Why Compass Pathways Stock Was a Double-Digit Winner This Week

The field of psychedelic medicine is relatively new, and because of this, certain investors consider it to be loaded with potential. That's why even minor events in companies specializing in this can be greeted with notable share price pops.

Such a dynamic was in evidence with U.K.-based Compass Pathways (NASDAQ: CMPS) this week. On news about a step completed in a clinical trial, the company's shares rose by 13% over the period, according to data compiled by S&P Global Market Intelligence.

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A significant milestone reached

Compass Pathways, which focuses on psilocybin -- the psychoactive compound found in "magic" mushrooms -- announced Tuesday that it had completed dosing in a late-stage clinical trial.

The biotech is currently putting its synthesized psilocybin treatment, COMP005, through its paces in a phase 3 trial. Participants are to receive either a 25-milligram dose of the medication or a placebo. Promisingly, we should have a readout before long, as Compass Pathways said it is on pace to publish six-week primary endpoint results toward the end of June.

The study comprises 258 patients currently afflicted with moderate to severe depression and who have not responded to a minimum of two previous treatments. The dosing took place at 32 sites in the U.S.

The power of psychedelics

In the press release marking the milestone, Compass Pathways quoted CEO Kabir Nath as saying that it "marks a critical milestone in our mission to address the pressing unmet need in treatment resistant depression."

It also further establishes once-taboo psychoactive substances as legitimate potential therapies for serious psychological disorders. Investors will be crossing their fingers for success with this late-stage round of testing.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.