Per the consensus of Wall Street analysts, Compass Pathways (NASDAQ: CMPS) stock is on track for an absolutely stellar 12 months. They see its shares rising by 307% compared to where it is today. For reference, a typical year sees the stock market rise by around 10%, so the bean counters are doubtlessly calculating that the upstart biotech will succeed in its ambitions to commercialize its first psychedelic therapy.

Unlike many frothy estimates, there's actually a credible path for Compass to wow the market to the extent that the analysts anticipate, though the outcome is very far from being assured. Here's what needs to happen.

Breaking through long-standing barriers

Some of the most important upcoming catalysts for Compass' stock have little to do with its own research and development (R&D) or business development activities.

Lykos Therapeutics, a psychedelic biotech spun out of the nonprofit Multidisciplinary Association For Psychedelic Studies (MAPS), is on the verge of commercializing its first therapy program, which is a combination of MDMA (a psychoactive chemical known by the street names ecstasy or molly) and psychological support intended to treat post-traumatic stress disorder (PTSD).

Lykos has submitted its approval packet to regulators at the Food and Drug Administration (FDA), and it should hear back by Aug. 11 of this year. That means before the close of 2024, the very first experiential psychedelic medicine could be approved for sale, upending decades of prohibition and marking the start of a new age of treating mental illnesses.

If Lykos succeeds, it is very likely that Compass' stock will fly upward. The implication is that regulators will be on board with the general idea that it is possible for psychedelics to be safe and effective. And so when it's another player's turn to have regulators consider their application for commercialization, investors will be able to have some confidence that there will not be an automatic rejection on the basis of the therapeutic modality alone.

Shifts in the disposition of other executive agencies, like the Drug Enforcement Agency (DEA), as well as in the disposition of federal legislators, are practically a given if the FDA gives the green light to Lykos. Each of those shifts has the potential to be another significant catalyst, such as rescheduling psychedelic molecules to be easier to use medicinally and provisioning for federal research dollars to go into psychedelics research.

And that's before even taking Compass' own increasingly mature pipeline into account. The biotech's lead candidate, COMP360, is a pairing of psychological support from trained clinicians and the psychedelic molecule psilocybin, and it's intended to address treatment-resistant depression (TRD). COMP360 is currently in phase 3 clinical trials, with one trial anticipating to report top-line data this summer and another reporting in the middle of 2025.