DEFA14A: Neuronetics and Greenbrook TMS Announce Merger to Create Mental Health Treatment Powerhouse

Neuronetics and Greenbrook TMS are merging to form a larger, vertically integrated organization focused on providing comprehensive mental health treatment.

Summary

• Neuronetics, Inc. is presenting its financial and operational outlook at the William Blair 44th Annual Growth Stock Conference.
• The company is combining with Greenbrook TMS to create a larger organization with increased scale and capabilities in the mental health treatment sector.
• The combined entity is expected to have a 2023 fiscal year revenue of approximately $145 million.
• Neuronetics anticipates mid-teens revenue growth in fiscal years 2025 and 2026.
• The merger is projected to yield approximately $15 million in annual cost savings, primarily realized in fiscal year 2025.
• The company expects to achieve adjusted EBITDA and cash flow positivity for the full fiscal year 2025, excluding one-time transaction costs.
• 100% of Greenbrook's long-term debt is being converted to Greenbrook common shares pre-merger.
• Neuronetics is the exclusive provider of TMS devices to Greenbrook, with 245 NeuroStars in active use.
• Neuronetics reaffirms its FY 2024 revenue guidance of $78.0 $80.0 million and operating expenses of $78.0 $80.0 million.
• Third quarter revenue is expected to be between $18.5 and $19.5 million.

Sentiment

Score: 7

Explanation: The document presents a positive outlook due to the merger, expected cost synergies, and revenue growth. However, the risks associated with the merger and the company's history of losses temper the overall sentiment.

Positives

• The merger creates a vertically integrated organization with significant scale in the U.S. mental health treatment market.
• The combined company is expected to achieve increased revenue scale and a strong growth trajectory.
• The merger is projected to result in material cost synergies of approximately $15 million annually.
• The company expects to achieve adjusted EBITDA and cash flow positivity for the full fiscal year 2025, excluding one-time transaction costs.
• Neuronetics' NeuroStar system is now FDA-cleared as an add-on therapy for ages 15 and older, expanding the market opportunity.
• The Better Me Provider Program shows improved patient response times and increased patient treatment rates.
• The company has seen strong early adoption of NeuroStar for adolescent patients, with over 425 patients treated since April 2024.
• Neuronetics has added approximately 27.4 million covered lives following the FDA clearance in March 2024.

Negatives

• Neuronetics 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 Advanced Therapy System to generate revenues.
• The company's revenue has been concentrated among a small number of customers.
• The company faces risks related to the Proposed Arrangement, including the possibility that the transaction may not be completed.

Risks

• The company's ability to achieve or sustain profitable operations is uncertain due to its history of losses.
• The company is heavily reliant on the sale and usage of its NeuroStar Advanced Therapy System.
• The company faces competition from other technologies and therapies.
• The company's revenue has been concentrated among a small number of customers.
• The company's ability to obtain and maintain intellectual property protection is crucial.
• The company's success depends on developments in clinical trials and regulatory review of the NeuroStar Advanced Therapy System.
• The company's performance is subject to regulatory changes in the U.S. and other applicable jurisdictions.
• The company's ability to meet expectations regarding the timing and completion of the Proposed Arrangement is uncertain.
• The Proposed Arrangement is subject to the risk of termination due to various events, changes, or circumstances.
• The Proposed Arrangement is subject to the risk that Greenbrook's and Neuronetics' respective stockholders may not approve the transaction.
• The Proposed Arrangement is subject to the risk that certain terminations of the agreements related to the Proposed Arrangement require Greenbrook or Neuronetics to pay a termination fee.
• The Proposed Arrangement is subject to the risk of failure to satisfy each of the conditions to the consummation of the Proposed Arrangement.
• The Proposed Arrangement may disrupt management's attention from ongoing business operations.
• The announcement of the Proposed Arrangement may affect Greenbrook's and Neuronetics' relationships with their respective customers, as well as their respective operating results and business generally.
• The Proposed Arrangement is subject to the outcome of any legal proceedings related to the transaction.
• The Proposed Arrangement may affect the retention of employees of Greenbrook following the announcement of the transaction.
• The Proposed Arrangement is subject to the risk that Greenbrook's and Neuronetics' stock price may decline significantly if the transaction is not completed.

Future Outlook

Neuronetics 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 transaction costs.

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.

Industry Context

The merger reflects a trend towards consolidation in the mental health treatment industry, with companies seeking to expand their service offerings and geographic reach. The combined entity aims to capitalize on the underpenetrated U.S. TMS market opportunity.

Comparison to Industry Standards

• The document does not contain specific comparisons to industry standards.
• However, the mention of Greenbrook TMS as a leading provider of TMS therapy in the U.S. suggests a comparison to other TMS providers such as TMS NeuroHealth Centers and Success TMS.
• The document also mentions Neuronetics as the #1 physician recommended TMS therapy, implying a comparison to other TMS therapies in terms of physician preference.

Stakeholder Impact

• Shareholders of both Neuronetics and Greenbrook will be impacted by the merger, requiring them to vote on the Proposed Arrangement.
• Employees of both companies may be affected by potential synergies and restructuring.
• Customers of both companies may benefit from a more comprehensive service offering and improved access to mental health treatment.
• The merger may impact suppliers and creditors of both companies due to changes in the combined entity's operations and financial structure.

Next Steps

• Drive increased awareness through targeted TV advertising, pilot in Southeastern U.S. launched.
• Drive penetration amongst the 4.3 million adolescent MDD patients in the U.S.
• Neuronetics and Greenbrook will be filing preliminary and definitive joint proxy statements with the SEC and on SEDAR+.

Key Dates

Keywords

Neuronetics, Greenbrook TMS, TMS, mental health, merger, NeuroStar, revenue, EBITDA, cost synergies, adolescent patients, FDA clearance