8-K: Neuronetics and Greenbrook TMS Announce Merger, Aiming for Profitability by 2025

Neuronetics and Greenbrook TMS are merging to create a larger mental health company, targeting profitability and significant cost synergies by 2025.

Summary

• Neuronetics, a leader in transcranial magnetic stimulation (TMS) technology, is merging with Greenbrook TMS, a major provider of TMS therapy.
• The merger aims to create a vertically integrated organization with increased scale and capabilities in the mental health sector.
• The combined entity is expected to have a 2023 pro forma revenue of approximately $145 million.
• The company anticipates mid-teens revenue growth in fiscal years 2025 and 2026.
• They expect to achieve approximately $15 million in annual cost savings, primarily in fiscal year 2025.
• The company projects to be adjusted EBITDA and cash flow positive for the full fiscal year 2025, excluding one-time transaction costs.
• Greenbrook's long-term debt will be converted to common shares before the merger.
• Neuronetics is maintaining its full year 2024 revenue guidance of $78.0 $80.0 million and operating expenses of $78.0 $80.0 million.
• Neuronetics has treated over 182,000 patients with over 6.6 million treatment sessions.
• Greenbrook has treated over 47,000 unique patients and administered over 1,520,000 treatments to date with $73.8 million in revenue in FY 2023.
• Neuronetics' NeuroStar system is now FDA-cleared as an add-on therapy for ages 15 and older.

Sentiment

Score: 7

Explanation: The document is generally positive due to the merger announcement, cost synergies, and path to profitability. However, there are risks and uncertainties associated with the merger and the company's history of losses, which temper the overall sentiment.

Positives

• The merger is expected to create significant cost synergies of approximately $15 million annually.
• The combined company is projected to achieve profitability in 2025.
• The merger will create a larger, more vertically integrated organization with increased scale.
• The combined company will have a broader reach and increased brand awareness.
• Neuronetics has seen strong early adoption of its adolescent therapy with over 425 patients treated since April 2024.
• Neuronetics has added approximately 27.4 million covered lives following the clearance for adolescent use in March 2024.
• The company is focused on improving patient care through its Better Me Provider Program, which has shown improved response times and patient engagement.

Negatives

• The company has a history of losses and needs to achieve or sustain profitable operations.
• The company relies heavily on the sale and usage of its NeuroStar system for revenue.
• The company's revenue has been concentrated among a small number of customers.
• The merger is subject to risks and uncertainties, including the possibility of termination and failure to meet expectations.
• The company faces competition from other technologies and therapies.
• The company is subject to risks related to reimbursement from third-party payors.

Risks

• The merger may not be completed, or the expected benefits may not be realized.
• The company may not achieve or sustain profitable operations due to its history of losses.
• The company's reliance on the NeuroStar system for revenue makes it vulnerable to changes in demand or competition.
• The company faces risks related to third-party payor coverage and reimbursement.
• The company's ability to achieve cash flow break-even in the fourth quarter of 2024 and on a full-year basis in 2025 is not guaranteed.
• The company is subject to risks related to product defects and intellectual property protection.
• The company faces risks related to the terms of its credit facility.
• The company's ability to successfully roll-out its Better Me Provider Program on the planned timeline is not guaranteed.
• The company's self-sustainability and existing cash balances may not be sufficient.

Future Outlook

The company anticipates mid-teens revenue growth in fiscal years 2025 and 2026 and expects to be adjusted EBITDA and cash flow positive for the full fiscal year 2025, excluding one-time costs related to the transaction.

Management Comments

• Neuronetics is dedicated to driving health policy to ensure broad US reimbursement among commercial and government payors.
• Neuronetics is inspired every day by the opportunity to help people live more fulfilling lives.
• The merger will create an organization with the ability to leverage its scale and capabilities to treat more patients suffering from mental health conditions.

Industry Context

The merger reflects a trend towards consolidation in the mental health sector, with companies seeking to expand their reach and improve efficiency. The focus on TMS therapy highlights the growing interest in non-drug alternatives for treating mental health disorders.

Comparison to Industry Standards

• Neuronetics is a market leader in TMS, with over 6.6 million treatment sessions performed, indicating a strong position compared to other TMS providers.
• Greenbrook TMS is a significant player in the TMS market with over 1,520,000 treatments administered, demonstrating a substantial scale of operations.
• The combined revenue of ~$145 million in 2023 positions the merged entity as a major player in the mental health treatment market, potentially comparable to other large mental health service providers.
• The projected mid-teens revenue growth for 2025 and 2026 is a positive outlook, but it will need to be compared to the growth rates of other companies in the mental health sector to assess its competitiveness.
• The target of $15 million in cost synergies is a significant goal, and its success will be measured against the cost-saving achievements of other companies undergoing mergers in the healthcare industry.

Stakeholder Impact

• Shareholders of both Neuronetics and Greenbrook will be impacted by the merger, with potential for increased value and growth.
• Employees of both companies may experience changes due to the merger, including potential job consolidation or restructuring.
• Customers of both companies may benefit from a more integrated and comprehensive service offering.
• Suppliers and creditors may be impacted by the changes in the combined entity's operations and financial structure.

Next Steps

• The companies will file preliminary and definitive joint proxy statements with the SEC and on SEDAR+.
• Neuronetics and Greenbrook stockholders will vote on the proposed merger.
• The company will continue to roll out its Better Me Provider Program.
• The company will drive increased awareness through targeted TV advertising, pilot in Southeastern U.S. launched.
• The company will drive penetration amongst the 4.3 million adolescent MDD patients in the U.S.

Key Dates

Keywords

Neuronetics, Greenbrook TMS, Transcranial Magnetic Stimulation, TMS, Merger, Mental Health, NeuroStar, Profitability, Cost Synergies, Adolescent Therapy, Depression, EBITDA, Revenue, Healthcare