8-K: Neuronetics Completes Acquisition of Greenbrook TMS in Transformative Deal

Neuronetics has successfully acquired Greenbrook TMS, creating a combined entity focused on expanding access to mental health treatments.

Summary

• Greenbrook TMS Inc. has been acquired by Neuronetics, Inc. through a plan of arrangement.
• Each Greenbrook share was exchanged for 0.01021 of a Neuronetics share.
• Prior to the acquisition, Madryn Asset Management converted approximately $128 million of debt into Greenbrook shares, resulting in them owning 95.8% of the company.
• Madryn also provided interim funding which was converted into additional Greenbrook shares.
• The combined company will operate as Neuronetics, Inc., and its shares will continue to trade on the NASDAQ under the ticker STIM.
• Greenbrook shares will be removed from the OTCQB Market, and Greenbrook will cease to be a reporting issuer in Canada.
• Neuronetics borrowed $1.5 million in unsecured debt from Madryn, with a 0% interest rate, increasing to 4% upon default, to be used for general corporate and working capital purposes.
• The unsecured debt matures on the earliest of the effective date of the arrangement, the outside date of the arrangement, or December 31, 2024.

Sentiment

Score: 8

Explanation: The document conveys a positive outlook on the merger, highlighting the potential for growth and improved patient access to mental health treatments. The language used by management is optimistic, and the strategic rationale for the acquisition is clear. However, there are some risks mentioned, such as the company's history of losses and reliance on a single product, which temper the overall sentiment.

Positives

• The acquisition creates a stronger combined company with a larger revenue base and cost synergy opportunities.
• The combined company is better positioned to expand patient access to mental health treatments.
• The integration planning teams have already made significant progress.
• The combined company will have a stronger leadership position in the mental health industry.
• The combined company is expected to drive profitable growth and positive cash flow.
• The combined company is aligned in its values and commitment to the mental health space.

Negatives

• Greenbrook shares will be delisted from the OTCQB Market.
• Greenbrook will cease to be a reporting issuer in Canada.
• The company has a history of losses.
• The company is reliant on the sale and use of its NeuroStar Advanced Therapy system to generate revenues.
• The company's revenue has been concentrated among a small number of customers.

Risks

• The combined company faces risks related to the integration of the two businesses.
• There are risks related to achieving or sustaining profitable operations.
• The company is reliant on the sale and use of its NeuroStar Advanced Therapy system to generate revenues.
• The company faces risks related to competition and the development of new technologies.
• The company's ability to obtain and maintain intellectual property protection is a risk.
• The company's ability to achieve cash flow break-even in the third quarter of 2025 is not guaranteed.
• There are risks related to the terms of the company's credit facility.

Future Outlook

The combined company aims to expand patient access to mental health treatments, drive profitable growth, and achieve positive cash flow, with a goal of cash flow break-even in the third quarter of 2025.

Management Comments

• Keith Sullivan, President and Chief Executive Officer of Neuronetics, stated that the transaction marks a transformative moment in the delivery of mental health therapy.
• Keith Sullivan also mentioned that the combined company is better positioned to expand patient access to life-changing mental health treatments.
• Bill Leonard, President and Chief Executive Officer of Greenbrook, expressed excitement and optimism about the future as a combined company.
• Bill Leonard also stated that the combined company will be able to better serve the mental health industry by increasing its leadership position.

Industry Context

This acquisition reflects a trend of consolidation in the mental health treatment sector, where companies are seeking to expand their reach and service offerings through mergers and acquisitions. The combination of Neuronetics' technology with Greenbrook's treatment centers aims to create a more comprehensive and efficient platform for delivering mental health care.

Comparison to Industry Standards

• Neuronetics is a leader in the TMS (Transcranial Magnetic Stimulation) market, with its NeuroStar system being a key product.
• Greenbrook operates a network of treatment centers, offering both TMS and Spravato treatments.
• The acquisition is similar to other consolidations in the healthcare sector, where companies combine to achieve economies of scale and expand their market presence.
• The combined company will compete with other mental health providers, including those offering traditional medication and other forms of therapy.
• The success of the combined company will depend on its ability to integrate operations, achieve cost synergies, and expand patient access to its treatments.

Management Changes

Related Party Transactions

• Madryn Asset Management provided interim funding to Greenbrook, which was converted into Greenbrook shares.
• Madryn Asset Management is the lender for the $1.5 million unsecured promissory notes.

Stakeholder Impact

• Shareholders of Greenbrook received shares of Neuronetics.
• Employees of both companies will be integrated into a single organization.
• Patients will have access to a broader range of mental health treatments.
• The combined company will have a stronger position in the mental health industry, potentially impacting competitors.
• Suppliers and creditors will be dealing with the combined entity.

Next Steps

• The combined company will focus on integrating operations and implementing strategic initiatives.
• Neuronetics will work to remove Greenbrook shares from the OTCQB Market.
• Neuronetics will cause Greenbrook to cease to be a reporting issuer in Canada.
• Former Greenbrook shareholders must complete and return the letter of transmittal to receive their Neuronetics shares.

Key Dates

Keywords

Acquisition, Merger, Neuronetics, Greenbrook TMS, Mental Health, TMS, NeuroStar, Debt Conversion, Share Exchange, Healthcare