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Original Post
Claim this username to collect earnings from this post, and the portfolio!
$CMPS is dropping their FDA Phase IIb results for COMP360 (psilocybin aka magic mushrooms) any day now.
The stock has run ~45% since Oct 4th on essentially no news (except for new patent approval). Big money is positioning itself for the results, which will likely drive the share price $15-$20 (as much as 50%) in one direction or another, given the options interest on 11/19
(with IV in the 190s-200+).
This is the company that people thought MindMed was back in the spring. They have the moat, the product, the first-mover advantage, the money, and the people. Volume from this news is gonna be crazy and will catapult the sp. If you don't have anecdotal belief in psilocybin, and you don't trust the data (below), this is not for you. Or, alternatively, puts. Good luck.
The DD below (posted originally 6mo ago) holds up.
My position: 915 shares at $36.11 cost basis. Happy hunting.
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Background
Company: Compass Pathways
Ticker: $CMPS
Market Cap (11/01/2021): $1.80b
Current Share Price (11/01/2021): $43.06
ATH Share Price (12/23/20): $59.20
About (in my own words): Mental healthcare drug co. w/ patented, synthetic form of psilocybin (active ingredient in ‘magic mushrooms') called COMP360. Their drug is currently in Phase IIb FDA Trials, with results expected to report late 2021.
The Background That Matters
The Bear Argument(s)
This is what I love most about this play: If you take the long position on $CMPS, you are betting against boomers (ironically, you're doing it by betting on boomers (mushrooms (psilocybin))).
1) Magic Mushrooms are Illegal! Yeah, no shit, buddy. But this play depends essentially not at all upon the federal legality of psilocybin or its synthetic alternatives. $CMPS is working to get drug approval through the FDA, not the DEA. If you want to tell me that the DEA in 2023 is going to kick in the doors of pharmacies and doctors' offices to seize synthetic psilocybin that was approved by the FDA for use in the treatment of mental health disorders - well, great. I can and will take that bet.
2) The FDA May Not Approve. True. But color me skeptical. The FDA has a history of approving some fairly novel drugs if they are shown to be effective, including J&J's ketamine nasal spray for the treatment of treatment-resistant depression in 2019. If the FDA were going to take a Puritanistic stance on psychedelics, they would've done it before offering Breakthrough Therapy Designation to COMP360.
3) Psychiatric drugs only make it to market 16% of the time. An old, thorough, completely-wrong SeekingAlpha valuation of $CMPS used an industry-average 16% approval rate (the average success / make-it-to-market rate for psychiatric drugs in Phase IIb drug trials) to value $CMPS. This dude (on SA... "Compass Pathways: rNPV Probabilities of Success are Underestimated") correctly eviscerates the shmuck's argument by pointing out that psilocybin has a massive, jaw-dropping dataset behind it, making its likelihood of success much, much higher than 16%... he just fucks up by suggesting $CMPS as only 4% of your portfolio.
4) Their trial dose of 25mg will be incorrect. Doubtful. All signs point to this being the optimal dose, as indicated by the NEJM study with results released tomorrow 4/14 (doses at 20mg and 30mg over six weeks) + older studies at Hopkins. Will it be perfect? No. But it'll probably work for nearly everyone. EDIT: Yup.
5) Interest rates increase and cash burn happens and single-drug pipeline and etc. and it just won't work. Psych companies are going public, and they're doing so with support from huge players. If interest rates go up, if inflation sets in - sure, the cash on-hand becomes less valuable. So they get more cash. Smart health sciences investors know this sector is the move. They are making the money available. $CMPS has years of runway on-hand. Yes, they have only one drug in their pipeline, but if the drug works -- and it does -- then who gives a shit?
6) $CMPS is unethical. $CMPS has come under fire recently for acting like pharma assholes. They're trying to file patents for everything from soft chairs to paint colors. That's why they're unpopular over on subs dedicated to investing in psychedelic stocks, and why they're taking heat in the still-small psychedelic circles. But to be honest, I could give a fuck. Their drug is going to work, and it's going to go to market, and it's going to help people, and if they have protections around it, well, all the better for my investment.
7) Mushrooms aren't medicine they're drugs you fuckin' kids! Fuck you, dude. Read the data.
The Bull Argument
Psilocybin works. Existing depression drugs do not.
The mental health crisis is just that - a crisis
- and it is growing at a scary rate, bolstered largely by depressed kids under age 18. We have two generations of combat veterans grappling with PTSD and a DoD that is supportive of alternative treatments. When these companies catch the public eye, money will flood into this space, and it will go largely to the biggest fish in the pond.
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