Greenbrook TMS Stock Could Improve the Mood of Investors

Greenbrook TMS Inc. (TSX:GTMS) is well positioned to help treat major depression disorders, a large and expanding market

Capital Ideas Media | January 7, 2020 | SmallCapPower: Mental health is becoming less of a taboo subject in our society and that’s partly why Greenbrook TMS Inc. (TSX:GTMS) is well positioned in helping to treat major depression disorders, which is a large and expanding market.

(Originally published on Capital Ideas Media on November 26, 2019)

The Company owns clinics in the U.S., providing Transcranial Magnetic Stimulation (TMS) therapy for patients that don’t respond to drug therapy.

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GMP Securities analyst Justin Keywood, CFA, has started coverage of Greenbrook TMS with a “buy” rating and a price target of $3, which implies a projected return of about 37% from current levels.

Here are some highlights from GMP’s report on Greenbrook TMS:

Creating a service delivery platform in mental health

GTMS has a network of 109 clinics in the U.S., providing TMS therapy for the treatment of major depression disorder.

TMS therapy is an FDA-cleared, non-invasive treatment for patients that fail to respond to drug therapy (typically ~50% of patients) and has been shown to be effective with a 68% response rate.

The treatment utilizes minimal electromagnetic stimulation through FDA-cleared medical devices to target specific regions of the brain to improve mood and depressive symptoms that could lead to complete remission.

TMS therapy also has no major side effects, while offering a compelling benefit to cost proposition for U.S. payers, leading to solid reimbursement rates in most states.

As a result, the market for TMS is large and growing, especially as the stigma around mental health abates.

We expect GTMS to increase its network of clinics to 170 from 109 by fiscal 2021, while realizing margin expansion with scale benefits.


Clinics visit and feedback from experts

We visited several of GTMS’ clinics, which revealed high-quality operations with discrete but good locations, along with professional staff and state of the art equipment.

We find these attributes to be important in providing a good patient experience, expected to have word of mouth and testimonial benefits, especially important in an online world.

We also met with GTMS’ chief medical officer, while speaking to other independent mental health experts on TMS therapy.

Our contacts validated the therapy as an effective option, including that there is a two-month waiting period in Canada.

TMS Machine and Treatment Example

“Greenbrook TMS is a network of 109 clinics in the U.S. providing Transcranial Magnetic Stimulation therapy, an FDA-cleared, non-invasive treatment of major depression disorder for patients that fail to respond to drug therapy and has been shown to be effective with a 68% response rate.” – GMP Securities

“We expect Greenbrook TMS to increase its network of clinics to 170 from 109 by fiscal 2021, while realizing margin expansion with scale benefits.” – GMP Securities

New indications and how the business scales

GTMS has an infrastructure to support many clinics beyond our forecasts and we could see the business eventually scale to reach ~800 locations.


GTMS has also invested to support good organic growth. This results in lower near-term corporate EBITDA margins but expansion occurs progressively as new clinics are added and operations optimize.

We forecast EBITDA margins to reach break-even in fiscal 2020 and mid-teens by 2021.

GTMS’ clinics could also accommodate new treatment indications, where trials are currently underway for PTSD, Bipolar Disorder and certain addictions.

We breakdown the key components of our thesis:

  • Add more clinics:GTMS has more than doubled its network of clinics in 2019 from 47 to 109 and we assume the network reaches 170 clinics at the end of 2021 with a potential for the business to eventually scale to ~800 locations.
  • As the industry leader,GTMS can selectively make good acquisitions at fair prices, given the fragmented nature of smaller TMS providers, along with expand density in existing regions. A healthy balance sheet with ~$12 million in cash and no debt also supports growth goals.
  • Drive organic growth:GTMS has built an infrastructure to support well beyond 170 clinics but also to maintain good organic growth. This is accomplished through regional support infrastructures with centralized sales and marketing functions and is a competitive advantage over much smaller competitors.
  • Profit expansion with scale:The consolidated EBITDA margin profile at GTMS shows the large corporate investments needed to support a major roll out of clinics and maintain or increase organic growth rates. As a result, we forecast near-term EBITDA margin pressure but progressing to break-even in 2020 and mid-teens by 2021.

TMS device providers and recent results

There are seven TMS devices that are currently cleared by the FDA, where GTMS utilizes three suppliers. These devices are generally only available to GTMS through a lease arrangement, where costs are around $55,000 per device each year.

As GTMS increases its network, there could be discounts on these rates with greater scale. Two of GTMS’ TMS device suppliers are also public companies, including Neuronetics (NASDAQ:STIM) and Tel Aviv-listed Brainsway (TASE:BWAY), where we can gain some insight into the overall market demand and growth rates.

Both of these companies have shown strong growth rates with Neuronetics sales increasing by 28% year-over-year and Brainsway showing a 29% compound annual growth rate over the past three years. (Editor’s note: STIM and BWAY shares have not performed well in the last year.)

We see this as another relevant data point, supporting TMS therapy as having increasing demand, consistent with our expert discussions that also revealed a two-month waiting period in Canada.




New indications: Medical device manufactures are seeking additional FDA cleared indications under the TMS label, including adolescents with depression, PTSD, Bipolar disorder and addiction.

GTMS already has the infrastructure and support systems in place to implement these or other new therapies when permissible to do so, which could have strong profit synergies.

Clinic visit and experts’ opinion: As TMS therapy is relatively a new concept to us, we performed extensive due diligence on GTMS by visiting several locations, speaking to their chief medical officer and having independent conversations with mental health experts.

We conclude that the mental health area has robust investment activity, given the attractive attributes of the market but TMS is valid, effective and has a solid benefit to cost analysis, critical for good reimbursement.

Bill Leonard is a founder and the CEO of GTMS and has over 20 years of experience in operational and strategic leadership in the development of medical devices, pharmaceuticals, and healthcare services.

Formerly, he was the President of the Bio-Pharmaceutical Division for Euclid Vision Corporation, where he procured FDA strategy for an ophthalmic drop that was successfully approved to undergo clinical trials.

Mr. Leonard also served as President of TLC Vision Refractive Surgery Division, the leading provider of ophthalmic refractive surgery services in the United States. He also holds a B.A. from Towson University, Maryland.


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