REG - Creo Medical Group - Strategic Partnership & 51% subsidiary cash sale

Creo MedicalAnnouncement

18/09/2024 12:00

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RNS Number : 7151E  Creo Medical Group PLC  18 September 2024

 

THIS ANNOUNCEMENT WAS DEEMED BY THE COMPANY TO CONTAIN INSIDE INFORMATION AS
STIPULATED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014 AS IT FORMS
PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018.
WITH THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INFORMATION IS NOW CONSIDERED
TO BE IN THE PUBLIC DOMAIN.

 

Creo Medical Group plc

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

 

Transaction to establish Strategic Partnership with leading global endoscopy
manufacturer

 

Sale of 51% interest in Creo's European subsidiary for approximately €36.7m
in cash on a cash free, debt free basis

 

Access to expanded complementary OEM product portfolio for distribution
through Creo's channels

 

Creo Medical Group plc (AIM: CREO), a medical device company focused on the
emerging field of minimally invasive surgical endoscopy for pre-cancer and
cancer patients, announces that it has entered into a binding agreement with
Micro-Tech (NL) International B.V., a wholly owned subsidiary of Micro-Tech
(Nanjing) Co. Ltd (SHA: 688029) ("Micro-Tech") for the sale of 51% of the
issued share capital of Creo Medical S.L.U. ("Creo Europe"), a wholly owned
subsidiary of Creo, at an equity value of €72m (the "Sale") on a cash-free,
debt-free basis.

 

The net proceeds payable to Creo from the Sale (the "Proceeds") will
strengthen the Group's balance sheet, enabling it to continue to invest in its
core Creo and Kamaptive business and deliver on its commercial and operational
objectives. The Proceeds are expected to be approximately €30m which will be
payable in cash on completion. For the year ended 31 December 2023, Creo
Europe contributed €3.6m of profits before tax and €8.8m of net assets
(excluding cash balances). The transaction includes customary acquisition
terms, including in respect of the operation of the Creo Europe up until
completion and no material adverse event occurring during the period until
completion. Ongoing shareholder terms have also been agreed which include a
future exit framework for Creo.

 

Background and Strategic Rationale

 

Creo Europe (formerly Albyn Medical S.L.) was acquired by Creo Medical Group
plc in 2020 as a route to expand its commercial platform in Europe by
providing a direct route-to-market for Creo's full suite of advanced energy
devices and complementing these through an Original Equipment Manufacturer
("OEM") strategy to develop the Creo brand in the market with increased
long-term security in the supply chain.

 

Since then, Creo Europe has grown organically and through acquisition,
expanding its geographic reach, incorporating Creo branded endotherapy
products to its product range, and complementing the Group's core technology
products to provide clinicians with a complete product solution for everyday
endoscopic procedures.

 

Today, Creo Europe manufactures and distributes specialist Gastroenterology,
Urology and Endoscopy products to healthcare providers across Europe, with a
product range including Creo's own manufactured products, Creo-branded
(third-party manufactured) products, and third-party branded (i.e.
distributed) products, predominantly in the major European markets.

 

The strategic transaction with Micro-Tech:

 

·    Strengthens Creo's commercial platform;

·    Expands Creo's endoscopic therapy product range in all markets;

·    Gives Creo Europe access to Micro-Tech's specialised global
distribution and manufacturing expertise; and

·    Enables Creo to continue to fund the ongoing strategic development of
its core technology business.

 

Creo Europe's managing director, Luis Collantes, will continue to manage and
operate the business with the support of both Creo and Micro-Tech. Alongside
Micro-Tech, Creo will retain a number of seats on the board of Creo Europe.

 

Creo and Micro-Tech have agreed to explore a co-branding and registration
strategy for certain Creo core products into the large Chinese market.

 

Completion

 

Along with other customary conditions, completion of the Sale is contingent on
Micro-Tech obtaining Outbound Direct Investment clearance in China along with
Foreign Direct Investment clearances in Spain, France, Belgium and Germany.
Whilst there is no certainty as to receipt or timing of receipt of the
necessary approvals to enable completion, it is expected that completion will
take place during Q1 2025 dependent on these relevant clearances being
obtained.

 

About Micro-Tech

 

Micro-Tech was founded in 2000 and is the market leader in endoscopic therapy
medical devices in China with an approximate market share of 30% of China's
endoscopy device market, designing, manufacturing and selling a range of
minimally invasive medical instruments. In 2023, Micro-Tech recorded revenue
of RMB 2.4bn (c. £250m), and a net profit of RMB 495m (c. £53m), making it
one of the largest Gastrointestinal (GI) consumables suppliers in the world.
Micro-Tech has built a strong, global sales network, with its headquarters
located in Nanjing, China, and subsidiaries in the US, Germany, Netherlands,
UK, France, Switzerland, Portugal and Japan. Micro-Tech is seeking partners
globally, including innovative GI products and sales channels in Europe to
continue to grow its market share.

 

The acquisition of a majority interest in Creo Europe will allow Micro-Tech to
open new sales channels in Europe and offers further growth potential for its
existing business. The resulting partnership with Micro-Tech will support the
development of the Creo brand globally and the acceleration of
commercialisation of Creo's own products in the APAC region. Creo Europe will
continue to sell Creo's own manufactured products in the UK and Europe and
will benefit from having access to the wider Micro-Tech product portfolio to
re-sell in Europe. Micro-Tech will also support Creo Europe in gaining the
necessary regulatory approvals to become a legal manufacturer of Micro-Tech
products in the EU.

 

Craig Gulliford, Chief Executive Officer of Creo, said: "Micro-Tech is not
only China's leading endoscopic instrument company, but also a significant
global brand in the GI Endoscopy market. The Sale represents an excellent
strategic partnership for us and will support our continued commercial growth
in the APAC region through product registration and co-branding in China.
Furthermore, Creo Europe will also gain access to the wider Micro-Tech product
portfolio and access to a complementary range of products under the Creo
brand, ensuring the same confidence in long-term supply to our developing
global sales channels. This strategic partnership also enables a global leader
in our market to gain access to our advanced energy platform in China, as well
as opening up exciting co-development opportunities in our quest to be at the
forefront of advanced energy in the GI endoscopy and minimally invasive
surgery markets.

 

"Creo Europe has performed strongly since its acquisition and subsequent
integration, with an enlarged product portfolio and enhanced Creo product
brand, with sales now established in the US and LATAM markets. We are
delighted to be able to retain a significant interest in Creo Europe following
the transaction, whilst generating a return on our initial investment,
strengthening our balance sheet to invest in our core strategy.

 

"The potential of this partnership to accelerate growth through Creo Medical
Europe, with a harmonised brand and product strategy across our global
commercial operations outside Europe, is really exciting and will enable us to
enhance our customers' procedure repertoire and further strengthen the
clinical benefits we can deliver for patients."

 

Xiaohui Long, Chairman of Micro-Tech, said: "Creo is a medical device company
focused on the development and commercialisation of minimally invasive
electrosurgical devices. As a leading Chinese manufacturer of endoscopic
diagnostic and therapeutic devices, Micro-Tech has been continuously expanding
its overseas sales channels and seeking valuable partnerships for innovative
products. Creo's  subsidiary, Creo Europe, is a key medical device
distributor in Western Europe, and its sales channels and products are highly
complementary to those of Micro-Tech. Upon completion of this acquisition,
Micro-Tech will be able to introduce more products to Creo Europe, empower
Creo's  R&D and market expansion efforts, and bring new momentum to the
development of both companies. Micro-Tech, Creo and Creo Europe share a high
degree of strategic alignment and synergy and we also share a common goal - to
provide better medical solutions for patients and doctors. This acquisition
will be mutually beneficial to all parties, helping us achieve our shared
growth goals."

 

The person responsible for arranging the release of this Announcement on
behalf of the Company is Richard Rees, a Director of the Company.

 

Important notices

 

This Announcement may contain, or may be deemed to contain, "forward-looking
statements" with respect to certain of the Company's plans and its current
goals and expectations relating to its future financial condition,
performance, strategic initiatives, objectives and results. Forward-looking
statements sometimes use words such as "aim", "anticipate", "target",
"expect", "estimate", "intend", "plan", "goal", "believe", "seek", "may",
"could", "outlook" or other words of similar meaning.  By their nature, all
forward-looking statements involve risk and uncertainty because they relate to
future events and circumstances which are beyond the control of the Company,
including amongst other things, United Kingdom domestic and global economic
business conditions, market-related risks such as fluctuations in interest
rates and exchange rates, the policies and actions of governmental and
regulatory authorities, the effect of competition, inflation, deflation, the
timing effect and other uncertainties of future acquisitions or combinations
within relevant industries, the effect of tax and other legislation and other
regulations in the jurisdictions in which the Company and its affiliates
operate, the effect of volatility in the equity, capital and credit markets on
the Company's profitability and ability to access capital and credit, a
decline in the Company's credit ratings; the effect of operational risks; and
the loss of key personnel. As a result, the actual future financial condition,
performance and results of the Company may differ materially from the plans,
goals and expectations set forth in any forward-looking statements. Any
forward-looking statements made in this Announcement by or on behalf of the
Company speak only as of the date they are made. Except as required by
applicable law or regulation, the Company expressly disclaims any obligation
or undertaking to publish any updates or revisions to any forward-looking
statements contained in this Announcement to reflect any changes in the
Company's expectations with regard thereto or any changes in events,
conditions or circumstances on which any such statement is based.

 

No statement in this Announcement is intended to be a profit forecast or
estimate, and no statement in this Announcement should be interpreted to mean
that earnings per share of the Company for the current or future financial
years would necessarily match or exceed the historical published earnings per
share of the Company.

 

 

Enquiries:

 

 Creo Medical Group plc                             www.creomedical.com (http://www.creomedical.com/)
 Richard Rees (CFO)                                 +44 (0)1291 606 005

 Richard Craven (Company Secretary)

 Cavendish Capital Markets Limited                  +44 (0)20 7220 0500
 Stephen Keys / Camilla Hume/George Lawson (NOMAD)
 Michael Johnson (Sales)

 Deutsche Numis (Joint Broker)                      +44 (0)20 7260 1000

 Freddie Barnfield / Duncan Monteith / Euan Brown

 Walbrook PR Ltd                                    Tel: +44 (0)20 7933 8780 or creo@walbrookpr.com
 Paul McManus / Sam Allen /                         Mob: +44 (0)7980 541 893 / +44 (0)7502 558 258 / +44 (0)7867 984 082

 Phillip Marriage

 

 

About Creo Medical

 

Creo 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
(http://www.creomedical.com/)

 

 

About Micro-Tech

 

Micro-Tech (Nanjing) Co., Ltd. is mainly engaged in the R&D, manufacturing
and sales of minimally invasive medical devices. In line with our mission of
"supporting clinicians with technology and innovation," MT is committed to
providing high-quality products and services to hospitals and clinics around
the world, advancing the quality of care, improving patient outcome and
maintaining low costs.

 

After 20+ years of innovation-driven development, MT has extended its product
family from non-vascular stents to three major product platforms, namely,
endoscopic diagnostic instruments and consumables, tumor ablation instruments
and consumables, and minimally invasive neurosurgery. Furthermore, MT has
expanded our market presence from China to about 90 other countries around the
world. MT has become a leading company in the field of minimally invasive
medical technology through scientific research and innovation, competitive
advantage in core products and rapid growth in market share.

 

For more information, please refer to the website www.micro-tech-medical.com
(http://www.micro-tech-medical.com)

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