Wall Street is getting behind the latest trend in mental health treatment — psychedelic therapy — by funding drug trials aimed at developing treatments for depression, anxiety or post-traumatic stress disorder.
One every five people in the U.S. reported a mental illness in pre-pandemic 2019, so the need for resources is mounting and treatment with psychedelic drugs such as psylocibin and MDMA is the latest focus for research. In 2021, the global market for psychedelic therapeutics was valued at just over $3.5 billion and is expected to more than double to $8 billion over the next five years.
- The global market for psychedelic therapeutics is expected to more than double to $8 billion by 2029.
- Transcend Therapeutics, one group working to develop a psychedelic compound for therapeutic purposes, announced $40 million in venture capital funding in closing its Series A funding.
- Twenty-five states have considered legislation to make psychedelics available for therapeutic use, and the FDA is expected to approve substances like MDMA or psilocybin for mental health treatment within the next few years.
As the market expands, states are expressing more willingness to consider the therapeutic effects of hallucinogens. A 2021 article from JAMA Psychiatry presented the results from a clinical trial that found “psilocybin-assisted therapy was efficacious in producing large, rapid, and sustained antidepressant effects in patients with major depressive disorder.”
So far, only Oregon and Colorado have legalized the use of psilocybin and psilocybin-related services like assisted therapy. Last year, 25 states considered bills to allow access to psychedelics. Amid movement in the states and lobbying at the federal level to decriminalize some substances for similar therapies, investors are putting millions into an early-stage market.
The Food and Drug Administration is expected to take action on approving the new treatments, which focus mainly MDMA and psilocybin use in a clinical setting, coupled with talk therapy and a trained practitioner to guide patients through the use of the drugs.
Significant changes could take years to materialize, and actually implementing treatments is a complicated process that involves training therapists on the drugs’ use. Researchers are also focused on shortening the “trips” for therapeutic purposes.
Companies are seeking to develop drugs that would have shorter, milder effects than MDMA, LSD or ketamine, which can last six to eight hours or more. Transcend Therapeutics says its drug induces euphoria but not hallucinations.
As the once red-hot biotech market sags and a benchmark index that tracks such stocks stips, enthusiasm for the medicinal potential of drugs similar to MDMA and psilocybin is on the rise.
The global pharmaceutical market for traditional antidepressants is expected to reach $22.6 billion by 2026. In 2021, the market was valued at $15.61 billion, lws by North America.
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Transcend Therapeutics raised $40 million in January to develop a PTSD treatment. Other companies, including Gilgamesh Pharmaceuticals Inc. and Lusaris Therapeutics Inc. have raised about $100 million since November for similar treatments. Irwin Naturals Inc. announced a $40 million deal with its commercial lender to continue expansion into the therapeutic hallucinogen market.
One early hiccup for hallucinogens: the amount of training and licensing required to offer such therapies.
Transcend Therapeutics, founded in 2021, says its new compound, methylone, has short-acting and mild effects, and requires less time with a clinician. It can also be used alongside common drugs for depression and anxiety, while some other naturally occurring psychedelic compounds can’t.
“There’s a role for traditional medicine for people who want to do six- to eight-hour trips, but you have to face the reality of the medical system as it is today,” Amy Kruse, a neuroscientist and partner at venture-capital investment firm Prime Movers Lab, which led a $39 million funding for Gilgamesh in December, told the Wall Street Journal.