ANYTHING IS POSSIBLE WITH THE RIGHT APPROACH - CREO MEDICAL
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CREO
MEDICAL
ANYTHING IS POSSIBLE
WITH THE RIGHT APPROACH
Annual Report and Accounts 2017
Creo Medical is a medical device company focused on the
emerging field of surgical endoscopy, a recent development
in minimally invasive surgery
Overview Governance
Our vision 2 Board of Directors 42
Highlights 3 Directors’ Report 44
The Rapid Rise of Endoscopy 5 Directors’ Responsibilities 45
CROMA platform 8 Corporate Governance Report 46
Investment proposition 10 Directors’ Remuneration Report 48
Chairman’s and CEO’s Q&A 12
CTO’s Q&A Meet the inventor 14
Financial Statements
Independent Auditor’s Report 52
Strategic Report Consolidated Statement of Profit and Loss
and Other Comprehensive Income 54
Our market opportunity 20
Consolidated Statement of Financial Position 54
Our products and pipeline 22
Consolidated Statement of Changes in Equity 55
Our business model 26
Consolidated Statement of Cash Flows 55
Our strategy 28
Notes to the financial statements 56
Financial Review 30
Parent Company Statement of Financial Position 69
Our people 32
Parent Company Statement of Changes in Equity 69
Principal risks and uncertainties 34
Notes to the Parent Company financial statements 70
CREO MEDICAL GROUP PLC 1 ANNUAL REPORT AND ACCOUNTS 2017
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Overview
OUR VISION
Our goal is to develop and commercialise a suite
of medical devices based on our groundbreaking
CROMA electrosurgery platform
HIGHLIGHTS
Successful admission to AIM, raising £20m
—
Completion of Multi-Centre Clinical Study
—
CROMA platform and Speedboat device received CE mark
—
FDA clearance for Creo’s CROMA platform and Speedboat device ahead of schedule
—
First patient treated with Speedboat
—
Significant grant funding awarded for research into brain tumour treatment
CREO MEDICAL GROUP PLC 3 ANNUAL REPORT AND ACCOUNTS 2017
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Overview
TRANSFORMING SURGERY
Creo Medical is at the forefront of a paradigm shift in endoscopic surgery
or surgical endoscopy – whatever the terminology, this is the new frontier
of minimally invasive surgery.
In the same way that laparoscopic techniques revolutionised procedures that previously
were only feasible with open surgery (with large incisions and the associated risks and
recovery time), surgical endoscopy has the potential to transform surgery.
THE RAPID RISE OF ENDOSCOPY
PARADIGM SHIFT
Advances in single-port laparoscopy,
robotic surgery, natural orifice
translumenal endoscopic surgery
& flexible endoluminal endoscopy
herald a new era of healthcare.
2010-2025
SURGICAL MILESTONE
Keyhole/laparoscopic surgery
GOLDEN ERA overtakes open surgery, accounting
for 75% of all procedures.
Open surgery remains
as standard of care but
availability of fibreoptic and
1990-2010
CCD endoscopes leads
to development of early
endoscopic devices.
OPEN SURGERY 1970-1990
1800-1970
CREO MEDICAL GROUP PLC 5 ANNUAL REPORT AND ACCOUNTS 2017
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Overview
TRANSFORMING OUTCOMES
Fold in shorter procedures, hospital stays and recovery times,
correspondingly lower costs and significantly improved outcomes,
and it’s a compelling story with material benefits for patients,
physicians and healthcare providers.
By moving treatment away from the operating theatre into the endoscopy suite,
patients can avoid the need for a general anaesthetic and mitigate the risks
inherent with surgical procedures.
CREO MEDICAL GROUP PLC 7 ANNUAL REPORT AND ACCOUNTS 2017
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CROMA PLATFORM GAME CHANGING TECHNOLOGY
Our strategy is to bring the CROMA
platform to market through a suite of
instruments we have designed, initially
into the field of GI Therapeutic
Endoscopy and BronchoscopyCROMA PLATFORM KEY BENEFITS
Our game changing technology Advantages differentiation
Competitive
• Bipolar radiofrequency for precise localised cutting
• Microwave coagulation
Therapy Current provides
options control Our options
• Single interface port, no need to swap instruments
Treatment for Open or laparoscopic surgery: Advanced therapeutic
Dissection & Resection • Small integrated• unit
GI Higher risk of complications endoscopy:
— • Risk of mortality
• Long hospital stay
• Lower risk of complications
• Risk of mortality is negligible
Hemostasis Physician Benefits • Performed in out-patient
• Safe, peace of mind, fast set-up clinic
—
• Predictable tissue effect
Ablation
• Saves considerable time during procedures
Potential Most patients are untreated: Therapeutic bronchoscopy:
• Can be used
treatment for in surgery and endoscopy
• 85% patients are inoperable1 • Treatment of precancerous
• Fall-back to surgery nodules as first-line option
Bronchoscopy = radiotherapy & • Treatment of patients not
Patient Benefits chemotherapy eligible for surgery
• Lower risk of remote
• 17%burns
five-year survival rate2
• Lower risk of thermaldamage to adjacent tissues
• Less time in hospital
Vessel No flexible endoscopic vessel Flexible endoscopic vessel
sealing sealer available: sealing:
Core Features • Harmonics cannot work • Combination of RF
in flexible applications & microwave
• RF bipolar energy has a 10 fold reduction
• No microwave options
in voltage levels over
• Potential to outperform
traditional monopolar systems
available rigid instruments
• Microwave energy has up to a 100 fold reduction in voltage levels
over monopolar RF energy based coagulation/ablation systems
• Closed loop monitoring of current and voltage at the tip of the
device to ensure optimal dosage of energy into tissue
• Precise and optimised cutting with lower thermal margins due to
intelligent energy delivery algorithms and device geometry
1 •Data
Greater control
for England & Walesover coagulation
– National dueannual
Lung Cancer Audit to the controlled
report depth
2015 (for the audit of2014), Royal
period
penetration
College of2015
of Physicians, the microwave energy
2 American Cancer Society. Cancer Facts & Figures 2016. Atlanta: American Cancer Society; 2016.
CREO MEDICAL GROUP PLC 9 ANNUAL REPORT AND ACCOUNTS 20178
CROMA PLATFORM GI ENDOSCOPY
GAME CHANGING TECHNOLOGY
Colorectal cancer worldwide:
• 16m screening colonoscopies are performed per annum in the
US1
• 1.1m will find a lesion which should be treated2
Our strategy50%isofto
• Approximately thosebring the
lesions are CROMA
surgically removed 1
platform toatmarket through a suite of
• But traditional colorectal surgery is associated with a 6%
mortality rate 30 days 3
instruments we have designed, initially
Growth of GI indications
into the
• Poor diet,field
obesity,of GI Therapeutic
sedentary lifestyles and an aging population
is driving growth in the Endoscopy device market.
Endoscopy and Bronchoscopy
• Western governments and healthcare organisations continue to
expand endoscopic screening programs which, in turn, is driving
an increase in the detection rates for a range of conditions
requiring the resection/biopsy of tissue and the control of
bleeding.
• Western practice continues to refer lesions > 2.5cm for surgical
resection on a significant scale. Surgical removal, whilst
delivering excellent curative results, is also a major operation
requiring long hospital stay (4-5 days) with a significant
mortality rate.
• This is driving significant demand for novel and superior
technology. Our CROMA platform has been designed to
transform the resection of large and pre-cancerous into routine
endoscopy, either displacing a surgical procedure or procedures
undertaken endoscopically with primitive snares (which
historically could result in high recurrence rates and even
reported to be a factor in colorectal interval cancer).
1 US surgical procedures volumes 2010, Millennium Research, RPUS435Sv10, Feb 2010
2 Gastrointest Endosc 2014; 80-133-43
3 Ann R Coll Surg Engi 2011; 96: 445-450CROMA PLATFORM ADvOCATES
Our game changing technology “Your device is
Competitive like a harmonic scalpel at the end of a
differentiation
scope, this is the holy grail of therapeutic endoscopy!”
Therapy Current options Our options
Rob Hawes M.D.
Florida Hospital, Orlando, US
Treatment for Open or laparoscopic surgery: Advanced therapeutic
Dissection & Resection • Higher risk of complications endoscopy:
— “Speedboat RS2 could make ESD safer, quicker and
GI
• Risk of mortality • Lower risk of complications
• Long hospital stay • Risk of mortality is negligible
Hemostasis accelerate the learning curve” • Performed in out-patient
Prof Brian Saunders clinic
— St Mark’s, UK
Ablation
“Speedboat RS2
Potential Mostwould transform
patients are untreated: myTherapeutic
repertoire”bronchoscopy:
treatment for
Mr Mike Williamson.• 85% patients are inoperable1 • Treatment of precancerous
• Fall-back to surgery nodules as first-line option
Bronchoscopy
Endoscopist, RUH, Bath
= radiotherapy & • Treatment of patients not
chemotherapy eligible for surgery
• 17% five-year survival rate2
Vessel No flexible endoscopic vessel Flexible endoscopic vessel
sealing sealer available: sealing:
• Harmonics cannot work • Combination of RF
in flexible applications & microwave
• No microwave options • Potential to outperform
available rigid instruments
1 Data for England & Wales – National Lung Cancer Audit annual report 2015 (for the audit period 2014), Royal
College of Physicians, 2015
2 American Cancer Society. Cancer Facts & Figures 2016. Atlanta: American Cancer Society; 2016.
CREO MEDICAL GROUP PLC 9 ANNUAL REPORT AND ACCOUNTS 20178
CROMA PLATFORM ABLATION
GAME CHANGING TECHNOLOGY
Challenges with existing treatment:
• Access for interventional treatment via bronchoscope is limited by
Our strategy is to bring the CROMA
size of airway (CROMA PLATFORM ABLATION
Our game changing technology Competitive differentiation
The proposed device is intended to be able to navigate to,
see & treat lesions deep in the lung:
• Access Creo Medical’s
Therapy lung probe is intended
Current options to be compatible
Our options
with existing access instruments - meaning that currently
Treatment for areas
Open or laparoscopic surgery: Advanced therapeutic
Dissection & Resection GI
inaccessible of the
• Higher risk lung may be treated
of complications with no additional
endoscopy:
— • Risk of mortality
equipment required
• Long hospital stay
• Lower risk of complications
• Risk of mortality is negligible
Hemostasis • Safety Creo’s lung probe is intended to • Performed in out-patient
ablate lung lesions safely
clinic
— without the complications associated with percutaneous ablation
Ablation
Potential
“Can you imagine
treatment for • 85%the utility
patients of this?1 IfTherapeutic
Most patients are untreated:
are inoperable • we can bronchoscopy:
Treatment navigate
of precancerous
to lesions,
Bronchoscopy sample them, but
• Fall-back to surgery
= radiotherapy &
also ablate them all in one
nodules as first-line option
• Treatment of patients not
go? I think that• will be completely revolutionary
chemotherapy
17% five-year survival rate
for lung
eligible for surgery
2
cancer management”
Dr Pallav Shah
Vessel No flexible endoscopic vessel
Consultant Pulmonologist Flexible endoscopic vessel
sealerUK
Royal Brompton Hospital,
sealing available: sealing:
• Harmonics cannot work • Combination of RF
in flexible applications & microwave
• No microwave options • Potential to outperform
available rigid instruments
1 Data for England & Wales – National Lung Cancer Audit annual report 2015 (for the audit period 2014), Royal
College of Physicians, 2015
2 American Cancer Society. Cancer Facts & Figures 2016. Atlanta: American Cancer Society; 2016.
CREO MEDICAL GROUP PLC 9 ANNUAL REPORT AND ACCOUNTS 20178
CROMA PLATFORM GLOBAL
GAME MARKETTECHNOLOGY
CHANGING POTENTIAL
Global endoscopic market by segment ($bn)1
Laparoscopy GI Urology Arthroscopy Bronchoscopy Gynaecology Other
Endoscopy endoscopy & ENT endoscopy
Our strategy is to bring the CROMA
$12.0
platform to market through a suite of
$10.0
instruments we have designed, initially
$8.0
into the field of GI Therapeutic
$6.0
Endoscopy and Bronchoscopy
$4.0
$2.0
$0
1 GI Endoscopy 2 Bronchoscopy Long-term
opportunities
• Limited innovation in • Growth driven by
recent years screening • Laparoscopy $8bn
• Growing volume of • No interventional addressable
interventional options available instrument market 4
techniques • Demand for new • Other markets
• $3-4bn addressable therapies
instrument market 2,3
• 4-6% annual growth2
1 Data presented is total segment value - including imaging & devices;
“Endoscopy Devices: Applications And Global Markets” (HLC093A), BCC Research, 2011
2 Boston Scientific investor presentation, 2015
3 Conmed investor presentation, August 2016
4 Medtronic investor presentation, June 2016CROMA PLATFORM
Our game changing technology Competitive differentiation
Therapy Current options Our options
Treatment for Open or laparoscopic surgery: Advanced therapeutic
Dissection & Resection GI • Higher risk of complications endoscopy:
— • Risk of mortality
• Long hospital stay
• Lower risk of complications
• Risk of mortality is negligible
Hemostasis • Performed in out-patient
clinic
—
Ablation
Potential Most patients are untreated: Therapeutic bronchoscopy:
treatment for • 85% patients are inoperable1 • Treatment of precancerous
• Fall-back to surgery nodules as first-line option
Bronchoscopy = radiotherapy & • Treatment of patients not
chemotherapy eligible for surgery
• 17% five-year survival rate2
Vessel No flexible endoscopic vessel Flexible endoscopic vessel
sealing sealer available: sealing:
• Harmonics cannot work • Combination of RF
in flexible applications & microwave
• No microwave options • Potential to outperform
available rigid instruments
1 Data for England & Wales – National Lung Cancer Audit annual report 2015 (for the audit period 2014), Royal
College of Physicians, 2015
2 American Cancer Society. Cancer Facts & Figures 2016. Atlanta: American Cancer Society; 2016.
CREO MEDICAL GROUP PLC 9 ANNUAL REPORT AND ACCOUNTS 201710
Overview
INVESTMENT PROPOSITION
Our advanced energy platform, healthy pipeline of new devices, strong IP
and management team give us a stable foundation for growth.
CROMA platform with Rich product pipeline and strong IP Sound pedigree
compelling benefits We have a broad pipeline of products – Our management team is drawn from
Our patented energy system combines staging from early concept development to the surgical instrumentation market and
microwave and bipolar radiofrequency post market human use – supported by an has experience spanning R&D, quality,
energy capable of delivering precise cut, IP portfolio comprising over 97 patents regulatory approval and commercialisation,
coagulation and ablation in a range of granted and 245 pending. and our distribution agreement entered
miniature endoscopic devices for into on 1 August 2016 with HOYA Group,
electrosurgery applications, bringing PENTAX Medical gives us a route to market
advantages in time, cost and outcomes. in multiple countries.
See page 8 for CROMA platform See page 22 for Our products and pipeline See page 32 for Our peopleWe have set ourselves up to capitalise on the opportunity,
advancing our pipeline systematically to target high value segments.
Sizeable opportunity Scalable business model Clear commercialisation strategy
Our devices are designed to enhance existing Our pioneering CROMA platform is designed We are pursuing a defined roadmap towards
techniques and provide effective new curative around the razorblade principle, with a single the launch of a GI suite of devices. This starts
therapies in high value segments of large and accessory port compatible with a suite of through building advocacy through key
growing global markets – heralding a new era. single-use devices that deliver superior opinion leaders, driving penetration through
The $3.4bn addressable instrument market1, 2 outcomes for physicians and patients. Our innovative training and the subsequent
continues to expand through increased model – from R&D, through manufacture and breadth of usage through stimulating
screening, poor diet, obesity and an aging sales & distribution – is designed to be increased generator utilisation and
population. Western healthcare organisations resilient and scalable. expanding into adjacent markets.
continue to expand screening programs
driving increasing early stage detection rates
for a range of conditions requiring tissue
management and the control of bleeding.
See page 20 for Our market opportunity See page 26 for Our business model See page 28 for Our strategy
1 Boston Scientific investor presentation, 2015
2 Conmed investor presentation, August 2016
CREO MEDICAL GROUP PLC 11 ANNUAL REPORT AND ACCOUNTS 201712
Overview
Chairman’s and CEO’s Q&A
Charles and Craig reflect on a year of significant milestones, and look forward to building
on the sound business and regulatory foundations enabled by the IPO.
What were the significant achievements With a growing head count over the year, I have been proud
of the year? to support the team through investment in leadership and
personal development.
CG: The last year has seen several terrific achievements but
I would begin with the successful completion of our multi- CS: The IPO was a major achievement in its own right and a
centre clinical study into the safety and efficacy of microwave transformative event for the business, given the challenging
energy. This was the first such study in the surgical backdrop in the equity markets especially with Brexit and
endoscopy field so ground-breaking. This served as the the US election results.
bedrock for our CE mark later in the year clearing the product
for clinical use in Europe – another significant achievement Using RF and microwave in combination, we are bringing
which came in as per expectations in Q3 of this FY. together proven technologies into a single device that is
more controllable than alternative tools. This is significant; it
Following the CE mark the first patients were treated with offers the potential to translate treatment from the operating
the product. So, following a long development phase, we are room to the endoscopy suite with a range of advanced,
now improving lives with our technology for the first time. As minimally-invasive products for use with flexible
we have now also initiated the clinical training programme, endoscopes. We believe Creo will be at the vanguard of the
we are poised to enable more cases to be carried out transformation of diagnostic flexible endoscopy into wider
allowing us to impact the lives of a wider group of our therapeutic practice, thereby saving patients from surgery.
customers’ patients over the course of the next year.
What was the rationale for the IPO?
In March, we were awarded a research grant for early
stage research focused on Glioblastoma to treat childhood CG: The decision to take public a pre-revenue business was
brain tumours. Creo is one of six European partners in a not taken lightly, but we wanted the ability to raise funds for
multidisciplinary consortium developing a truly innovative investment in both organic growth and potential future
micro-optofluidic lab-on-chip platform that deploys strategic acquisitions, supported by our long-term investors.
semi-conductor technology to neutralise cancer stem cells There proved to be clear support for the proposition,
with electromagnetic waves. This fits in our longer term demonstrated by our raising more capital than we could
technical roadmap, but it is a special privilege to be working have reasonably expected had we gone down the venture
with this consortium to help change young people’s lives for capital route. We see this as a positive endorsement of our
the better in the future. business, long-term plan and the breadth of the opportunity.
Aside from the strengthened balance sheet, being a public
After the end of the financial year we were delighted to company has brought us added advantages in terms of
Charles Spicer Craig Gulliford
Chairman Chief Executive Officer receive 510(k) regulatory clearance from the FDA for our international profile, credibility and the ability to attract and
Speedboat device in the US, several months earlier than retain talented staff.
anticipated. This major landmark demonstrates our sound
quality assurance and regulatory approach. We are now
able to commit to and plan the roll-out of initial clinical
cases and to establish our training regime in the US.The placing proceeds are allowing us to invest across the small number of cases in Europe to a carefully-selected How would you describe Creo’s culture?
business, including R&D to advance our pipeline of devices, wider group delivering good quality clinical outcomes in
clinical and regulatory activities, business development and Europe and the US over the next eighteen to twenty-four CS: Craig and his management team have worked hard to
manufacturing. All of which enables us to pursue our vision months. The goal is a repeatable, predictable training build the team ethos and company values. Creo’s culture is
of becoming a leading advanced energy, minimally-invasive programme that delivers clinical results in the wider collegiate and our people share a vision of what the product
medical devices company. endoscopy community. can achieve. Key to our success is the close working
relationship between Craig as CEO and Chris, our founder and
CS: The listing process pulled together the whole business We have performed well against our Intellectual Property CTO, who invented the technology. Friends since university,
and has given the company an enhanced identity and strategy and goals. The CTO’s Q&A sets out more details of and with complementary skills, they set the tone for respect,
greater self-confidence. Admission to AIM gave us the our Intellectual Property and Knowledge development. teamwork and mutual support around the business.
opportunity to put in place those board structures,
governance and management systems that are rightly We have recently moved into our new facility in Chepstow. How do you see the outlook for the business?
required for a public company. The disciplines required of a Four times larger than our previous facility, but at a
public company lend themselves to the mindset of an comparable underlying rent, this gives us the space to CG: The strategy is clear; to establish CROMA through a
effective medical technology business and so have helped expand and build the business appropriately including comprehensive training and education program which will
us to ‘grow up’ as a company. expanding our histopathology and tissue capability. provide data points for the learning curve ahead of adoption as
well as demonstrating the capabilities of the CROMA platform.
Completing an IPO takes a great deal of hard work from all CS: The IPO has given us the ability to put in place what
involved. I wish to thank, in particular, all our advisers who we need ahead of schedule. We have an excellent team, Since the IPO we have hired significant experienced
did an exemplary job and continue to support us. having invested significantly in leadership and personal commercial talent with experience in delivering training and
development to empower our people and integrate new education programs during the rise in laparoscopic surgery.
What are the principal market drivers joiners into the organisation. Now settled in our excellent This expertise is already being applied to build the CREO
new facility, our team is well placed to execute the next surgical training program as well as identifying a range of
in your target applications?
phase of Creo’s growth. distribution partners in Europe, EMEA and the US.
CG: We estimate the emerging market of surgical Our strategy, in simple terms, is during the first year after IPO
endoscopy in the indication areas targeted by Creo to be What have been the key areas of focus
to focus on regulatory issues. Year 2 will be predominantly
worth more than $1.4 billion globally. Demand for such for the Board? early clinical end points while we start to build the longer
procedures is fundamentally driven by poor diet and term commercial platform with clinical end points and the right
sedentary lifestyles effecting disease incidence rates CS: We have a focused board that brings together broad mix of direct and distribution resources. We hope that this will
worldwide, especially as western diet and lifestyle becomes and deep experience of medical technology in different then allow us to formally launch a suite of products in year 3.
more prevalent in the developing world. global regions. In addition to me, there are two non-
executive directors, John Bradshaw and David Woods. Our highest priority is the clinical training programme especially
In contrast to the laparoscopic markets, clinicians have Dave is a med-tech veteran from our key partner and as we reach into the US. Over the next 18 months, we will
benefited from limited innovation in the GI endoscopy shareholder HOYA Group, PENTAX Medical, a global leader iterate new devices from our pipeline, with an eye on 2019
sector, particularly in terms of advanced, custom-designed in flexible endoscopes. John chairs our audit committee and when we plan commercial launch of a suite of GI products.
solutions using controllable advanced energy to improve has huge experience in our sector, having been CFO of
procedures. We continue to see strong demand from the Gyrus Group plc, the laparoscopic surgery pioneer, where We are in a good place, and getting done the things we said
clinical community for such tools. our founder and CTO, Chris Hancock, also worked. All three we would get done. The achievement of FDA clearance
of us are passionate about med-tech and have ahead of schedule gives us the time to do things even more
How has the business performed complementary skills and experience in the sector. carefully and to more diligently build the platform in terms of
against strategy? clinical use, so that when we launch with additional devices,
As well as putting in place the governance infrastructure we will have a strong product foundation.
CG: We have a clear strategy and our plans are well on and procedures required for a quoted business, our focus is
track. Our customers have treated a small number of to support the executive team and staff in implementing CS: There is still a lot to do, and the business is focused on
carefully selected patients, and have had positive feedback Creo’s business plan and to oversee the allocation of getting our first product to launch in a really professional
from the first participants in our developing clinical training resources to ensure we maximise shareholder value. way with a forensic focus on quality. Thanks to the excellent
programme. We will select the trainees and supervise them Creo family we are in a good position, and that includes our
carefully for the next eighteen months, increasing from a fellow shareholders, advisers and partners as well as the
staff and management team.
CREO MEDICAL GROUP PLC 13 ANNUAL REPORT AND ACCOUNTS 201714
Overview
CTO’s Q&A Meet the inventor
Professor Christopher Hancock describes Creo Medical’s journey
and its approach to innovation and IP
The beginning license or sell the IP rights to a third party who would take on
the product development and commercialise the system. This
Winding right back, I did an apprenticeship in microwave model worked for the cancer treatment system, but the market
radar engineering before going to Bangor University in 1987. was changing and in 2007 it dawned on me that to create a
When I joined Gyrus Medical in 1997 I saw the application successful medical device company you really need to have
of energy to a new design of medical instruments – I’d never the infrastructure that owns its IP and is able to exploit it for
come across keyhole surgery or the use of energy in surgery. the benefit of patient outcomes. When Craig joined the
I found it fascinating to be able to combine the techniques I’d business he suggested we change the model to develop the
learned in my apprenticeship and university and apply them resources and infrastructure to be able to take a device to the
in clinical applications. point where it can be used to treat patients. That’s when we
became Creo Medical.
In 2002 I left Gyrus Medical to take some time out to travel
around the world to develop my own thoughts and ideas From this point, our focus became broader. We looked at a
around new high frequency microwave devices developed for number of ideas before concentrating on the platform generator.
the communications industry and novel microwave techniques In the same way that there was a transition from open surgery
– travelling provided the ideal environment for me to free think to laparoscopic surgery, our platform facilitates the move to
and to be creative; anything is possible with a head full of ideas the next era in treatment, non-invasive surgery through natural
and a notebook! orifices, which minimises risk and trauma to the patient.
From a technical standpoint, what we’re doing now at Creo
During my 9 months of travel, I wrote and filed 4 patent Medical is enabled by new microwave power devices whose
applications on the ideas I had for using high frequency cost reduction is driven by demand in the communications
microwave energy and novel energy delivery techniques. industry. These sorts of devices and technologies usually
During this time I became extremely passionate about using start in military applications which are eventually adopted
the new devices and the ideas I had come up with to provide by the communications industry. This enabled the use of
a better, less invasive alternative for the treatment of cancer. higher frequency, more controllable energy delivery to treat
To be able to treat the tumour from the inside in a controlled fine tissue structures as well as larger volume tumour ablation.
manner without causing unnecessary damage to healthy tissue Our breakthrough is the combined use of high frequency
is an interesting alternative to chemotherapy or radiotherapy, microwave energy to coagulate blood vessels to stop bleeding
where you’re basically poisoning the body and damaging other and RF energy to produce scalpel blade like cuts with a small
healthy organs. It was these original ideas that formed the basis blunt energy delivery structure. The combined high frequency
of MicroOncology Ltd, a company set up to develop the new microwave and low frequency RF energy can be used to treat
cancer treatment system. a range of clinical conditions, many of which are unmet clinical
Professor needs. The ability to combine RF and microwave energy
Christopher Hancock
Chief Technology Officer Our model was to develop and build the prototype cancer delivery, along with other novel ideas, is also providing very
treatment system, register as much new IP as possible and then interesting results for non-invasive tumour ablation.A portfolio of IP
IP management is vital in medical devices, Chart 1: Graphical representation of Creo Medical’s patent families*
and is something we take very seriously.
We’ve built an estate of IP families, with our
CROMA platform at the heart (see Chart 1).
Speedboat Fluid &
For a company of our size we have a huge & Endo Plasma
suite of patents. We have an array of
foreground and background patents to
protect our CROMA platform and the range
of devices it services.
2017 has been a record year for Creo Medical
in terms of generating of new intellectual Speedboat Plasma
property and the grant of key patent sterilisation
applications that protect our CROMA
platform and core pipeline devices. Since
1 January 2017, 15 new patents have been
granted or allowed (63 if the independently Platform generator ABC/APC
Haemostat Lipotunneller
enforceable national patents derived from & interface elements
European patent applications are counted
separately). We have also filed 17 new
inventions since 1 January 2017.
Cyst treatment
97 granted patents
245 patents pending† Graspers
Radiating snare End ablator
Resector Duodenal Ligament
ablation tightening
Scope-conveyed
Cold snare
flexible ablator
† Correct as at 10 November 2017
Resector Ablation
* Size of circle represents number of patents & Grasper
CREO MEDICAL GROUP PLC 15 ANNUAL REPORT AND ACCOUNTS 201716
Overview
Geographic protection
This takes the Creo Medical patent portfolio Chart 2: IP map
to 97 granted patents (295 if national patents
derived from European applications are
counted separately) and 245 pending
applications in 12 jurisdictions across the
globe. We chose our jurisdictional coverage
carefully to give us the best patents protection
in various key markets around the world (see
Chart 2).Future applications Innovation culture Finally, we continue to actively work with other academic and
clinical institutions both in the UK and around the world to
We are currently focused on GI applications, and have an At Creo Medical we have a very inclusive approach to promote the collaborative way of working and to enable the
IP suite that is comparable to that of a large corporate; we innovation. Our view is that if you treat people well and Creo Medical products to receive the best possible clinical
could license access to the CROMA platform and the group respect them you’ll get the best out of them. We run an and scientific input. In 2017, we have been actively working
of instruments designed for use in the GI tract. We can then innovation workshop every month and invite as many with the University of West of England, University College
focus our resources on instruments for ablation, pulmonary, people from the company as possible to attend. Not just the London, St. Mark’s Hospital, Florida Hospital (Orlando, USA),
and a range of other tumours throughout the body. engineers and the commercial team, but HR, finance, even East Kent Hospitals University NHS Foundation Trust,
For example, we are working on some exciting ideas with the company lawyer! It is important to get input from Royal United Hospital Bath, University of Manchester,
members of my Microwave Medical Research Group at everyone, and to genuinely listen to this input – ‘there is no Northwick Park Institute of Medical Research and medical
Bangor University to navigate inside the bronchial tree, to be such thing as a bad idea’. Being open minded and able to training labs in Berlin, Germany and Boston, USA.
able to see and to treat the patient through the delivery of adapt is important. Listening to the users is key, to the
microwave energy. A lot of the uptake of the colon cancer clinicians and patients.
treatment device can be attributed to increased screening,
and there is a big drive towards pulmonary screening too. Innovation networks
The close interaction with Bangor University has worked An example of how we work is the Semiconductor-based
extremely well for Creo Medical in that we have taken on Ultrawideband Micromanipulation of Cancer Stem Cells
first class microwave and RF engineers who became (SUMCASTEC) project we started working on this year. This
interested in medical applications of microwave energy is an Horizon 2020 project involving a European consortium
through the microwave engineering techniques module I of neuroscientists, clinicians, microbiologists, and engineers
teach at Bangor University. As a part of our engineering with various areas of expertise, whose aim is to work on
training programme at Creo Medical, we also encourage treatment for extremely aggressive brain tumours, in
engineers to register as external students on MSc and PhD particular Glioblastoma, which represents around 15% of
programmes, where the work at Creo Medical constitutes brain tumours and Medulloblastoma, which is the most
the research element of the programme – this new common type of pediatric malignant primary brain tumour.
approach was set up three years ago and has worked very
well both for Creo Medical and Bangor University. Creo Medical heads up two key parts of this project.
The first is to provide the product development and
commercialisation arm that will enable the outcome of
this research to be transferred to a device that can be used
to treat these (and other) brain tumours in-situ using a
minimally invasive approach that preserves as much brain
function as possible. The second is to develop the cell
neutralisation aspect of the project, where focussed thermal
and non-thermal energy delivery techniques are being
considered to selectively destroy the cancerous cells,
without causing damage to surrounding tissue (this is
particularly important when considering structures within
the brain). This aspect of the work is being carried out in
close collaboration with Bangor University.
CREO MEDICAL GROUP PLC 17 ANNUAL REPORT AND ACCOUNTS 201718 Strategic Report
STRATEGIC
REPORT
Strategic Report
Our market opportunity 20
Our products and pipeline 22
Our business model 26
Our strategy 28
Financial Review 30
Our people 32
Principal risks and uncertainties 34
CREO MEDICAL GROUP PLC 19 ANNUAL REPORT AND ACCOUNTS 201720
Strategic Report
Our market opportunity
Our solutions will enable transformational procedures that blur the
lines between surgery and endoscopy, addressing unmet needs
in large and growing applications.
What is electroscopic surgery? insertion. There is very limited space left in an endoscope Why we are targeting particular segments?
Electrosurgery is the application of electrical current to for instruments, although all endoscopes have a working
biological tissue as a means to cut, coagulate and ablate. instrument channel offering approximately 3mm of space There are unmet needs
Electrosurgical devices were first commercialised in the through which devices can be introduced. As such, and with Advanced therapeutic endoscopy has the potential to reduce the
1920s for use in open surgical applications. Over time, the limited device options currently available, while a patient risk of complications, with mortality rates improved to negligible
advancing technology drove innovation into laparoscopy can be diagnosed endoscopically, the majority of levels – current mortality rates from upper GI bleeding are up to
(i.e. keyhole surgery), a field in which there are now a interventions still require a minimally invasive surgical 15%1, and traditional colorectal surgery is associated with a 6%
considerable number of devices. In contrast, therapeutic procedure at best, or open surgery at worse. mortality rate at 30 days2 because of the risks of puncturing the
endoscopy or endoscopic surgery has comparably few colonic wall when using traditional surgical blades. In contrast
surgical tools available. A minimally invasive procedure, such as laparoscopy, to the need for a long hospital stay, endoscopy procedures can
improves on open surgery as it can be performed through be performed in an out-patient clinic.
Endoscopes are effective screening and diagnostic a few small incisions rather than a single large one.
instruments that allow physicians to visualise the internal Laparoscopic surgical procedures are versatile as multiple Despite the rise in incidence rates through increased
structures of organs such as the gastrointestinal tract, lungs instruments can be placed at the surgical site through screening and associated increases in incidence of various
and bladder via naturally occurring orifices. Endoscopes are multiple bore insertion tubes with short lengths, allowing indications, in comparison to laparoscopy where there is a
not equipped to perform a surgical intervention in most fast insertion and removal of instruments. Creo Medical’s variety of advanced energy devices for a wide range of
situations. Insertion of the endoscope is surgically non- technologies are designed to enable certain surgical procedures, the endoscopist has very few “tools” to work
invasive, avoiding the need for surgical incisions, which, procedures to be effected through the insertion of devices with. Our clinical advisory group “Horizon”, comprising some
however small, increase the risk to the patient and increase through the working channel of an endoscope, circumventing of the world’s pre-eminent endoscopists, have quantified 76
the cost of the procedure. the need to make abdominal incisions with the associated specific unmet or underserved clinical needs in the GI where
general anaesthetic. advanced energy could be applied.
$30bn
Endoscope diameter is limited by the size of the entry orifice.
For example, a colonoscope will typically be 12mm in Endoscopy has been a rapidly expanding practice due to
diameter, while an orally inserted gastroscope will typically the advent of colorectal cancer screening in most healthcare
have a diameter of 10mm. Within these confines the systems. This has driven growth in equipment and devices
endoscope must carry a video camera lens, light source, to enhance the ability to screen and detect early stage and
air/water/suction channel and guide wires to control the pre-cancerous lesions in the GI tract. The global market for endoscopic devicesCapsule endoscopy HD Systems In cases of lung cancer, 85% of patients are currently In bronchoscopy, there is demand for new therapies and
Suction / irrigation devices inoperable3 and have to rely on radiotherapy and growth is driven by screening, but, as mentioned above,
chemotherapy, with the five-year survival rate only 17% 4. no interventional options are currently available. Worldwide,
Other device Surgery involves removal of large sections of the lung and there are 1.8m cases of lung cancer each year.
Rigid endoscopy even the entire lung. Challenges with existing treatment
include difficulties with access for interventional treatment via Longer term opportunities include laparoscopy applications,
2% 2% bronchoscope, since this is limited by the size of the airway with an estimated addressable market of $8bn11.
3%
2% (22
Strategic Report
Our products and pipeline
Our unique platform and pipeline
of devices are designed to enhance
existing surgical techniques and offer
new curative therapies.
CROMA electrosurgical platform
Our advanced energy platform uniquely combines bipolar The benefits for physicians and patients include: • a connection which uniquely combines the delivery of RF
radiofrequency for precise localised cutting and microwave • a bipolar radiofrequency energy source which facilitates and microwave energy; and
for controlled coagulation, providing physicians with flexible, precise, localised cutting or resecting of tissue, resulting
• energy which is optimised for specific purposes without
accurate and highly controllable devices delivered through a in predictable tissue effect and reducing the risk of
the need for complex set up.
standard flexible endoscope. remote burns and of unwanted thermal damage to
healthy tissue;
Our strategy is to bring the CROMA platform to market
This technology makes it possible to treat conditions using
• a microwave energy source which facilitates controlled through a suite of medical devices which we have designed.
flexible endoscopy in the endoscopy suite as opposed to a
and focussed coagulation of vessels and ablation of
surgical outcome carried out in the operating theatre under
cancerous or pre-cancerous lesions to provide more
general anaesthetic. CROMA delivers Dissection, Resection
control to the surgeon. This results in highly predictable
Haemostasis and Ablation with unparalleled controllability.
tissue effects;97 245
granted patents patents pending
CREO MEDICAL GROUP PLC 23 ANNUAL REPORT AND ACCOUNTS 201724
Strategic Report
Our products and pipeline
continued
Minimally invasive surgical devices The Speedboat device has the ability to coagulate bleeding
The first device developed for use with CROMA is the vessels when the microwave energy is activated by the
Speedboat. The Speedboat harnesses the cut and surgeon, and to cut or resect when the RF energy is
coagulation capability of CROMA and enables the removal activated. Along with other design features of the device
of cancerous and pre-cancerous GI growths and lesions in that enable certain procedures to be delivered
the bowel with a flexible endoscope. This approach can endoscopically, this reduces the risks associated with these
replace open or laparoscopic surgery as well as the procedures:
alternative endoscopic approach of Endoscopic Mucosal • curved hull shape of underside of device (i.e. Speedboat);
Resection (EMR). EMR can remove larger lesions but in • integrated retractable needle to prevent multiple
many pieces, which can lead to residual abnormal tissue instrument changes; and
being left behind, causing recurrence. With the Speedboat
device, the endoscopist is able to remove the lesion in a • flat gold plated top side of device to assist with
single large piece (en-bloc), providing a more complete and orientation of the device that ensures it is in the correct
accurate specimen for analysis and reducing the need for plane in respect of the tissue.
frequent endoscopic checks. The use of the Speedboat
device reduces the risks associated with alternative
laparoscopic procedures and can reduce the length of
hospital stays.We are working on further areas of application of bipolar The Group’s ‘super-cable’ technology enables the centre Development of the Ablation Probe and ‘super-cable’ is at
radiofrequency and microwave technology, including conductor of a coaxial transmission line (microwave cable) preliminary stages, although in-vivo testing to demonstrate
bronchoscopically guided lung tumour ablation, an area to be made hollow which allows Creo to use the hollow navigation deep into the lung has been achieved. See the
associated with a low proportion of patients suitable for centre of the cable to introduce a fibre-scope for illumination status of this and other products in our pipeline below.
curative surgery and poor survival rates. CROMA could and a bundle of lensed fibres for vision. Creo has also
potentially offer a minimally invasive treatment for these integrated a control wire into the hollow cable for steering
lesions. We have developed the Ablation Probe and the purposes. The ‘super-cable’ is likely to be the basis for future
related ‘super-cable’ prototype intended to enhance the Creo endoscopic and bronchoscopic devices which could
navigation of the Ablation Probe while providing integrated replace existing endoscopes and bronchoscopes with
navigation and imaging. smaller diameter structures to allow access to sites that
are currently inaccessible, enabling diagnosis and therapy
to be performed.
Development Preclinical Clinical
Concept Prototype Ex vivo In vivo First in man Post market
Therapy GI
Enhancing Endoscopy Speedboat
Haemostasis
graspers
Haemostasis probe
Resector
New Ablation
Flexible Ablation
Therapies device
Ablation probe
with navigation
(super-cable)
CREO MEDICAL GROUP PLC 25 ANNUAL REPORT AND ACCOUNTS 201726
Strategic Report
Our business model
RESILIENT AND SCALABLE
Our business model is designed to be resilient and scalable, and
to leverage the strengths of our pioneering products and strategic
relationships to create value for stakeholders.
INPUTS
We will create value through our unique resources and relationships
Expertise and IP Strategic relationships Long-term investors
We have a depth of expertise, with a talented team of We establish and nurture relationships with eminent Sizeable shareholdings are held by key members of our
world-class developers drawn from the front-line of related clinicians and Key Opinion Leaders practicing in our fields team, as well as strategic partners, and our status as a
disciplines, spanning military radar, microwave ovens as of interest around the world. These relationships help us to public company gives us access to capital to achieve
perfect our devices, generate clinical data and develop a
well as medical devices. our vision.
network of influential advocates who help drive adoption of
our CROMA platform and devices.
Our established and growing IP portfolio includes 97
granted patents and 245 pending patent applications, all in Our distribution agreement with HOYA Group, PENTAX
the area of electrosurgical energy generation and control, Medical will allow the distribution of our products – once
together with a range of applicator structures for advanced commercialised – in key markets in the Asia Pacific region.
tissue management.KEY DIFFERENTIATORS
We will grow value through our resilient and scalable model
RESILIENCE SCALABILITY
Recurring revenues Our strategy is to deliver new curative therapies Rich pipeline growth in GI instruments of 4-6%. Other target
and therapy-enhancing technologies which Our pipeline of instruments is focused on three applications are the bronchoscopy and
from razorblade model
have a high health economic benefit for the therapeutic endoscopic specialisms: lower laparoscopy markets.
The CROMA generator has a single accessory
port compatible with a suite of single-use global healthcare system. We will initially focus gastrointestinal, lung/bronchoscopy, and upper
devices that use the microwave and RF energy on the gastrointestinal endoscopy market, gastrointestinal. Our devices are at various Pragmatic manufacturing model
potentially expanding to bronchoscopy and stages of development, from concept to We have dedicated spaces for innovation (Bath),
for cutting, coagulating and ablating in various
laparoscopy over time. in-human testing. The main products are the design & development (Bath/Chepstow),
procedures.
Speedboat, the Haemostasis Graspers, the cleanroom manufacturing & assembly (Chepstow).
Diversified geographies Haemostasis Probe, the Resector and the We plan to retain manufacturing largely in-house
Diversified applications flexible lung tumour Ablation Probe. to ensure quality control. In due course we will
The precise cut, coagulation and ablation Following our CE mark and FDA clearance
look at controlled outsourcing of aspects of the
capabilities of the CROMA platform have for CROMA and Speedboat, we are seeking
Advocacy-based training model manufacturing process to increase capacity and
application in a range of electrosurgical regulatory approval for our suite of devices
We are working to build advocacy by utilising reduce production costs in the medium term.
procedures where tissue resection with in the EU, US and – via our distribution
our network of key opinion leaders to deliver
haemostasis (control of bleeding) and/or the agreement with HOYA Group, PENTAX Medical
and endorse a training programme to Wide sales and distribution reach,
ablation of tissue is required. Surgery is carried – key markets in the Asia Pacific region..
endoscopists, to demonstrate to them that our direct and through partners
out in increasingly minimally invasive products could be utilised with their existing We intend to establish a direct sales force
environments which requires long, flexible levels of competence and skill. initially in core markets and to enter into
devices and the need for precision and control.. distribution agreements for non-core territories.
Large and growing In 2016 we entered into a Distribution
Agreement with HOYA Group, PENTAX Medical
addressable markets covering key markets in the Asia Pacific region.
The GI endoscopy market has an addressable
market of $3-4bn and forecast annual average
VALUE CREATION
We will share value with our stakeholders
Physicians Patients Healthcare providers Investors Employees
Peace of mind from a safe, fast set-up Improved outcomes, including lower Improved outcomes and lower costs Attractive growth prospects. Dynamic, creative and
of a procedure that can be used in risk of remote burns and thermal resulting from the use of endoscopy entrepreneurial culture, with exciting
surgery and endoscopy, with damage to adjacent tissue, faster suites rather than operating theatres opportunities for development.
predictable tissue effect and recovery and less time in hospital. (and endoscopists rather than
saving of considerable time. surgeons) and reduced need for
hospital stays for patients.
CREO MEDICAL GROUP PLC 27 ANNUAL REPORT AND ACCOUNTS 201728
Strategic Report
Our strategy
ADVANCING OUR PIPELINE
We have made pleasing progress to advance our pipeline through
our phased commercialisation model, and are on track for the
market to adopt our first device during 2017 and 2018 ahead of our
commercial builds in 2019.
STRATEGIC PILLARS
INNOVATION AND IP REGULATORY COMMERCIALISATION
• Continue to invest in R&D to develop our technology • Pursue regulatory approvals for the suite of products • Build advocacy by deploying the CROMA
and IP portfolio, seeking non-dilutive grant funding in the EU, US and in the Asia Pacific region, through electrosurgical platform in target hospitals and
where possible and appropriate. our Distribution Agreement with HOYA Group, developing a network of Key Opinion Leaders to
PENTAX Medical. build a body of clinical case reports;
• Actively review peers to identify potential strategic • Drive penetration via our training programmes and
collaborations, non-organic growth opportunities the development of a value-added pipeline of
and licensing opportunities. instruments for GI endoscopy; and
• Drive breadth of usage by growing footprint of
generators, including into new geographical markets
and adjacent segments such as bronchoscopy.PROGRESS IN 2017
• 17 new inventions registered since 1 January 2017; • Obtained CE Mark for the CROMA generator • Passed key milestone of first human case of
& Speedboat; Speedboat, by Brian Saunders; and
• 15 patents granted since 1 January 2017; and
• HOYA Group, PENTAX Medical initiated the • Rolling out CROMA generator & instruments to EU
• Participation in a multidisciplinary consortium aimed
regulatory procedures for entry into the Asia Pacific KOLs to generate clinical data and medical industry
at developing a novel and innovative micro-
region; and recognition.
optofludic lab-on-chip platform deploying semi-
conductor technology to neutralise cancer stem • Held pre-submission meeting with FDA for
cells with electromagnetic waves. ablation device and confirmed that non-clinical
regulatory pathway.
PRIORITIES
• Expand the portfolio of consumable instruments • Obtain FDA clearance of the Speedboat (obtained • Identify new broader GI customer base in
available, both for the GI endoscopy suite and into on 21 August 2017); and EU markets;
adjacent segments such as bronchoscopy.
• Obtain CE and FDA clearance for suite of devices, • Launch KOL advocacy phase for Speedboat in
including the Resector, the Haemostasis Graspers the US;
and the Haemostasis probe to enable their launch
• Continue with placements in the EU and
into the EU and US, and through HOYA Group,
Asia Pacific;
PENTAX Medical into key Asia Pacific markets.
• Identify early adopters for ablation device;
• Continue to roll out instruments; and
• Initiate general sales roll-out:
——Establish a direct sales force in the EU
——Develop a distributor network for regions outside
core markets.
We will consider strategic acquisitions as a way to enhance our technological base
and/or accelerate our market reach
CREO MEDICAL GROUP PLC 29 ANNUAL REPORT AND ACCOUNTS 201730
Strategic Report
Financial Review
Revenue ongoing cash requirements of the business through
The Group does not currently generate any revenue from its development phase. The Adjusted EBITDA position excludes
activities. Other operating income of £0.3m in the year (4 share based payment expenses which are non-cash,
months to June 2016: £0.2m) relates to research grants. exceptional costs relating to the flotation of the Group in
the year and incorporates the recovery of research and
Operating loss development expenditure which the Group is able to benefit
The operating loss for the period increased to £8.9m (4 from through R&D Tax credit schemes.
months to 30 Jun 2016: £1.9m), reflecting the increased
operating expenses in relation to clinical and development Expenses of the initial public offering (IPO)
activities together with further investment in headcount and IPO related costs incurred in the period were £1.3m
business infrastructure to support the business and enable (4 months to 30 June 2016: £nil). These costs primarily
it to continue to develop and commercialise its technology. related to commissions, legal, accounting and other
This continued investment in the business will support its advisor fees including irrecoverable VAT in connection
anticipated growth and development in the coming periods. with the IPO. In addition to these costs a further £1.5m
(4 months to 30 June 2016: £nil) was capitalised.
The underlying operating loss (or adjusted EBITDA) for the
year was £5.6m (4 months to 30 June 2016: £1.6m). Tax
The tax credits recognised in the current and previous
Whilst EBITDA is not a statutory measure the Board believe fiscal year relate solely to R&D tax credit claims.
it is helpful to investors to include as an additional metric to
help provide a meaningful understanding of the financial
information as this measure provides an approximation of the
12 months to 4 months to
(All figures £) 30 Jun 2017 30 Jun 2016
Operating Loss (8,903,066) (1,874,656)
Share based payments 776,782 20,361
Depreciation and Amortisation 142,423 46,942
R&D Tax Credits 1,160,000 255,077
Expenses of the initial public offering - one off 1,252,692 –
Underlying operating loss (5,588,236) (1,552,276)
Richard Rees
Chief Financial Officer
Expenses
Administrative expenses comprising R&D, operational
support, sales and marketing, and finance and
administration costs totalled £9.2m (4 months to 30 June
2016: £2.0m). Adjusting for costs and tax income above,
underlying administrative expenses are £5.6m (4 months
to 30 June 2016: £1.6m).
This annualised increase of £0.9m reflects the continued
investment made by the Group in clinical and development
activities. Personnel costs continue to be the largest
expense and represent approximately 69% of the Group’s
underlying administrative expenses.You can also read
