Psychedelic company Compass Pathways PLC (CMPS) got off to a stellar start of trading on Friday, as investors hungry for the next new thing bought up shares.
The U.K.-based mental health care company said on Friday that it had upped its initial public offering, and priced the shares at $17, which was higher than the expected range of $14 to $16 a share. The first trade was at 37.6% above the initial public offering price sending the stock to roughly $23. The stock was continuing to move higher and was lately selling at $29.
Initially the company was valued at $578 million, but the market cap eventually hit a billion. According to its prospectus, Compass reported total net losses of $13.2 million, $19.6 million and $24.8 million, respectively, for the fiscal years ended Dec. 31, 2018 and Dec. 31, 2019 and the six months ended June 30. Perhaps at some point investors will right size the market cap.
Compass had raised $116 million prior to its IPO. As of June 30, it had an accumulated deficit of $62.4 million. Its largest shareholder is Atai Life Sciences, which owns 29% of the stock. Other large shareholders include founders, George Goldsmith and Ekaterina Malievskaia, each with 16.5% of the company. Entities affiliated with Peter Thiel own 7.5%.
Psychedelic company stock traders will need to be extra cautious as this category has become very volatile with the rush to get into the early stages of the industry. Investors may recall that in 2018 when Tilray (TLRY) went public, the stock trading had to be halted five times and shares briefly hit $300. Tilray shares now trade at $5.
Psilocybin Treatments for Depression
The company is known for its development of a new model of psilocybin therapy, in which psilocybin, a compound derived from a type of mushroom, is administered in conjunction with psychological support. This is not unlike the ketamine clinics, in which patients will take ketamine treatment under the guidance of a mental health professional.
"Our initial focus is on treatment-resistant depression, or TRD, a subset of major depressive disorder, or MDD, comprising patients who are inadequately served by the current treatment paradigm," says the company in its overview. The company noted in its filing that early signals from academic studies, using formulations of psilocybin of other sources, have shown that psilocybin therapy "may have the potential to improve outcomes for patients suffering with depression, with rapid reductions in depression symptoms and effects lasting up to six months, after administration of a single high dose."
The company has targeted the depression market, which is seen as valued at $200 billion.
It also says that it has developed a proprietary, high-purity polymorphic crystalline formulation of psilocybin, that it's calling COMP360. In 2019, it completed its first phase clinical trial, administering COMP360, along with psychological support, to 89 healthy volunteers, the largest randomized controlled clinical trial with psilocybin therapy to date, according to Compass Pathways. It found it was generally well-tolerated and is currently evaluating COMP360 in conjunction with psychological support in another trial.
That Phase IIb clinical trial consists of 216 patients suffering with TRD, in 20 sites across North America and Europe. This trial is investigating the safety and efficacy of COMP360 combined with psychological support, for the treatment of TRD, and aims to determine the optimal dose of COMP360. The trial is expected to yield results in late 2021.