Compass Pathways Stock Slumps After Positive Late-Stage Trial Results From Psychedelic Drug ‘Underwhelm’ Analysts

Shares of Compass Pathways Plc. (CMPS) slumped 47% on Monday afternoon after the results from the late-stage trials of COMP360 in treatment-resistant depression fell short of market expectations.

COMP360 is a synthetic, proprietary formulation of psilocybin. Psilocybin is part of a group of drugs called psychedelics or hallucinogens with the ability to alter one’s sense of perception.

Compass Pathways said that a single dose of the drug reduced symptom severity by 3.6 points from baseline in the Montgomery-Åsberg Depression Rating Scale (MADRS) as compared to placebo at week 6.

The company said it will discuss the “highly statistically significant and clinically meaningful” data with the U.S. Food and Drug Administration, which has yet to review it.

The company is also running another late-stage trial for the drug, which aims to evaluate the efficacy of two fixed doses taken three weeks apart.

According to Compass Pathways, an estimated 21 million adults in the U.S. suffer from major depression, and approximately 9 million are drug-treated.

Approximately a third of patients with major depressive disorder will develop treatment-resistant depression, which is defined as an inadequate response to two or more appropriate courses of approved medications.

Following the announcement, Evercore ISI downgraded Compass Pathways to ‘In Line’ from ‘Outperform’ with a price target of $6, down from $11.

The reduction in symptom severity by 3.6 points as compared to placebo on a standardized depression scale "underwhelmed," the analyst told investors, as per TheFly.

This dataset does indicate Compass may have an approvable drug, but the firm noted that durability is a key component for commercial success, and this will remain a question with relatively unclear durability in a mid-stage trial and a weaker effect at 6 weeks in the late-stage trial.

H.C. Wainright, however, is more optimistic and noted that the results from the late-stage study mark "a historic first for a psychedelic therapy." The data also positions COMP360 as "a potential first-in-class treatment in a large, underserved depression market," said the analyst, who reiterated a ‘Buy’ rating and $45 price target on the shares.

On Stocktwits, retail sentiment around CMPS jumped from ‘bullish’ to ‘extremely bullish’ territory over the past 24 hours while message volume rose from ‘high’ to ‘extremely high’ levels.

A Stocktwits user opined that while the late-stage results were good, the market wants ‘groundbreaking’ results.

CMPS stock is down by about 35% this year and nearly 61% over the past 12 months.

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