The company is developing psilocybin-based treatments for a variety of illnesses.
In the wake of its latest report on Nov. 9, Real Money’s Timothy Collins noted that “It's been a roller coaster ride for Compass Pathways shares over the past two days ... Unfortunately, the coaster ran out of track and crashed to the ground by lunchtime Tuesday. The end result is a stock that broke above $60 for a brief moment in the pre-market was trading at nearly half that price by the time lunch ended for many people on the East Coast.”
As Collins pointed out, this is a dramatic fall from its trading highs earlier in the year. That kind of volatility has chased CMPS throughout 2021. Its price has jumped between $60 and $30, usually settling down to swing in a range between $30 and $45.
That kind of pattern is a red flag to many investors, but Collins remains interested. The reason? He sees strong potential in Compass’ underlying product.
“The company released both its quarterly report and the topline results for its phase IIb COMP360 psilocybin therapy for treatment-resistant depression (TRD). In terms of the quarterly results, no one expects much. This is still a company in research, development, and testing mode, so it should be no surprise the market focused on the topline results from its current trial more than the financial numbers.”
As Collins noted “The larger, single 25mg does showed significant results compared to the 1mg group with lasting remission. Unfortunately, the 10mg group didn't experience statistical improvement. That was likely one reason the market faded the initial pop. The concern may have been the 12 patients that expressed suicidal thoughts or behavior. Half came from the 10mg group and an additional five from the 25mg group. The question became: did the drug cause that behavior or did it simply not work for them?”
He added “What the study does show is psilocybin has the potential to help; however, it is not yet a panacea or even a standalone treatment based on these results. It also pointed to the current need for a high dose and reinforces the need for treatment centers. In short, it won't be the first line treatment any time soon.”
Compass Pathways’ stock price reflects exactly what you would expect from these results. Collins sees the company’s product as potentially strong but unproven. That potential is why he remains optimistic about the company. The open questions are why he’s not necessarily all-in.