Psychedelics Market 2023 Year-End Review
The psychedelics industry is maturing after the investment boom of 2020 and 2021, and patient long-term investors looking for opportunities to diversify their portfolios have options when it comes to exposure.
As clinical trials and research continue to demonstrate the potential benefits of psychedelic-assisted therapy (PAT), companies in the space are attracting more attention. The Investing News Network (INN) spoke with Naseem Husain, senior vice president and exchange-traded fund (ETF) strategist at Horizons ETFs, to get his thoughts on 2023.
"Compared to the market fervor in 2020/2021, like (2022), 2023 was a quieter and colder year in the psychedelics marketplace. This past year, no major catalysts emerged and there was continued consolidation in the industry — a trend that will likely continue," the expert said during the interview, emphasizing the period's slowness.
"That being said, clinical trials take time, and 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 added.
According to Research Nester, the psychedelic drug market was worth US$3 billion in 2022. If it grows at the firm's estimated compound annual growth rate of 14 percent, the market will be worth more than US$12 billion by 2035.
“There are 22 million American adults suffering from depression, 300 million people worldwide. So unfortunately, there's a very large unmet need and a massive market opportunity,” Cybin (NYSEAMERICAN:CYBN) CEO Doug Drysdale explained in an end-of-year conversation with INN. “The (depression and anxiety) market is maybe around a US$40 billion potential. If you add in other potential indications … like postpartum depression, alcohol use disorder or eating disorders, you're looking at a total addressable market of maybe US$100 billion annually.”
Here INN looks back on the psychedelics space in 2023 and highlights key developments and trends.
Regulatory developments in the US and elsewhere
As more people struggle with mental health and the addiction crisis worsens, a growing body of evidence suggests that psychedelic substances may offer much-needed relief. Researchers have continued to demonstrate that these treatments can be used to treat a variety of mental health disorders, and may reduce healthcare costs as well.
This has sparked a shift in the US legislative landscape, with increasing bipartisan support for psychedelic drug reform. At the federal level, President Joe Biden has expressed his expectation that psychedelic therapies will be approved in specific circumstances, and in 2023, the Food and Drug Administration (FDA) took steps to facilitate the development of psychedelic therapies when it released a comprehensive guide for clinical investigations.
At the state level, Oregon and Colorado have emerged as pioneers in the regulated use of psychedelics, with Oregon granting its first license for a healing center in March after officially legalizing PAT in January. Likewise, Colorado passed its Regulated Natural Medicine and Legalization Act in July, and will progressively implement various PATs.
While some states have introduced legislation to legalize or decriminalize psychedelics, the legislative process can be slow and outcomes uncertain. For example, while Oklahoma has approved HB 3414 to increase research, other legislation is still working its way through the system, such as New York's Psychedelic Law Enforcement Reform Act.
In October, California Governor Gavin Newsom signed a bill to immediately allow doctors to prescribe psychedelic treatments if the substances are rescheduled. However, he vetoed SB 58, which sought to decriminalize the possession and personal use of a selected group of psychedelics, after it had already passed through the Senate and Assembly. Newsom said his reason for vetoing the bill was that it failed to meet guidelines that would criminalize possession outside of medical clearance. It also didn’t satisfy the criteria for treatment guidelines, such as dose information.
Outside the US, other countries have also been taking steps to regulate and explore the therapeutic potential of psychedelics. Canada, the US' northern neighbor, is one example — on a provincial level, Alberta enacted a new policy at the start of 2023 that regulates psychedelic drugs for mental health treatment.
Federally, most psychedelic therapies remain illegal. However, Canadians continue to lobby for increased access to these treatments, and in rare cases can be approved for PATs that are undergoing clinical trials through the country’s Special Access Program. Last year, the Senate’s Subcommittee on Veteran Affairs published a report calling on governments at all levels to perform a large-scale research program on PATs, as the treatments have the potential to greatly help military veterans, an underserved demographic for which mental health struggles are common.
One company making this a focus is the veteran-founded Apex Labs, whose psilocybin product APEX-90 was recently approved for a 160 macro-dose clinical trial starting in the first quarter of 2024. However, ahead of the trial, a Canadian military veteran with treatment-resistant depression was approved for the treatment through the Special Access Program; they received a dose on November 2 in Vancouver accompanied by psychotherapy.
For its part, Australia has taken a different approach. On July 1, legalization took effect for MDMA and psilocybin for the medical treatment of post-traumatic stress disorder (PTSD) and depression, respectively, in tandem with therapy.
“Time will tell, but the Australian announcement is likely the biggest ‘positive’ event for the space and could provide a model for other jurisdictions to emulate,” Husain said. “If a major country like Australia is able to successfully administer psychedelic medicines, that could prove a catalyst for Canada and other Commonwealth nations.”
Which psychedelics clinical trials moved forward in 2023?
The use of psychedelics for therapeutic purposes continued building momentum in 2023 as clinical trials investigating the efficacy of these substances for treating a range of mental health conditions reached new milestones.
One of the more notable trials of 2023 was Compass Pathways' (NASDAQ:CMPS) investigation of the effectiveness of its product, COMP360, in treating bipolar II depression. This was the first study of PAT on bipolar disorder. The results, which were published in JAMA Psychiatry on December 6, suggest that psilocybin combined with psychotherapy could be an effective and safe treatment for bipolar II depression. The company is also studying the use of COMP360 to treat mental health disorders such as anorexia, PTSD and treatment-resistant depression, among others.
Another significant development in the field of psychedelic therapies was the publication of positive results from MindMed’s (NASDAQ:MNMD,NEO:MMED) Phase 2b trial of its LSD-based product MM-120, which was being investigated as a potential treatment for generalized anxiety disorder. According to the company’s website, there is also evidence to suggest that MM-120 could be effective for treating chronic pain and substance use disorders. MindMed’s share price rose by 7 percent following the news. The company plans to move on to Phase 3 trials in 2024.
Cybin, another player in the psychedelics industry, reported positive topline data from Phase 2 clinical trials of CYB003 for major depressive disorder. “(It’s) really unprecedented to see 80 percent of patients in remission after two doses. I don't think we've ever seen anything like that in depression, ever,” Cybin’s Drysdale commented to INN about the results. The US Patent and Trademark Office granted the company a patent for its product on December 6.
Finally, MAPS Public Benefit, a subsidiary of the Multidisciplinary Association for Psychedelic Studies (MAPS), submitted a new drug application to the FDA in December following positive results from Phase 3 trials that studied the efficacy of its MDMA-assisted therapy for treating PTSD. On January 5, MAPS Public Benefit announced it was changing its name to Lykos Therapeutics as it begins to focus on product commercialization pending FDA approval of its treatment.
Patenting and commercialization could be headwinds
The market for psychedelic therapies is evolving, and with the changing landscape there will be challenges that must be addressed. In a December 2022 research paper, experts explored the economic considerations surrounding PAT, including market dynamics and the potential for growth and consolidation in the space.
Bruce Campbell, president and portfolio manager at StoneCastle Investment Management, discussed MindMed in a market call with BNN Bloomberg: “One of the risks they obviously have with a company like (MindMed), they're going to need to continually raise money over time, much like the cannabis sector has done, to kind of build out their operations. So they're nowhere near the point where they're going to be cashflow positive. So you do have to be aware that if the stock runs up it could pull back on financing, and it's probably a position that you want to trade around.”
Campbell’s comments specifically address MindMed, but they also speak to the broader challenges and risks associated with investing in the psychedelics industry, including the need for ongoing funding and the potential volatility.
While some clinical trials have yielded promising results, companies must still overcome the complexities of patenting and commercializing their products. One issue that could hinder profitability is that psychedelic compounds are naturally occurring substances that may be difficult to protect under existing intellectual property laws.
To address this challenge, companies in the psychedelics industry are exploring a range of strategies, including developing novel formulations of compounds, combining them with other ingredients to create proprietary products and leveraging their expertise and data to establish a competitive advantage.
For example, Numinus Wellness (TSX:NUMI,OTCQX:NUMIF) made significant changes to its business in 2023 in order to increase its revenue, including launching a clinic licensing platform called Numinus Network, expanding its practitioner training programs and partnering with Healing Commercial Real Estate to find more clinics for its services. The company also closed operations at its non-revenue-producing Numinus Bioscience research lab.
After turning its focus to revenue-generating activities, Numinus reported significant growth in revenue in the fourth quarter of 2023, including US$5 million from the company’s wellness clinics.
As part of its focus on practitioner training, Numinus announced a partnership with MAPS in June, for which it submitted a clinical trial application to Health Canada. The purpose of the trial is to study how healthcare practitioners could establish protocols and procedures for MAPS’ MDMA-assisted therapy and identify any potential challenges. If successful, Numinus has plans to incorporate the therapy into its repertoire of PAT education and training programs.
While regulatory considerations are an important factor in the growth and development of the PAT industry, another trend affecting the sector is the increasing consolidation of the market through mergers and acquisitions.
“We've seen a huge amount of consolidation over the last couple of years, down from maybe 60 reported psychedelic companies to frankly only about a half a dozen now that are really focused on drug development,” Drysdale noted. Two such examples in 2023 were Cybin’s acquisition of Small Pharma and Otsuka’s (TSE:4578) acquisition of Mindset.
Psychedelics industry working to address ethical concerns
As the PAT sector develops, concerns are also arising, especially when it comes to the need for companies to balance affordable and equitable access to treatment as they pursue growth and expansion.
To this end, Beckley Waves, a venture studio that works exclusively with practitioners in the psychedelics space, established the New Ethics Council in June. The council is composed of experts who will be able to provide guidance on best practices. Among them is Beckley Waves founder Amanda Fielding, who has been an influential presence in the industry for generations, pouring over 55 years of research into the benefits of psychedelic experiences.
Investor takeaway
Looking back on recent developments in the psychedelics industry, it’s clear that in 2023 the field made significant strides in terms of clinical research, as well as some regulatory progress.
Of course, uncertainties still lie ahead in this young sector. “Despite positive broader market performance across other major indices, risk-off sentiment from 2022 persisted throughout 2023, which has led to a greater gulf between the psychedelic and biotech industries and other sectors,” said Husain.
Don’t forget to follow us @INN_LifeScience for real-time news updates!
Securities Disclosure: I, Meagen Seatter, 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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Psychedelics Market Forecast: Top Trends That Will Affect Psychedelics in 2024
As research into psychedelic drugs continues to produce positive results, policymakers are taking note.
With promising clinical trials, increasing public acceptance and a growing desire for psychedelic-assisted therapies (PATs), the sector seems to be poised for significant growth in the coming years.
Heading into 2024, the Investing News Network (INN) turned to industry insiders to dig into what might be in store for the psychedelics market. Read on to learn what they had to say.
Institutions considering psychedelics investment
Psychedelics companies are seeing a growing influx of funding and support thanks to positive clinical trial results.
“I think we've seen a shift in the last maybe three or four months of the year where more institutions are starting to look back at the psychedelic space again,” Cybin (NYSEAMERICAN:CYBN) CEO Doug Drysdale said in an interview with INN. “We had Steven Cohen's fund, Point72, make a significant investment in Cybin. They came in on our (at-the-market offering), and a number of other institutions are paying attention now as the sector is maturing.”
In addition, Lykos Therapeutics, which just changed its name from MAPS Public Benefit, secured US$100 million in Series A funding from a group of private investors in January 2024.
Lykos was previously focused on developing PATs for a range of mental health disorders, but after completing Phase III trials for its MDMA-assisted therapy for post-traumatic stress disorder in 2023, and then submitting a new drug application (NDA) to the US Food and Drugs Administration (FDA) in December, the company has changed its focus to bringing its MDMA treatment to market. 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 psychedelics industry.
Regulatory change key for psychedelics progress
The regulatory landscape for these psychedelic substances will play a crucial role in shaping 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 key differences, namely psychedelics companies' 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 exchange-traded fund (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 create greater accessibility for the patients who need these treatments. More and more practitioners are being allowed to administer psychedelic drugs 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 a strict stance on cannabis, has approved the legal therapeutic use of MDMA and psilocybin, although some scientists have called the decision rushed.
In some cases, patients are circumventing federal roadblocks either by procuring illicit substances on their own, or by seeking treatment through private institutions. For example, psychedelic integration therapy, which helps individuals process and integrate insights gained during a psychedelic experience, is available in Vancouver, BC, 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 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
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 a Forbes article on cannabis and psychedelics market predictions for 2024. However, he also acknowledged that the industry is often unpredictable.
That said, there has been some progress on that front.
As mentioned, Lykos has now submitted an 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 will take six months with a priority review or 10 months with a regular review.
If the FDA ultimately approves the treatment, MDMA would need to be moved from Schedule I to Schedule II, opening the door for other practitioners who have potential therapies in their pipelines.
While legalization is widely expected in the future, opinions vary on how quickly it will come. For instance, the American Medical Association predicts that most states will have legalized psychedelics by 2037 — that means 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.
Investor takeaway
The evidence suggests that the psychedelics 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 treatments by offering affordable and effective therapies to those who need them.
Don’t forget to follow us @INN_LifeScience for real-time news updates!
Securities Disclosure: I, Meagen Seatter, 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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