After Prozac® and the SSRIs transformed depression care in the late 1980s and 1990s, most of the major pharmaceutical companies (GlaxoSmithKline, Pfizer, Eli Lilly & Co.) quietly exited the field as generics eroded pricing and clinical complexity made new development unattractive. Patients who had two or more antidepressants had almost nowhere to go. Johnson & Johnson's Spravato®, approved in 2019, was the first genuinely new mechanism in a generation, and its path from a slow, disappointing launch to a $2 billion blockbuster with room to grow proved the infrastructure could be built, the unmet need from patients was significant, and payers would pay. As RTW Managing Partner and CIO Rod Wong argues in Innovation Is the Best Medicine™, psychedelics are now poised to follow the same path, with the potential to offer rapid, durable remission in patients who have run out of options.
Three positive clinical trials have now positioned Compass Pathways' COMP360 as the first classical psychedelic on a credible path to FDA approval for treatment-resistant depression (TRD). On July 16, 2026, Eli Lilly paid $2.8 billion upfront to enter this space. AbbVie paid up to $1.2 billion for a psychedelic candidate for major depressive disorder in August 2025.
RTW holds financial interests in two companies in this space: Compass Pathways (Nasdaq: CMPS) and GH Research (Nasdaq: GHRS). The investment case rests on three compounding advantages:
a patient population of roughly four million Americans, fewer than 200,000 of whom receive any FDA-approved treatment for TRD today;
clinical data demonstrating durable antidepressant effect detectable the day after a single dose; and
a commercial delivery and reimbursement infrastructure that is already in place.
A Disease with Almost No Solutions
Treatment-resistant depression is a major depressive disorder in which a patient has failed to achieve adequate response after at least two trials of antidepressant pharmacotherapy. Approximately four million Americans suffer from TRD.1
The accumulation of untreated or inadequately treated depression often creates a compounding burden: comorbid anxiety disorders, elevated risk of substance use disorders, social and occupational impairment, and a high risk of suicide.2
Steve Levine, MD, a psychiatrist and Chief Patient Officer at Compass Pathways, describes what typically happens to these patients:
"In many cases, people with treatment-resistant depression are just locked in the permafrost of primary care and never get referred out, in many cases because there's no one to refer to. There aren't enough psychiatrists. The ones who actually accept insurance, which is only about half of them, often have long waiting lists or aren't even accepting new patients, so they stay in primary care. They cycle through the same types of medicines over and over again."
There are more than 50 approved antidepressants on the US market. Most have failed to demonstrate efficacy specifically in TRD. The one exception is Spravato® (esketamine, Johnson & Johnson), which received FDA approval for use in combination with an oral antidepressant in 2019 and as monotherapy in January 2025. Due to multiple factors, including access to care and reimbursement constraints, fewer than 200,000 US patients with TRD receive any FDA-approved TRD treatment, a penetration rate below five percent.3 The gap between the addressable population and existing treatment penetration defines the treatment imperative and the investment opportunity.
The pattern has precedent. When Eli Lilly launched Prozac in 1987, medical visits for depression increased 70% within a decade, not because depression became more common, but because a new treatment option drew previously untreated patients into care for the first time. New entrants in a severely underpenetrated market expand the treated population. They do not divide it.4
How Does Psilocybin Work?
Psilocybin is a naturally occurring compound found in hundreds of mushroom species. Once ingested, it is rapidly converted by the body into psilocin, the pharmacologically active form. Psilocin is structurally similar to serotonin — close enough that it activates the same receptor family, 5HT2A, found throughout the brain. That structural resemblance allows psilocin to engage the serotonergic system and produce its profound effects on brain activity. Crossing into the brain, psilocin reorganizes how regions communicate, forging new connections between areas that do not ordinarily interact.
The clinical use of psychedelics should not be confused with recreational drug use associated with the counterculture movement. Unlike opioids or benzodiazepines, psilocybin does not produce physical dependence or withdrawal. No addiction signal has been observed in controlled clinical settings.5,6
COMP360 is designed to be administered in interventional psychiatry clinics with a physician and nurses on site, and close patient monitoring.
Demonstrated Effect from Late-Stage Clinical Trials
COMP360 has now produced positive results across three robust clinical studies: a Phase 2b trial and two pivotal Phase 3 trials (COMP005 and COMP006), enrolling more than 1,000 participants in aggregate.7
In COMP005, a single 25 mg dose produced a highly statistically significant reduction in depressive symptom severity at week 6 (MADRS mean difference: −3.6 points; p<0.001), with durable benefit maintained through week 26 after just one or two doses. COMP006 replicated that finding with two doses administered three weeks apart (MADRS difference: −3.8 points; p<0.001), with durability confirmed at six months. In both trials, statistically significant separation from the comparator was detectable from the day after administration, a rapidity of onset that conventional antidepressants, requiring four to six weeks, cannot match.8
Adverse events across both Phase 3 trials (primarily headache, nausea, anxiety, and transient visual phenomena) were categorized as mild to moderate and resolving within 24 hours. The safety monitoring board identified no unexpected findings, no hallucinogen persisting perceptual disorder, and no clinically meaningful imbalance in suicidal ideation between arms.
Many FDA-approved psychiatric drugs achieved approval after failing multiple pivotal trials. Spravato itself succeeded in two of five pivotal studies. COMP360 is the first classical psychedelic to consistently achieve highly statistically significant results at a primary endpoint with a well-tolerated safety profile across three successive trials in a notoriously difficult population.9
The Commercial Infrastructure is in Place
Thanks in large part to Johnson & Johnson’s efforts to commercialize Spravato, there are 7,300 established certified interventional psychiatry clinics in the US that can administer COMP360.
"You don't have to look far to imagine what the COMP360 infrastructure could look like. Spravato is administered in these clinics. You can see how quickly patients are taken in, given the right medical care, monitored by nurses, monitored by CCTV as they go through their experience, and discharged into the world better. That's the same paradigm that COMP360 gets to slot into." - Connor Williams, Senior Research Analyst, RTW Investments, LP10
The controlled-substance pathway is similarly straightforward. Historically, FDA approval triggers an eight-factor DEA analysis; with an expected outcome of Schedule III classification, identical to Spravato's current status. However, recent executive orders which recognized the potentially transformative potential for psychedelics in TRD may further streamline and accelerate this rescheduling process.
When Spravato launched in 2019, there was no well-established reimbursement path suitable for administration monitoring, which created reimbursement friction during its early commercial years. Today, Compass can leverage the reimbursement pathways created by Johnson & Johnson for Spravato. In addition, Compass secured new Category III CPT codes (0820T–0822T) for continuous in-person monitoring during psychedelic therapy, effective October 2024, reportable on an hour-by-hour basis which may further facilitate their launch trajectory.
The dosing regimen comparison is also structurally favorable. Spravato requires 25-50 three-hour clinic visits per year, which can create a significant logistical and caregiver burden. COMP360's emerging profile suggests one or two initial doses plus two to four re-treatments annually on average, an order-of-magnitude reduction.
Compass is targeting a complete NDA submission in Q4 2026 and a US commercial launch in the first half of 2027, subject to FDA approval and DEA rescheduling. TRD is the first indication. A registrational PTSD study is underway.
More Treatments for TRD on the Horizon
GH Research (Nasdaq: GHRS) is developing GH001, an inhaled 5-MeO-DMT for TRD. Data from its Phase 2b demonstrated rapid onset and durable remission and a Phase 3 trial is targeted for 2026.11,12
On July 16, 2026, Eli Lilly paid $2.8 billion upfront for AtaiBeckley, whose lead drug is an intranasal synthetic 5-MeO-DMT— the same active molecule as GH001.
Longer-term, the emergence of non-hallucinogenic 5HT2A agonists, compounds designed to engage the same receptor without inducing a psychedelic experience, represents a potential next wave in this class.
With Spravato reaching fewer than 5% of US patients with TRD new treatment options with differentiated profiles can expand the treated patient pool.
As Rod Wong argues in Innovation Is the Best Medicine, psychedelics are now primed to enter mainstream medicine with the potential to offer durable remissions after a single treatment session, a clinical profile unlike anything the field has produced before.13 The fact that Eli Lilly and AbbVie collectively committed more than $4 billion to psychedelic medicine acquisitions suggests the industry has reached the same conclusion.
Listen to the Conversation
S2E8 — Connor Williams. In the episode that launched this series, RTW Senior Research Analyst Connor Williams traces psilocybin's journey from Schedule I classification to pivotal Phase 3 results, examines the science of 5HT2A agonism, addresses common misconceptions about safety and abuse potential, and explains how the interventional psychiatry delivery model positions COMP360 for scalable commercial deployment.
S2E9 — Dr. Steve Levine, Chief Patient Officer, Compass Pathways. Stephanie Sirota’s interview with the architect of Compass's patient access strategy. Dr. Levine covers the clinical profile of the TRD patient population, the reimbursement infrastructure Compass has built ahead of launch, what the PTSD program could mean for the company's long-term pipeline, and why, in his view, TRD and COMP360 are a rising tide story rather than a market share battle.
Disclosure: RTW has a financial interest in Compass Pathways (Nasdaq: CMPS) and GH Research (Nasdaq: GHRS). This article is for informational purposes only and does not constitute investment advice or an offer or solicitation to buy or sell any security. Statements reflect RTW's views and opinions as of the date hereof. All expressions of opinion are subject to change without notice and are not intended to be a forecast of future events or results. Past performance is not indicative of future results.
1Greenberg PE et al. "The Prevalence and National Burden of Treatment-Resistant Depression and Major Depressive Disorder in the United States." Journal of Clinical Psychiatry, 2021. Estimated 2.8 million US adults with TRD among 8.9 million with medication-treated MDD. Compass Pathways and industry sources use the broader 4 million figure based on updated population estimates.
2Nöhles VB, Bermpohl F, Schoofs N, et al. "Clinical and Treatment Characteristics of 3795 Adults Consecutively Hospitalized for Major Depressive Disorder in the OASIS-D Study." Depression and Anxiety, 2025; 4470169. https://doi.org/10.1155/da/4470169
3Compass Pathways press release, March 24, 2026: “Compass Pathways Announces Fourth Quarter and Full-Year 2025 Financial Results and Business Highlights." ir.compasspathways.com.
4Wong R. Innovation Is the Best Medicine: A Policy Roadmap for Biotechnology. Chapter 4: "The Ups and Downs of Depression Innovation." RTW Investments, 2025.
5Johnson MW, Hendricks PS, Barrett FS, Griffiths RR. "The abuse potential of medical psilocybin according to the 8 factors of the Controlled Substances Act." Neuropharmacology, 2019; 142:143-166. Doi: 10.1016/j.neuropharm.2018.05.012.
6Goodwin GM et al. "A systematic review of the safety of psilocybin." Journal of Psychopharmacology, 2022; 36(12):1317-1326. Doi: 10.1177/02698811221131545.
7Compass Pathways press release, July 7, 2026: "Compass Pathways Announces Six-Month Data from Second Phase 3 Trial Confirming Rapid and Durable Profile." ir.compasspathways.com.
8Compass Pathways press release, February 17, 2026: "Statistically significant rapid onset from the day following administration maintained at all measured timepoints through Week 6 in both clinical trials in the 25 mg arm."
9Psychiatric Times, February 18, 2026: "COMP360 is the first classic psychedelic to consistently achieve a highly statistically significant result and clinically meaningful effect, with a generally well-tolerated and safe profile." psychiatrictimes.com.
10Williams C. “Psilocybin: Counterculture to Cutting-Edge Psychiatry,” The RTW Podcast, Season 2, Episode 7. RTW Investments, LP. Published June 22, 2026. rtwfunds.com/podcasts.
11GH001 vs Placebo in Patients with Treatment-Resistant Depression." JAMA Psychiatry, March 25, 2026. DOI: 10.1001/jamapsychiatry.2026.0096.
12GH Research PLC press release, January 5, 2026: "GH Research Announces FDA Lifts Clinical Hold on GH001, Clearing Path for Global Phase 3 Initiation in 2026.” investor.ghres.com.
13Wong R. Innovation Is the Best Medicine: A Policy Roadmap for Biotechnology. Chapter 4.
