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Compass Pathways (CMPS) - >>> The First Psychedelic Drug Stock Jumps In Debut After Upsized IPO


Investor's Business Daily

by BILL PETERS

09/18/2020


https://www.investors.com/news/compass-pathways-sees-544-million-valuation-first-psychedelic-drugs-ipo/?src=A00220&yptr=yahoo


Compass Pathways (CMPS) jumped in its first day of trading on Friday, making it the first psychedelic drug company to go public on a big U.S. exchange.

Shares surged 42% to 24.09 in the stock market today, giving the company a market cap of more than $800 million. The debut comes a day after the company announced an upsized pricing for its IPO.

The London-based company, which is researching a therapy using the main ingredient in hallucinogenic mushrooms, said in a release late Thursday that its IPO priced at $17 a share, up from initial expectations for $14-$16 announced earlier in the week.

Compass said it sold 7.5 million American Depositary Shares in the offering, for total proceeds of $127.5 million. That was also above the 6.7 million planned. Each of the 7.5 million American Depositary Shares represented 7.5 ordinary shares in the offering.

The company has also granted the underwriters of its IPO a 30-day option to buy an additional 1,125,000 American Depositary Shares, up from 1,005,000 initially.

Compass Pathways filed for the IPO late last month. Cowen, Evercore ISI and Berenberg were the joint book-running managers for the Compass Pathways IPO. Canaccord Genuity, already an active deal maker in the cannabis industry, is the lead manager.

The psychedelic drugs industry has been put into the spotlight over the past year, as more investors pour their money into startups promising treatments for a range of mental illnesses.

With that trend have come concerns about a repeat of the cannabis industry's boom and bust. Most existing drugs in the industry — like LSD, MDMA and psilocybin — aren't yet legal or patentable.

Compass Pathways' COMP360 Therapy

The company, in a filing on Monday, said would have around 34 million shares outstanding after the offering, or 35 million if the underwriters fully exercise the option. That could give the company a valuation of nearly $600 million.

Compass Pathways has developed a crystalline form of psilocybin, called COMP360, for which it has a U.S. patent. Psychedelic drug developers, if they want to be profitable, will likely have to develop novel drug compounds and drug-delivery methods, a path similar to the legal pharmaceutical industry.

The drug developer plans to use COMP360 in conjunction with therapy for treatment-resistant depression. If regulators approve, Compass plans to market it to clinics and health care providers in the U.S. and Europe.

The FDA in 2018 gave breakthrough status to COMP360. Last year, the agency also approved the Johnson & Johnson (JNJ) drug Spravato, which uses a derivative of ketamine, for treatment-resistant depression. This summer, the FDA approved Spravato for people who are actively suicidal.

Ketamine — perhaps best known as a party drug — is regularly used, legally, as an anesthetic. Therapists also use ketamine for psychedelic-assisted psychotherapy.

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