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Greenbrook TMS has a huge upside, says Clarus Securities

Greenbrook TMS

Greenbrook TMS
Greenbrook TMS Inc. Opens the Market (CNW Group/TMX Group Limited)
An earnings beat has Clarus Securities analyst Noel Atkinson keeping the faith on healthcare services stock Greenbrook TMS (Greenbrook TMS Stock Quote, Chart, News TSX:GTMS). Atkinson reviewed Greenbrook’s third quarter results in an update to clients on Thursday, saying the company should hit breakeven EBITDA by mid 2021.

Toronto-headquartered Greenbrook is the operator of 125 treatment centres in the United States employing Transcranial Magnetic Stimulation (TMS) therapy for the treatment of depression and other mental health disorders. The largest provider of TMS therapy in the US, has now provided over 510,000 treatments to over 14,000 patients.

Greenbrook announced its third quarter financials and provided a corporate update on Tuesday, with the Q3 showing revenue up 42 per cent year-over-year to $12.0 million and up 23 per cent sequentially. Adjusted EBITDA came in at a loss of $0.9 million versus a loss of $1.0 million a year ago and a loss of $1.7 million for the Q2 2020. (All figures in US dollars except where noted otherwise.)

It was the company’s second-highest quarterly revenue so far and a return to strong regional operating income in spite of COVID-related challenges, according to management, who forecasting another strong quarter for the Q4.

“We continued to experience record monthly highs in new patient starts throughout Q3 2020, highlighting the essential need for TMS therapy during these challenging times. We believe these record monthly highs will support a continued strong upward trend into the fourth quarter of 2020,” said president and CEO Bill Leonard in a press release.

The top and bottom line numbers of $12.0 million and negative $0.9 million were beats of Atkinson’s estimates for $11.8 million and negative $2.4 million, respectively.

The company said it’s aiming for 140 active centres open in 2021 and to that end will be pursuing a $30-million term loan to support its expansion efforts.

“We believe an aggressive growth program is warranted, even if adding higher portion of new centres to the mix will impact Adj. EBITDA in the near term. We now expect GTMS to reach breakeven Adj. EBITDA by mid-2021,” Atkinson wrote.

Along with the quarterly numbers, Greenbrook announced the launch of a pilot program offering Spravato, a nasal spray for general anesthetic and for treatment-resistant depression, at five of its centres, with the company aiming to assess the value of Spravato as another treatment option for its patients.

On the pilot, Atkinson said there could be substantial revenue and profit potential over time, if and when Greenbrook does a full rollout. The analyst said Spravato would appear to be a complementary rather than cannibalistic offering alongside TMS and that a successful implementation could put Greenbrook as more of a ‘centre of excellence’ when it comes to treating depression and thus become more top-of-mind within its physician referral network.

“Given the recent investor interest in psychedelics (psilocybin, LSD, MDMA, generic ketamine) for treatment of depression and in small rollups of private ketamine clinics, Greenbrook appears to be positioning itself to become (by far) the world’s largest psychedelic treatment clinic chain if it launches the Spravato treatment option. GTMS has almost 120 across the U.S., serves thousands of patients per year already for TMS, and has a robust network of referring physicians and insurance providers,” Atikinson said.

Finally, Atkinson commented on a large-scale study published in the Journal of Affective Disorders in August which looked at TMS treatments over a three-year period and involving over 3,000 patients who completed a full TMS treatment regimen at one or more of 100 participating clinics (some of which were likely Greenbrook clinics, Atkinson guesses). The results showed “impressive efficacy” of TMS for drug-resistant depression, said Atkinson, where self-reported results showed 65 per cent of patients completing a full treatment regimen achieved at least a 50-per-cent improvement in depression score and 32 per ent achieved remission (scoring as having normal mood). Clinicians’ evaluations reportedly showed even higher response and remission rates.

“We continue to believe that Greenbrook is one of the most exciting US-focused health care services stocks due to a plethora of macro growth drivers for the transcranial magnetic stimulation (TMS) services sector overall and Greenbrook’s positioning as by far the largest independent TMS treatment provider,” wrote Atkinson.

“There is also the potential that the COVID outbreak’s effect on people’s mental health could ultimately spur an acceleration in demand for TMS treatment beyond our current forecast. Finally, if Greenbrook moves forward with offering Spravato treatments, that could become a sizeable revenue and profit contributor that is not yet in our forecast model – and would likely significantly increase investor awareness of the Company,” he said.

With the update, Atkinson reaffirmed his “Speculative Buy” rating and C$3.50 price target, which at press time represented a projected 12-month return of 144.8 per cent. By the numbers, Atkinson thinks Greenbrook will deliver full 2020 revenue and adjusted EBITDA of $46.7 million and negative $5.0 million, respectively, and 2021 revenue and adjusted EBITDA of $69.3 million and $2.2 million, respectively.

About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.
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