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.
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,
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.
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