COMPASS Pathways IPO
COMPASS Pathways Seeks to Raise Up to $107 Million to Advance Psilocybin Assited Therapy
COMPASS Pathways is the first company to file an IPO based solely on the commercial potential of psychedelics, looking to raise up to $107 million to fund clinical trials for its formulation of psilocybin, one of the psychoactive ingredients in magic mushrooms. The expected offering price is between $14 and $16 per share (NASDAQ Global Market Symbol: CMPS).
Q&A’s
Source: Image to be Used in Compass Pathway’s Prospectus
What is COMPASS Pathways
COMPASS Pathways is a for-profit company plans to commercialize a formulation of psilocybin, the main psychoactive ingredient in “magic mushrooms”, and use it in conjunction with psychological support to treat mental health disorders. The Company is also developing proprietary digital and online tools to track and assist in delivering psychological support.
The first targeted disorder is treatment-resistant depression (TRD). TRD refers to depression that has not improved after two or more existing depression treatments. COMPASS also intend to extend the medical use of psilocybin beyond TRD, as well as to commercialize other psychedelic compounds to treat psychological and medical conditions.
The Company employees approximately 50 full-time employees and five part-time employees. Of these, nine employees hold M.D. and/or Ph.D. degrees. 29 full-time equivalent employees are directly engaged in R&D.
The Company is preliminarily valued at approximately $570 million, and following the IPO would have approximately $170 million in cash.
What is COMP360
COMPASS’s brand of crystalline psilocybin.
COMPASS’s initial product is called COMP360, a crystalline formulation of psilocybin, the most prominent psychoactive ingredient in magic mushrooms. COMPASS is seeking FDA approval to allow the use of COMP360, in combination with psychological support, to treat certain mental health issues.
Does COMPASS Pathways Have a Patent on Psilocybin
No.
COMPASS has an issued patent on its method to reduce psilocybin to a pure crystalline form. Others are free to use psilocybin. As a natural compound, no company may patent psilocybin. Instead, anyone seeking a patent in this area will need to either develop a novel synthetic alternative to psilocybin, or to develop new ways of delivering psilocybin to the body. COMPASS chose to use natural psilocybin, but reduce it to a pure crystalline form pursuant to a process that is protected by patent. Read more on the COMPASS Patent here. View the COMP360 Patent here.
Will COMPASS Pathways Efforts Result in the Legalization of Magic Mushrooms
Maybe.
If COMPASS’s FDA trails are successful, initially only COMP360 will be available for legal prescription use. That use will be limited to administration via prescription in connection with psychological support for specified conditions relating to depression. Nonetheless, COMPASS’s efforts will likely change the regulatory landscape of psilocybin. Currently psilocybin is classified as a Schedule I drug, which is defined as a drug that has no currently accepted medical use and a high potential for abuse. COMPASS’s clinical trials of COMP360 are expressly proving that psilocybin is safe, has a medical use, and low potential for abuse. As a result, Schedule I will no longer be an appropriate regulatory classification for psilocybin.
What Schedule Should Psilocybin Be On
Unscheduled.
DEA Schedules
In the United States, drugs are regulated via the Drug Enforcement Agency’s drug schedules. The scheme includes four main schedule categories, I to V (read about the DEA Schedules), with I being the most restricted schedule (includes heroine) and V being the least (includes Robitussin AC). LSD and magic mushrooms are currently Schedule I drugs, which are defined as drugs with no medical use and a high potential for abuse.
We believe psilocybin should not be scheduled. The early results from COMPASS Pathways research efforts are demonstrating that psilocybin is safe to use with low potential for addiction. Expert analysis has concluded that psilocybin presents low risk of social harm and there is a growing body of evidence that a single dose of psilocybin may produce positive changes for people.
What Schedule Will Psilocybin Likely Be On
Schedule IV.
Because of the history of psychedelic use, the prevailing social attitudes and the political forces regulating individual rights in the United States, we believe Psilocybin will remain a controlled substance at a federal level for the foreseeable future. However, we also believe it will be moved to a lower schedule. The most likely schedule for psilocybin is schedule IV, which includes compounds with a low potential for abuse and low risk of dependence, and a moderately low potential for abuse. Unfortunately, because the regulatory powers are likely to view recreational use of psychedelics as “abuse”, it is unlikely to see the compounds put on Schedule V, which represents regulated drugs with the lowest potential for abuse.
Will LSD Be Moved to a Lower Schedule
Not in the near future.
While LSD likely presents the same low risk for abuse, low health risks and significant medical benefits, it is not the subject of any major on-going FDA approved study likely to lead to rescheduling. Nonetheless, there are several early stage startup companies that are focusing efforts on LSD, and these may lead to Phase I study of LSD or a LSD analogue for medical purposes. We do believe, however, that when psilocybin becomes legal and widely used as a prescription medication, the social and political climate will no longer support vigorous criminal prosecution for the use of psychedelics, and the risk of using and possessing LSD will diminish over time
What Compass Pathways Does
COMPASS is a mental health care company that will use psilocybin in conjunction with psychological support to combat treatment-resistant depression (TRD). COMPASS also intends to commercialize other psychedelic compounds to treat psychological and medical conditions.
COMPASS patented a crystalline formulation of psilocybin, COMP360, which is undergoing FDA clinical trials for eventually legalization as a prescribed medication.
What is Major Depressive Disorder (MDD)
Source: COMPASS Pathways Form F-1
* CBT = cognitive behavioral therapy; rTMS = repetitive transcranial magnetic stimulation; tDCS=transcranial direct current stimulation; ECT=electroconvulsive therapy; DBS=deep brain stimulation
MDD is a condition characterized by a persistent feeling of sadness and heightened negative emotions. MDD is a chronic, relapsing, recurring and serious mental health condition associated with high mortality rates, morbidity and diminished quality of life.
The World Health Organization estimates that more than 320 million people worldwide are suffering with MDD and that MDD currently accounts for an average of 7.5% of years of life lost due to disability globally, as defined by disability-adjusted life years, or the sum of years of healthy life lost to either mortality or non-fatal illness or impairment.
What is Treatment Resistant Depression (TRD)
Nearly one-third of those suffering with MDD are not adequately helped after two or more existing depression treatments. This condition is referred to as treatment resistant depression or TRD. The TRD population includes approximately 100 million people globally, based on the most recently available data in 2010. In the United States, the per patient healthcare costs of TRD is between $17,000 and $25,000, compared with less than $10,000 for non-TRD MDD patients. TRD patients have higher prescriptions costs, more doctor visits and increased rates of hospitalization. TRD patients also have, on average, twice the number of inpatient visits compared with non-TRD MDD patients and, on average, their hospital stay is approximately 36% longer.
The following table indicates the worldwide estimated patient populations suffering with new onset MDD, persistent MDD and TRD, and the primary treatment options available.
How Psilocybin Works
Psilocybin appears to have the potential to generate new insights and perspectives leading to reduced rigidity in thinking. This modification of thought patterns can be uncomfortable or anxiety-provoking. In non-directive therapy, therapists refrain from intervening with the patient’s experience, unless required for safety reasons.
Psilocybin and psilocin, the metabolite compound the body breaks psilocybin down to when orally ingested, activate the 5-HT2A receptor, induce a range of downstream effects that may cause important, sustained changes in brain function. These effects include altered release of serotonin and dopamine, changes in brain network connectivity, and increased levels of neuroplasticity, whereby the nervous system is able to reorganize its structure, function, and connections. The appear to contribute to psilocybin therapy’s potential to generate rapid-onset and sustained positive mood effects.
How COMPASS Pathways Treatment Works
COMP360 therapy begins with preparations sessions, in which patients are given a thorough orientation to the therapy approach. The psilocybin administration session lasts approximately six to eight hours, with patients supported by therapists in a non-directive manner (for an example of non-directive coaching, see the Flight Instructions). After the administration session, the patient works with therapists in integration sessions to help them process the range of emotional and physical experiences facilitated by COMP360. More specifically:
Preparation: The objectives of the preparation sessions are to establish a therapeutic alliance between the patient and therapist, and to demonstrate and practice the skills of self- directed inquiry and experiential processing. COMPASS has created an online preparation platform for patients where they can remind themselves what to expect from the experience and how to prepare for it.
Psilocybin administration session: A psilocybin administration session lasts approximately six to eight hours and a therapist and assisting therapist are present throughout the session. The therapist’s goal during the session is to establish psychological safety, minimizing anxiety and encouraging openness to all emerging experiences. The session takes place in a room designed to be ambient, comfortable and calming. Patients wear eyeshades to help them focus internally, lie on a bed, and listen to a carefully curated music playlist through a high-quality sound system and earphones. After the acute effects of psilocybin subside, patients are evaluated for safety and discharged.
Post-administration integration: The objectives of integration sessions are to help patients process the range of emotional and physical experiences facilitated by the psilocybin session and to generate insights that can lead to cognitive and behavioral changes. COMPASS notes that psilocybin therapy can give patients a sense of agency, whereby they feel separate from their symptoms and empowered to make changes in their lives.
In addition, throughout the process, COMPASS uses digital and online tools to monitor patient progress and to complement and augment our therapies. For example, not only will COMPASS provide online portals for information, mobile phone-based apps for helping patients monitor mood and similar items, it will be able to monitor the ways in which patients are utilizing psychological services to better monitor progress.
What is the COMPASS Therapist Training Like
The COMPASS core training curriculum consists of:
Over 10 hours of self-paced online learning through our interactive therapist training platform, including video re-enactments of preparation, psilocybin administration, and integration sessions, a psilocybin therapy manual, and an online therapist forum;
At least five days of in-person interactive learning, led by experienced therapists;
Clinical experience of supporting participants in at least four psilocybin experiences under the guidance of experienced therapists. Trainee therapists gain clinical experience as an assisting therapist at their site, and/or have the opportunity to sit in other psilocybin therapy studies run by the Company’s academic collaborators; and
Ongoing professional development through 1:1 mentoring and clinical supervision by mentors. This includes feedback from mentors about therapists’ fidelity to the therapeutic model from recorded video/audio footage of sessions (with participant consent).
The training program currently is available to professionals involved in the clinical studies, however, it is likely the program will be expanded to establish an accredited training program for psilocybin therapists.
What is a COMPASS “Center of Excellence”?
COMPASS has the ambition to create a new mental health care model, and intends to establish Centers of Excellence to serve as research facilities and innovation labs. They will be used will gather evidence to shape the therapy model and digital technology solutions to improve patient experience and support therapists.
Centers of Excellence will allow the Company to test and establish new care models that can be licensed or franchised to existing behavioral health providers, community mental health teams, private clinic networks, partial hospitalization programs, and intensive outpatient programs. Centers of Excellence would also train and certify therapists who are supporting or will support the clinical trials, as well as generate and collect safety and other data, as well as other develop intellectual property.
In designing the Centers of Excellence, COMPASS will need to navigate the complex state regulatory regime that generally prohibit the practice of medicine by corporations. These laws generally prohibit the practice of medicine and certain other health professions by lay persons or entities and are intended to prevent unlicensed persons or entities from interfering with or inappropriately influencing the professional judgment of clinicians and other health care practitioners.
How Do Clinical Trails Work?
Clinical Trials proceed in three pre-approval phases:
Phase I—Phase I clinical trials involve initial introduction of the investigational product into healthy human volunteers or patients with the target disease or condition. These studies are typically designed to test the safety, dosage tolerance, absorption, metabolism and distribution of the investigational product in humans, excretion, the side effects associated with increasing doses, and, if possible, to gain early evidence of effectiveness.
Phase II—Phase II clinical trials typically involve administration of the investigational product to a limited patient population with a specified disease or condition to evaluate the drug’s potential efficacy, to determine the optimal dosages and administration schedule and to identify possible adverse side effects and safety risks. Phase II studies are sometimes divided into Phase IIa and Phase IIb. Phase IIa is specifically designed to assess dosing requirements. Phase IIb is designed to study efficacy of the drug at the prescribed dose.
Phase III—Phase III clinical trials typically involve administration of the investigational product to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval and physician labeling.
The FDA maintains several programs intended to expedite development of new drugs to address unmet medical needs in the treatment of serious or life-threatening diseases or conditions. These programs include: Fast Track designation and Breakthrough Therapy designation.
Fast Track. A drug is eligible for Fast Track designation if it is intended to treat a serious condition and demonstrates the potential to address unmet medical needs. Fast Track designation provides increased access to the FDA during development. It also provides the potential for rolling review once a marketing application is filed, which allows the FDS to review portions of the marketing application before the sponsor submits the complete application.
Breakthrough Therapy. A drug may be eligible for Breakthrough Therapy designation if it is intended to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies. Breakthrough Therapy designation provides all the features of Fast Track designation in addition to intensive guidance on an efficient drug development program, and FDA organizational commitment to expedited development, including involvement of senior managers and experienced review staff in a cross-disciplinary review.
Phase I Trial Data. Source: COMPASS Pathways Form F-1
What Are the COMPASS Psilocybin Clinical Trials
In October 2018, COMP360 was granted Breakthrough Therapy status. It has successfully completed Phase I trials and is now completing a Phase IIb trial.
Phase I Trial
In 2019, COMPASS completed a Phase I clinical trial in 89 healthy volunteers, which was the largest controlled trial of psilocybin. Prior to administration, participants took part in a two-hour preparatory group session. Participants were randomized to three arms: placebo, 10mg or 25mg doses of COMP360. COMP360 was administered orally and 1:1 psychological support was provided. Participants were followed up for 12 weeks following drug administration and completed safety assessments, using a range of validated measures of cognitive function and emotional processing.
Participants with a history, or a first-degree relative with a history of schizophrenia, psychosis, bipolar disorder, delusional disorder, paranoid personality disorder, schizoaffective disorder, borderline personality disorder, major depressive disorder, panic disorder, generalized anxiety disorder, obsessive-compulsive disorder, eating disorder, or body dysmorphic disorder, were excluded. Additionally, participants with a history of substance abuse, who had taken psychiatric medications within one year of enrollment or had prior exposure to psilocybin within one year of signing the informed consent were excluded.
Psilocybin was found to be well tolerated and non-toxic in the study. Specific findings at administered dose and in the placebo dose are shown in the charts.
Phase II Trial
COMPASS is currently conducting its Phase IIb trial, and expects to report data in late 2021. The study involves 216 patients suffering with TRD, in 20 sites across North America and Europe. This Phase IIb dose-finding trial is investigating the safety and efficacy of COMP360 combined with psychological support, and aims to determine the optimal dose of COMP360, with three doses potential doses: 1mg, 10mg, 25mg of COMP360. Note, a gram of dried mushrooms typicaly contain between 5 to 20 mg of psilocybin.
While COMP360 has been generally well tollerated in the clincal studies, two patients have experienced suspected, unexpected serious adverse reactions. One patient experienced a moderate in severity adjustment disorder more than a month after administration of COMP360, which led to hospitalization. Another patient experienced suicidal ideation several weeks after administration that required hospitalization. Note, that these events occured in a patient population that is suffering from treatment resistent depression, and while the reaction may be related to the administration of COMP360, they are the type of outcomes expected in the underlying population. While it is possible COMP360 lead to these issues, it is also possible that these issues would have occured, possibly more broadly, without the administration of COMP360. One of the purposes of the clinical trials is to answer these type of questions.
COMPASS has introduced a variety of digital and online technolgies to assist in the therapy. including an online portal to help patients prepare for their psilocybin experience, and a web-based “shared knowledge” interactive platform to complement therapist training. We are also collecting digital phenotyping information through the measurement of human-smartphone interactions. After the trial, these data will be compared with information collected from validated psychiatric scales, such as MADRS, to develop potential digital applications to help anticipate relapse of depression. In the future we plan to expand our research into additional digital technologies to complement and augment our therapies.
Future Trials
The Company intends to undertake the follow studies, among others:
SSRI Trial. Prior to beginning Phase III, the Company will conduct a Phase II trial of the safety and efficacy of COMP360 in TRD patients when administered as an adjunct to SSRIs. Based on anecdotal and case report evidence, and the psilocybin mechanism of action, the subjective and antidepressant effects of psilocybin in patients who have taken serotonergic antidepressants up to two weeks prior to a therapy session may be either attenuated or absent.
Phase IIb Follow-up. A long-term follow-up study of participants taking part in the Phase II trials.
What The IPO Would Accomplish
COMPASS has raised $112 million through mid-2020. Following the IPO, the Company would have approximately $170 million in cash.
The IPO will allow COMPASS to raise up to $107 million to fund the remaining Phase IIB and Phase III trials and to fund the marketing and rollout of COMP360, as well as other business epenses. In addition, the IPO will develop a public market for the COMPASS stock, which will be listed on the NASDAQ market (technically, COMPASS ADR’s will trade on NASDAQ, because COMPASS is a UK-based company).
The Company is valued at approximately $570 million at the time of filing.
Who Owns COMPASS
Prior to the IPO, COMPASS was funded via the sale of promissory notes and convertible preferred stock, as is common for venture capital-backed companies. The Company is primarily owned by its founders, and its investors. In addition, company employees own significant options to purchase stock in the Company.
Specifically, assuming the exercise of outstanding options, George Goldsmith and Ekaterina Malievskaia, who are married, and founded the Company each own 16.6% of the Company. ATAI Life Sciences, an investor in each funding round, owns 29.1% of the Company, and venture capitalist Peter Thiel and affiliated entities own 7.5% of the Company. The rest of the Company is owned by a combination of smaller investors, employees and the board of directors. As a whole, the board and executive team would own 44.8% of the Company, if they exercised all outstanding options. The average exercise price of options is $0.07 per share. The expected offering price of the shares to the public is between $14 and $16 per share.