Is Compass Pathways Stock a Once-in-a-Lifetime Bargain?
Compass Pathways (NASDAQ: CMPS) is not your typical healthcare company. The London-based clinical-stage biopharma is developing therapies for various forms of depression that center around psilocybin, the main psychoactive compound of hallucinogenic mushrooms. This compound also happens to be a Schedule I substance under the Controlled Substances Act in the U.S., meaning it is considered to have a high potential for abuse, no currently accepted medical use in treatment, and a lack of accepted safety for use under medical supervision. Compass, in turn, will face an uphill battle from a regulatory standpoint to get its products on the market in key commercial territories like the U.S., and then to get them covered by the most important third-party payers such as Medicare and Medicaid.
Highly differentiated healthcare companies, however, can be a veritable gold mine for early shareholders. For example, GW Pharmaceuticals was a money-making machine for its shareholders because of its success in the rapidly emerging cannabinoid-based prescription drug space. This cannabis-oriented drugmaker was ultimately bought out at a hefty premium by Jazz Pharmaceuticals earlier this year. Could a similar story unfold for Compass Pathways? Let's consider the company's risks and potential rewards to find out.
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