Psychedelics Market Forecast: Top Trends That Will Affect Psychedelics in 2024

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.