As the research into psychedelic formulas continues to produce positive results, policymakers are taking notice.
With promising clinical trials, increasing public acceptance and a growing desire for psychedelic-assisted therapies (PAT), the industry seems to be poised for significant growth in the coming years.
Growing investment in the psychedelics sector
Companies in the psychedelic space are seeing a growing influx of funding and support thanks to positive clinical trial results.
In addition, Lykos Therapeutics, which just changed its name from MAPS Public Benefit Corporation, secured US$100 million in Series A funding from a group of private investors on January 5, 2024.
Lykos was previously focused on developing PATs for a range of mental health disorders, but, following the completion of Phase III trials of its MDMA-assisted therapy for post traumatic stress disorder in 2023 and subsequent submission of a new drug application (NDA) to the US Food and Drugs Administration (FDA) in December, the company has now changed its focus to bringing its MDMA treatment to market if it receives approval. The funding will be used to support these ongoing efforts.
Several of the same investors also recently contributed to a US$3.3 million funding round for Beckley Waves, a venture studio formed exclusively for the development of the psychedelic industry.
Ongoing regulatory progress
The regulatory landscape for these substances will play a crucial role in shaping the future of the market, with drug reform and decriminalization efforts having the potential to unlock significant growth opportunities.
While the current legislative landscape for psychedelics bears some similarities to that of the cannabis industry, there are also some key differences, namely its sole focus on therapeutic applications.
“In my opinion, the psychedelics industry is completely different than the cannabis market,” said Naseem Husain, senior vice president and ETF strategist at Horizons ETFs. “One is a medical and biotechnology opportunity while another is primarily focused on retail, at least in the North American market. While both have legal barriers to overcome that could result in growth, the psychedelic pipeline is about pharmaceutical and regulatory development and less so about marketing and distribution like we’ve seen in the hyper-competitive cannabis sector.”
This crucial distinction could allow for greater accessibility for the patients who need these treatments. More and more practitioners are being allowed to administer them via trials, and certain US states and Canadian provinces have legalized PATs or developed regulatory mechanisms to make them accessible, such as Health Canada’s Special Access Program. Even Australia, a country that has maintained its strict stance on cannabis, approved the legal therapeutic use of MDMA and psilocybin — a decision some scientists have called as rushed, especially when compared to the sluggish progress of cannabis legislation in the country.
In some cases, patients seek to circumvent the federal roadblock, either by procuring illicit substances on their own or by seeking treatment through a private institution. For example, psychedelic integration therapy, which helps individuals process and integrate the insights gained during a psychedelic experience, is available in Vancouver, but often at an exorbitant cost, and patients are left to source psychedelic compounds on their own.
What Drysdale and other market participants hope to achieve through their therapies is an affordable and effective treatment, which needs Health Canada or FDA approval to be accessible.
“What we’re doing is we are creating and producing synthetic, modified molecules, GMP manufactured, hoping to be FDA approved, prescribed by a doctor, reimbursed by your insurance company,” he said. “And I think that’s what you need to attract the attention of patients who are already depressed and dealing with stuff. I think that some may go seek natural mushrooms but if we can make these treatments really accessible through this regulated route first, then I think that’s the most reliable and less risky way of providing really significant access.”
Potential rescheduling on the horizon
So, could 2024 be the year for psychedelic drug reform? Some experts think the answer could be yes.
“I see the FDA approving one or both of these compounds (psilocybin and MDMA) and a new medical model and industry will be birthed in 2024 and 2025,” Andrew DeAngelo said in his 2024 Cannabis and Psychedelic Predictions article for Forbes, in which he also acknowledged that the industry is often unpredictable.
There has been some progress on that front. As mentioned above, Lykos Therapeutics has now submitted its NDA to the FDA for its MDMA treatment, and the company requested a priority review because of the FDA’s designation of MDMA as a breakthrough therapy. If the FDA accepts the application, the process would take six months with a priority review or 10 months for a regular review.
If the FDA ultimately approves the treatment, MDMA would need to be rescheduled from Schedule I to Schedule II, opening the door for other practitioners who have potential therapies in their pipeline.
While others are less certain of reform this year, most agree that legalization is on the way. The American Medical Association predicts that most states will have legalized psychedelics by 2037, so current investors might still need to wait a while before they start seeing high returns on investment.
“Participants and analysts have known that the psychedelic opportunity is ultimately a long-game that requires public policy progression, alongside pharmaceutical advancement and innovation. Ultimately, a watershed moment could lead to a waterfall effect across the industry,” Husain said.
The evidence suggests that the psychedelic industry could be on the brink of significant growth in the coming years, but with some caveats. While clinical trial results have been promising and public acceptance is growing, the regulatory landscape will play a critical role in shaping the future of the market.
With the right regulations and approvals in place, psychedelics could revolutionize mental health care and offer affordable and effective therapies to those who need them.
Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.