-- Watch Go daddy today.
The First Pure-Play Psychedelic Drugs IPO Reveals Clues On Emerging Industry
Compass Pathways, which is developing a therapy that uses synthetic psilocybin, on Friday became the first pure-play psychedelic drug company to file for an IPO, a move that lent further insights into
what shape a legal psychedelic drugs industry might take as bigger money moves into the space.
The company is backed by billionaire investor Peter Thiel, who cofounded
PayPal(
PYPL) and Palantir, and has developed a crystalline form of psilocybin — the mind-altering compound in magic mushrooms — called COMP360.
Compass Pathways, based in London, intends to pair the administering of COMP360 with therapy for depression that persists despite other forms of treatment. If COMP360 is approved, Compass plans to market it toward health-care providers and clinic networks in the U.S. and Europe.
Management is looking to raise up to $100 million, according to the filing on Friday. It would trade on the Nasdaq Global Market under the ticker
CMPS.
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Cowen, Evercore and Berenberg are the joint book-running managers for the IPO. Canaccord Genuity, which helped galvanize the cannabis industry's rush to the public markets, is serving as lead manager.
The company is currently examining the safety and effectiveness of the COMP360 therapy in a Phase 2b trial of more than 200 such patients in 20 sites in North America and Europe. Researchers in that trial are exploring three dose sizes for the drug. Compass said it plans to report data from the tests late next year, the filing said.
Compass last year completed a Phase I trial of the therapy on 89 volunteers. The FDA in 2018 gave breakthrough status to COMP360. The IPO filing noted that more than 320 million people around the world suffer from major depressive disorder.
The FDA has OK'd other treatments using psychedelic drugs. The FDA last year approved
Johnson & Johnson's(
JNJ) nasal spray Spravato, which uses a derivative of ketamine, for treatment-resistant depression. The agency this summer approved Spravato for people who are actively suicidal.
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Significant Losses
The first psychedelic drugs IPO filing comes as investors like hedge fund titan Steve Cohen and
Bob Parsons, the founder ofGoDaddy(GDDY), put their support behind research into the effects of drugs like MDMA, also known as ecstasy or Molly.- Go Bob!
But the Compass Pathways IPO filing, however, warned it had taken "significant losses," with more likely, and that the therapy will require "substantial additional funding." The company had a net loss of around $25 million over the first half of this year.
Costs relating to testing and compliance drove those losses. As of June 30, its accumulated deficit was $62.4 million.
Compass said it relies on third parties to make and supply the psilocybin used in COMP360, with no plans to build any manufacturing facilities. It said it faces "substantial competition" — from big pharma companies, universities and nonprofits — and has identified "material weaknesses" in its financial reporting protocols.
The company noted that challenges remained in completing trials, training therapists and developing facilities for that training and other research. The costs making medications available to patients could be steep.
Since psilocybin consumption isn't yet legal, regulatory scrutiny could be more intense. Compass said that each of its research sites must maintain a DEA researcher registration to distribute COMP360 and receive it from an importer. In the U.S., researching drugs like psilocybin or ecstasy need the green light from both the FDA and DEA.
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Thiel, ATAI Back Psychedelic Drugs
Thiel or companies affiliated with him own around 7.5% of Compass. The largest shareholder is ATAI Life Sciences, a company that backs other psychedelic drugs companies, which holds a roughly 29% stake in the IPO hopeful.
Compass Pathways' roots go back to 2015, when two of its co-founders, George Goldsmith and Ekaterina Malievskaia, formed the nonprofit Compass Trust Limited, to support research and development of psilocybin therapy.
It later evolved into a for-profit company — a development that came with some friction in the psychedelics community,
as Quartz reported in 2018.
Goldsmith is Compass' CEO. Malievskaia is its chief innovation officer. The two are married.
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For-Profit, Nonprofit Competition
According to the Quartz story from 2018, people who worked with Compass raised concerns that the company was moving too quickly to research and commercialize psilocybin. They argued the practices posed dangers to patients and mirrored the competition-stifling practices of big pharma.
Some nonprofit psychedelic drugs researchers, like MAPS and the Usona Institute, have tried to steer clear of that approach.
"If we have patents or patents pending, we will license that intellectual property, for no more than reasonable and ordinary administrative costs, to anyone who will use it for the common good and in alignment with these principles," Usona says in its statement on "open science."
Compass' IPO papers said that Usona and other non-profits "may be willing to provide psilocybin-based products at cost or for free, undermining our potential market for COMP360."
Compass' previous psilocybin patent applications have faced resistance or rejection. It has one patent in Germany and two in the U.K. The filing said the drug developer had pending patent applications in the U.K. and more than 20 with nations or different patent-related organizations.
In January, Compass said it received a U.S. patent for COMP360. Not long after, a law firm, Kohn & Associates, challenged the patent in a petition, arguing its claim to a new medication was flimsy and based on prior research. A USPTO board this month denied the petition.
