‘2020’s Most Important IPO’ Sets the Stage for a New Biotech Boom
In today’s Money Morning…depression afflicts roughly 5% of all people on Earth…promising signs, but a long way to go…a trend in the making…and more…
Last year I wrote a Money Morning article on what I believed was 2020’s most important IPO.
It was an opinion piece discussing the recent listing (at the time) of Compass Pathways PLC [NASDAQ:CMPS]. A biotech stock with a very distinct twist…
See, Compass is an aspiring drug-maker. One that is hoping to create a new solution for patients with treatment-resistant depression — a particularly nasty variant of all-too-common clinical depression.
Needless to say, this is a pretty big issue to tackle.
After all, depression afflicts roughly 5% of all people on Earth. A fact that has made it the leading cause of disability amongst younger people (ages 15–44) in the US, as well as the leading cause of non-fatal disability in Australia.
So finding a long-term solution to this global burden would clearly be a massive breakthrough.
Not only for the individuals suffering at the hands of this terrible illness, but also for overall output and wellbeing. It is estimated that depression costs the global economy US$1 trillion in lost productivity.
Which is precisely why Compass’s latest breakthrough is one that everyone should be excited about…
Promising signs, but a long way to go
Now, what sets Compass apart from most biotech stocks is its drug of choice. A compound that they’ve formulated and dubbed COMP360.
However, the key ingredient of COMP360 is psilocybin. A drug that is better known by its street name of magic mushrooms. The kind of psychedelic that sends users on mind-altering trips.
And while psychedelics like psilocybin have been illegal in the US and most of the world for decades at this point, they’ve recently been part of a therapeutic resurgence. They’re riding the same wave of optimism and investigation as medicinal cannabis has done recently.
But while cannabis has shown great promise in a few treatable sectors, psychedelics are offering new hope to a field that is renowned for having little to offer victims. After all, anti-depressants can certainly be effective for some, but not all.
That’s precisely why depression and other mental illnesses like anxiety are so topical.
We simply don’t understand enough about them to offer effective treatments for everyone.
Compass, though, with its latest findings, may finally have found a new way forward. They’ve reported on the results of their phase IIb trial — the largest study of psilocybin to date.
And what they found is that 29.1% of patients who received the highest dose of COMP360 (25 milligrams) were in remission within three weeks. A dramatic contrast to the 7.6% of patients who achieved the same result in the control group.
Keep in mind, the 233 people taking part in this trial didn’t just have your average case of depression either. These were patients who were classified with ‘treatment-resistant depression’. The kind that can’t be alleviated with your typical anti-depressant.
That’s why these results are so important.
They showcase the potential of psilocybin to offer hope of treatment to those who can’t find it anywhere else.
But it certainly wasn’t all good news for Compass…
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A trend in the making
While the results were certainly positive overall, a few extraneous details have dragged down Compass’s share price.
For instance, 12 of the enrolled patients in this study were reported to have adverse events. Most of which was categorised as suicidal behaviour or incidents of self-harm — a response that at face value can almost certainly be viewed as been made worse by the use of this psychedelic drug.
After all, 11 of these 12 patients were either dosed with 25 or 10 milligrams of COMP360.
That is obviously cause for concern and a big reason for the immediate negative reaction from investors. But it certainly won’t overshadow or dismiss the far more positive outcome for the majority.
If anything, it simply shows that more research and trials are necessary. Not only to hone the effectiveness of the drug for patients that exhibit a positive response, but also to prevent these kinds of negative outcomes too.
We can’t forget that this is still such a new area of research. Especially when we’re dealing with the complexities and anomalies of neuroscience.
Which is precisely why you can expect much, much more investigation to come. Including plenty of competition looking to showcase their own psychedelic treatments.
That’s why Compass was, in my opinion, the most important IPO of 2020. Because it has set the stage for a much bigger industry to flourish. And these mixed results will only fuel an already emerging trend.
You can simply look at the rise of stocks like Mind Medicine Inc [NASDAQ:MNMD] and ATAI Life Sciences NV [NASDAQ:ATAI] as clear indicators of this ‘shroom boom’, with the latter only finalising its own IPO earlier this year.
And it doesn’t end there either.
ATAI, for instance, isn’t just interested in psilocybin. It is exploring the potential of a range of psychedelics, such as ketamine and MDMA. These are two other drugs that are renowned for illicit recreational use rather than therapeutic benefits.
But again, this stigma is changing. As can be seen by plans for yet another competitor, KetamineOne, detailing its own plans to IPO in the US in the near future.
Even in Australia, where this trend hasn’t caught on quite as quickly, a few early adopters are taking charge. Incannex Healthcare Ltd [ASX:IHL], for example, a pot stock, has branched out into psychedelics within the past year. Even going so far as to undertake their own study for the treatment of generalised anxiety.
And with a 243% return year-to-date for investors, clearly they’re doing something right — showcasing the long-term potential and early investor excitement around this emerging psychedelic trend.
Which is why, if you’re looking for a speculative trend to keep an eye on, this is certainly one to watch.
Editor, Money Morning
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