London-based COMPASS Pathways plc (Nasdaq: CMPS) has secured $285 million in private funding to advance the company toward offering psychedelics as a treatment for mental health conditions.
The company appears to see a clear path toward FDA approval and has convinced several investors of the opportunity. COMPASS Pathways named 11 investment firms and hinted at others participating in the round. The company said that it expects the funds to carry it through late 2025.
“We view this investment as a validation of the potential of psychedelic medicine and the importance of a rigorous and evidence-based approach,” Kabir Nath, CEO of COMPASS Pathways, said in the release.
The investment firms TCGX and Aisling Capital led the round. Participating investors include Vivo Capital, RA Capital, Paradigm BioCapital Advisors LP, Logos Capital and Laurion Capital Management.
There are two categories for the funding that COMPASS Pathways has secured. It has about $125 million in gross proceeds now. It also has the opportunity to get about $160 million in gross proceeds if the three-year warrants are fully exercised.
Earlier in the year, the company announced it had landed up to $50 million in debt financing from Hercules Capital Inc.
In late 2022, COMPASS Pathways announced it would launch a phase 3 trial of its synthetic psilocybin formulations (COMP360) in treating treatment-resistant depression. The company claimed this study would be the first-ever phase 3 study of psilocybin therapy. It’s currently recruiting patients for the study.
It is also working on phase two trials for the use of COMP360 in treating post-traumatic stress disorder (PTSD) and anorexia nervosa.
The funding will also support COMPASS Pathways’ commercial planning and preparation efforts, the release states.
In October 2018, COMPASS Pathways’ COMP360 for treatment-resistant patients received the FDA’s Breakthrough Therapy designation. The FDA reserves this designation for treatments that show substantial evidence that they are better than the status quo. It is also designed to expedite the development and review of drugs that treat a “serious condition,” according to the FDA’s website.
The only psychedelic-like drug that is legally available is ketamine. However, ketamine does not have clearance from the FDA to treat behavioral health conditions, making ketamine’s use in mental health an off-label application. This and several other factors complicate its use in mental health treatment.
However, some predict that MDMA and psilocybin approvals by the FDA may come within a year. Further, reporting by The Intercept shows an expectation within the Biden administration that psilocybin and MDMA will be approved for treating depression and post-traumatic stress disorder by mid-2024.
The need for a new option for mental health treatment continues to rise as the efficacy of mainstay pharmaceuticals is better understood. For example, the efficacy of selective serotonin reuptake inhibitors (SSRIs) in people with depression has been questioned. Another increasingly popular option for those with treatment-resistant depression is transcranial magnetic stimulation (TMS).