Psychedelic Market Grows Despite Many Unknowns

The psychedelics renaissance is in an expanded growth mode, not just in the U.S. and Canada, but in other countries as well.

But everywhere in the world, it’s a bit of a Dr. Jekyll/Mr. Hyde scenario: startup businesses ostensibly building a serious moneymaking enterprise in a nascent industry, while conducting experiments in labs with novel brain-chemistry substances that could change the world of mental health wellness for good… if all goes as planned.

The usual financial indicators point to a troubled and struggling industry. One example: the North American Psychedelics Index is at its lowest point in 5 years.

And look at some of the top companies and how they are faring: MindMed (NASDAQ: MNMD)reported an accumulated deficit (page 8) of $156.1 million on March 31, 2022; Atai Life Sciences listed 22 potential difficulties involved in their clinical trials that could be serious problems to their growth (https://ir.atai.life/static-files/9c1939ee-7c32-422f-8bdf-de5b2702a0a6, pgs. 46-47); and Cybin, with many impressive developments since the beginning of the year (https://sec.report/Document/0001628280-22-017746/annualinformationformaif-c.htm, pg. 20), reminds investors that “since inception, the company has had negative operating cash flow and incurred losses,” and that the company’s negative operating cash flow and losses “may continue for the foreseeable future”( https://sec.report/Document/0001628280-22-017746/annualinformationformaif-c.htm, pg. 46).

Even so, it’s these companies—plus others in the space, such as Field Trip, Awakn Life Sciences, and Seelos Therapeutics—that always show up in financial reporting as the companies to watch. They may look dark and troubled on paper right now, but according to researchers, their future in the industry is blazingly bright. 

Data Bridge, a market research company, reported projections that the global psychedelic drugs market is expected to more than double over the next few years, reaching $8 billion by 2029 from $3 billion in 2021.

Even though the U.S. and Canada lead the global psychedelics market development—there are more than 50 publicly traded companies related to the development or administration of psychedelic-like drugs in the U.S., with at least 3 valued at more than $1 billion—there are other countries working in psychedelics as well, according to the Data Bridge report, including Mexico, Germany, China, France, U.K, Italy, Spain, The Netherlands, Russia, Switzerland, Belgium, Austria, the UAE, Egypt, Israel, and others. 

The U.S. had a market share of 93.5 percent in 2021 in the North American region, and is projected to continue experiencing high growth through this year, according to a psychedelic drugs market research report. Germany is expected to dominate the European market with a market share of around 19 percent by 2031, while the U.K. and France are also expected to drive demand in Europe for psychedelics over the next few years.

In 2020, China dominated the East Asia psychedelics market with 40 percent share, and the psychedelics market there is projected to expand at a rate of 17.1 percent from 2021 to 2031. 

Psilocybin formulations are showing the most promise for accelerated business development. But MDMA quickly surpassed it this year.

For instance, there are currently a combined 109 clinical studies with psilocybin either recruiting or active in the U.S., Canada, Denmark, Switzerland, Ireland, the U.K., Argentina, Sweden, Germany, and Jamaica. 

But there are 116 MDMA clinical studies combined in the U.S., Canada, Switzerland, the U.K., Spain, Israel, The Netherlands, France, Norway, South Africa, Italy and Germany.

Clinical trials have become one of the key indicators for the success of a company in this industry, as it demonstrates both the business determination and scientific acumen to set up a trial as a necessary stepping stone to get to market, along with an ability to continue to fund the expensive research and development that can go on for years. 

Depression Drivers

But what’s really driving the market for psychedelics and their proven mental wellness attributes is an increase in depression across the globe, with more people seeking alternative treatments because standard depression drugs do not address some of their more serious depression issues. The total cost of mental illness in the U.S. is estimated to be $2.5 trillion; and the global antidepressant market is worth over $13.5 billion.

One study reported that the ideal antidepressant has not been found, as the problems of intolerance, delayed therapeutic onset and limited efficacy persist. The complications of treating depression include the fact that it may be “an umbrella construct” with multiple disorders of “varying biological pathophysiology” which each require different treatment. 

So far, more and more psychedelics studies appear to confirm that the psychedelic compounds they are studying (especially psilocybin) may provide the answer for treating depression without the disturbing side effects or the need for constantly taking medications.

There will continue to be ongoing issues as the psychedelics industry grows while the mental health wellness world watches, tests various compounds and molecules, and builds new enterprises.

Some issues are predictable, such as problems with patents going forward as in the case of the challenge against Compass Pathways’ (NASDAQ: CMPS) psilocybin patent. That challenge was denied by the U.S. Patent Trial and Appeal Board’s (PTAB) in late June in a decision that appears to actually be a win for both sides.

Other issues are less predictable, such as psychedelics administered without psychological support and/or a supportive environment that may have limited antidepressant efficacy, and in very rare cases, could even worsen a patient’s condition, according to a 2017 study. “We share the view that the presence of psychological support is an essential component of the psychedelic treatment model. But we also recognize that the magnitude and nature of its contribution needs to be better defined and tested,” the authors wrote.

Increasing demand for psychedelic therapy is poised to synergize with an upswell in funding initiatives from other non-medical sources through 2022 and into 2023, potentially jeopardizing standards of safety and professionalism if corners are cut, according to another study. “In anticipation of and, to some extent, already witnessing the beginning of a ‘hype-cycle’, we believe that innovative, pragmatic and exploratory research can play a vital role, helping safeguard the development of a particularly promising, yet vulnerable, approach to mental health care.”

The psychedelics industry is hot all across the globe. It’s making leaps and bounds in terms of developing the science, even as it scrambles for financial resources to keep research and development funded. There are signs of a shakeout of companies this year and into 2023, with more mergers, acquisitions, and partnerships expected. 

Multi-million deals will continue—like the $64 million and $70 million investment deals in 2021. Decriminalization and psychedelics drug reform will continue—legalization of psilocybin is making headway in the U.S. (Oregon and Colorado); it is already legalized in Austria, the British Virgin Islands, The Netherlands and Jamaica. 

Whatever the business and science dynamics of the industry are today, psychedelics are all aimed at a righteous goal once approved and out of the labs: Provide the world with a new choice for better mental health. The question is how long will that take, and what global power will lead the charge.

 

Dave Hodes

David Hodes is a business journalist based in the Washington D.C. metropolitan area. He has contributed feature articles to several cannabis and psychedelics publications, as well as general business/lifestyle publications, on a variety of topics. Hodes was selected as 2018 Journalist of the Year by Americans for Safe Access. He is a member of the National Press Club, and the deputy booking agent for the National Press Club Headliners Committee.


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