Creo Medical Group - Disposal and outsourcing of manufacturing

Creo Medical Group plc

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

Disposal and outsourcing of manufacturing

Sale of manufacturing business to further reduce operating costs and improve margins

Creo Medical Group plc (AIM: CREO), the medical device company focused on the emerging field of minimally invasive surgical endoscopy for pre-cancer and cancer patients, announces that it has entered into an agreement to sell its manufacturing operations to Creo's current manufacturing operations management as a management buyout (the "Manufacturing Disposal"), for an undisclosed amount.

Under the terms of the Manufacturing Disposal, a newly established company controlled by the current management of Creo's manufacturing operations ("NewCo"), will, subject to the satisfaction of certain conditions, acquire all of Creo's UK manufacturing operations. As a result, 25 full-time employees will transfer from Creo to NewCo at closing. The transaction is expected to close in May.

Manufacturing of Creo's product portfolio will be undertaken by NewCo as a third-party manufacturer, ensuring continuity of supply and manufacturing quality, and facilitating a strong ongoing relationship between NewCo and Creo. Craig Gulliford, Creo's CEO, will support the effective transition of Creo's manufacturing outsourcing to NewCo by becoming a non-executive director of NewCo.

As part of the Group's strategy to improve operational efficiency and financial discipline, as set out in the Company's 2024 Annual Report, Creo has been actively reviewing its manufacturing strategy. The Manufacturing Disposal and outsourcing relationship is consistent with the Company's strategy to pivot to a lean, new product introduction company that designs, builds and tests medical devices that are then produced by third party partners. Having considered various options, the transaction represented the best outsourcing option, delivering financial benefits while derisking the technology transfer, maintaining the know-how of an experienced team and ensuring continuity of supply.

The manufacturing outsourcing is expected to reduce the Company's annual operating costs by over £1m, representing a further 15% reduction from the FY25 closing run rate on a pro forma basis, which were already c.40% lower than the FY24 closing operating cost run rate.

Peter Tomlinson, current Chief Operating Officer at Creo and CEO of NewCo, said:

"This strategic decision marks an exciting new chapter for the Creo Medical Operations team. Having developed the manufacturing capability within Creo, we see a clear opportunity to establish a focused, world-class medical device manufacturing and engineering business. We will have the agility to invest, scale, and support a wide range of medical device innovators while continuing to serve as a trusted partner to Creo. Our ambition is to build a highly capable and globally competitive manufacturing platform for advanced medical technologies.

"We remain deeply committed to supporting Creo Medical's growth and innovation, and the long-term partnership between our organisations will continue to be a cornerstone of our future."

Craig Guliford, CEO, commented:

"We have a commitment to improve the operational efficiency of the business and focus on our core strengths as a world class medical device design, clinical application and sales execution business. The outsourcing of product manufacturing has been a key part of this strategy, having already outsourced our next generation bipolar range in our near-term product launch program. This is a further important milestone enabling us to scale our business with increasing volumes on the back of a maturing manufacturing process.

"We are extremely proud of the sophisticated manufacturing operation and talented team we have developed for our class leading products over the last few years which have enabled us to reach this point.

"Having looked at the options available for our outsourcing strategy, it became very clear that the capability within the operations team stands out in the UK peer group we evaluated. I am excited to see our volumes grow in the short term and working closely with Peter and the team as they embark on realising the growth potential in this area of the devices market. 

"This enables the team at Creo to focus on that which is unique to us, significantly differentiated product design, clinical application and sales execution through our sales channels with real traction and momentum."

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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