This 1 Stock Is a Definite Winner in the Election | The Motley Fool

The 2020 election had many areas of significance, with investors focusing on renewable energy, healthcare, and navigating the COVID-19 pandemic effects. But voter approval of one state ballot initiative took a potentially historic step in treatment in mental healthcare. 

Oregon became the first U.S. state to legalize the use of psilocybin — the active ingredient in magic mushrooms — for the treatment of mental health disorders. The vote has positive ramifications for newly public biotech company Compass Pathways (NASDAQ:CMPS). 

Image source: Getty Images.

Where it came from

U.K.-based Compass Pathways was founded to study the approach of psilocybin therapies to treat mental health issues. The company developed a synthesized version of psilocybin, and is studying the effectiveness of using it as a psychoactive treatment for treatment-resistant depression. 

Psychedelic, or “magic,” mushrooms have been used as a recreational drug since the 1960s when Timothy Leary traveled to Mexico for his first experience with the hallucinogenic. It had been used in Mexico for more than 2,000 years for sacred and medicinal purposes by the Aztecs, whose word for it is teonanácatl, or “god fungus.” 

Compass now has its formulation in phase 2b clinical trials, where the efficacy of the treatment is tested. The treatment has received breakthrough therapy designation from the U.S. Food & Drug Administration (FDA), allowing it to expedite the development and review of the therapy. 

The path forward

Oregon Measure 109, named the Psilocybin Program Initiative, was approved with 56% of the vote, according to the Associated Press. Oregon’s ballot initiative gives its public health department a two-year program development period to create regulations and a framework for manufacturing and dispensing psilocybin treatment for mental health therapy. Licensed service providers would be able to treat adults 21 and older for treatment-resistant depression, post-traumatic stress disorder, and other mental health conditions. 

Compass plans to have its phase 2b clinical trials completed by the end of 2021, chairman, co-founder, and chief executive officer (CEO) George Goldsmith said in a recent CNBC interview. 

The biotech company went public Sept. 18, 2020 with an initial public offering (IPO) priced at $17 per share. Though shares have more than doubled since then, there may be plenty more to come, and the Oregon vote helps set up its path forward. 

Who benefits

Citron Research, most widely known for short-seller reports, put out a positive evaluation on Compass on Oct. 5, saying it has the “potential to be a generational stock.” It notes the importance of the treatment’s breakthrough therapy designation from the FDA, which Compass itself calls a “significant milestone.” The designation is given “if preliminary clinical evidence shows that it may demonstrate substantial improvement over available therapy,” as stated by the…