Will Compass Pathways Be The Next Unicorn?

Will Compass Pathways Be The Next Unicorn?
Will Compass Pathways Be The Next Unicorn?

With the news flow increasing and stock valuations rising, the psychedelics sector is heating up.

Early pubcos in the space like MindMed Inc (CAN:MMED / US:MMEDF) and Champignon Brands (CAN:SHRM / US:SHRMF) have already generated multi-bagger returns for investors.

New RTO, Numinus Wellness (CAN:NUMI) tripled in value on its first day of trading before pulling back.
For investors looking for additional opportunities in this space, this begs the question: who’s next to go public?

One psychedelics company whose name is on the lips of many is Compass Pathways.

Compass is a UK-based psychedelics company that is preparing to begin a Phase III clinical trial of psilocybin for the treatment of depression. It made a huge splash when it announced receiving a “breakthrough therapy” designation from the FDA for this research.

This puts the company at the front of the line (at present) in getting a psychedelics drug through the drug approval process.

Compass Pathways is currently a private company. But speculation on an IPO dates back to at least the Fall of 2018.
IPO Beckons for Magic Mushroom Research Into Depression

(Bloomberg) -- A health-care investment firm that’s backing studies of magic mushrooms to treat depression raised $25 million of capital and may consider an initial public offering next year, according to people familiar with the matter.

Atai Life Sciences AG is close to announcing the fundraising with lead backers Christian Angermayer, a German investor, as well as PayPal co-founder Mike Novogratz and Icelandic entrepreneur Thor Bjorgolfsson, said the people, who asked not to be named because the matter isn’t public yet.

Atai owns a substantial stake in U.K. startup Compass Pathways, which is conducting clinical trials of psilocybin, a psychedelic compound in magic mushrooms, as a treatment for depression. Atai also is the largest shareholder of Innoplexus AG, which operates a technology platform that uses artificial intelligence to identify tailored treatments for diseases.

Atai is already in talks with banks about a potential listing in Canada next year, a step for which it seeks a valuation of $800 million or more, according to one of the people familiar with the matter.

There was more Bloomberg-based speculation about a Compass IPO in February of this year.
Move Over, Pot: Psychedelic Companies Are About to Go Public

The first companies developing medical treatments from psychedelic drugs like LSD, ketamine and the active ingredient in magic mushrooms are gearing up to list on Canadian stock exchanges.

…Compass Pathways declined to comment on whether it’s planning a public listing, but the company is “always looking at options to ensure continued growth and funding,” chief communications officer Tracy Cheung said in an email.

More recently, Compass closed on a new financing on April 27, 2020. It raised $80 million in its Series B investment round.

Compass has shown it can raise capital privately. But bringing a drug to market through the clinical trials process isn’t cheap.

As far back as 2014, the cost to develop a new drug was pegged at $2.6 billion. More conservative estimates point to an average of around $1 billion.

Even if Compass is able to fund its own R&D (and commercialization) at the low end of this curve, there would appear to be a major funding gap between the $80 million it just raised and the capital necessary for Compass to cross the finish line with its psilocybin drug.

Going public is the fastest/easiest way of addressing that gap.

If insiders were targeting a potential $800 million IPO valuation in October 2018, what would Compass have its sights on in 2020 – with pubco valuations for psychedelics starting to catch fire?

A psychedelics Unicorn?

No, it’s not some 21st century drug-induced fantasy. It could really happen.
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