CREO Creo Medical Group Plc

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:

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

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