Nauman Khan
3 min read
In This Article:
Psychedelic stocks are gaining attention as new ways to treat mental illnesses like depression and post-traumatic stress disorder (PTSD). Companies in the niche use substances like psilocybin to develop treatments that present alternatives to traditional pharmaceutical compounds. Investors are hopeful, but the road to approval is risky and drawn out.
Compass Pathways (CMPS) just faced one of those setbacks when it ran a late‐stage (Phase 3) trial of its synthetic psilocybin drug (COMP360) in 258 adults with treatment-resistant depression. Those receiving the treatment had a 3.6-point greater reduction in symptoms versus those receiving the placebo, which met the trial’s predefined goal of at least a 3-point difference, but came up short of the 5-point gap Wall Street had hoped for. As a result, shares plunged nearly 50% on Monday, June 23.
-
Holiday Trading, Trade Negotiations and Other Key Things to Watch this Week
-
Alphabet's Strong Free Cash Flow Makes GOOG Stock a Value Buy
-
Alibaba Is Restructuring Its E-Commerce Unit. How Should You Play BABA Stock Here?
Despite the drop, analysts remain mostly bullish. The company has another major trial underway, with results expected next year. If that data is stronger, the stock could rebound sharply. Compass is also pushing ahead in studies for PTSD.
For investors who believe in the future of mental health innovation, this dip might be an opportunity to get in at a better price.
Based in London, Compass Pathways is a biotechnology company focused on developing innovative treatments for mental health conditions, primarily targeting psilocybin for treatment-resistant depression (TRD).
Valued at $248 million in market cap, shares of this psychedelic drug company have plunged 54% over the past 52 weeks and are down 27% year to date, significantly underperforming the broader S&P 500 Index ($SPX).
After the haircut, CMPS is more attractively valued with a price-book ratio of 1.31x, significantly cheaper than the sector median of 2.7x. This pricing suggests CMPS may offer a good entry point relative to its peers.
While COMP360 met its goal in the COMP005 trial, the modest 3.6-point improvement disappointed markets, causing a sharp stock correction. Still, Compass Pathways is gearing up for a key catalyst in 2026, its 26-week readout from two Phase 3 trials testing its psilocybin-based treatment for treatment-resistant depression (TRD).
