1 Reason Compass Pathways Is Worth a Second Look This Month

Compass Pathways (NASDAQ: CMPS) could be just months away from bringing one of the first Food and Drug Administration (FDA)-approved psychedelic treatments to market. The company is developing COMP360, a synthetic version of psilocybin designed to treat patients with treatment-resistant depression.

Following positive results in two Phase 3 trials, Compass now plans to complete its FDA application by the end of the year. This could potentially set up an approval decision in early 2027. If you believe approval could be imminent, it would make sense to start acquiring shares this month.

Results matter

In September, Compass released 52-week results from its Phase 3 COMP005 trial, providing additional evidence that COMP360's benefits can last well beyond the initial treatment. Among patients receiving COMP360 during the study's open-label extension, 40% to 45% experienced at least a 50% reduction in depression symptoms. Approximately 30% achieved remission.

These results are particularly encouraging because most conventional antidepressants require daily medication. COMP360 could potentially offer sustained relief with only a few treatments annually.

Image source: Getty Images.

An FDA decision could arrive soon

Compass expects to complete its rolling FDA application in the fourth quarter. Worth noting: The FDA awarded COMP360 a Commissioner's National Priority Voucher (CNPV), potentially reducing the review period to just one or two months after the application is filed. That could put an approval decision within reach in early 2027.

To be sure, approval isn't guaranteed, and commercial adoption will depend partly on insurance reimbursement and the availability of treatment centers. Still, Compass now has two positive Phase 3 trials, encouraging follow-up data, and an accelerated regulatory pathway.

Wall Street already sees significant upside here. With shares trading around $12, the average analyst price target of $23.75 implies about 95% upside. Those forecasts aren't contingent solely on FDA approval. But make no mistake: If the FDA approves COMP360, the stock should get a solid boost. After all, shares surged 42% in April following an executive order just to accelerate psychedelic drug development. Now imagine what could happen if the FDA actually gives COMP360 the green light.

Jeff Siegel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.