GI market) with the remainder divided between the value of Albyn Medical and net cash. Creo Medical had reported that it had £30.6m in cash and £10.7m in debt at the end of H121 and raised £36.3m in gross proceeds in a Q321 placement and open offer.

Investment summary

Creo Medical is a UK-based medical device company that was founded in 2003 and went public in 2016 on the AIM market. It is focused on the development and commercialisation of minimally invasive electrosurgical devices for a variety of indications in the GI, soft tissue and pulmonological areas. Its CROMA platform delivers a combination of bi-polar RF and microwave energy for the purpose of dissection, resection, ablation and haemostasis of diseased tissue. Products include the Speedboat Inject, Speedboat Slim, SpydrBlade Flex, SlypSeal Flex, MicroBlate Fine and MIcroBlate Flex. All six products have been CE marked and four are also cleared for use by the FDA, with the remainder expected to be cleared in the coming months. In July 2020, Creo Medical announced the acquisition of Albyn Medical, which commercialises products for the urology, gynaecology and GI endoscopy markets. Albyn Medical was purchased for €24.8m plus up to €2.7m in performance related milestones. With this acquisition, besides acquiring profitable products, Creo has also acquired Albyn Medical’s 70-person strong EU sales and marketing team.

Valuation: £434m or 240p per basic share

We value Creo Medical at £434m or 240p per basic share using a risk-adjusted NPV model utilizing a 12.5% discount rate on the CROMA platform products and a 10% discount rate for Albyn Medical products (as they are more mature). Approximately 75% of the value is attributable to the CROMA platform (focused on the GI market) with the remainder divided between the value of Albyn Medical and net cash. We attribute a 70% probability of success for the CROMA platform as it is still in the early phases of adoption. We forecast that sales will start to mature in 2026, when we expect revenues for the platform to hit £347m, with £205m coming from the US. We will adjust our assumptions as we are further updated on the progress of commercialisation.

Financials: Well capitalised

The company reported that it had £30.6m in cash and £10.7m in debt as of 30 June 2021 with £12.9m in sales for H121, nearly all of which was attributable to Albyn Medical. The company raised £36.3m in gross proceeds in a Q321 placement and open offer and we project a financing need of an additional £30m before profitability (£10m in 2022 and £20m in 2023), which we expect in 2025. Sales have been minimal historically, but that has changed with the inclusion of Albyn Medical sales and we expect will increase further with the expected penetration of CROMA products.

Sensitivities: Commercialisation risk dominates

Although Creo’s products are unique in their use of bi-polar RF and other design elements, the competitive landscape in GI endoscopy and energy products is crowded with a large number of large and legacy players. Even with a better device, it is not an easy to convince surgeons to switch brands or move to a new type of procedure. One of the focus procedures for Creo is endoscopic submucosal dissection (ESD), which has gained limited traction in the US mainly because of generally longer procedure times and somewhat higher adverse events (although Creo’s products address both), despite better outcomes from patients versus the standard of care. Creo Medical may need to meaningfully increase its investment in US sales and marketing to gain significant penetration. This can be done organically or through acquisition, as Creo has done with its Albyn Medical purchase. Reimbursement may also be an issue as there is no separate payment for use of Creo products and they are bundled into a total payment for the entire procedure. Gaining reimbursement will likely make adoption easier as financial considerations often dominate in the US healthcare industry.

Company description: Innovative medical devices

Creo Medical is a UK-based medical device company focused on the development and commercialisation of minimally invasive electrosurgical devices for a variety of indications in the GI, soft tissue and pulmonological areas.

Exhibit 1: The CROMA Advanced Energy Platform

Exhibit 2: Creo’s suite of products

Source: Creo Medical

Source: Creo Medical

Exhibit 1: The CROMA Advanced Energy Platform

Source: Creo Medical

Exhibit 2: Creo’s suite of products

Source: Creo Medical

Its CROMA platform is at the heart of the company’s surgical products and delivers a combination of bi-polar RF (while use of RF in endoscopic procedures is common, it is usually delivered as monopolar RF; Creo appears to be unique in using bi-polar RF in its stated target indications), which is used for endoscopic cutting, resection and dissection, and microwave energy, for coagulation and ablation. Products using the CROMA platform include the Speedboat Inject, Speedboat Slim, SpydrBlade Flex, SlypSeal Flex, MicroBlate Fine and MIcroBlate Flex.

Exhibit 3: Video of Creo’s products and what they do

Source: Creo Medical

All six products have been CE marked and four of them are also cleared for use by the FDA via the 510(k) pathway, with the other two expected to be cleared in the coming months.

Exhibit 4: Description of Creo Medical’s products

Product

Description

Indications

Availability

Comments

Speedboat Inject

Flagship product. Multimodal bipolar RF and focused microwave energy blade antenna with an integrated needle injection capability. Enabling surgeons to lift tissue with a retractable needle, cut tissue using bipolar RF energy delivered along the edge of the instrument for localised energy transfer, reducing the adverse events associated with monopolar tissue resection, and deliver high frequency controlled and focused coagulation, all within a single instrument.

Dissection of pre-cancerous and cancerous lesions in the lower and upper GI tracts

US, EU/UK, India, South Africa, Australia, New Zealand

CE marked for lower GI tract use, FDA clearance in both upper and lower GI tract. Commercially launched October 2019

Speedboat Slim

Similar to Speedboat Inject except has a narrower diameter of 3.2mm to allow use in narrower and more flexible scopes.

Dissection of pre-cancerous and cancerous lesions in the lower and upper GI tracts

EU/UK

CE marked in EU

MicroBlate Fine

Microwave needle ablation device designed to same form and dimensions as a standard biopsy needle. Has a diameter of less than 1mm (likely the smallest diameter for a microwave ablation device) allowing the ablation of tumours in a wide range of tissue types.

Ablation of soft tissue such as pancreas, liver, kidney, lung and muscle

US, EU/UK

CE marked in the EU and FDA clearance in the US since October 2020

MicroBlate Flex

Flexible version of MicroBlate fine for use when a flexible device is needed for access. May be particularly useful to treat nasopharyngeal cancer and nasal polyps.

Ablation of soft tissue such as pancreas, liver, kidney, lung, muscle as well as nasal indications

US, EU/UK

CE marked in the EU and FDA clearance in the US since January 2021

SlypSeal Flex

Flexible microwave haemostasis device designed for treatment of bleeds in the GI tract, such as stomach ulcers and bleeding polyps. Non-stick feature lowers risk of re-bleeds.

Haemostasis in the GI tract

US, EU/UK

CE marked in EU and FDA clearance in the US since March 2020

SpydrBlade Flex

Flexible bi-polar RF and microwave scissor device for grasping, cutting and coagulating highly perfused tissue.

Highly perfused tissue in the colon, stomach, liver and spleen, among other areas

EU/UK

CE marked in EU

Source: Creo Medical

Initial focus on the GI Endoscopy market

Although the company’s approvals span a variety of indications and organs the initial commercial focus will mainly be in the GI endoscopy market, which is what the Speedboat products, with the first launch in Q419, are approved for. And within the GI endoscopic market, the focus of the company is to increase penetration within the ESD and peroral endoscopic myotomy (POEM) procedures.

ESD is a relatively new up-and-coming outpatient procedure (most patients go home the same day) to remove early-stage cancerous tumours or polyps from the GI tract. A typical ESD procedure involves marking the perimeter of the lesion, use of a lifting agent around the perimeter of the lesion, the mucosa around the lesion is cut, the submucosa beneath the lesion is dissected and any intraprocedural bleeding is managed with a water jet and haemostatic devices.

Historically, endoscopic mucosal resection (EMR) procedures have been the most used technique for removing early-stage tumours and polyps in the GI tract but it has difficulty in reducing adenomas larger than 2cm.1 Meta-analysis comparing the procedures indicate that ESD has a much higher rate of en bloc resection (where the entire tumour is taken out) than EMR, 91.7% versus 46.7%, respectively. Additionally, the rate of recurrence is much lower in patients who receive ESD at only 0.9% versus the 12.2% recurrence rate for patients receiving EMR.

  Backes et al., Endoscopic mucosal resection (EMR) versus endoscopic submucosal dissection (ESD) for resection of large distal non-pedunculated colorectal adenomas (MATILDA-trial): rationale and design of a multicenter randomized clinical trial. BMC Gastroenterology (2016) 16:56

Two aspects of the procedure although have limited adoption despite the higher rates of efficacy. First, the procedure time is much longer than EMR, with EMR generally taking 30 minutes on average while ESD can take between one and two hours2 likely due to the need for precision as well as the need for frequent instrument changes.3 The extra time is generally worth it for the patient but financial considerations at hospitals and outpatient surgical centres (time per procedure is higher due to the longer procedure time and a surgeon can perform fewer per day, affecting revenue) make this a more difficult sell. That said, an ESD is still significantly cheaper than more traditional surgical colectomy (€3190 vs €8,490).4

  Fujiya et al., Efficacy and adverse events of EMR and endoscopic submucosal dissection for the treatment of colon neoplasms: a meta-analysis of studies comparing EMR and endoscopic submucosal dissection. Gastrointestinal Endoscopy 2015;81(3):583–95.

  Tsiamoulos et al., A novel multimodality endoscopic device for colonic submucosal dissection using a combination of bipolar radiofrequency and microwave modalities. Endoscopy 2016; 48: 271–276

  Dahan et al., What is the cost of endoscopic submucosal dissection (ESD)? A medico-economic study. United European Gastroenterology Journal 0(0) 1–8

Complication rates are also higher with ESD procedures, with a perforation rate of 5.7% versus 1.4% for EMR5 although most perforations are small and can be identified/treated during the procedure using a clip.6 Procedures to treat distal colorectal cancers (involving the descending colon, sigmoid colon, rectosigmoid and rectum) appear to have fewer perforations that proximal colon cancers (involving the cecum, ascending colon and transverse colon).7 There is also a higher bleeding risk of 4.8–5.7% compared to 0.9–1.4% for EMR.8

  Backes et al., Endoscopic mucosal resection (EMR) versus endoscopic submucosal dissection (ESD) for resection of large distal non-pedunculated colorectal adenomas (MATILDA-trial): rationale and design of a multicenter randomized clinical trial. BMC Gastroenterology (2016) 16:56

  Fukami, Surgery Versus Endoscopic Mucosal Resection Versus Endoscopic Submucosal Dissection for Large Polyps Making Sense of When to Use Which Approach. Gastrointestinal Endoscopy Clinics (2019) 675–685

  Backes et al., Endoscopic mucosal resection (EMR) versus endoscopic submucosal dissection (ESD) for resection of large distal non-pedunculated colorectal adenomas (MATILDA-trial): rationale and design of a multicenter randomized clinical trial. BMC Gastroenterology (2016) 16:56

  Fukami, Surgery Versus Endoscopic Mucosal Resection Versus Endoscopic Submucosal Dissection for Large Polyps Making Sense of When to Use Which Approach. Gastrointestinal Endoscopy Clinics (2019) 675–685

Creo Medical’s Speedboat can help with both drawbacks of the ESD procedure, which may increase its use. It uses a bipolar RF energy blade, while typically commonly used ESD cutting instruments use monopolar RF. Monopolar RF knives use significantly higher voltages and direct current and heat across the bowel wall, increasing the risk of injury. With the Speedboat, the current is restricted to a specific area, which should help reduce complications9. Also, as the Speedboat incorporates cutting, coagulation and fluid injection devices in one product, procedure times are shorter due to less frequent instrument changes.

  Tsiamoulos et al., A novel multimodality endoscopic device for colonic submucosal dissection using a combination of bipolar radiofrequency and microwave modalities. Endoscopy 2016; 48: 271–276

With regards to the market size, there are approximately 19m colonoscopies performed annually in the United States with approximately 1.5m procedures performed on US Centers for Medicare & Medicaid Services (CMS) patients that involve removal of polyps, growths or tissue from the large bowel, according to the federal agency. As these numbers are just for Medicare and Medicaid patients, the total number of procedures such as these performed in the US is likely double. While the incidence of new cases of colorectal cancer are approximately 150,000 per year, a large number of people have polyps or adenomas. Adenomas are found in 20–53% of the US population over the age of 50 (approximately 33 million to 62 million people in the US alone).10

  Strum, Colorectal Adenomas, NEJM 2016;374:1065-75.

The Speedboat is also being used in POEM procedures, a minimally invasive procedure for the treatment of achalasia, an incurable condition that is marked by a failure of the smooth muscle fibres to relax, impairing a patient’s ability to squeeze food down into the stomach, causing an inability to swallow, regurgitation/vomiting, heartburn, gas, chest pain and progressive weight loss. Achalasia can happen at various points along the GI tract such as the myoenteric plexus of the oesophagus, lower oesophageal sphincter, the vagal trunks and the dorsal vagal nucleus.11 Prevalence of the condition appears to be around 10.82 per 100,000, which would indicate around 36,000 cases in the United States.12

  Campos et al., Endoscopic and Surgical Treatments for Achalasia: A Systematic Review and Meta-Analysis. Annals of Surgery, Volume 249, Number 1, January 2009

  Sadowski et al., Achalasia: incidence, prevalence and survival. A population-based study. Neurogastroenterology and Motility (2010) 22, e256–e261

Historically, this condition was treated with non-surgical approaches including Botox, balloons and pharmacologic therapy (muscle relaxants). Each of these have significant weaknesses. Botox tends to not have a long-lasting impact on the condition. Symptomatic improvement is 78.6% at one month but then degrades to 40.6% at one year. A second treatment is required in 46.6% of patients.13. Endoscopic balloon dilation (EBD) has a similar issue, although it is typically more efficacious. Symptom relief has been shown to be 84.8% at month one and 68.2% at one year with 25% of patients requiring subsequent dilations. This procedure also has some side effects such as a 1.6% risk of perforation as well as a significant increase in heartburn episodes (approximately one-third of patients studied).14

  Nassri et al., Pharmacotherapy for the management of achalasia: Current status, challenges and future directions. World Journal of Gastrointestinal Pharmacology and Therapeutics 2015 November 6; 6(4): 145-155

  Campos et al., Endoscopic and Surgical Treatments for Achalasia: A Systematic Review and Meta-Analysis. Annals of Surgery, Volume 249, Number 1, January 2009

Pharmacologic agents such as nitrates have been used but efficacy tends to be of very short duration (as low as 30 minutes) and have a high incidence of headache and hypotension. Calcium channel blockers have also been used with some efficacy in 50–90% of patients. However, up to 30% of patients experience significant side effects such as peripheral oedema and headaches.15 Pharmaceutical agents are only typically used in mild disease and when more invasive procedures are inappropriate.

  Nassri et al., Pharmacotherapy for the management of achalasia: Current status, challenges and future directions. World Journal of Gastrointestinal Pharmacology and Therapeutics 2015 November 6; 6(4): 145-155

There have been a variety of different surgical approaches used, with laparoscopic myotomy being most popular. 89.3% of laparoscopic myotomy procedures in patients with achalasia were successful. In total, 6.9% of patients treated with this procedure have had perforations, with another 6.3% having further complications. As with EBD, there can be a significant number of heartburn episodes (31.5% without an anti-reflux procedure and 8.8% when this preventative procedure is conducted).16

  Campos et al., Endoscopic and Surgical Treatments for Achalasia: A Systematic Review and Meta-Analysis. Annals of Surgery, Volume 249, Number 1, January 2009

POEM procedures, unlike ESD (but similar to laparoscopic myotomy), is performed under general anaesthesia and requires a hospital stay (median of one day17). In the procedure a flexible scope is inserted through the mouth to avoid cutting the chest or abdomen. It involves a submucosal injection of saline to create a mucosal bulge, followed by a cut to the oesophageal mucosa. Then a submucosal tunnel is made followed by dissection of submucosal fibres to weaken the sphincter so that food may pass. The success rate of 91.5% at two months and 88.5% at three years is comparable to laparoscopic myotomy.18 However, procedure length tends to be shorter than for laparoscopic myotomy (120 minutes versus 149 minutes) and hospitalisation tends to be shorter (one day versus two days). Complications of the procedure are broadly similar.19

  Ashrava et al., Per oral endoscopic myotomy: early experience and safety of a multispecialty approach. Surgical Endoscopy 2018 Jul;32(7):3357-3363

  Inoue et al., Per-Oral Endoscopic Myotomy: A Series of 500 Patients. Journal of the American College of Surgeons 2015;221:256e264

  Bhayani et al., A Comparative Study on Comprehensive, Objective Outcomes of Laparoscopic Heller Myotomy With Per-Oral Endoscopic Myotomy (POEM) for Achalasia. Annals of Surgery Volume 259, Number 6, June 2014

Use of Speedboat in POEM procedures has similar benefits to use in ESD, reduced procedure time due to less need to switch instruments and less risk of injury through the use of bipolar RF.20 Procedure durations are usually around an hour and some of the procedures can be completed in as little as 25 minutes.21 As procedure times can be a major component of a decision whether to use a certain approach, we would expect both Speedboat use in POEM procedures and the overall share of POEM of the achalasia market to increase.

  Patil et al., Feasibility of Speedboat RS2 with bipolar radiofrequency energy for peroral endoscopic myotomy in patients with achalasia. Endoscopy International Open 2020; 08: E998–E1001

  Nabi et al., Endoscopic submucosal dissection and tunneling procedures using a novel all-in-one bipolar device. Endoscopy International Open 2020; 08: E1302–E1307

Commercial penetration assumptions

Our assumptions are focused on the market for ESD procedures as POEM procedures are treating a relatively niche market with generally poor data sources. As mentioned, there are approximately 19m colonoscopies performed annually in the United States, with approximately 1.5m procedures performed on US CMS patients that involve removal of polyps, growths or tissue from the large bowel, according to the federal agency. As the median age of people who receive EMR and ESD procedures is around retirement age,22 the total number of procedures such as these in the US is likely double that, at around 3m per year.

  Choi et al., Safety and effectiveness of endoscopic mucosal resection or endoscopic submucosal dissection for gastric neoplasia within 2 days’ hospital stay. Medicine (2019) 98:32(e16578)

We do not have these data for the other major markets but assume a per-capita reduction of 40% in the EU and Japan as they typically perform fewer colonoscopies.23 We assume peak penetration of around 9% as although Speedboat has advantages, ESD will be one of several potential approaches. Additionally, following discussions with the company and in reviewing the market environment, we assume Creo Medical will book approximately £730 per procedure. There is also a fee for the CROMA energy platform device (approximately £22,000) but the future economics are uncertain. Often medical device companies will give these types of permanent-use devices away for free or for nominal amounts to accelerate penetration of their single-use devices (such as Speedboat). Based on these assumptions, our 2026 sales estimate (which is when we forecast the products reaching maturity) is £347m for the US, EU/UK and Japan (representing approximately 475,000 procedures). Any sales outside these regions would provide upside to our estimates. Note that achieving these estimates would likely require significant additional investment in the US sales and marketing team (as assumed in our model) to drive growth in that important market among gastroenterologists.

  Audibert et al., Global perspective on colonoscopy use for colorectal cancer screening: A multi-country survey of practicing colonoscopists. Contemporary Clinical Trials Communications, 7 (2017), 116–121

To give a reference point for this peak sales estimate, Conmed, a major surgical device supplier, estimates the GI endoscopic technologies market is approximately $3.0–3.2bn with the RF energy-based surgical device market valued at $2.7–2.9bn per year.

Additionally, Creo Medical has a vast patent portfolio. As of 31 December 2019, it had 188 granted patents and another 599 pending applications around the world. With this in mind, we are modelling patent protection until 2040.

The opportunity outside GI

Outside of the GI space, Creo Medical has also stated an intention of expansion into lung and pancreatic cancers among others. However, these are much more niche markets because colorectal cancer screening guidelines are quite broad and include all adults aged 50–75 years in the United States. For lung cancer, the guidelines only recommend screening for people with a history of smoking at least 20 packs per year or more, who are current smokers or have smoked in the last 15 years and are aged 50–80 years. There are no guidelines for pancreatic cancer screening. Less screening means fewer growths and polyps discovered, functionally reducing the size of the market.

For lung cancer, the total potential screening population is around 15 million24 people compared to 83–85 million for colorectal cancer.25 The current screening standard is low-dose computed tomography (LDCT), which effectively takes x-rays of the chest to detect lesions. The big issue with LDCT is that there is a dose of radiation involved, which in itself may increase the incidence of lung cancer. The typical dose of radiation is 2 millisieverts (mSv), which is equivalent to 243 days of natural background radiation. Follow-up exams, such as full chest CT, would involve a typical dose of 8mSv or 2.7 years of natural background radiation. Over time and if repeated this would lead to unnecessary cumulative radiation exposure greater than that of nuclear industry workers and atomic bomb survivors.26 Another issue with LDCT is that as an imaging technology, even skilled readers can miss a 3mm (or smaller) nodule. Due to this and other reasons, only about 14.4% of the eligible population is generally screened27 (note that this percentage estimate is based on older and more restrictive 2013 guidelines whereas the screening criteria was recently significantly expanded in March 2021). This has a knock-on effect that once the cancer is detected, it has likely already progressed past the point of surgical intervention. According to the National Cancer Institute, only 18% of lung cancer at diagnosis is at the localised stage, where surgery would be most effective (as compared to 37% of colorectal cancers). We estimate approximately 20,000–40,000 surgical procedures for lung cancer per year.

  Meza et al., Evaluation of the Benefits and Harms of Lung Cancer Screening With Low-Dose Computed Tomography: A Collaborative Modeling Study for the U.S. Preventive Services Task Force. Rockville (MD): Agency for Healthcare Research and Quality (US); 2021 Mar. (Evidence Syntheses, No. 198tr.)

  Piscitello et al., Estimating the Screening-Eligible Population Size, Ages 45–74, at Average Risk to Develop Colorectal Cancer in the United States. Cancer Prevention Research 2020;13:443-8

  McCunney et al, Radiation risks in lung cancer screening programs: a comparison with nuclear industry workers and atomic bomb survivors. Chest. 2014; 145(3):618-624.

  Zahnd et al., Lung Cancer Screening Utilization: A Behavioral Risk Factor Surveillance System Analysis. American Journal of Preventive Medicine 2019;57(2):250−255

Unlike colorectal and lung cancer, there are no official screening guidelines for pancreatic cancer. According to the consensus reached at the International Cancer of the Pancreas Screening Consortium summit, screening is not recommended for the general population, instead focusing on those with first-degree relatives (parents, siblings and offspring) with pancreatic cancer, a very limited segment of the population. Those with two first-degree relatives with pancreatic cancer have a 6.4-fold greater risk of pancreatic cancer (8–12% lifetime risk) than the general population. Those with three or more first-degree relatives with pancreatic cancer have a 32-fold greater risk (40% lifetime risk).28 Gene testing can provide a signal of risk as well but it is thought it is of limited use at the moment as the genetic basis for susceptibility to pancreatic cancer is unclear.

  Canto et al., International Cancer of the Pancreas Screening (CAPS) Consortium summit on the management of patients with increased risk for familial pancreatic cancer Gut 2012; 0:1-9

Endoscopic ultrasound is generally the procedure performed to screen patients for pancreatic cancer. It is similar to colonoscopy as it requires sedation and sometimes general anaesthesia. It involves the insertion of a tube into the mouth, down to the stomach and into the first part of the small intestine. Risks are bleeding and GI perforation, and sometimes infection. So, while accurate, it is far from perfect or patient friendly, which at least partially explains why such a high percentage of pancreatic patients are detected late (only 11% are diagnosed when the tumour is localised). Given there are 60,000 new cases per year of pancreatic cancer, we believe there are fewer than 10,000 pancreatic cancer surgical procedures per year.

Given that lung and pancreatic cancer are much smaller opportunities and will likely take Creo Medical years to develop a market within these indications (although MicroBlate Fine and MicroBlate Flex can already be used in the lung and pancreas in the US and EU/UK), we are not including these in our forecasts. However, that may change as the company provides more evidence of effectiveness and gains momentum with oncologists treating those diseases.

Albyn Medical

In July 2020, Creo Medical announced the acquisition of Albyn Medical, which designs, manufactures and commercialises a wide variety of products that broadly cover the endourology, urology, urogynaecology, endoscopy, GI motility and coloproctology areas (see Exhibit 5) although 90% of revenues come from the GI endoscopy space.

Exhibit 5: Albyn Medical products

Type

Product/item

Ureteroscopy

WiScope Ureteroscope

Peditrol irrigation system

Endourology accessories

Nitinol stone retrieval basket

Ureteral catheters

Ureteral stents

Nephrostomy sets

Needles & dilators

Guidewires and special wires

Cystoscopy

WisScope cystoscope

Biofeedback-Stimulation

BioSmart

AROS

Femiscan

Bladder Cancer

Elmedical thermochemotherapy system

Procedure tables

SmartDyn integrated

Examination tables and chairs

Urodynamics table/chair

Video fluoroscopy table

Ultrasound

Pinit

Albit

Urodynamics

Hermes

SmartDyn

SmartDyn integrated

SmartFlow

SmartScale

Consumables

Endoscopy

Premier Endoscopy

Endoscopy (ENDO-FLEX)

Endoscopy (FORESIGHT)

Gastric balloon removal kit

Gold hpdry

pH and impedance

SmartpH

Vizion

pH impedance catheters and buffer solutions

Manometry

SmartGI

Isolab HR

GI manometry catheters

Transit markers

Gastric transit markers

Colon transit markers

Source: Albyn Medical/Creo Medical

Albyn Medical was purchased for €24.8m plus up to €2.7m in performance related milestones. Albyn Medical was profitable with €1.7m in PBT for FY19 and contributed £12.8m in sales to Creo in H121. Importantly, with this acquisition, Creo has also acquired Albyn Medical’s 70-person EU sales and marketing team, which has a direct presence in Spain, France, Germany and the UK, effectively increasing its sales and marketing presence by tenfold. In November 2020, Creo Medical announced it was acquiring the Belgian medical device company Boucart Medical SRL for €4.5m in cash and up to €0.5m in additional considerations and folding it into its Albyn Medical subsidiary. Boucart supplies products for the GI market in the Belgium and Luxembourg area and reported PBT of €0.6m in 2019. The Boucart acquisition added a further 10 sales and marketing personnel to the team.

Sensitivities

Although Creo’s products are unique in their use of bi-polar RF and other design elements, the competitive landscape in GI endoscopy and energy products is crowded, with a large number of large and legacy players. One of Creo’s biggest competitors is Olympus, which had £5.3bn in 2020 sales (over half from their endoscopy division) and has a plethora of products serving the GI endoscopy space and ESD procedures. Further, even with a better device it is not an easy undertaking to convince surgeons to switch brands or move to a new type of procedure. Creo is focused on the ESD procedure, which has gained limited traction in the US mainly because of generally longer procedure times and somewhat higher adverse events (although Creo’s products address both), despite better outcomes from patients versus the standard of care. Creo Medical may need to meaningfully increase its investment in US sales and marketing to gain significant penetration as it is currently limited to only a few sales and marketing personnel in the important region. This increase can be achieved organically or through acquisition, as Creo has done with its Albyn Medical purchase, which has helped it acquire a 70-person EU sales and marketing team. Reimbursement may also be an issue as there is no separate payment for use of Creo products and they are bundled into a total payment for the entire procedure. However, according to the company, an ESD conducted using Creo products is still significantly cheaper than surgical colectomy (around £10,000 cheaper per procedure), mainly due to lower downstream costs associated with lesion recurrence and a lower number of procedure-related complications. Gaining reimbursement will likely make adoption easier as financial considerations often dominate the decision-making process in the US healthcare industry.

Valuation

We value Creo Medical at £434m or 240p per basic share using a risk-adjusted NPV model utilising a 12.5% discount rate on the CROMA platform products and a 10% discount rate for Albyn Medical products (as they are more mature). Approximately 75% of the value is attributable to the CROMA platform (especially the GI market), with the remainder divided between the value of Albyn Medical and net cash. We attribute a 70% probability of success to the CROMA platform as it is still in the early phases of adoption (Speedboat only launched in Q419). Additionally, our 2026 sales estimate (which is when we forecast the CROMA products reaching maturity) for the platform is £347m, with £205m coming from the US. We will adjust our assumptions as we are updated on the progress of commercialisation and as additional studies are published using the CROMA devices (both company and physician sponsored).

Exhibit 6: Creo Medical valuation

Product

Main indication

Status

Probability of successful commercialisation

2026 sales (£m)

rNPV
(£m)

CROMA Platform

GI, soft tissues and pulmonology

Market/registration

70%

347

334.7

Albyn Medical

Urology, gynaecology and GI

Market

100%

30

43.6

Total

 

 

 

 

378.3

Net Cash (30 June 2021 + offering)

56.1

Total firm value

434.5

Total basic shares (m)

180.9

Value per basic share (£)

2.40

Options (m)

11.7

Total number of shares (m)

192.6

Diluted value per share (£)

2.26

Source: Edison Investment Research

Financials

Creo Medical reported that it had £30.6m in cash and £10.7m in debt as of 30 June 2021 with £12.9m in sales for H121, most of which was attributable to Albyn Medical. The company reported an H121 operating loss of £11.1m (vs £10.6m in H120). It raised £36.3m in gross proceeds in a recent placement and open offer and we project a financing need of an additional £30m before profitability (£10m in 2022 and £20m in 2023). We model this need as illustrative long-term debt.

Sales have historically been minimal but this has changed with the inclusion of the sales of Albyn Medical Products and will change further upon penetration of the CROMA products, though that will likely require significant additional investment in the US sales and marketing team to drive growth in that important market among gastroenterologists. We project revenues of £25.9m in 2021 and £28.4m in 2022 with net losses of £21.2m and £24.4m, respectively.

Exhibit 7: Financial summary

£'000s

2019

2020

2021e

2022e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

13

9,429

25,933

28,374

Cost of Sales

(9)

(5,394)

(13,506)

(14,797)

Gross Profit

5

4,035

12,427

13,577

Sales, General & Administrative and Research & Development Expenses

(18,365)

(25,525)

(33,693)

(36,550)

EBITDA

 

 

(18,234)

(21,441)

(21,216)

(22,922)

Operating Profit (before amort. and except.)

 

 

(18,875)

(23,037)

(22,813)

(24,518)

Intangible Amortisation

0

0

0

0

Other

127

49

50

51

Exceptionals

0

(447)

0

0

Operating Profit

(18,875)

(23,484)

(22,813)

(24,518)

Net Interest

260

22

138

143

Other

0

0

0

0

Profit Before Tax (norm)

 

 

(18,615)

(23,015)

(22,675)

(24,375)

Profit Before Tax (reported)

 

 

(18,615)

(23,462)

(22,675)

(24,375)

Tax

2,704

3,146

1,513

0

Deferred tax

(0)

(0)

(0)

(0)

Profit After Tax (norm)

(15,911)

(19,869)

(21,162)

(24,375)

Profit After Tax (reported)

(15,911)

(20,316)

(21,162)

(24,375)

Average Number of Shares Outstanding (m)

121.3

156.5

172.0

183.0

EPS - normalised (£)

 

 

(0.131)

(0.127)

(0.123)

(0.133)

EPS - Reported (£)

 

 

(0.13)

(0.13)

(0.12)

(0.13)

Dividend per share (£)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

2,169

32,994

32,587

32,851

Intangible Assets

865

28,529

27,594

27,366

Tangible Assets

1,296

3,378

3,851

4,343

Other

8

1,086

1,142

1,142

Current Assets

 

 

86,094

60,510

72,173

59,567

Stocks

727

6,812

6,911

6,911

Debtors

1,616

5,633

6,843

6,843

Cash

81,048

45,092

53,265

40,659

Other

2,702

2,973

5,154

5,154

Current Liabilities

 

 

(5,056)

(21,837)

(15,455)

(15,455)

Creditors

(4,883)

(16,024)

(15,455)

(15,455)

Short term borrowings

(173)

(5,813)

0

0

Long Term Liabilities

 

 

(544)

(8,861)

(8,764)

(18,764)

Long term borrowings

(544)

(6,542)

(6,566)

(16,566)

Other long term liabilities

0

(2,319)

(2,198)

(2,198)

Net Assets

 

 

82,663

62,806

80,541

58,199

CASH FLOW

Operating Cash Flow

 

 

(11,674)

(15,815)

(22,340)

(21,991)

Net Interest

(51)

(173)

0

0

Tax

(127)

(291)

0

0

Capex

(1,118)

(576)

(596)

(616)

Acquisitions/disposals

0

(20,586)

0

0

Financing

49,306

159

36,320

0

Dividends

0

0

0

0

Other

124

0

0

0

Net Cash Flow

36,460

(37,282)

13,385

(22,606)

Opening net debt/(cash)

 

 

(44,155)

(80,331)

(32,737)

(46,699)

HP finance leases initiated

0

0

0

0

Exchange rate movements

0

36

0

0

Other

(284)

(10,348)

578

0

Closing net debt/(cash)

 

 

(80,331)

(32,737)

(46,699)

(24,093)

Source: company reports, Edison Investment Research

Contact details

Revenue by geography

Creo House
Unit 2 Beaufort Park
Beaufort Park Way
Chepstow
NP16 5UH
+44 (0)1291 606005
https://creomedical.com/

N/A

Contact details

Creo House
Unit 2 Beaufort Park
Beaufort Park Way
Chepstow
NP16 5UH
+44 (0)1291 606005
https://creomedical.com/

Revenue by geography

N/A

Management team

CEO: Craig Gulliford

CTO: Chris Hancock

Craig is a founding angel investor in Creo Medical and joined the company as CEO in 2012. Craig qualified with an MSc in electronic engineering from the University College of North Wales and has over 20 years’ experience in building international businesses from early stage through to significant scale. Craig’s early career developed in the Middle East working with large corporates delivering complex commercial projects. In January 1999, Craig joined a start-up software and hardware business where, as COO, he was part of a small team that grew the company both organically and through acquisition, from a loss-making start-up to a profitable business delivering significant shareholder returns and an exit in 2007.

Chris is the founder of Creo Medical with over 20 years’ experience in medical device development including four years at Gyrus Group in his role as senior engineer. Chris holds a personal chair in the Medical Microwave Systems Research Group at Bangor University. Chris is a Fellow of the Institute of Physics, a chartered physicist, Fellow of the Institute of Engineering and Technology, a chartered engineer and a senior member of the IEEE. Chris is also a Royal Academy of Engineering Visiting Professor at UCL and was awarded Katherine Burr Blodgett Gold Medal and Prize in 2019 for work on Creo’s CROMA Advanced Energy Platform technology. Chris is a named inventor and lead author on over 800 granted patents, patent applications and international journal publications.

Chief Commercial Officer: David Woods

CFO: Richard Rees

David is an industry veteran within the med-tech sector. His experience in the medical device market encompasses general and orthopaedic surgery, gastroenterology, pulmonology and ENT. David was previously the president and CEO of PENTAX Americas and M&A Director of HOYA Group PENTAX Medical. David was awarded the ASGE Presidents award in 2010 recognising exceptional contributions to the society and its mission.

Richard joined Creo Medical as CFO in July 2016. Prior to joining Creo, Richard was CFO of SPTS Technologies, a UK-based, global manufacturer of semiconductor capital equipment. In 2011, Richard was part of a management team at SPTS Technologies that, together with Bridgepoint Capital, acquired SPTS Technologies for $200m from Sumitomo Precision Products. In 2014, SPTS Technologies was acquired by Orbotech for more than $350m. Prior to joining SPTS Technologies, Richard spent seven years at KPMG in audit.

Management team

CEO: Craig Gulliford

Craig is a founding angel investor in Creo Medical and joined the company as CEO in 2012. Craig qualified with an MSc in electronic engineering from the University College of North Wales and has over 20 years’ experience in building international businesses from early stage through to significant scale. Craig’s early career developed in the Middle East working with large corporates delivering complex commercial projects. In January 1999, Craig joined a start-up software and hardware business where, as COO, he was part of a small team that grew the company both organically and through acquisition, from a loss-making start-up to a profitable business delivering significant shareholder returns and an exit in 2007.

CTO: Chris Hancock

Chris is the founder of Creo Medical with over 20 years’ experience in medical device development including four years at Gyrus Group in his role as senior engineer. Chris holds a personal chair in the Medical Microwave Systems Research Group at Bangor University. Chris is a Fellow of the Institute of Physics, a chartered physicist, Fellow of the Institute of Engineering and Technology, a chartered engineer and a senior member of the IEEE. Chris is also a Royal Academy of Engineering Visiting Professor at UCL and was awarded Katherine Burr Blodgett Gold Medal and Prize in 2019 for work on Creo’s CROMA Advanced Energy Platform technology. Chris is a named inventor and lead author on over 800 granted patents, patent applications and international journal publications.

Chief Commercial Officer: David Woods

David is an industry veteran within the med-tech sector. His experience in the medical device market encompasses general and orthopaedic surgery, gastroenterology, pulmonology and ENT. David was previously the president and CEO of PENTAX Americas and M&A Director of HOYA Group PENTAX Medical. David was awarded the ASGE Presidents award in 2010 recognising exceptional contributions to the society and its mission.

CFO: Richard Rees

Richard joined Creo Medical as CFO in July 2016. Prior to joining Creo, Richard was CFO of SPTS Technologies, a UK-based, global manufacturer of semiconductor capital equipment. In 2011, Richard was part of a management team at SPTS Technologies that, together with Bridgepoint Capital, acquired SPTS Technologies for $200m from Sumitomo Precision Products. In 2014, SPTS Technologies was acquired by Orbotech for more than $350m. Prior to joining SPTS Technologies, Richard spent seven years at KPMG in audit.

Principal shareholders

(%)

Canaccord Genuity Wealth

14.57

Baillie Gifford

8.43

Capital Research

7.16

M&G Investment Management

5.28

AXA Investment Managers

3.05

FIL Investment Advisors

2.95

BennBridge

2.85


General disclaimer and copyright

This report has been commissioned by Creo Medical and prepared and issued by Edison, in consideration of a fee payable by Creo Medical. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Creo Medical and prepared and issued by Edison, in consideration of a fee payable by Creo Medical. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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