Creo Medical — A rewarding FY22 for core technology arsenal

Creo Medical (AIM: CREO)

Currency in GBP

Last close As at 02/02/2023

GBP0.20

−0.25 (−1.25%)

Market capitalisation

GBP36m

Research: Healthcare

Creo Medical — A rewarding FY22 for core technology arsenal

Creo Medical has announced its FY22 trading update and outlook for the year ahead. FY22 was a busy period marked by several commercial developments for Creo, including increased adoption of its Speedboat Inject device, new robotic deals with Intuitive and CMR Surgical, and multiple heads of terms agreements signed. Group revenue increased 7% y-o-y to c £27m and this growth was fully attributed to the core portfolio, which recorded an 8x increase in revenue over FY21 (£2.3m vs £0.3m in FY21). Looking ahead, commercialisation of the core technology portfolio will remain a key strategic priority for the company in 2023, along with leveraging cross-selling opportunities from the mature consumables business. Management expects the strong revenue growth from core products and lower (post-launch) opex to support cash flows and help achieve the goal of turning EBITDA-positive by FY25. Cash balance at end-FY22 stood at £13.1m, which, based on current burn rates, should fund operations to end-H123, with management actively seeking options to raise more capital. Our estimates and valuation are under review.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

creo05

Healthcare

Creo Medical

A rewarding FY22 for core technology arsenal

FY22 trading update

Healthcare equipment & services

18 January 2023

Price

20p

Market cap

£36m

Gross cash (£m) at 31 December 2022

13.1

Shares in issue

181.5m

Free float

75.9%

Code

CREO

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

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. In 2020 Creo acquired Albyn Medical, which provides it with profitable products and a direct salesforce in Europe.

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Jyoti Prakash, CFA

+44 (0)20 3077 5700

Nidhi Singh

+44 (0)20 3077 5700

Creo Medical is a research client of Edison Investment Research Limited

Creo Medical has announced its FY22 trading update and outlook for the year ahead. FY22 was a busy period marked by several commercial developments for Creo, including increased adoption of its Speedboat Inject device, new robotic deals with Intuitive and CMR Surgical, and multiple heads of terms agreements signed. Group revenue increased 7% y-o-y to c £27m and this growth was fully attributed to the core portfolio, which recorded an 8x increase in revenue over FY21 (£2.3m vs £0.3m in FY21). Looking ahead, commercialisation of the core technology portfolio will remain a key strategic priority for the company in 2023, along with leveraging cross-selling opportunities from the mature consumables business. Management expects the strong revenue growth from core products and lower (post-launch) opex to support cash flows and help achieve the goal of turning EBITDA-positive by FY25. Cash balance at end-FY22 stood at £13.1m, which, based on current burn rates, should fund operations to end-H123, with management actively seeking options to raise more capital. Our estimates and valuation are under review.

Year

end

Revenue (£m)

PBT*

(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/20

9.4

(23.0)

(12.8)

0.0

N/A

N/A

12/21

25.2

(29.7)

(14.6)

0.0

N/A

N/A

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

Creo’s flagship product, Speedboat Inject, and the CROMA platform continued to show strong growth momentum in FY22, with sales growing threefold y-o-y (45% over H122) to c £0.9m. We assume therefore that the remaining £1.4m revenue growth was primarily recorded as licensing income from Intuitive Surgical. We also estimate that revenue from the European consumables business stood at £24.7m in FY22, broadly in line with the £24.8m reported in FY21. While profitability figures have not been disclosed, management has indicated that the underlying EBITDA loss has reduced in FY22 and is in line with market expectations. The improved operating performance was driven by lower costs (both R&D and marketing costs) following the conclusion of product development and launch-related activities seen in past years.

Importantly, the company’s clinical training programme, Pioneer, saw a doubling of clinicians in the training programme (450 in FY22), which resulted in 80 confirmed users out of 150 trained during the year. This is a 4x increase over the 20 users at the end of FY21 and is a leading indicator of future sales potential.

Commercialisation efforts for the remaining pipeline also accelerated in FY22, with Speedboat Slim (designed to be compatible with 3.2mm scopes vs. 3.7mm for Speedboat Inject) launched in November 2022 (positive initial user feedback) and Microblade Fine gaining market traction (used in over 25 cases of pancreatic ablation and initial use for liver tumour ablation). We expect the broader pipeline to support the core portfolio sales uptake in FY23. With the first anticipated inhuman robotic procedure using Creo’s Kamaptive technology expected in 2023, Creo intends to further expand its existing partnerships with Intuitive and CMR Surgical, along with exploring other such partnership opportunities.

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 £60,000 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.

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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 £60,000 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 2023 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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