Psychedelics market update: 2022 prediction panning out

Coming into 2022, INN asked Andrew Charrette, director of regulatory affairs and psychedelic advisor with KGK Science, if change in the market would require a significant regulatory approval.

“It'll be difficult, and it's going to be difficult for even the best companies as they're still flying blind right now,” he said at the time. That projection has panned as 2022 has brought market difficulties across the board.

It's clear that the macroeconomic conditions affecting virtually every sector in the investment landscape are impacting the current financial reality for psychedelics stocks.

Jim Gilligan, chief scientific officer and interim CEO at Tryp Psychedelics (CSE:TRYP,OTCQB:TRYPF), said a variety of companies, including his own, have seen significant valuation declines “despite making advances,” explaining that these drops have been based on nothing coming out of company pipelines.

“There have been changes in market dynamics in biotech and psychedelics in particular that are sort of outside of our control,” Gilligan said. He was referring to the immense pressures created by the poor economic conditions at large, which are sending markets across the board into a decline.

Payton Nyquvest, founder and CEO of Numinus Wellness (TSX:NUMI,OTCQX:NUMIF), told INN he has seen several cycles of new capital coming into the market. Right now he is encouraged by what he described as a new level of knowledge. From his perspective as the founder of one of the first psychedelics firms to hit the public market, investors are more educated now than they were during the initial wave of hype.

That rush led to “not completely clear business plans,” which according to Nyquvest have fueled a consolidation trend in the space. “We've now seen a real focus in prioritizing what is really going to create value,” he said.

Psychedelics market update: Not all companies will be winners

Evan Levine, CEO of PsyBio Psychedelics (TSXV:PSYB,OTCQB:PSYBF), told INN he is worried about the value proposition of the entire psychedelics sector based on how little time companies have been around.

“A lot of these companies were formed just using the word 'psychedelic,' in my opinion,” Levine said.

Investors will have to be more cautious than ever before with the names they pick in psychedelics, according to the PsyBio executive. “Do I think our sector is a screaming buy? No, I don't,” he said. “I think that there's a few companies out there that have a real shot at succeeding within our industry.”

Levine agreed with Gilligan’s assessment that macroeconomics are having a significant impact on the progress and valuation of the psychedelics category.

“There's not a lot of value in a lot of the companies out there,” Levine said.

Psychedelics market update: 2022 studies show market progress

The psychedelics industry has grown thanks to the progress of clinical trials, which are adding to the medical promise of substances that were previously thought of as dangerous.

The development of these studies has become pivotal for the overall health of the market, with players on the sidelines looking forward to the first approval just as much as drug makers themselves.

Experts have previously told INN that the market is expected to see a slew of new studies launch this year. And when it comes to the studies everyone is watching in 2022, some have already brought promising data readouts.

Gilligan and Levine both told INN they are keeping a close eye on the progress of COMPASS Pathways' (NASDAQ:CMPS) primary study evaluating the company's lead psilocybin candidate.

In May, COMPASS shared an update on its Phase IIb study at the American Psychiatric Association's annual meeting, and said it plans to begin the critical third phase in H2 2022.

Psychedelics market update: Regulatory progress updates

Nyquvest told INN there’s never been more clarity when it comes to the psychedelics industry and regulators.

Aside from medical regulators who oversee the progress of clinical studies with substances like MDMA and psilocybin, there have been more changes for regulation at the policy maker level. The Numinus executive pointed to moves from the states of Oregon and Colorado, as well as new policies from Health Canada.

For his part, Gilligan told INN he is hoping for an efficiency upgrade over the application of rules by federal regulators in the US, the home of the most prominent psychedelics studies.

The Drug Enforcement Agency (DEA) and US Food and Drug Administration play key roles in the progress of psychedelic medicines, and with the recent explosion of companies launching studies, there’s been a need to adjust the previous understanding surrounding these substances.

“They're becoming more comfortable with the administration of psychedelics,” Gilligan said.

The executive said there are still frustrations with the licensing lag created by the DEA’s role when it comes to psychedelic studies. “Performing clinical studies that involve a multitude of states, you need to have a multitude of DEA approvals … and there's tremendous variability in state to state.”

The executive remains hopeful that thanks to the uptick in studies, the DEA is becoming more comfortable with the rules surrounding psychedelics.

“What we're hoping is that there'll be this realization that they really should not be scheduling (drawings), and that will facilitate and make it much easier to do your clinical research,” Gilligan said.

Psychedelics market update: Investor takeaway

The psychedelics investment proposition finds itself in a unique place right now as the market anticipates the eventual arrival of massive catalysts by way of drug approvals.

While investors wait, there has been a drag in valuations and stock prices that is also connected to current market pressures at a bigger level outside of just biotech and pharmaceuticals.

Investors are more educated than ever when it comes to psychedelics, and will have to use those skills regularly as they try to pick winners while watching out for companies that may be on the way out in 2022.