Trading Update

Creo Medical Group PLC

07 February 2024

 

Creo Medical Group plc

("Creo" the "Company" or the "Group")

FY 2023 Trading Update

New products support strong growth and accelerate commercial momentum of Creo's core technology

Double digit Group revenue growth and ongoing cost control

Creo Medical Group plc (AIM: CREO), the medical device company focused on the emerging field of minimally invasive surgical endoscopy for pre-cancer and cancer patients, provides a trading update for the year ended 31 December 2023, including an overview of its commercial and clinical progress.

2023 was a pivotal year for Creo, with considerable strides made by all areas of the business with the focus on commercialisation of its core technology. The Company expects to report growth in Group revenues of 13%, from £27.2m in FY22 to £30.8m in FY23. Underlying operating costs were reduced by £3.7m (a reduction of 10% YoY) through tight cost control while still funding the strategic product development programmes that fuel future growth as Creo transitions into a fully commercial business with a clear path towards cashflow break even and beyond.

Gross margin across the Group improved from 48.3% to 49.6% through supply chain management and increasing sales volumes. Materially reduced operating costs contributed to a reduced underlying EBITDA loss of £16.4m (FY22: £20.8m). Following changes to the UK R&D tax credit scheme during the year, the amount recoverable (from 1 April 2023) reduced from 33p per £1 spent on R&D to 18.6p per £1. This resulted in a reduction of over £2m than anticipated. Without this change, underlying EBITDA loss would have been under £14.5m.

The improved revenues, margin improvement, conversion of inventory to cash and lowered operating costs improved net cash burn. Cash and cash equivalents as at 31 January 2024 were £22.8m (31 Dec 2022: £13.1m) and the Group remains on track to reach cash flow break even as planned, with the Company well positioned to meet its stated growth ambitions.

Core technology sales and Kamaptive licensing income increased to £4.0m (FY22 £2.3m) with core technology sales increasing c. 250%. December 2023 was a record month for orders and shipments following the launch of Speedboat® UltraSlim, which makes the range now compatible with all routine endoscopes worldwide. This momentum has carried through into 2024 and the Company is managing manufacturing capacity appropriately to take account of the increase in demand.

Creo's Endotherapy consumable revenues of £26.8m represent growth of 8% (FY22: £24.9m). The European consumables business acquired in 2020 is growing and profitable and continues to provide a solid foundation for the commercialisation of Creo's core technology.

Successful launch of Speedboat® UltraSlim

Speedboat® UltraSlim has been used successfully in procedures in the UK, USA, LATAM and APAC to treat precancerous lesions in the colon, oesophagus and stomach, as well as in oesophageal and gastric POEM procedures (which address swallowing disorders and gastroparesis).  Within weeks of release, the device had been used by 16 doctors across 12 sites. Feedback includes:

"The Speedboat® UltraSlim improvement in size, energy delivery and handling will allow me to do more cases."

"This new device will make my procedures faster and I can perform a POEM and Fundoplication with one Speedboat versus three total devices."

"I can go whatever direction I want with complete rotation and deliver microwave faster. The UltraSlim is a gamechanger."

Growing number of users and user pipeline

The number of users and prospective users for Creo's core technology continues to grow. Multinational and regional training and mentoring events held during 2023 have resulted in 175 confirmed users at the end of the period. This is an increase of c.120% over the 80 as at 31 December 2022 and a 30% increase over the 115 as at 30 June 2023. Management remains confident that this growth trajectory will continue during 2024, supported by: the exceptional clinical feedback from the new device, the large backlog of trained clinicians, who are expected to convert into users, and the growing pipeline of future users as Creo's core technology continues to gain market traction.

Third party validation

The results reported by The Royal Oldham Hospital during 2023 illustrate the positive impact of Speedboat® and the launch of Speedboat® Submucosal Dissection ("SSD") service on patient outcomes, waiting lists and the prevention of bowel cancer. Having attended Creo's 'Pioneer' training programme and installed devices across multiple endoscopy rooms immediately, the hospital performed five SSD cases in its first afternoon, with over thirty further patients successfully treated within weeks, delivering excellent patient outcomes and at a significantly lower cost to the Trust.

The validation of Creo's technology has gathered further momentum with the selection of Speedboat® Inject by the National Institute for Health and Care Excellence ("NICE") to be scoped and routed for guidance and by an ongoing collaboration with NHS Supply Chain.

Product development

The Company has now started clinical market development with its MicroBlate® range, which provides flexible microwave ablation for soft tissue where flexibility and small diameter is required. MicroBlate® Flex has now been used in clinical cases ablating tumours in the lung for the first time as part of a multi-site clinical study, following pancreas and liver cases previously announced.

The Company expects regulatory approval in 2024 for its SpydrBlade™ technology, a surgical device that combines the Speedboat® blade and precise microwave coagulation in a unique multi-modal jaw design.

Kamaptive licensing partnerships

Creo's Kamaptive licensing partnerships with Intuitive and CMR have progressed well during 2023. Milestones have been met and the team continues to explore how best to expand the scope and reach of its partnerships.

The Company anticipates continued progress towards SpydrBlade's integration into robotic laparoscopic tools, as part of the Kamaptive programme, during 2024. Discussions to expand and broaden partnership opportunities with new and existing partners continue such as the recently announced collaboration with Khalifa University.

Commenting on outlook, Craig Gulliford, Chief Executive Officer of Creo, said:

"2023 was another significant year for Creo, beginning with the planned fundraise in extremely challenging market conditions, which allowed us to focus time and energy on the business for the rest of the year. We closed the year with a c. 250% increase in our core technology revenues and with over 80% of the Group revenues now derived from Creo branded products. The final step of miniaturising our Speedboat technology in the form of Speedboat® UltraSlim was launched into the US, EU and now beyond; this significant step has expanded our market access even further, making Speedboat compatible with all routine endoscopes worldwide.

"We are also developing the clinical case volumes and commercialising our MicroBlate brand. With increasing clinical cases and, more recently, the first combined use of our products for Robotic procedures, our technology promises to deliver an alternative to patients in indications where, to date, mortality rates have remained stubbornly high.

"We have also made some significant progress on the Kamaptive programme integrating our SpydrBlade technology into the field of robotically assisted laparoscopic surgery. We are solving the foundational limitations of existing market leading laparoscopic technology that prevent their effective application in robotic surgery.

"The collaborations with our Kamaptive partners illustrate that Creo has a truly unique technology platform, with unmatched surgical resection and sealing capabilities. This platform is driving increased volumes and users across all areas as the business transitions further into a commercially cash generative phase.

"With revenues increasing across the Group by 13%, operating costs reducing by 10% and an outlook of an increasing product range, increasing Kamaptive programme and having now maximised the miniaturisation of the Speedboat product, all of the indicators are on the right trajectory.

"We look forward to another year of strong growth in our core technology from both existing and new users and remain confident of our goal to achieve cashflow break even in 2025."

Creo expects to announce its audited results for the year ended 31 December 2023 during April 2024.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as amended by The Market Abuse (Amendment) (EU Exit) Regulations 2019.

Enquiries:

Creo Medical Group plc	www.creomedical.com
Richard Rees (CFO)	[phone]
Cavendish Capital Markets Limited	[phone]
Stephen Keys / Camilla Hume (NOMAD)
Michael Johnson (Sales)
Deutsche Numis (Joint Broker) Freddie Barnfield / Duncan Monteith / Euan Brown	[phone]
Walbrook PR	Tel: [phone] or [e-mail]
Paul McManus / Sam Allen Phillip Marriage	Mob: [phone] [phone]

About Creo Medical 

Creo Medical is a medical device company focused on the development and commercialisation of minimally invasive electrosurgical devices, bringing advanced energy to endoscopy.

The Company's vision is to improve patient outcomes through the development and commercialisation of a suite of electrosurgical medical devices, each enabled by CROMA, powered by Kamaptive. The Group has developed the CROMA powered by Kamaptive full-spectrum adaptive technology to optimise surgical capability and patient outcomes. Kamaptive is a seamless, intuitive integration of multi-modal energy sources, optimised to dynamically adapt to patient tissue during procedures such as resection, dissection, coagulation and ablation of tissue. Kamaptive technology provides clinicians with increased flexibility, precision and controlled surgical solutions. CROMA currently delivers bipolar radiofrequency ("RF") energy for precise localised cutting and focused high frequency microwave ("MW") energy for controlled coagulation and ablation via a single accessory port. This technology, combined with the Group's range of patented electrosurgical devices, is designed to provide clinicians with flexible, accurate and controlled clinical solutions. The Directors believe the Company's technology can impact the landscape of surgery and endoscopy by providing a safer, less-invasive and more cost-efficient option for procedures.

For more information, please refer to the website www.creomedical.com

 

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