When the FDA denied MDMA-assisted therapy earlier this year, the shockwaves throughout the psychedelic industry were immediate and apparent. Now, Compass Pathways, another major player in the space, has announced that it is laying off roughly 30% of its workforce and delaying the Phase 3 Trials for its lead COMP360 program. The announcement saw its shares plunge 35%, and is perhaps the latest sign that the hype bubble around psychedelic drug development has burst, and early idealism among investors is giving way to a rougher economic reality.
Compass Pathways is a biotech company that has been advancing its lead drug, a synthetic form of psilocybin dubbed COMP360, for treatment-resistant depression. The company was the first major for-profit power player that many in the grassroots psychedelic movement saw as a “big bad wolf,” given their significant funding from investors like Paypal billionaire and major Trump donor Peter Thiel. In 2018, Compass was also the first company to receive “breakthrough-therapy” status from the FDA for psilocybin, which fast-tracks the federal review of drugs that offer “substantial improvement over available therapy.”
READ: Where Did Western Psychedelic Therapy Come From, Exactly?
The company previously attracted controversy for its overly broad patent applications — a legalistic land grab that included trying to monopolize the use of psilocybin as a mental health treatment and specific clinical settings such as “mood lighting, soft furniture, subdued colors, and a good sound system.”
In 2021, David Bronner, CEO of Dr. Bronner’s and a major financial donor to the psychedelic movement, called out Compass in a blog post where he accused the company of attempting to block Oregon’s Measure 109, which legalized psilocybin-assisted therapy. “Monopolistic behavior that attempts to… lock up psychedelic therapy inside the FDA medical pharma model… is harmful to the healing we as a movement want to bring to the world,” Bronner wrote.
Compass has incurred losses since its inception, and by September 2024, had accumulated a deficit of $491.4 million, including a $38.5M loss in Q3. The company disclosed in its quarterly report that its board of directors had authorized a strategic reorganization to refocus its capital resources on completing its COMP360 Phase 3 program, pushing back the expected timeline for its published data to the second quarter of 2025. As part of the restructuring, all efforts not related to Compass’ lead drug program will be stopped. The company is also exploring selling off its digital technologies and intellectual property. Members of senior management, including its chief legal officer and chief communications officer, will be eliminated or put on leave.
On an earnings call, Compass CEO Kabir Nath said that the delay in releasing its Phase 3 data was caused by “a number of items related to the complexity of the trials that we’re now learning along the way.” Those complexities include the sticky issue of functional unblinding, where study participants are able to determine if they receive placebos instead of the drug being studied. Functional unblinding was a major reason why the FDA rejected Lykos Therapeutics’ MDMA therapy application in August. By highlighting this specific hurdle, Compass is similarly suggesting it is concerned about its ability to address the FDA’s heightened scrutiny over the issue. Nevertheless, it stressed that its trial design includes features that will help to minimize functional unblinding, including using three dose levels of psilocybin at 25, 10, and 1mg, and primarily including study participants who have never tried psychedelics before.
