SMALL CAP IDEAS: Creo Medical powers on towards profitability

“We know what we have to do.” These are the words of Craig Gulliford, CEO of Creo Medical, after what he described as the Welsh-based medical device company’s latest fundraising round.

“We know how to get people to use the current products we have [and] we know what the outlook looks like for the products.’

Armed with its range of minimally invasive surgical devices and an already established European distribution network, Creo Medical attracted attention in February when it raised £33.7 million through a significantly oversubscribed equity offering.

It aimed to raise £25 million as it targeted the path to cash flow break-even and profitability by 2025.

‘There are many companies in med-tech and life sciences that go bankrupt long before that [they] come to this point in time,’ Gulliford explained.

‘[This is] often because there is no access to the capital needed to navigate the regulatory landscape.”

Having successfully navigated the rigorous regulatory landscape to get its devices approved, not to mention the added challenges of the pandemic followed by global economic challenges, Creo is ready to go commercial.

And of course the financial headwinds are diminishing as it invests less in research and development.

Creo was founded in 2010 after a chance meeting in Bath between postgraduate housemates Craig Gulliford and Chris Hancock, the company’s founder and chief technology officer.

Usage: Creo tools can be used to treat early stage growths or pre-cancerous lesions

Now reacquainted, the pair set their sights on commercializing Hancock’s invention – a line of products that use both radio frequency to shrink growths and microwaves to stop bleeding.

This technology provides clinicians with new tools for minimally invasive surgery in the areas of gastroenterology, interventional pulmonology and soft tissue ablation.

Essentially, this means diagnosing and treating diseases around the gut region, lung region and in soft tissue, using heat to minimize damage caused by surgery.

Creo’s instruments can be used to treat early stage or precancerous growths known as polyps, for example, simplifying the process of doing this and is the result of years of research by founder Hancock.

Unlike rival endoscopic devices, Creo’s patented system can ground the flow of electricity used to cut tissue, eliminating the need to pass current through patients.

What sets Creo apart, however, is the tremendous amount of time and resources its products can save hospitals, given the technology’s matchless sophistication.

“The difference is night and day,” Gulliford remarked.

When a patient is treated with Creo’s technology, they can undergo an endoscopic procedure in up to an hour and a half and be home within 24 hours, Gulliford explains.

“The alternative would have been with those patients, three or four hours of surgery in the operating room, with probably three to four days in the hospital,” he said.

Creo says using its flagship Speedboat Inject device could save the NHS £5,000 per procedure, as the method is faster and less damaging than conventional surgery.

This in turn means less strain on bed space and operating rooms.

More than 1,000 procedures have already been performed using Creo’s Speedboat Inject – a tube-like device that can film, cut and reseal wounds and is used for internal procedures called endoscopy.

Speedboat is already enjoying “increased acceptance,” analysts at the Edison research firm said in early April. Adding commercialization of this and other core products will be critical financially for Creo as it targets that break-even milestone in 2025.

Creo’s acquisition of distributor Albyn Medical in 2020 has given it an already functioning distribution network in Europe.

Fifteen months after the initial purchase, Albyn is now fully integrated with Creo, Gulliford confirms.

Meanwhile, trials and regulatory research of Creo’s other products continue, including the MicroBlate Flex tissue ablation device, which will be tested in humans in the coming months.

These and other Creo products feature the company’s patented ‘Kampative’ technology, which integrates radio frequency and microwaves using the CROMA Advance Energy platform.

Since Creo is already equipped with this solid portfolio of devices and a means to sell them, its future success ultimately rests on attracting clinicians to its training platform.

More than 80 clinicians were confirmed to have used Creo’s products in January, up from 20 in December 2021, with 450 completing the training program last year.

“We have the basic training centers up and running worldwide,” Gulliford said.

‘The next step is now to enlarge the funnel […] regionalized mentoring and practice, he added.

Combined, clinicians have performed 1,500 surgeries using Creo’s devices.

The additional funds raised in February will help fund further training and drive market adoption.

Creo has already sold a range of products made by Albyn, with the acquisition increasing the parent company’s sales and marketing presence tenfold, Edison calculated.

Gulliford said this lower-margin Albyn range “fits in nicely” alongside its “tier-one” advanced energy products, as well as effectively providing exposure to a wider range of markets.

Given the largely untapped territory that Creo’s products are trying to break into, offering a new type of surgery after open and then keyhole, the peer group is relatively small.

“When you think about the actual technology to put advanced energy into instruments of this type, you see very, very little of that level of innovation in this space,” Gulliford said.

While Gulliford listed Microtech and Boston Scientific among his closest rivals, he says the true sophistication and compact nature of Creo’s technology has yet to be truly matched.

So, armed with its hitherto unrivaled products, the comfort of not having to splash out on further research, and a hefty amount of cash in the back pocket, Creo is now on its way to profitability – and with the destination in sight.

“We don’t have to invent or prove anything,” Gulliford repeated. He added, “We just have to keep grinding and doing our job.”

Creo Medical shares currently trading at 24.5p.