On Monday (NASDAQ:MNDY), Canaccord Genuity revised its outlook on Compass Pathways (NASDAQ:CMPS), slashing the price target to $23 from the previous $48, yet reaffirmed a Buy rating on the stock. The firm's analyst has updated the financial model to incorporate a more cautious approach, including a delay in the expected launch of COMP360 in the United States and internationally. Originally projected for 2026/27, the launch is now anticipated in 2028/29.
The analyst's revised model also accounts for a slower uptake and increased sales, general, and administrative costs post-launch due to the potential need for additional education in the face of uncertainties surrounding the drug's commercialization. Despite these changes, the firm maintains a 60% probability of approval for COMP360, suggesting that delays in trial timelines could be beneficial for generating more robust Phase 3 data.
Compass Pathways has reported that its restructuring, announced during the third-quarter 2024 update, should ensure a cash runway extending "at least into 2026", aligning with Canaccord's updated model. The firm expects fundraising efforts to occur in the third quarter of 2025, based on potential positive data expected in the second quarter of the same year, and also in subsequent years.
The adjustments to Canaccord's model also involve extending the discounted cash flow (DCF) analysis period to the end of 2025, which has contributed to the lowered price target. Despite the significant reduction from $48 to $23, the firm notes that the new price target still offers substantial upside potential from the stock's current trading levels. Peak unadjusted sales are now forecasted at $3.4 billion by 2035, a decrease from the previous estimate of $4.2 billion.
In other recent news, Compass Pathways has faced significant developments. The company reported delays in its phase III clinical trials for COMP360, an oral psilocybin therapy for treatment-resistant depression (TRD). The expected release of COMP360 trial data has been pushed to Q2 2025 for COMP005 and the second half of 2026 for COMP006. Additionally, Compass Pathways announced a workforce reduction of approximately 30% and a halt to non-COMP360 preclinical efforts as part of a strategic focus on the development of COMP360.
In response to these developments, H.C. Wainwright adjusted its price target on shares of Compass Pathways to $60 from the previous $120 but maintained its Buy rating. RBC Capital Markets also adjusted its price target to $18 from $23, maintaining an Outperform rating. Despite the delays, both firms expressed confidence in the potential of COMP360 for treating depression.
Compass Pathways reported a cash burn of $35.8 million for Q3 2024, despite a $13.6 million R&D tax credit. However, the company remains committed to the successful launch and commercial viability of COMP360, with data from over 1,000 patients expected from ongoing trials.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Compass Pathways' (NASDAQ:CMPS) financial situation and market performance. The company's market capitalization stands at $372.89 million, reflecting its current valuation in the biotech sector.
InvestingPro Tips highlight that Compass Pathways holds more cash than debt on its balance sheet, which aligns with the article's mention of the company's cash runway extending "at least into 2026". This financial cushion could provide some stability as the company navigates the delayed timeline for COMP360's launch.
However, it's crucial to note that CMPS is quickly burning through cash, an InvestingPro Tip that underscores the importance of the restructuring efforts mentioned in the article. This cash burn rate explains why Canaccord Genuity expects fundraising efforts in 2025 and beyond.
The stock has shown significant volatility, with a 16.45% return over the last week but a -37.71% return year-to-date. This volatility reflects the uncertainty surrounding the company's product development timeline and potential market success.
Investors seeking a more comprehensive analysis can access 10 additional InvestingPro Tips for Compass Pathways, offering deeper insights into the company's financial health and market position.
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