Compass Pathways: An Overvalued Psychedelic Company With A Single Mediocre Drug

Nov. 23, 2020 8:17 AM ETCOMPASS Pathways plc (CMPS)AXSM, JNJ, MKGAY, MRK37 Comments
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  • BiotechValley Insights is initiating coverage of COMPASS Pathways with a "Bearish" rating at a $13 PT.
  • CMPS has filed an IPO with an initial valuation of US$544M; since then, the stock has rallied 210% as of today. I think the current share price is extremely frothy.
  • The company has a single "mediocre" Phase 2 candidate, COMP360, which is a serotonin 2 receptor partial agonist for treating treatment-resistant depression (TRD). I have doubts about its commercial success.
  • I am going to explore the market landscape and clinical data of COMP360 and explain why it will likely be a mediocre treatment option for TRD.
  • The complex nature of its in-person therapy that requires 5+ visits to the clinic, reimbursement hurdles, and side-effect profile will be detrimental to COMP360's commercial success.

Data by YCharts

Company History

COMPASS Pathways | Navigating Mental Health Pathways

Source: Company Website

COMPASS Pathways (NASDAQ:CMPS) is a London-based psychedelic drug company advancing a single pipeline candidate for treatment-resistant depression (TRD). CMPS filed an IPO on September 18, 2020, and netted US$136.4M through an upsized initial public offering on the Nasdaq of 8.6M American Depositary Shares (ADSs) (including full exercise of the overallotment) at $17 per ADS. Each ADS represents one ordinary share. The company originally planned to sell 6.7M ADSs at a range of US$14-16 per ADS. Since then, the stock has rallied 210% as of today. I have doubts about its commercial success, and therefore, I am not comfortable with its current valuation. I am planning to watch it from the sidelines.

Pipeline & Technology

Source: Image created by the author based on the information presented by CMPS

CMPS is developing psychedelic therapy called psilocybin (COMP360) to treat treatment-resistant depression. Psilocybin is a psychoactive substance administered in conjunction with psychotherapy conducted by a registered mental health professional.

Psilocybin is now in clinical development for TRD in the US, Canada, and Europe. CMPS recently announced safety data from an exploratory phase I study (EudraCT 2018-000978-30) that evaluated the feasibility and safety of simultaneous psilocybin administration with 1:1 in-person psychological support. The COMP360 received a Breakthrough Therapy status by the FDA, which could lead to a faster six-month review and extra support from the FDA during clinical development. If everything goes well, the COMP360 psilocybin therapy will be approved and launched around 2023-2024 in the US and Europe.

COMP360 (Psilocybin)

Source: Company IR presentation * Note: *5-HT2A = 5-hydroxytryptamine 2A; DMN = default mode network; mPFC = medial prefrontal cortex

Psilocybin belongs to a class of drugs referred to as psychedelics (‘mind-manifesting’). According to the company, partial agonism of 5-HT2a receptors is a key mechanism

This article was written by

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