This article has been written by Jessica Stewart. Everything written herein is personal thoughts and opinions of the writer. Jessica’s bio can be found at the bottom of the article.
Last week, Compass Pathways released the highly-anticipated topline results from their Phase 11b trial of psilocybin for Treatment Resistance Depression (TRD).
We all waited with bated breath for these results. Surely any good news that came from this announcement would propel the market forward. Right?
Well, that’s not exactly what happened.
To set the groundwork leading up to last week’s results, you’d have to understand the significance of this trial. For starters, this is the largest double-blinded randomized, placebo-controlled trial in history. With 233 participants, a lot of ground was covered. Prior to this, the threshold was 151 participants. Thus, this was a necessary progression.
Hence the importance. And significance.
So What Happened?
We all know by now that the test results were actually quite positive. But ever since the release, public stocks, especially Compass Pathways, fell in price. Why is that? Well, there are a lot of aspects to unravel to get to any semblance of clarity.
I’ll break it down more thoroughly below.
The Absence of Diamond Hands
Unlike most development-stage biotech companies, psychedelic stocks are overwhelmingly held by retail investors. Typically, at this stage in drug development, more institutional capital makes up the majority of shareholders. When that’s the case, there is more flexibility and overall desire for long-term success. In other words, volatility is expected when you’re a professional investor. And you’re much more tolerant of all sorts of news.
But with 80% of shares of Compass being held by the public, fear can take hold pretty quickly. Generally speaking, the less educated are less inclined to hold on for a ride. When you’re not bought into HOW the drug development process might play out, you become narrowly focused on seeing only amazing news. When that’s where the bar is set, even positive topline results can’t match the hype.
It’s Difficult To Fully Understand
These types of test results contain a great deal of information. While these results were certainly positive as a whole, there were safety concerns addressed within. For most, this nets as breakeven. And when you break even on a meaningful test such as this, you start to become skeptical of the process.
Comparisons are the Death of Happiness
Another reason the results were considered disappointing is because of the natural instinct an investor might have to compare these results to MAPS Phase III results. When a test declares that “67% of participants in the active group no longer qualifying for PTSD and a clinically meaningful reduction in symptoms in 88%,” you realize where the expectations might reside. Compare those numbers to 36.7% (control = 17.7%) response at week three and 24.1% (control = 10.1%) at week 12, and you can justify the reactions.
What’s the Deal with the Safety Issues?
After reading the results, my opinion about this crystallized. In my personal opinion, the biggest question raised by these results is to ask – to what extent are risks mitigated by psychotherapy but not by “psychological support?” Extrapolated further, what occurs when Psychedelic Assisted Therapy becomes unbundled?
Matthew Johnson has talked about “Behavioral Toxicity” in the past. This means that the danger exists not in a treatment’s addictive capacity but in the potential for someone to hurt themselves or another during a transformative experience.
We Don’t Have all the Answers
It goes without saying that there is a lot to unpack here. Hopefully, my way of simplifying the key points helps you understand how early we are in this process, and just how volatile the market can be.
As we continue to track results like these, I encourage you to sign up for our mailing list. We’ll be launching many more market analyses and the opportunity to gain access to specialized content.