Creo Medical — Progressing on all fronts

Creo Medical (AIM: CREO)

Currency in GBP

Last close As at 04/02/2023

GBP0.20

−0.25 (−1.25%)

Market capitalisation

GBP36m

Research: Healthcare

Creo Medical — Progressing on all fronts

2022 was an eventful year for Creo Medical, as it progressed on all fronts of its ‘Build, Buy and Partner’ strategy. The period was marked by the increasing traction of Speedboat Inject (its flagship electrosurgical device) and its proprietary CROMA technology platform. Enhanced levels of user, robotics deals with Intuitive and CMR, and multiple heads of terms agreements all suggest a potential inflection point for Creo. To factor in these developments and the improved visibility of the company’s near-term plans, we have revisited our model assumptions and introduced more granularity to our estimates. We now categorise Creo’s revenue stream from three sources: Core technology, Consumables and Partnerships, resulting in our valuation rising to £493m or 272p/share, from £489m (269p/share) previously. We note that at current burn rates, Creo would need to raise funds by Q223 to continue supporting its development plans.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

creo05

Healthcare

Creo Medical

Progressing on all fronts

Company outlook

Healthcare equipment
& services

19 January 2023

Price

20p

Market cap

£36m

Estimated net cash (£m) at 31 December 2022

6.3

Shares in issue

181.5m

Free float

75.9%

Code

CREO

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(28.1)

(58.2)

(83.8)

Rel (local)

(32.7)

(63.0)

(83.9)

52-week high/low

172.0p

20.0p

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.

Next events

FY22 results

Mid 2023

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

2022 was an eventful year for Creo Medical, as it progressed on all fronts of its ‘Build, Buy and Partner’ strategy. The period was marked by the increasing traction of Speedboat Inject (its flagship electrosurgical device) and its proprietary CROMA technology platform. Enhanced levels of user, robotics deals with Intuitive and CMR, and multiple heads of terms agreements all suggest a potential inflection point for Creo. To factor in these developments and the improved visibility of the company’s near-term plans, we have revisited our model assumptions and introduced more granularity to our estimates. We now categorise Creo’s revenue stream from three sources: Core technology, Consumables and Partnerships, resulting in our valuation rising to £493m or 272p/share, from £489m (269p/share) previously. We note that at current burn rates, Creo would need to raise funds by Q223 to continue supporting its development plans.

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

12/22e

27.1

(26.4)

(12.4)

0.0

N/A

N/A

12/23e

31.0

(21.8)

(10.2)

0.0

N/A

N/A

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

Speedboat Inject gaining traction

During 2022, Creo’s continued focus on the commercialisation of its Speedboat Inject device and CROMA platform resulted in increased orders and a 3x growth in revenue to £0.9m,and management expected to close the year with c 800 procedures. While the focus continues to be on lower gastrointestinal (GI) procedures, selective usage in other indications such as peroral endoscopic myotomy (POEM) and gastrointestinal stromal tumour (GIST) reflect the potential for scope expansion. With 450 clinicians in the training pipeline and planned bundling of European consumables in the United States and Asia-Pacific, we see potential for incremental revenue growth in the medium term.

Robotics deals are early endorsement of technology

We are encouraged by the robotics deals signed with Intuitive Surgical and CMR Surgical and see these as an early validation of Creo’s Kamaptive technology. The deal with Intuitive, in particular, holds significant potential, given the market credibility and reach of Intuitive’s robotic systems (da Vinci and Ion). Creo recorded the first licensing income from the deal in FY22 (c £1.4m) and expects milestone payments of £3m in FY23 and FY24 each, along with device sales revenue starting in FY24.

Valuation: £493m or 272p per share

Our valuation is virtually unchanged at £493m or 272p/share after incorporating changes in our forecasts, including inclusion of ex-Europe consumables sales and the expected contribution from the Intuitive deal, partially offset by a more protracted ramp-up of the Speedboat Inject user base we now assume. We estimate the need to raise a total of £25m before turning EBITDA-positive in H225 and achieving net profitability in H126 (previously £30m and FY25, respectively).

Investment summary

Company description: Differentiated medical devices

Creo Medical is a UK-based medical device company, founded in 2003 and listed 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. The core of the company’s business model is its patented Kamaptive technology, which is a combination of bipolar radiofrequency (RF; most available products use monopolar RF) and microwave energy delivered through the company’s CROMA platform for the purpose of dissection, resection, ablation and haemostasis of diseased tissue.

The company has been employing a three-pronged business strategy (termed ‘Build, Buy and Partner’) and has made progress on all fronts over the past two years. ‘Build’ incorporates the development and commercialisation of its core portfolio of electrical surgical products and includes the Speedboat Inject, Speedboat Slim, SpydrBlade Flex, SlypSeal Flex, MicroBlate Fine and MicroBlate Flex. All six products have been CE marked and five are also cleared for use by the FDA, with the remainder awaiting FDA clearance imminently. The ‘Buy’ or acquisitive strategy is based on complementary bolt-on and strategic acquisitions, for example, Creo’s acquisition of the GI consumables businesses Albyn Medical in July 2020 and Boucart Medical in November 2020. The ‘Partner’ strategy, which involves out-licensing its CROMA/Kamaptive technology platform to third parties, gained significant traction in 2022 with co-development deals signed with two robotics players, Intuitive (May 2022) and CMR (October 2022). Management anticipates that c 80% of long-term value will come from the suite of electrosurgical devices that forms Creo’s core business.

Valuation: £493m or 272p per share

We value Creo Medical at £493m or 272p per basic share using a risk-adjusted NPV model with a 12.5% discount rate. Given recent developments as part of the business strategy, we have split our valuation to reflect the contributions from each of the pillars (‘Build, Buy, Partner’) to our net present valuation (NPV). For the core technology business (Build), with the growing commercialisation and acceptance of Speedboat Inject (800 procedures anticipated in 2022 and 450 clinicians in the training pipeline, a leading indicator of future sales potential) and supported by increased company disclosures and granularity on its commercial strategy and sales expectations (also indicative of commercial progress, in our view), we have increased our probability of success to 100% (from 70% previously). However, we now introduce a slower ramp-up than incorporated earlier in our model based on recent management disclosures. We anticipate that core technology will contribute c £47m in sales by 2027, ramping up to £188m by 2032 (against the management target of £200m). For the mature Consumables business (Buy), we have incorporated the incremental revenue potential from bundling activities ex-Europe (United States and Asia-Pacific) in our model. We have also introduced a contribution from Partnerships in our valuation (Partner), although the current assessment is almost entirely driven by the deal with Intuitive Surgical. We see upside potential from this category as the current collaborations develop and further deals are made. Based on our current estimates, c 78% of our enterprise value for Creo is attributable to the Core technology (CROMA platform and Creo devices), 15% to Consumables (majorly Albyn Medical) and 7% to Partnerships (mainly Intuitive).

Financials: EBITDA break-even anticipated in H225

While Creo generates a steady revenue stream from its mature European consumables business (c 90% of FY22 revenues of £27.1m), in our view, its valuation case is driven by its core portfolio of electrosurgical devices (led by Speedboat Inject), with the bulk of the contribution from future-years. Following recent management disclosures, we have reduced our top-line estimates for FY22–23 slightly (£31.0m versus £33.8m for FY23 previously). Furthermore, for FY23, we have cut our R&D estimates based on management guidance, which leads to an improvement in our estimated underlying EBITDA loss for the year (loss of £15.8m versus £17.4m previously). We estimate Creo to end FY22 with a net cash position of £6.3m (gross cash of £13.1m as disclosed in the January 2023 trading update, net of our forecast total debt of £6.8m) which, based on our projected burn rates, should fund operations into Q223. We anticipate the need to raise another £25m (FY23: £15m and FY24: £10m), down from £30m previously, modelled as illustrative debt, to support the company’s growth plan. Introducing a relatively slower sales ramp-up in our updated model results in our estimated timeline for achieving net profitability being pushed out to H126 from FY25 previously. We however estimate underlying EBITDA to turn positive in H225 (£1.1m in FY25).

Sensitivities

Although Creo’s products are unique in their use of bipolar 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, the requirement for additional training to optimally use and handle the device may make it more challenging to convince surgeons to switch brands or move to a new type of procedure. While some of these concerns have been mitigated by the improving sales traction of and positive feedback on the Speedboat Inject device, future uptake will still be dependent on a range of factors, such as the ability to attract more clinicians to its training programme and converting them into regular users, as well as expanding the usage of CREO devices into broader applications. We see these variables as having a significant bearing on future cash inflows for the company. However, we also believe that the recent licensing agreements for the Kamaptive technology provide another avenue for growth, partially de-risking the dependence on the core portfolio to drive growth. Effective integration of Creo’s technology/devices into the robotics systems of the signed partnerships, if successful, should provide significant growth opportunities for the company in the near future. We see timely access to and availability of funds as another key sensitivity, particularly given the ongoing macroeconomic tightness. The company may need to raise funds through equity issues, which increases dilution risk. Reimbursement may also be an issue as surgical devices are typically 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: Advanced surgical 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. Its CROMA platform (powered by Kamaptive technology) is at the heart of its surgical products and delivers a combination of bipolar RF for endoscopic cutting, resection and dissection, and microwave energy, for coagulation and ablation. While the use of RF in endoscopic procedures is common, it is usually developed as monopolar RF and Creo appears to be unique in using bipolar RF. With bipolar 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. Products using the CROMA platform include Speedboat Inject, Speedboat Slim, SpydrBlade Flex, SlypSeal Flex, MicroBlate Fine and MicroBlate Flex. All six products have been CE marked and five are also cleared for use by the FDA via the 510(k) pathway, with the remaining expected to be cleared in the near future. The company currently has 125 patent families, which comprise 484 granted patents and 946 pending applications.

Exhibit 1: Creo Medical’s products

Product

Description

Indications

Availability

Comments

Speedboat Inject

Flagship product. Multimodal bipolar RF and focused microwave energy blade antenna with 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 precancerous 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 precancerous and cancerous lesions in the lower and upper GI tracts

US, EU/UK

CE marked in EU; launched in the US in November 2022

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 bipolar 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

Delivering on its Build, Buy and Partner strategy

Creo’s business strategy is based on three strategic pillars: Build, Buy and Partner; and the company has taken several initiatives to strengthen each pillar. In the past couple of years, the company has made tangible progress across all three categories.

Build

In 2022, Creo witnessed strong momentum in the adoption of its core CROMA technology platform and the flagship Speedboat Inject device. In FY22, 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. Management anticipated closing the year with c 800 procedures for Speedboat Inject. The regional spilt for procedures stands at 40–45% in the United States, 40–45% in Europe and the remaining in Asia-Pacific. In addition to upper and lower GI procedures, Speedboat Inject has been used to treat multiple POEM and stomach procedures on patients in the United States, along with additional indications treated in Europe, the Middle East and Africa, including a GIST, reflecting the expanded scope of the device for the treatment of other indications.

A key factor driving uptake and usage of Creo’s electrosurgical devices is the training of clinicians and specialists in appropriately using the device for endoscopic procedures. Creo’s clinical training programme, Pioneer, provides training to the clinicians on Creo’s technology. Pioneer is an important driver for sales growth as, according to the company, the trainees typically convert into long-term customers. With COVID-19 headwinds subsiding, Creo has been able to develop its training programme by organising several regional and multinational events and expanding its access to new territories, notably in the Asia-Pacific region (in particular, Singapore and Thailand). The company has opened a regional hub in Singapore to support the near-term product launch plan and the company has enrolled around 15 distributors. The expansion efforts have led to an increase in the pipeline of clinicians to be trained (c 450 as of end FY22) and the company remains on track to grow this figure further.

In addition to this, Creo opened US headquarters, in June 2021, supporting commercial roll-out in the United States. Moreover, it purchased the freehold of Creo House, its head office in Chepstow, in June 2021 (for £4.25m) to support its growth plans. All manufacturing activities are likely to be carried out at the UK site, which has annual manufacturing capacity of 100k devices, according to management.

Buy

Creo has been supplementing its core portfolio with strategic acquisitions, notably Albyn Medical, Boucart Medical and Aber Electronics. 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, although 90% of revenues come from the GI endoscopy space. 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 and we expect it to make the bulk of the consumables revenue for Creo. 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 tenfold.

In November 2020, Creo Medical acquired Belgian medical device company Boucart Medical for €4.5m in cash and up to €0.5m in additional considerations, 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. These acquisitions have added a continuous revenue stream to Creo’s business operations, accounting for c 99% of the revenue in FY21 and c 90% in FY22.

In November 2021, Creo acquired Aber Electronics, a UK-based manufacturer of power amplifiers and radio frequency products, which are the key elements in Creo’s products. The acquisition was a material part of the company’s buy strategy as it not only strengthened R&D capabilities but also secured an important part of its supply chain.

Partner

In May 2022, Creo announced a long-term robotics collaboration with category leader Intuitive Surgical (a US-based medical robotics developer for minimally invasive procedures). The agreement aims to combine Intuitive’s robotics platform and Creo’s Kamaptive technology. The agreement will entail co-development for undisclosed Creo product(s) for compatibility and for FDA regulatory studies, which we understand will likely require c 18 months to complete. While the exact deal terms have not been disclosed, the terms of the agreement include joint clinical studies and the potential for royalty and milestone payments to be received by Creo. We believe this agreement reinforces Creo’s differentiated offering in an evolving subsegment and holds significant upside potential on successful development.

Intuitive Surgical (Nasdaq: ISRG) is a world-leading developer of robotic-assisted surgery platforms. It mainly operates in two types of minimally invasive robotic systems: da Vinci Surgical System and Ion Endoluminal System. While the da Vinci system is an advanced robotic system for complex surgery, the Ion Endoluminal System is mainly used in diagnostic procedures and potential interventional treatment of lung cancer, emphysema, chronic obstructive pulmonary disease and other respiratory disorders. The Ion Endoluminal System received FDA clearance in February 2019, although it currently does not hold a CE mark in Europe. Intuitive had an installed base of 7,865 systems at the end of December 2022 (including 7,544 da Vinci surgical systems and 321 Ion systems) and recorded revenue of $6.2bn in FY22 (see Exhibits 2 and 3).

Exhibit 2: Da Vinci installed base

Exhibit 3: Ion installed base

Source: Intuitive Surgical SEC filings

Source: Intuitive Surgical SEC filings

Exhibit 2: Da Vinci installed base

Source: Intuitive Surgical SEC filings

Exhibit 3: Ion installed base

Source: Intuitive Surgical SEC filings

While Creo has not provided details on its technological collaboration with Intuitive, indicative information suggests that the partnership will initially focus on the newer Ion systems. In the longer term, we see upside potential for a possible collaboration expansion to include the da Vinci systems, which have a much broader footprint and are estimated to have been used in upwards of 10 million procedures to date (Exhibit 4).

Exhibit 4: Number of procedures using Intuitive systems (‘000)

Source: Intuitive Surgical SEC filings

The Intuitive deal was followed by a second robotics deal, with CMR Surgical, a global surgical robotics company, in October 2022. Creo Medical signed a non-exclusive licence and royalty agreement with CMR Surgical, wherein CMR will be permitted to integrate certain features of Creo’s Kamaptive technology into CMR’s Versius surgical robotic system, which CMR markets as next-generation laparoscopic surgery robot. The deal represents another win and validation for the company’s ‘Powered by Kamaptive’ licensing programme.

In addition to these deals, Creo has entered into non-binding terms with a number of parties to provide third-party access via potential licensing deals to its advanced energy Kamaptive technology (specifically for SpydrBlade, Cool Plasma and MicroBlate). These agreements are an effort by management to develop a potential market in additional surgical areas, such as laparoscopic surgery, robotic-assisted surgery and non-thermal plasma sterilisation, where Creo does not currently have an operational presence.

Key changes to the model and valuations

During 2022, Creo witnessed a material uplift in demand for the CROMA platform, reflected in the growing traction of Speedboat Inject and the licensing deals signed during the year. As a result of recent developments and our discussions with management, we have more visibility on the near-term revenue and growth trajectory. We have therefore revised our assumptions and introduced more granularity to our estimates. We base our revenue projections on three focus areas: Core technology, Consumables and Partnerships. Below we present details on our revised methodology.

Core technology

Core technology includes revenue from Speedboat, CROMA technology and Creo’s other surgical devices. Based on discussions with management, we now use a bottom-up approach to value Creo’s core portfolio. We base our estimates on projected users for Speedboat Inject over the forecast years, segregating them further into three categories based on usage frequency: low, medium and high. Low users include clinicians utilising Speedboat Inject once a month, medium users once a week and high users twice a week. Based on the number of users and the estimated device usage, we calculate (using a weighted average) the number of devices that we expect to be used or procedures to be performed using a Creo device during the year. We use an average price of £750m per Speedboat Inject device (prices are uniform across geographies, according to management) and expect the total number of users to reach over 1,000 by 2026 (Exhibit 5).

Exhibit 5: Core technology (CROMA platform)

2021

2022

2023e

2024e

2025e

2026e

2027e

Number of users at the beginning of the year

5

20

80

180

380

680

1030

New users added

15

60

100

200

300

350

400

Number of users at the end of the year

20

80

180

380

680

1,030

1,430

y-o-y growth (%)

 

 

125%

111%

79%

51%

39%

Low (once a month)

 

70

150

250

375

450

575

% of total

 

85%

83%

66%

55%

44%

40%

Medium (once a week)

 

8

20

85

165

260

365

% of total

 

10%

11%

22%

24%

25%

26%

High (twice a week)

 

2

10

45

140

320

490

% of total

 

3%

6%

12%

21%

31%

34%

Source: Edison Investment Research

We estimate current gross margins for Speedboat Inject at 60% and project them to rise to 70% (by FY25) with increases in sales volume. Note that our model does not currently include contributions from any of the other five devices in the core portfolio, given the very early stages of commercialisation. We see upside from each of these devices as they gain traction in the market and get incorporated in our valuation. For reference, management has indicated similar prices for the other devices with the exception of Microblade Fine ($1,500–1,700/device) and SpydrBlade ($1,200/device). Management has also guided that gross margins for the other devices will be around 60% as well, with the exception of Microblade Fine, for which margins are estimated in the range of 80–90%.

Consumables

Consumables primarily comprises the integrated businesses of Albyn Medical, Boucart Medical and Aber Electronics and accounts for most of the current revenue for Creo. During 2022, Creo launched several consumable GI products (currently marketed in Europe) in the United States as part of its plan to offer bundled products with its core technology/asset portfolio to potentially generate incremental revenues per procedure. Creo also opened a new office in the United States in July 2021, to act as a learning centre and training laboratory to support its US roll-out plan.

We have assumed a nominal growth rate (3.0%) for the business in Europe and have incorporated consumable product sales in the United States and other regions (with estimated consumable revenue potential of c $400/procedure). We estimate peak penetration of 15% by 2026 (ie 15% of all procedures using Speedboat will also use consumable products from Creo).

As Speedboat Inject gains momentum, we believe the contribution from the Consumables division to total revenue will go down in the near future. According to our estimates, the Core technology segment will contribute more than 50% of revenue by 2027, while the rest is likely to come from the Consumables and Partnership segments.

Partnerships

Under Partnerships, we have considered income from licensing agreements like those with Intuitive and CMR. Given limited information and visibility of the terms of the deal with CMR, our valuation for this segment is based on the deal with Intuitive, including milestone payments and device revenues (related to Intuitive’s Ion systems). Based on our estimates, we project £3.0m of milestone income in both 2023 and 2024, followed by £2.0m in 2025. Moreover, we expect device sales to commence in 2024, where we model initial penetration of 2.5% and peak penetration of 10% in 2028 (as a percentage of total procedures performed by the Ion robots). We also assume a 50% probability of success to factor in the risk associated with the early stage of the deal. As highlighted earlier, we see a considerably larger opportunity from the da Vinci robots, which could add significant upside to our estimates and valuation. In Exhibit 6 we show a breakdown of our revenue forecasts by business area.

Exhibit 6: FY23–25 revenue forecasts by business area (£m)

Source: Edison Investment Research

Sensitivities

Although Creo’s products are unique in their use of bipolar 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 £5.2bn in FY22 sales (over half from its endoscopy division) and has a plethora of products serving the GI endoscopy space and electro surgical resection (ESD) procedures.

Even if Creo products are technically superior, requirements for training or optimal use and handling of the device may make convincing surgeons to switch brands or move to a new type of procedure more challenging. While some of these concerns have been mitigated by the improving sales traction and positive feedback on the Speedboat Inject device, future uptake will still be dependent on a range of factors such as the ability to attract more clinicians under its training programme and convert them into regular users, and expanding the usage of Creo devices into broader applications. We see these variables as having a significant bearing on future cash inflows for the company. However, we also believe that the recent licensing agreements for the Kamaptive technology provide another avenue for growth, partially de-risking the dependence on the core portfolio to drive growth. Effective integration of Creo’s technology/devices into the robotics systems of the signed partnerships, if successful, should provide significant growth opportunities for the company in near future.

Additionally, Creo will have to make additional efforts to target the US market, which has limited traction for ESD procedures because of generally longer procedure times and somewhat higher adverse events (although Creo’s products address both concerns), despite better outcomes for 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 increase could be achieved organically or through acquisition, as Creo has done with its Albyn Medical purchase with which it acquired a 70-person EU sales and marketing team.

Based on our cash burn projections, we anticipate the need for Creo to raise funds in Q223 and therefore see timely access and availability of funds as another key sensitivity, although Creo’s business model can be seen as relatively lower risk than that of pre-revenue stage medtech companies. However, particularly given the ongoing macroeconomic tightness, Creo may need to raise funds through equity issues, which increases dilution risk.

Reimbursement may also be an issue as surgical devices are typically bundled into a total payment for the entire procedure. Gaining reimbursement would likely make adoption easier as financial considerations often dominate in the US healthcare industry. However, according to the company, an ESD conducted using Creo products is still significantly less costly 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.

Valuation

We value Creo Medical at £493m or 272p per basic share (£489m or 269p/share previously) using a risk-adjusted NPV model utilising a 12.5% discount rate. Following the increased commercial traction of Speedboat Inject and more detailed company disclosures on its sales trajectories and strategies, the recent robotics deals and improved revenue visibility, we have reassessed our assumptions and introduced further details to make our estimates more robust. As a result, we split our valuation into three major focus areas: Core technology, Consumables and Partnerships.

For the core portfolio, with the growing commercialisation and acceptance of Speedboat Inject, together with increased company disclosures and granularity on its commercial strategy and sales expectations, we have increased our probability of success to 100% (from 70% previously), although we now introduce a slower ramp-up than incorporated earlier in our model. We calculate that the core portfolio will contribute c £47m in sales by 2027, ramping up to £188m by 2032 (against management’s target of £200m). Overall, our valuation estimate from this segment stands at £379m (£432m previously) due to slower ramp-up in sales than previously anticipated. For the consumables business, our model now includes incremental revenue potential from bundling activities in the United States and Asia-Pacific, which raises the segment valuation to £74.4m (£43.1m previously). Importantly, we now include a contribution from partnerships in our valuation, although the current assessment is almost entirely driven by the deal with Intuitive Surgical (following additional details provided by management on the scope and framework of the arrangement), which we value at £33.7m (based on a 50% probability of success). We see upside potential from this category as the current deals develop and further deals are made. Based on our revised estimates, c 78% of our implied enterprise valuation for Creo is attributable to the Core technology (CROMA platform and Creo devices), 15% to Consumables (mainly Albyn Medical) and 7% to Partnerships (mainly Intuitive).

Exhibit 7: Creo Medical valuation

Product

Main indication

Status

Probability of successful commercialisation

2027 sales
(£m)

rNPV
(£m)

Core Technology (Croma Platform)

GI, soft tissues and pulmonology

Market

100%

47

379.0

Consumables (Albyn Medical)

Urology, gynaecology and GI

Market

100%

32

74.4

Partnerships (Intuitive)

50%

33.7

Total

 

 

 

 

487.1

Estimated net cash (December 2022)

6.3

Total firm value

493.4

Total basic shares (m)

181.5

Value per basic share (£)

2.72

Options (m)

0.0

Total number of shares (m)

181.5

Diluted value per share (£)

2.72

Source: Edison Investment Research

Financials

We have adjusted our estimates based on the changes in our assumptions and valuation methodology, as discussed above. Our FY23 revenue estimate goes down slightly to £31.0m versus £33.8m previously, as we incorporate a more gradual ramp-up in sales based on current trends and management feedback. For FY23, we cut our estimates for operating expenses which leads to an improvement in our estimated underlying EBITDA loss for the year (a loss of £15.8m versus £17.4m previously). The decline in operating expenses comes from the management expectation of lower costs in the near future given that the product portfolio is already developed, reducing the need for incremental R&D. Based on the slower ramp-up expected for Speedboat Inject (compared to our previous estimates), we now expect Creo to reach net profitability in H126 compared to FY25 previously. However, we expect underlying EBITDA, a key metric used by Creo, to turn positive in H225 (£1.1m in FY25).

Creo ended FY22 with gross cash of £13.1m (estimated net cash position of £6.3m excluding our forecast total debt of £6.8m), which, based on our projected burn rates, should be sufficient to fund operations into Q223. We anticipate the need to raise another £25m (FY23: £15m and FY24: £10m), which we model as illustrative debt, to support its growth plan.

Exhibit 8: Financial summary

£'000s

2019

2020

2021

2022e

2023e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

13

9,429

25,161

27,104

31,016

Cost of Sales

(9)

(5,394)

(13,576)

(13,258)

(14,278)

Gross Profit

5

4,035

11,585

13,846

16,738

Research & Development Expenses

(8,146)

(10,193)

(12,869)

(11,582)

(9,845)

Sales, General & Administrative expenses

(10,219)

(15,332)

(25,490)

(25,745)

(26,002)

EBITDA

 

(18,234)

(21,441)

(26,722)

(23,417)

(19,045)

Underlying EBITDA (Adjusted for R&D tax credit)

 

 

(18,295)

(20,978)

(19,461)

(15,772)

Operating Profit (before amort. and excepts.)

 

(18,875)

(23,037)

(29,284)

(26,011)

(21,602)

Intangible Amortisation

0

0

0

0

0

Other

127

49

52

64

64

Exceptionals

0

(447)

(623)

0

0

Operating Profit

(18,875)

(23,484)

(29,907)

(26,011)

(21,602)

Net Interest

260

22

(432)

(359)

(218)

Other

0

0

0

0

0

Profit Before Tax (norm)

 

(18,615)

(23,015)

(29,716)

(26,370)

(21,819)

Profit Before Tax (reported)

 

(18,615)

(23,462)

(30,339)

(26,370)

(21,819)

Tax

2,704

3,146

5,744

3,956

3,273

Deferred tax

0

0

0

0

0

Profit After Tax (norm)

(15,911)

(19,869)

(23,972)

(22,415)

(18,546)

Profit After Tax (reported)

(15,911)

(20,316)

(24,595)

(22,415)

(18,546)

Average Number of Shares Outstanding (m)

121.3

155.8

164.4

181.4

181.5

EPS - normalised (p)

 

(13.11)

(12.75)

(14.58)

(12.36)

(10.22)

EPS - Reported (£)

 

(0.13)

(0.13)

(0.15)

(0.12)

(0.10)

Dividend per share (£)

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

2,169

32,994

39,442

39,189

38,523

Intangible Assets

865

28,529

27,255

26,562

25,881

Tangible Assets

1,296

3,378

8,603

9,043

9,058

Other

8

1,086

3,584

3,584

3,584

Current Assets

 

86,094

60,510

61,167

36,282

34,712

Stocks

727

6,812

8,504

9,135

9,838

Debtors

1,616

5,633

4,830

5,723

6,549

Cash

81,048

45,092

43,534

13,169

6,797

Other

2,702

2,973

4,299

8,255

11,527

Current Liabilities

 

5,056

21,837

19,737

16,486

17,206

Creditors

4,883

9,960

9,921

9,349

10,069

Short term borrowings

173

5,813

5,381

2,702

2,702

Other short-term liabilities

0

6,064

4,435

4,435

4,435

Long Term Liabilities

 

544

8,861

7,554

6,528

20,502

Long term borrowings

544

6,542

5,175

4,149

18,123

Other long term liabilities

0

2,319

2,379

2,379

2,379

Net Assets

 

82,663

62,806

73,318

52,457

35,527

CASH FLOW

Operating Cash Flow

 

(11,674)

(15,815)

(23,199)

(20,003)

(14,966)

Net Interest

(51)

(173)

(463)

(389)

(227)

Tax

(127)

(291)

(2,349)

(3,956)

(3,273)

Capex

(1,118)

(576)

(6,122)

(2,342)

(1,890)

Acquisitions/disposals

0

(20,586)

(1,752)

0

0

Financing

49,306

159

34,208

0

0

Dividends

0

0

0

0

0

Other

0

0

0

0

0

Net Cash Flow

36,336

(37,282)

323

(26,689)

(20,356)

Opening net debt/(cash)

 

(44,155)

(80,331)

(32,737)

(32,978)

(6,318)

HP finance leases initiated

0

0

0

0

0

Exchange rate movements

0

36

(303)

0

0

Other

(160)

(10348)

221

30

9

Closing net debt/(cash)

 

(80,331)

(32,737)

(32,978)

(6,318)

14,028

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 lossmaking 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 the 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 American Society for Gastrointestinal Endoscopy 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 lossmaking 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 the 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 American Society for Gastrointestinal Endoscopy 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

14.63

Baillie Gifford

7.28

Development Bank of Wales Plc

7.04

Capital Research

6.35

M&G Investment Management

5.19

AXA Investment Managers UK Ltd

4.485

BennBridge

3.30


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

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

More on Creo Medical

View All

Latest from the Healthcare sector

View All Healthcare content

Research: Financials

Secure Trust Bank — In line, with good momentum

In its FY22 post-close trading update, Secure Trust Bank (STB) announced that business has been trading in line with management expectations and with good momentum. Continuing profit before taxes and impairments was ‘significantly’ up, while its cost to income ratio ‘improved markedly’. Core loans rose by 19.1% y-o-y (we forecast 13%), with strongest growth in consumer finance as expected. New business lending did drop 11% y-o-y for Q422 as the bank tightened its lending criteria (as previously flagged by management) due to macroeconomic concerns. Loan arrears are back to pre-pandemic levels in vehicle finance and at record low levels in retail finance. This reflects STB’s repositioning to more prime segments and the de-risking of its loan book over the last few years. STB stated that its FY22 net interest margin percentage remained stable versus H122 despite rising funding costs (this matches our expectation).

Continue Reading
Secure-Trust-Bank_resized

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free