COMPASS PATHWAYS PLC - Equity Research Initiation Report

Nolan Kushnir
Dec 10
15 min read

Nolan's Investment Notion released our first coverage on CMPS back in the beginning of February 2025 with a bullish, informal company analysis titled "Compass Pathways (CMPS) - Company Analysis", when CMPS was trading around ~$4.5 USD. CMPS is now trading at ~$6.5 USD as of today, marking a ~31% increase since our first public coverage. This equity research initiation report marks the official formal coverage of Compass Pathways Plc by Nolan's Investment Notion.

Executive Summary:

Nolan’s Investment Notion initiates coverage on Compass Pathways PLC (CMPS) with a buy rating and $22 price target (presenting a 238% upside), driven by the company's main asset COMP360 being brought to market sooner than expected, while paired with controlled operating expense spending. COMP360 recently delivered positive and pivotal phase 3 clinical trial results; and now appears positioned to be the first FDA approved psilocybin assisted therapy for treatment resistant depression (TRD). My thesis is based on (1) clinical de-risking after COMP005 results, (2) a clear regulatory path enabling potential FDA approval for late 2026 - early 2027, and (3) a high-value commercial opportunity supported by strong efficacy, durable response, and significant unmet clinical needs in TRD. COMP360’s display of significant statistical improvement in MADRS (Montgomery–Åsberg Depression Rating Scale) in week 6 of their pivotal COMP005 trial, coupled with an acceptable safety profile and a therapist-based delivery model, advantageously positions it against competitive options such as SSRIs, TMS, and Spravato. These alternatives all suffer from either limited durability or high discontinuation rates. It is my belief that investors are undervaluing CMPS in the current market by not appreciating their ability to rapidly scale the therapy ecosystem with structural advantages. Our accessibility-driven models suggest a faster initial uptake than consensus, capturing a meaningful amount of the diagnosed ~2.8M TRD patients in the U.S. With ~$200M in cash, advancement of COMP006 to full top-line data in Q1 2026, and an anticipated NDA filing in late 2026, we see CMPS at a clinical and regulatory inflection point. My risk adjusted net present value (rNPV)-driven valuation (exhibit #8) supports the view that CMPS is significantly undervalued relative to the significance of its upcoming catalysts, creating an asymmetric risk/reward profile as COMP360 approaches commercialization.

Our View:

We believe CMPS offers a very clear, late-stage, de-risked path in CNS (Central Nervous System) therapeutics, anchored by COMP360’s reproducible efficacy, an FDA designation of breakthrough therapy (meant to expedite product to market), and a uniquely human-to-human, therapy-enabled commercial model. Phase 3 results materially reduce clinical uncertainty, and combined with Compass’s manufacturing, therapist-training, and clinical site-activation infrastructure, position the company to scale faster than market expectations. Recent press releases from management have confirmed their estimate of commercialization being pulled closer by 9-12 months due to positive data readouts from Part A of COMP005 trials. In our view, investors are still pricing CMPS as an early-stage psychedelic asset rather than a near-commercial psychiatric therapeutics company. This disconnect creates upside as investors reevaluate the probability of FDA approval, speed of COMP360 uptake in TRD patients, and the durability advantage that distinguishes COMP360 from SSRIs, TMS, and Spravato. With multiple catalysts ahead before NDA submission and a large, underserved TRD population, we see an asymmetric risk/reward profile that supports our $22 price target.

Company Overview:

Compass Pathways (CMPS) is a clinical-stage mental health biotechnology company headquartered in London, UK, with operations in the U.S. and Europe. Founded in 2016, the company is focused on developing psilocybin-assisted therapies for treatment-resistant depression (TRD) and other difficult to treat mental health conditions such as PTSD. Its lead asset is COMP360 which is a proprietary synthetic psilocybin formulation currently in Phase 3 development. Compass’s mission is to innovate the space of mental health treatment by developing evidence supported and regulatory approved psychedelic therapies. The company is driven by the rationale that TRD represents a large, growing, and underserved population where existing treatments offer limited effectiveness, poor durability, and high discontinuation rates. By pairing COMP360 with a structured, therapist-guided model, Compass aims to create a scalable, consistent therapeutic landscape capable of delivering deep-rooted and durable clinical improvement for patients who find traditional antidepressants or therapies ineffective.

COMP360 is Compass’ flagship product which integrating three components: (1) a pharmaceutical-grade synthetic psilocybin drug, (2) a standardized method of delivery consisting of preparation, supervised dosing, and integration sessions with a therapist, which is where we believe COMP360 really breaks the mold, and (3) an operational delivery infrastructure that includes therapist training, site activation, and digital tools for session consistency. This combined drug and therapy framework is designed to produce consistent outcomes, enhance safety, and support regulatory and commercial scalability for TRD and beyond. The ability to bring patients to a deeply connected and impressionable state with psilocybin, then paired with guidance from trained therapists, is what we believe to be driving COMP360’s success thus far, and what will carry it further to come. The company’s synthetic psilocybin is manufactured using a high-purity crystallization process that ensures consistency within all batches and avoids the variability associated with plant derived psilocybin. Compass holds a broad IP portfolio that includes formulation patents for COMP360, method of use patents covering therapist guided administration, and trade secrets related to session structure and manufacturing processes. COMP360 is also designated by the FDA as a Breakthrough Therapy, providing expedited development and review priority for promising psychiatric treatments. Compass’s progress is driven by an experienced management team led by CEO Kabir Nath and Chief Medical Officer Dr. Guy Goodwin, both of whom bring extensive backgrounds in CNS therapeutics and clinical psychiatry. The company remains pre-commercial and reported approximately $200M in cash as of the latest quarter (Q3 2025), providing runway into 2026 to complete its Phase 3 program and advance toward an NDA submission.

Source: Nolan's Investment Notion, Exhibit #1

COMP360 Clinical Evidence:

As a brief overview, COMP360 is being developed for treatment-resistant depression (TRD), defined as major depressive episodes that have failed to respond to multiple adequate antidepressant trials. Compass’ phase 2b trial back in 2021 was the first major efficacy signal, providing robust, randomized evidence that a single high dose (25mg) of COMP360 can provide rapid and clinically meaningful symptom reductions in TRD. Phase 2b was the largest psilocybin depression RCT to date with 233 TRD patients across 22 sites in 10 countries, all of which randomized to a single dose of COMP360 (25mg, 10mg, 1mg). At week 3, on the MADRS, the 25mg vs 1mg doses showed a -6.6 point difference on the scale, as well as long term observational follow up (COMP004) suggested longer maintenance of antidepressant effect after a single 25mg dose vs 10mg vs 1mg. On October 23rd, 2018, the DFA also granted Breakthrough Therapy designation to psilocybin therapy for TRD being developed by Compass Pathways, recognizing preliminary clinical evidence of substantial improvement over existing therapies and enabling expedited development and review.

There is the pivotal phase 3 program, which they are currently still in, containing COMP005 and COMP006 trails. COMP005 was designed with N=258 TRD patients, randomized with a placebo control, containing a single 25mg dose of COMP360 vs the placebo. All patients received the standardized psychological support as the therapist-delivery model intends, and patients were to discontinue antidepressants prior to dosing. The top-line results that were released June of 2025 showed a -3.6 point MADRS difference vs the placebo at week 6. There were no unexpected safety findings, and the results were consistent with the phase 2b efficacy signals. We now wait on the market-moving catalyst being the 26-week COMP005 durability data which is expected in Q1 2026. The second pivotal trial, COMP006, is designed to further evaluate whether 2 dosing sessions improves the durability and strengthens efficacy. It is planned to have N=568 TRD patients, and randomized dosing arms from: 25mg x2 doses, 10mg x2 doses, 1mg control x 2 doses, with the 2 administrations being spaced 3 weeks apart. Primary efficacy data from 9 weeks is expected in Q1 of 2026, and the 26-week durability data in Q3 2026. The enrollment of COMP006 is still ongoing, and if this trial provides the positive results that are expected, we can likely see the green light from FDA for approval and hopefully have a potential NDA filing in late 2026 with the FDA.

Market Opportunity, Industry, and Competitive Landscape:

Now looking at the market and opportunity for CMPS to capitalize on, there is a global prevalence of ~300M MDD patients (Major Depressive Disorder), and a subset of roughly 15-30% of those being TRD (~2.8M in U.S.). TRD is a high value segment as patient's needs are highly unmet, there are high relapse rates with few remedies providing real duration, and resulting in a high economic burden. There are limitations for all existing therapies that are leading to these unmet needs, such as, SSRIs/SNRIs having a slow onset and low remission rates, Spravato having limited durability and an FDA black box warning (strictest FDA safety alert), and ECT/TMS while having potential, also comes with limited access and variable durability among patients. This is where COMP360 fits right into place, a fast acting and durable solution. The size of commercial opportunity does not look large at first, but the numbers do work well while still being relatively conservative, as indicated in exhibits #2 and #3.

Source: Nolan's Investment Notion, Exhibit #2

Source: Nolan's Investment Notion, Exhibit #3

These numbers reflect the projected amount of eligible TRD patients that will be accessible for treatment for CMPS, and when. While the numbers are not large, COMP360 is a high-priced, niche treatment formulation that has potential to snowball in popularity given positive trail and commercial results. Given ~2.8M TRD patients in the U.S. we estimate roughly half (1.4M) will be eligible patients given their age, previous clinical mental history, safety exclusions, label-specific criteria such as greater than or equal to 2 failed antidepressants, etc. We then have the accessibility pool ramping from 2% in 2027 to 25% where it peaks in 2033, given the niche nature of this treatment, limited number of clinics, therapist staffing, patient willingness, etc. Lastly we then see the market penetration of that accessible pool starting at 10% in 2027 and ramping to 60% where it peaks in 2033, due to competition (Spravato, TMS, etc), brand recognition, deployment strategy, etc., and it is also important to note that these numbers are conservatively projected. The stats show mental health disorders including TRD have been on an upswing since the COVID-19 pandemic, surging by an estimated 25% in the first year alone and they do not show signs of slowing down, including TRD. While these patient numbers are projected to peak in 2033, you can still expect to see revenue growth beyond.

MDD climbs globally year over year, and has risen ~50-60% over the last 30 years, and TRD represents 15-30% of these cases expanding the eligible pool over time. There is a growing acceptance among clinicians and academic centers for psychedelic medicine providing clear pathways for the emerging drug and guided therapy models like COMP360, as well as regulatory support such as FDA Breakthrough Therapy, which lowers the perceived risk, encourages investment in infrastructure and accelerates clinic deployment. It is also worth mentioning the disproportionate healthcare utilization (ER visits, hospitalizations, disability) that TRD patients consume, this incentivizes payers to begin reimbursing high-intensity interventions if it reduces downstream costs. TRD patients incur 2–3x higher annual healthcare costs than non TRD MDD patients, so payers are more inclined to support one-time or episodic therapies if durability reduces chronic pharmacotherapy burden. Speaking to the commercial model and delivery infrastructure a bit more, this drug plus therapeutic protocol creates a unique and defensible strategy that is challenging for competitors to replicate, as they must replicate both molecule and care models. The therapist training ecosystem that CMPS is going for increases provider familiarity, which has historically increased adoption for novel CNS interventions, as well as onboarding clinics is a one-time fixed cost, however it produces multi-year prescribing loyalty.

In terms of the industry, interventional psychiatry is expanding. This macro trend is a result of a few facts: mental health disorder rates continue to rise as traditional methods become less effective, the whole mental health industry is shifting from chronic daily meds (SSRIs/SNRIs) towards interventional treatments like TMS, Spravato, and ketamine, paving the runway for psychedelic-assisted therapy. COMP360 is not just a one-off idea, it is also following evolution of the real market. Compass sits in a unique spot in comparison to competitors as it spans multiple treatment categories. As a treatment for TRD, COMP360 will not only span across pharmacologic modalities (SSRIs, SNRIs, Spravato), but also interventional ones like TMS and ECT. Psilocybin-assisted therapy is emerging as a new mechanism that activates 5-HT2A, a serotonin receptor in the brain which leads to rapid neuroplastic effects, changes in brain network connectivity and psychological effects, something that traditional SSRIs cannot achieve.

While COMP360 is exciting and innovative, it is not the only company in the landscape. Usona Institute is testing psilocybin for MDD, however is only in phase 2 which is years behind CMPS, as CMPS is the only psilocybin program in phase 3. Usona is also non-profit with no clear commercial pathway, whereas Compass has already built a commercialization framework. Atai Life Sciences is also a large public competitor with a $1.6B market cap as of today, however they have lots of breadth with no depth. They have numerous early programs, but no specialized late stage assets like COMP360. One of their main product trials is on DMT, which requires rapid (<30 min) sessions that provide limited durability; COMP360 has demonstrated weeks-months of sustained remission. In regards to any other small private psilocybin/DMT/MDMA players, COMP360 has the scale, capital, IP, and clinical data that no small player could possibly match at this point. Most private companies also lack the late-stage programs, whereas mentioned before, COMP360 remains the first potential FDA-approved psychedelic.

Financial Models and Forecasts:

In the following exhibits we present our full financial forecasts for Compass Pathways Plc, including a revenue build, cost structure projections, a 10-year pro forma income statement, and a rNPV model of COMP360. Our models take into account and reflect assumptions around the products pricing, market penetration, opex discipline, and probability-adjusted regulatory timelines.

Source: Nolan's Investment Notion, Exhibit #4

Revenue projections are as seen above, starting in 2027 (year 2 of rNPV model) at $12.6M and ramping up to a revenue of $1.477B by 2035 (year 10). The as seen before charts containing market size stats are also above (exhibit #2), where we can see projected accessibility of eligible patients growing from 28,000 in 2027 to 350,000 in 2033, depending on the number of clinics offering COMP360 expanding, number of trained therapists, and patient willingness. The penetration model gives us the final number of projected clients, going from 2,800 clients in 2027 to 210,000 clients by 2033, dependent on brand recognition, deployment strategy, and competition. We estimate a single course of COMP360 costing roughly ~$10,000, 45% of which being CMPS revenue ($4,500), and conservatively projecting 1 dose per year, per patient.

Source: Nolan's Investment Notion, Exhibit #5

Source: Nolan's Investment Notion, Exhibit #6

The above exhibit (#5 and #6) is our cost structure projections, displaying COGS (cost of goods sold), R&D (research and development), and SG&A (selling, general, and administration). We can see COGS starting in the year 2027 as per projected commercialization start, and reflecting a very high profit margin for the synthesized psilocybin, as it is a very cheap substance to manufacture, leaving our projections sitting at roughly 4.5% of revenue. R&D costs are higher in precommercial years, sitting at 12% (relative to the previous year projection) in 2027 due to tapering off phase III costs, as well as funding additional indications such as PTSD. Once pipeline programs mature, we can see R&D shift to maintenance levels from 4% in 2030 to 2% in 2035. We see high SG&A spikes in early commercialization years, sitting at 75% in 2027 and 80% in 2028 (both relative percentages) due to building clinic networks, certifying treatment centers, training therapists, reimbursing onboarding costs, and medical affairs as well as reimbursement infrastructure, similar to the rollout of Spravato. SG&A normalizes rapidly as once clinic infrastructure is fixed, we can see a maintained 5% growth by 2033 due to good operating leverage, similar to mature neurology/psychiatry products and single-product biotech companies.

Source: Nolan's Investment Notion, Exhibit #7

The above exhibit (#7) is our projected 10 year income statement with relevant line items. Revenue projections for PTSD were based relative to TRD projections, using management releases regarding the finalization of late stage PTSD trials, and PTSD being a massively underserved market, while still keeping numbers conservative. Although we see revenue commencing in 2027 with projected commercialization, we don’t see CMPS’ operating income going positive until 2031 due to the high opex that comes with initial commercialization. We can see net income turning positive in the same year, 2031, as with gross profit and eps. We see positive growth in profit margin as we sit around ~20% in the first positive year (2031), but that margin climbs up to ~70% by year 2035. As you will soon see in the equity valuation, CMPS currently sits on roughly ~$200M of cash, which should float CMPS comfortably through data readouts in 2026 and into 2027.

Source: Nolan's Investment Notion, Exhibit #8

The final exhibit you see above is our risk adjusted net present value model (rNPV). Net incomes are represented as risk-free cash flows, and recent press releases from management regarding phase III data has pulled commercialization estimates closer by 9-12 months, creating a higher PoS going into 2026. We have landed on a WACC of 13% given that CMPS is still pre-revenue, dependent on a single lead asset, and still exposed to volatile risks. CMPS is almost all equity, and a 13% cost of equity is not only consistent with small-cap biotech betas, but also backed by CAPM calculations. Once discounting all of our risk-adjusted cashflows and adding them up, we can see a projected explicit forecast value of ~$842M. The terminal value was then calculated at a growth rate of 0% to stay conservative, then discounted to PV, and added to the net cash position as well as forecast value, leaving us with an equity value today of ~$2.14B. This equity value, then divided by the 95M currently outstanding shares, is how we arrived at our $22 price target for CMPS.

Key Takeaways:

There are a few key takeaways from these projected financial models: (1) after commercialization and clinical infrastructure is in place, COMP360 can scale rapidly once operating leverage kicks in; (2) CMPS is projected to turn positive on all fronts in 2031, and currently sits on a cash runway to bring them near projected FDA approval, at which point CMPS will most likely conduct a couple equity raises to support launch; (3) The rNPV is highly sensitive to penetration and pricing assumptions, however the valuation is conservative with a 13% WACC discount factor, and the majority of the valuation stemming from COMP360 TRD indication alone also proves volatility; (4) model outcomes are highly dependent on phase III success and treatment-center scalability.

Valuation:

The core valuation engine of this report is pushed from our rNPV model. The reason we concluded on a rNPV model as being the best fit is due to the nature of CMPS being a pre-commercial biotech with no current operating cash flows. This rNPV model allows to take into account unpredictable earnings streams, as well as negative cash flows in early years, while still allowing for an accurate equity value estimate. Using the estimated WACC of 13% as the discount factor and a terminal growth rate of 0%, we arrived at a projected equity value of ~2.14B, accounting for the adjusted net cash position, explicit forecasted value, and terminal value, where we derived the $22 per share price target.

In the upside scenario we could see shares trading at $40 a share dependent on successful phase III trials, FDA approval on time, better penetration numbers, and an overall successful launch and commercialization. The combination of increasing penetration, lower perceived risk, and higher net incomes could raise our price target 75% or higher.

In the downside scenario we could see shares trading at $4 a share dependent on failure of phase III trials, launch date slips, potential safety concerns rising, failure in additional indications like PTSD, and undisciplined opex spending or underdelivered revenues. A severe downside doesn't have to mean a zero case since the psilocybin mechanism still has salvage value, but we could see a -80% or greater fall to our price target.

Risk Analysis:

The key risks that could jeopardize the program's success include: (1) clinical risks including phase III failure, safety or tolerance concerns, FDA pushing for additional trials; (2) commercialization risks such as competition from Spravato or other future psychedelic options, further infrastructure build-out being required, payer reimbursement being restrictive therefore limiting adoption; (3) financial risks like dilution through financing if cash runway does not extend to approval, high and persistent SG&A burden, forex risk between UK/U.S. operations; (4) execution risks related to the dependency being on a single asset, delays in site onboarding, management turnovers or strategic missteps.

Investment Thesis:

At Nolan’s Investment Notion, we like the steps and process Compass Pathways has taken to revolutionize mental healthcare with their psilocybin and therapist guided treatment plan, to specifically target a greatly underserved market of TRD patients, and potentially beyond to other indications. The studies and academic literature available on psilocybin scientifically links its ability to affect mood disorders, and Compass has been able to replicate that so far in their clinical trials. Compass’ program strictly following FDA guidance, coupled with high efficacy and market needs, brings about a high probability of approval that could come sooner than the market anticipates, as well as a high margin model supporting promising commercialization success. These factors paired with our financial models suggesting a price target of $22 a share supports a buy consensus as of today on Compass Pathways Plc.

Disclosures:

The author holds a long position in Compass Pathways (CMPS) at the time of writing and may benefit from share price appreciation.
This report was prepared independently for academic and educational purposes. The author has not received compensation from Compass Pathways or any other third party.
The author is not a registered investment advisor, broker-dealer, or research analyst. Nothing in this report should be interpreted as investment advice or a recommendation to buy or sell securities.
This report contains forward-looking statements that involve risks and uncertainties. Actual outcomes may differ materially from the projections or assumptions presented.
Biotech regulatory, clinical, and commercial outcomes are inherently uncertain. All financial forecasts and valuation estimates reflect the author’s assumptions and are subject to change.
The author does not have any material conflicts of interest other than the disclosed equity ownership.