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Investing.com - Evercore ISI downgraded Compass Pathways (NASDAQ:CMPS) stock rating to In Line from Outperform on Monday, while reducing its price target to $6.00 from $11.00. The stock, currently trading at $2.43, has shown significant volatility with a beta of 2.25. According to InvestingPro data, CMPS has experienced a 22.49% year-to-date return despite recent pressures.
The research firm cited concerns about the durability of the company's treatment effects as a key reason for the downgrade. Evercore ISI noted that while recent data suggests Compass may have an approvable drug, the relatively unclear durability in Phase 2b trials and weaker effect at six weeks remain significant questions for commercial success. Despite these concerns, InvestingPro analysis shows the company maintains a strong financial position with a current ratio of 10.18 and more cash than debt on its balance sheet.
Evercore ISI also pointed out that the effect size of Compass Pathways' treatment is lower compared to Spravato's monotherapy study, creating additional competitive challenges. The firm characterized the company's second Phase 3 trial as a "show me" story for investors amid what it described as an increasingly competitive landscape.
The downgrade comes despite Evercore's acknowledgment that Compass has "already taken some of the downside off the table with previous heavily dilutive financings." These earlier financial moves have provided some cushion against market reactions to clinical development challenges.
Clinical and commercial uncertainties will continue to weigh on the stock until more definitive data emerges from the company's ongoing trials, according to the research firm's assessment of Compass Pathways' near-term prospects. While analyst targets range from $11 to $45, InvestingPro's Fair Value analysis suggests the stock is currently undervalued. Investors seeking deeper insights can access the comprehensive Pro Research Report, available exclusively on InvestingPro, which includes detailed analysis of CMPS's financial health, growth prospects, and market position.
In other recent news, Compass Pathways Plc announced that its investigational psilocybin treatment, COMP360, achieved the primary endpoint in its Phase 3 COMP005 trial for treatment-resistant depression. The study demonstrated a statistically significant reduction in depression symptoms compared to placebo, with a mean difference of -3.6 points on the Montgomery-Åsberg Depression Rating Scale at week 6. The trial, which dosed 258 participants across 32 U.S. sites, represents the first Phase 3 efficacy data for a synthetic psilocybin treatment. Despite the positive results, investors appeared disappointed, leading to a notable drop in the company's stock. The company plans to discuss these findings with the U.S. Food and Drug Administration, although the FDA has not yet reviewed the results. Additionally, Compass Pathways held its 2025 Annual General Meeting, where all resolutions, including the re-election of board members and the appointment of auditors, were passed. TD Cowen maintained a Buy rating on Compass Pathways, setting a price target of $23.00, reflecting confidence in the company's potential, particularly concerning the Phase 3 COMP005 trial outcomes. The company is also conducting a second Phase 3 trial, COMP006, to further explore the efficacy of COMP360 with results expected in 2026.
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