Creo Medical — CE extension nearly doubles addressable GI

Creo Medical (AIM: CREO)

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Research: Healthcare

Creo Medical — CE extension nearly doubles addressable GI

Speedboat Inject, Creo Medical’s flagship electrosurgical device, has received the CE mark for upper gastrointestinal (GI) procedures. This CE mark extension nearly doubles the device’s scope across all GI tract procedures in Europe and will likely create new surgical opportunities for additional indications (upper GI) as well as increasing the total user base in the near-to-medium term. We believe that the growth in Speedboat Inject’s user base rests on its pioneer training programme and robotics deals with Intuitive Surgical and CMR Surgical, which remain the primary growth drivers for Creo. We note that Speedboat Inject already has regulatory clearance for full GI tract procedures across both the United States and Asia Pacific (APAC) region. Taking into account the £33.7m (gross) fund-raise in Q123, we estimate the company is funded to operational profitability into H126.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

creo05

Healthcare

Creo Medical

CE extension nearly doubles addressable GI

19 June 2023

Price

32p

Market cap

£121m

Pro forma net cash (£m) at 31 December

2022 (includes £32m fund-raise in Q123)

33.4

Shares in issue

350.9m

Free float

87.8%

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

Nidhi Singh

+44 (0)20 3077 5700

Creo Medical is a research client of Edison Investment Research Limited

Speedboat Inject, Creo Medical’s flagship electrosurgical device, has received the CE mark for upper gastrointestinal (GI) procedures. This CE mark extension nearly doubles the device’s scope across all GI tract procedures in Europe and will likely create new surgical opportunities for additional indications (upper GI) as well as increasing the total user base in the near-to-medium term. We believe that the growth in Speedboat Inject’s user base rests on its pioneer training programme and robotics deals with Intuitive Surgical and CMR Surgical, which remain the primary growth drivers for Creo. We note that Speedboat Inject already has regulatory clearance for full GI tract procedures across both the United States and Asia Pacific (APAC) region. Taking into account the £33.7m (gross) fund-raise in Q123, we estimate the company is funded to operational profitability into H126.

Regulatory update

Year end

Revenue (£m)

PBT*

(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/21

25.2

(29.7)

(14.6)

0.0

N/A

N/A

12/22

27.2

(31.0)

(14.9)

0.0

N/A

N/A

12/23e

32.8

(24.3)

(6.3)

0.0

N/A

N/A

12/24e

40.8

(14.8)

(3.6)

0.0

N/A

N/A

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

While Creo has been focusing its efforts on increasing adoption of its core CROMA technology platform and its flagship Speedboat Inject device, we expect the new regulatory approval for upper GI procedures in Europe will add further momentum to Speedboat usage. According to management, upper GI procedures in the US account for more than 40% of global Speedboat Inject procedures to date. Additionally, the company notifies that it already has a pipeline of clinicians, who are willing to use Speedboat Inject for upper GI procedures in Europe. As the Speedboat Inject device is already in use for full GI tract procedures for cutting and coagulation of soft tissue using radiofrequency and microwave energy across the US and APAC, we expect a quick turnaround into regular users in Europe.

This development follows the company’s recent efforts to gain more traction for Speedboat Inject and its CROMA technology platform. In May 2023, Royal Oldham Hospital (UK), a NHS facility, signed up for Creo’s CROMA technology platform, Speedboat Inject and related endotherapy products. Creo has a target base for the Speedboat range of products of more than 350 hospitals in the UK. In June 2023, Speedboat Inject was selected for assessment by the National Institute for Health and Care Excellence (NICE), a UK-based independent expert organisation that provides national guidance on medical practices and technologies. The guidance, if favourable, would likely support increased adoption of the device in the UK.

We note that expansion of the Speedboat Inject user base (with an emphasis on training enrolment) remains the strategic priority for Creo in FY23. Robotic deals with Intuitive and CMR offer additional upside for the company, given the market credibility and reach of Intuitive’s robotic systems (da Vinci and Ion).

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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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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