Trump Backs Psychedelics. Here's 1 Company Investors Need to Know About
Trump Backs Psychedelics. Here's 1 Company Investors About
Jeff Siegel, The Motley FoolFri, April 24, 2026 at 2:10 AM UTC
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Key Points -
Trump’s executive order could shorten regulatory timelines and bring institutional capital into psychedelics faster than expected.
While most peers are early-stage, Compass Pathways is already in phase 3 testing with positive late-stage data.
With about $150 million in cash, Compass Pathways is funded to reach a regulatory decision without relying on near-term dilution.
10 stocks we like better than Compass Pathways ›
Last weekend, President Donald Trump signed an executive order aimed at accelerating the review of psychedelic therapies for mental health conditions.
At a high level, the order does three things. It shortens the timeline for clinical trials and regulatory review, it helps normalize these therapies in the eyes of both patients and providers, and it sends a clear signal of federal backing. That combination has real implications, particularly when it comes to how investors value psychedelics stocks.
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Of course, the psychedelics sector is still quite small, and even with this latest executive order, risk remains. After all, at their core, most psychedelics stocks are biotech stocks, and their valuations depend on clinical trial outcomes, regulatory approval, and drug efficacy, not consumer demand or branding.
Psychedelics companies follow the same FDA pathway as biotechs developing drugs, where outcomes are binary and data-driven. Ultimately, they are developing pharmaceutical therapies, which means their risk, timelines, and valuation models are identical to biotech.
Once you understand that, you understand the foundation for any sound analysis on psychedelics stocks. And when you look at the small basket of psychedelics companies that are currently publicly traded, one in particular stands out: Compass Pathways (NASDAQ: CMPS)
FDA submission is right around the corner
Most companies in the psychedelics space, aside from AtaiBeckley (NASDAQ: ATAI) and Definium Therapeutics (NASDAQ: DFTX), are still in early development. That is, phase 1 or early phase 2 trials, and years away from any meaningful regulatory outcome.
Artist's rendering of mushrooms, a microscope, and the human brain.
Image source: Getty Images.
But Compass Pathways is already in late-stage development with its lead asset, COMP360, a synthetic psilocybin therapy for treatment-resistant depression. It's currently in pivotal phase 3 development, which is the final stage before a potential FDA submission.
Also worth noting: The company has already delivered positive late-stage data. The company said it had seen "highly statistically significant and clinically meaningful data that demonstrates effects within one day and durability lasting at least through 6 months after just one or two doses for those who have a clinically meaningful response, as well as a generally well-tolerated and safe profile."
Compass is now moving toward a filing , and, unlike a lot of other psychedelics companies, it has the necessary cash to get there. At the end of 2025, Compass reported $149.6 million in cash and cash equivalents.
The company has guided to an annual cash burn of $120 million to $145 million, or roughly $10 million to $12 million per month. Following recent financings and warrant exercises, management expects its cash position to fund operations into 2028.
That's not trivial, as many companies in the psychedelics space do not have that kind of multiyear visibility. They are dependent on future financings to continue operations. Compass is funding its final stage of development now, not trying to survive long enough to reach it.
Late-stage execution
In 2025, Compass reported $118.4 million in research and development expenses and $60.6 million in general and administrative costs, with spending primarily tied to advancing its late-stage phase 3 program and preparing for potential commercialization.
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The company has also demonstrated consistent access to institutional capital, which has helped enable its progress thus far.
In early 2025, Compass raised more than $140 million through a financing round, supplemented by additional proceeds from warrant exercises. That ability to raise capital in a difficult biotech environment is not incidental. It reflects investor confidence in both the clinical data and the timeline to a potential regulatory event. And that confidence is visible in the shareholder base.
To be sure, Compass is not a retail-driven story. Institutional investors and hedge funds own roughly 46% of Compass Pathways' shares, including specialist biotech funds such as RTW Investments and Deep Track Capital, as well as larger institutions like Toronto-Dominion Bank and Ark Investment Management. UBS and Two Sigma also hold positions.
Funded to finish
In biotech, companies rarely fail because of a lack of scientific progress alone. They fail because they run out of capital before reaching a regulatory decision. Compass has positioned itself to avoid that outcome.
Of course, that doesn't make it risk-free. Indeed, the company remains dependent on regulatory approval and eventual commercialization. But within the psychedelics sector, the combination of late-stage clinical progress and a balance sheet capable of supporting that progress makes Compass one of the most likely to reach the FDA approval finish line first.
You see, following a New Drug Application (NDA) submission, FDA review timelines can typically range from six to 10 months, meaning a decision could occur within roughly 12 months depending on review designation. Though there's no guarantee of success.
Compass is targeting its NDA submission in the fourth quarter of this year. This means Compass is no longer counting in years, it's counting in quarters. The finish line is in sight.
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Jeff Siegel holds no positions in the stocks mentioned in this article. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Source: “AOL Money”
