Compass's Psilocybin Trial for Depression Yields Mixed Results, Raising Questions About Its Potential

Compass Pathways, a UK-based biotechnology company, has released results from its closely watched late-stage clinical trial testing a proprietary version of psilocybin for treatment-resistant depression. While the trial met its primary endpoint, the magnitude of the effect has left investors questioning the drug's potential in an increasingly competitive landscape.

Trial Results and Investor Reaction

The Phase 3 trial, which enrolled 258 patients with treatment-resistant depression, demonstrated that a single dose of Compass's psilocybin formulation significantly reduced depressive symptoms compared to placebo. Specifically, the drug arm showed a 3.6-point larger decline on a 60-point depression severity scale relative to the placebo group.

Despite the positive outcome, Compass's shares plummeted by nearly 50% following the announcement, with the stock trading below $3 per share. The market reaction appears to stem from expectations of a more robust efficacy signal, with some analysts and key opinion leaders in the field suggesting that a 4-point-or-more decline would be the target to aim for.

Guy Goodwin, Compass's chief medical officer, expressed encouragement about the data, calling it an "important milestone" for patients whose depression hasn't responded adequately to multiple approved treatments. However, the lack of details on response rates, remission rates, and the drug's durability of effect in the company's release has left investors seeking more information to gauge the treatment's competitive profile.

Competitive Landscape and Analyst Perspectives

The results from Compass's trial have prompted comparisons to other treatments in the field of treatment-resistant depression. Some analysts, like Leonid Timashev from RBC Capital Markets, view the results as "clinically meaningful" and potentially competitive with Johnson & Johnson's Spravato, a ketamine-based nasal spray approved for treatment-resistant depression in 2019.

Timashev argues that Compass's single-dose regimen could offer "significant convenience advantages" over Spravato. However, other analysts, such as Gavin Clark-Gartner from Evercore ISI, have taken a more cautious stance, downgrading their stock rating on Compass and citing clinical and commercial uncertainties.

The competitive landscape in psychedelic-based treatments for depression is evolving rapidly. GH Research, an Ireland-based developer, recently reported results from a small study testing an inhaled version of mebufotenin, a molecular cousin to psilocybin. Their 81-person trial showed a striking 16-point drop on the depression severity scale compared to placebo, although differences in trial design and timing of assessments make direct comparisons challenging.

As the field of psychedelic medicine continues to advance, Compass Pathways faces the task of differentiating its psilocybin-based treatment in an increasingly crowded market. The company expects to share 26-week results from another ongoing late-stage trial in the latter half of next year, which may provide additional insights into the drug's long-term efficacy and safety profile.