Neuronetics, Inc. STIM recently announced a definitive agreement with Greenbrook TMS Inc. GBNHF to acquire its outstanding common shares in an all-stock transaction.
Following the merger's completion, Greenbrook will be able to improve its existing sites to provide the benefits of NeuroStar to any practice across the country. It will do so using Neuronetics' innovative NeuroStar platform as well as its education and training expertise.
The merger agreement will help Neuronetics strengthen its position in the mental health market. The agreement provides the company with multiple strategic benefits. It also offers compelling financial benefits for both entities under the agreement.
Financial Details
Per the terms of the deal, Neuronetics shareholders will hold approximately 57% of the combined company, and Greenbrook shareholders will own approximately 43% on a fully diluted basis. As of the date of the Definitive Agreement, each Greenbrook share is expected to be exchanged for 0.01149 shares of Neuronetics common stock at the closing of the transaction, subject to adjustment for any interim period funding by Madryn and other customary adjustments prior to the closing (based on the terms of the agreement). An aggregate of 25,304,971 Neuronetics shares will be issued to Greenbrook shareholders in connection with the transaction.
Rationale Behind the Acquisition
The merger is aimed at driving significant increase in awareness of NeuroStar among patients, caregivers and providers. Under centralized management, Neuronetics can better operationalize NeuroStar TMS best practices across Greenbrook sites nationwide.
The agreement also offers financial benefits for the combined company, including expected mid-teens year-over-year revenue growth in fiscal 2025 and 2026, improved balance sheet to execute long-term growth strategy as well as accelerated path for profitability. Through marketing expenditure optimization as well as back office functions, the combined company is expected to realize at least $15 million of annualized cost savings, the majority of which will be realized in fiscal 2025.
More on the News
Before the completion of the transaction, all of Greenbrook's existing credit facility and subordinated convertible debt will be converted into Greenbrook common shares.
The transaction has been unanimously approved by the board of directors of both companies.
The transaction is expected to be closed during the fourth quarter of 2024, subject to approval by both companies' shareholders, court approval in respect of the plan of arrangement as well as other customary closing conditions. After the transaction is closed, Neuronetics intends to delist the common shares of Greenbrook from the OTCQB.
Industry Prospects
Per a report from Skyquest, the global Mental Health market was valued at $399.6 billion in 2022 and is expected to reach $544.6 billion by 2031, at a CAGR of 3.5%. The primary factors influencing the global market include the increasing prevalence of mental health disorders worldwide and advancements in technology and research, which have led to the development of innovative treatment options. The growing awareness and acceptance of mental health issues also contribute to the market's growth.
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Looking at the market potential, Neuronetics' latest acquisition is strategically well-timed.
Other Notable Developments
In July 2024, Neuronetics launched the Better Me Provider ("BMP") program, which is a part of the company's Neurostar product line. This latest development should help STIM to meet new standards and improve treatment accessibility within the mental health industry.
Earlier this year, Neuronetics announced the FDA clearance of NeuroStar Advanced Therapy for usage as a supplement to treat MDD in adolescents aged between 15 and 21 years. NeuroStar is the first and only FDA-approved transcranial magnetic stimulation treatment available for this age group.
In March 2024, Neuronetics entered into an expanded commercial partnership with Transformations Care Network ("TCN"), a mental health care provider. The company will supply new TMS equipment to TCN. This partnership marks a significant advancement in the field of mental health treatment, particularly for those suffering from MDD and treatment-resistant depression.
Price Performance
In the past year, STIM's shares have lost 57.1% against the industry's 5.5% growth.
Zacks Rank and Key Picks
Neuronetics currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are Intuitive Surgical, TransMedics Group and Quest Diagnostics. While Intuitive Surgical and TransMedics sport a Zacks Rank #1 (Strong Buy) each, Quest Diagnostics carries a Zacks Rank #2 (Buy).
Intuitive Surgical's shares have surged 52.6% in the past year. Estimates for the company's earnings have moved north 5.1% to $1.65 per share for 2024 in the past 30 days.
ISRG's earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 8.97%. In the last reported quarter, it posted an earnings surprise of 16.34%.
Estimates for TransMedics' 2024 EPS have moved up 83.3% to 22 cents in the past 30 days. Shares of the company have soared 160.4% in the past year compared with the industry's 5.5% growth.
TMDX's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 287.50%. In the last reported quarter, it delivered an earnings surprise of 66.67%.
Estimates for Quest Diagnostics' 2024 EPS have decreased 0.4% to $2.28 in the past 30 days. In the past year, shares of HAE have risen 11.3% compared with the industry's 15.4% growth.
In the last reported quarter, DGX delivered an earnings surprise of 1.73%. The company has a trailing four-quarter average earnings surprise of 3.31%.
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