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The investigation of psychedelic drugs for their medical benefits is attracting investors. How does the leading US drug agency feel?

The development of the growing psychedelics industry depends on myriad factors, but one of the most critical is its relationship with a principal medical authority.

The US Food and Drug Administration (FDA) is the leading body for drug approvals in the US. Its job is to review clinical data from established medical studies on the feasibility of drug compounds or products as treatments for specific ailments.

Essentially, this federal body determines whether medical products will ultimately reach the hands of patients.

What does the FDA think about psychedelics?

As a federal agency, the FDA has to adhere to federal policy for drugs in the US. The country's national drug-scheduling system provides data on all kinds of drugs and the regulations they must follow.

All major psychedelic compounds beyond ketamine are in the Schedule I category, which receives the heaviest scrutiny from federal authorities. Schedule I drugs are considered to have no currently accepted medical use and a high potential for abuse.

This means that psychedelics such as ibogaine and psilocybin are in the same class as heroin and methamphetamines. Cannabis is also listed in this segment, although US President Joe Biden requested a review of that scheduling in October 2022.

If this is the case, then why are companies in the psychedelic drug development space pursuing clinical studies and looking for FDA approval? Interestingly, despite the legal status of these drugs, the FDA isn't so closed off that it won't examine their potential.

For example, in March 2019, the federal agency approved Johnson & Johnson (NYSE:JNJ) subsidiary Janssen Pharmaceuticals’ Spravato (esketamine), a ketamine analog nasal spray for treatment-resistant depression and depression with suicidal ideation.

While legal options for psychedelic drug treatments are extremely limited at present, several clinical trials challenging the Schedule I classification are currently underway with FDA approval. These studies are mainly focused on the potential of psychedelic drugs to treat post-traumatic stress order (PTSD), depression and addiction.

FDA-approved clinical trials underway

In 2017, the non-profit organization Multidisciplinary Association for Psychedelic Studies (MAPS) was granted breakthrough therapy designation by the FDA in a move that represented a change in the drug authority's perspective. MAPS is investigating the use of MDMA as a method of psychotherapy for patients with PTSD.

The breakthrough therapy designation allows for clinical research to speed along the development and review of drug candidates geared at treating serious conditions. This designation requires preliminary clinical evidence indicating that the drug candidate is safe and has the potential to make substantial improvements for patients over other available therapies.

During the first Prohibition Partners LIVE online event, Rick Doblin, founder and executive director of MAPS, told the audience he sees the FDA as an engaged partner in conversations surrounding the construction of clinical trials with psychedelic agents.

Doblin added that he perceives the FDA as a regulatory agency that is willing to put science over politics when it comes to the medical benefits of psychedelics. In November 2022, MAPS completed its second Phase 3 trial of MDMA, which will inform MAPS’ new drug application, which it expects to submit to the FDA midway through 2023.

According to a 2022 report from KPMG, if the FDA does approve MAPS’ MDMA in-patient therapy treatment for PTSD in the coming year, it “would open the floodgates for further development.” As it stands, a handful of publicly traded companies are already taking advantage of the gates opened by MAPS' successful clinical work, starting down the long road to bringing legal and reputable psychedelic therapies to market in the future.

In late 2020, the psychedelics market saw excitement when Compass Pathways (NASDAQ:CMPS) listed directly onto a senior US stock exchange. Similar to MAPS, Compass Pathways has received support from the FDA. In 2018, the company confirmed the receipt of breakthrough therapy designation from the FDA for its study of treatment-resistant depression using psilocybin.

In November 2022, Compass Pathways reported the publication of positive results from a Phase 2b clinical trial of psilocybin therapy for treatment-resistant depression in the New England Journal of Medicine. Phase 3 trials are scheduled to begin by the end of 2022. The company is also running Phase 2 psilocybin therapy trials for PTSD and anorexia nervosa.

In early 2022, Mind Medicine (MindMed) (NASDAQ:MNMD,NEO:MMED) received investigational new drug (IND) clearance from the FDA for its Phase 2b trial to evaluate the benefits of MM-120, a pharmacologically optimized form of LSD, in treating generalized anxiety disorder. The company initiated dosage to patients in Q3 2022 with key clinical readouts expected in late 2023.

“We don’t see a future in recreational psychedelics,” JR Rahn, co-founder director and co-CEO of the firm, previously told the Investing News Network. “The only future that we see is psychedelic medicines being passed through the FDA.”

Cybin (NYSEAMERICAN:CYBN,NEO:CYBN) received IND clearance from the FDA in June 2022 for a Phase 1/2a trial evaluating its flagship psilocybin-based candidate CYB003 against major depressive disorder and alcohol use disorder. After receiving its US Drug Enforcement Agency issued Schedule I license, the company initiated dosing in its first-in-human Phase 1/2a trial in late August. Cybin expects the trial will be completed in the first half of 2023.

Changing mentality on psychedelics helping drive market

A report by Psychedelic Support points to the fact that the FDA and National Institutes of Health have commented on the medical benefits associated with psychedelics-based treatments.

"The message was clear. The FDA will evaluate risk-benefit profile of psychedelic substances in the same way as other investigational drugs," the report indicates.

According to the report, the agency's requirements for clinical trial designs highlight the following questions:

  • How psychedelics work in a particular setting
  • Timing of administration
  • Structured approach or will multiple approaches work?
  • How fast does symptom reduction occur and how long are symptoms decreased?
  • Do people relapse, and if so can the drug retrieve them from relapse?

Banking giant Morgan Stanley (NYSE:MS) released a pivotal psychedelics market research report in mid-2022. The report outlines the challenges market players face in navigating the FDA’s rigorous clinical trial process.

“The most immediate challenge is navigating clinical trials and achieving FDA approval before advancing to administration and treatment protocols,” the report’s authors explain.

But regardless of these inherent challenges, Morgan Stanley said the fact that the FDA has designated both MDMA and psilocybin as breakthrough therapies is clear evidence that psychedelic drug candidates are indeed making credible progress toward a potential pathway to full FDA approval. “Over the next few years, we might see the first psychedelic therapies pass FDA approval, giving clinicians additional tools to treat mental illness, and potentially the data to determine which psychedelic drugs would better treat certain indications and patients,” the firm's report states.

In terms of the potential for long-term growth in the psychedelic drug market, Morgan Stanley points to the wide range of possible treatment areas, including depression, PTSD, attention deficit hyperactivity disorder, addiction, anxiety and chronic pain.

Investor takeaway

From the information currently available, it's clear that one of the biggest drug authorities in the world appears to be slowly but surely increasing its support of psychedelics.

What's more, the medical indications show a promising market that is already garnering support among investors. The psychedelics space looks set to continue developing as more companies come to market.

Don't forget to follow us @INN_LifeScience for real-time news updates!

Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.


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