Compass could be first to U.S. market with psychedelics therapy for depression

Compass’s founders George Goldsmith and Ekaterina Malievskaia have often described the company as born of necessity – to treat their son’s severe depression, which did not respond to standard therapies. The couple initially established a nonprofit to help such patients before creating a start-up called Compass Pathways, which is now developing a psychedelic treatment for severe depression and post-traumatic stress disorder (PTSD). If approved, it would be the first drug of its class available in the U.S.

Ekaterina Malievskaia trained as a physician. She was born in Yekaterinburg, Russia, and graduated from the St. Petersburg Medical Academy before moving to New York in the 1990s to continue her education and career. There she met her future husband and business partner, George Goldsmith, a former McKinsey & Company adviser and the founder of TomorrowLab and business-leadership network Tapestry Networks.

“But despite our backgrounds, nothing prepared us for the devastation caused by the failure of the mental health care system when my son became ill. Even when the best doctors in the best institutions gave up on us, I kept looking for solutions,” Malievskaia wrote in an article for the bulletin of the Multidisciplinary Association for Psychedelic Studies, or MAPS.

While searching for an alternative, Goldsmith, who had spent five years in a clinical psychology doctoral program, recalled the work of neuroscientist John Lilly, who studied the effects of psychedelics in the 1960s. Psilocybin is the active compound found in hallucinogenic mushrooms. “We had resources and connections, and we could understand and assess the risks and benefits of emergent evidence for novel approaches,” Malievskaia wrote.

That led to the creation of Compass in 2015 as a nonprofit to support the development of psilocybin therapy. It was funded entirely by the couple, who had by that time moved to the UK.

They intended to conduct clinical research at a hospice on the Isle of Man and at a research center in the U.S. The problem was that the U.S. researchers did not have psilocybin. Some members of the nonprofit’s board suggested that it manufacture the compound itself rather than wait, Malievskaia wrote. While the organization was arranging production, circumstances on the Isle of Man changed and “the opportunity passed.”

At the same time, costs were rising, and the couple’s own money was no longer sufficient. Acting on an adviser’s recommendation, Malievskaia and Goldsmith decided to register a UK company that would conduct research and qualify for incentives unavailable to nonprofits.

In 2016, they established Compass Pathways to manufacture psilocybin for research. Their business partner was German entrepreneur Lars Christian Wilde, who had himself suffered from treatment-resistant depression and anxiety before finding relief through experimental treatment with psilocybin. He said that “serendipity brought me to meeting George and Katya.”

The partners decided not to limit themselves to manufacturing the compound for research, and in 2017 Compass Pathways moved to conduct its own trials. It focused on treatments for PTSD and treatment-resistant depression. More than 320 million people worldwide have major depressive disorder, or MDD, and standard treatment is ineffective in around a third of cases. In the U.S. alone, the economic burden of MDD and associated conditions is estimated at more than $200 billion annually, the company claims.

In 2018, biotech Atai Life Sciences became a Compass shareholder with a 29.21% stake. Angermayer and Wilde had founded Atai that same year with backing from Thiel. At the time, it effectively operated as a venture fund investing in other biotechs. After partnering and later merging with Beckley Psytech, the developer of a competing psychedelic treatment, Atai began reducing its stake in Compass. In July of this year, pharmaceutical giant Eli Lilly agreed to acquire AtaiBeckley at a premium to its market value.

Compass completed an IPO on the Nasdaq in 2020, selling 7.5 million American depositary shares at $17 apiece, with each ADS representing one ordinary share. The stock has since lost around 50%, although it is up almost 67.5% since the beginning of this year.

Clinical trials of Compass’s drug, called COMP360, are nearing completion. In February, the biotech published the first data from the phase III trials in patients with treatment-resistant depression. The interim results confirmed COMP360’s efficacy, as well as its rapid and durable effects, while its safety profile was generally favorable. Compass stock surged 31% on the day the interim data was released. Compass is also evaluating COMP360 in patients with PTSD in a late-stage clinical trial.

All this is happening at what Oppenheimer analyst Jay Olson calls “a structural inflection for the U.S. psychedelics sector.” In April, U.S. President Trump signed an executive order aimed at accelerating research and expanding patient access to psychedelics for PTSD.

Just six days after Trump signed the order, the U.S. Food and Drug Administration allowed Compass to submit its application for COMP360 approval on a rolling basis, i.e., filing completed sections as data and documentation become available, according to Vicente, a law firm specializing in psychedelics and cannabis. The FDA also selected the drug for the Commissioner’s National Priority Voucher program, which can shorten the review period from the usual 9-12 to 1-2 months.

If the drug is approved, Compass plans to launch COMP360 in the first half of 2027, the company states. That is around two years ahead of the competing treatment from AtaiBeckley, the Motley Fool has noted. COMP360 could therefore become the first classic psychedelic therapy approved in the U.S.

Vicente cautioned, however, that Trump’s executive order does not legalize psilocybin at the federal level. It remains a tightly controlled Schedule I substance alongside such illicit drugs as heroin and LSD. Only Congress or the Drug Enforcement Administration can reschedule it, Vicente points out.

Compass stock has gained 70% year to date and 170% over the last 12 months. It has 16 “buy” calls from analysts versus a single “hold” rating. The average target price of $23.35 per share implies around 100% upside from the latest closing price.

This text is for informational purposes only and does not constitute personalized investment advice.