Importantly, the results weren’t just good—they were too good to ignore. “For something like psychedelic compounds, because of stigma, so-so results probably wouldn’t be enough to overcome the hesitancy both from regulators and from physicians. But the results they’ve been getting are anything but,” says Lamkin, the law professor.

Over the past decade, the US Food and Drug Administration (FDA) has made some moves that seem to be paving the pathway for psychedelics to reach patients. In 2018, the agency approved Epidolex, the first approved drug with an active ingredient derived from marijuana, to treat some forms of epilepsy. The following year it greenlit Spravato, a variation of ketamine delivered in a nasal spray for patients with treatment-resistant depression. And perhaps most significantly, it designated MDMA and psilocybin as breakthrough therapies (meant “to expedite the review of drugs”) in 2017 and 2018 respectively. “Breakthrough therapy status is not just authorization, it’s encouragement—that’s really surprising,” Lamkin says.

Another event that seemed to help turn the tide of public opinion more in favor of psychedelics: the publication of Michael Pollan’s book How to Change Your Mind in 2018. “When you have a book like that comes out from a well-established author, it takes something that maybe has some stigma and gives it a sense that this is real, that it’s something worth knowing about,” says Shlomi Raz, chairman and CEO of psychedelic drug startup Eleusis. “I can’t tell you how many people said, ‘I read that book and now I’m interested.’”

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Where the money flows

Tesla La Touche launched psychedelic medicine startup Aphrodite Health in April 2021. The all-female leadership team, rare in the overwhelmingly white and male psychedelics space, hopes to use psychedelics to treat mood disorders that arise in women during menopause. Even though she has 20 years of experience bringing “technology and care delivery solutions” to market at companies like Johnson & Johnson and Roche, La Touche was surprised at the early buzz around her company. She expects her seed round of funding to close by the end of July.

“I think the world is ready for us to explore options for more self-directed care. Psychedelic medicine presents that as an opportunity for us to get a few things right in how we address our wellbeing,” La Touche says. “The diversity of the team we’re presenting to the market—people are ready to have the perspective we bring to the market in this nascent area of medicine.”

Even a few years ago, Aphrodite Health’s story would have seemed impossible. Henri Sant-Cassia, founding partner at UK-based VC firm the Conscious Fund (which has invested in Aphrodite Health), said that even in 2019, when his fund was founded, the field was like “a formless pre-Big Bang void.” “It was all off the radar. You had to phone people because they didn’t have web sites. There was virtually nowhere to invest, and very few investors,” he says.

Suddenly, though, the field seemed to coalesce: “It was a kind of acceleration over the last 12 months, a hyper-acceleration.” His fund has been involved in about 24 projects in two years.

This explosion happened in part because of spectacular results of scientific studies that the private sector could not ignore, and the destigmatization of psychedelics because of works like Pollan’s book.

But another factor was a growing acknowledgement that the state of the art for psychiatric conditions just wasn’t cutting it. “There’s clearly a major unmet [patient] need. No one will dispute that. And Covid didn’t make it any better,” says Raz. “Whether it’s substance abuse, depression, anxiety, eating disorder, or chronic pain, these are the conditions that constitute a bulk of the public health spending.” (One 2016 study found that mental disorders cost $201 billion in 2013, the most of any medical condition.) As talking about mental health has become less taboo, conditions like depression and anxiety have become more prevalent.

So startups began cropping up to meet that need, as did investors to fund them. A Pitchbook list of psychedelic startups includes more than 50 companies, the oldest of which was founded in 2010. Some have even gone public: Compass Pathways in Sept. 2020, MindMed in April 2021, and Peter Thiel-backed ATAI Life Sciences in June 2021. The market for psychedelic medicine, valued at about $2 billion in 2019, is expected to more than triple, reaching nearly $7 billion by 2027, according to a 2020 analysis from Data Bridge Market Research. A July 1 report from investment bank H.C. Wainwright & Co estimates psychedelic-assisted psychotherapy could have global annual revenues of more than $17 billion by the late 2030s.

“The market is basically saying, ‘We didn’t realize there was all this data, we like what we see, now let’s take this to the next step,'” says Patrick Trucchio, managing director at H.C. Wainwright & Co. “It’s not often that the market sends that signal. It’s got to be a compelling platform.”

These companies are all involved at different stages of the drug pipeline. A good number, including Aphrodite Health, are developing and testing proprietary compounds for psychiatric conditions and beyond. Modern drug discovery and development is always difficult and expensive. But one challenge with psychedelics is that the core therapeutic compounds of MDMA and psilocybin are not themselves able to be patented. “[Companies] will have to make modifications that will make their inventions patentable,” Lamkin says. “What is the value-add going to be on the changes they make to these drugs?” That is, companies will have to ensure the other compounds don’t inhibit or alter the effect of the active ingredient (several drug company CEOs I spoke with said compounds they had added to the psychedelic drug made them work better).

Other companies are looking beyond drug discovery, cultivating key components of the drugs, providing materials for research, or creating clinics where patients could one day receive psychedelic treatment.

It’s not just more companies crowding the psychedelic field—there are more investors, too. It’s no longer just early movers, either; retail investors are in the mix, as are institutions and a handful of specialists like the Conscious Fund. Though smaller sources of capital—”people who can put in half a million dollars at a stage when it’s a real gamble”—make up the backbone of the industry, the industry now has “numerous investors, people with ridiculously deep pockets who can write very substantial amounts,” Conscious Fund’s Sant-Cassia says. And while early investors may have known every detail about the drug compound at the heart of a startup’s business model, newer investors tend to be more “financially motivated” and “profit-focused,” he adds.

Such investments do come with risk, however. “At any moment the FDA can look at data being generated, say ‘We don’t like what we’re seeing,’ and shut everything down,” Trucchio says. So far that hasn’t been the case—regulators have been communicative with and supportive of companies and clinical trials. But there’s still a chance that could change before anything has been approved, particularly if bad incidents involving people and psychedelics (even if they’re separate from any trials) get made public.

But that doesn’t mean the hype isn’t warranted. Once cannabis became legalized, La Touche says, the whole foundation for clinical practice started to shift. “Let’s demystify the whole industry. Now people are ready, the writing is on the wall. People are ready to rattle the chains, make some waves, shake trees,” La Touche says.

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The future

The science may be promising, the business community may be ready, but there are still some hurdles to overcome before psychedelic medicine can reach patients in need.

One such hurdle is government regulation around psychedelics. While countries such as Israel and Canada have already begun updating their laws to allow for some medical uses of MDMA and psilocybin, federal US laws haven’t been updated since the 1970 Controlled Substances Act (some US state and local governments, such as Oregon and Denver, have respectively legalized and decriminalized psilocybin). In the US, the most likely path for getting psychedelic medicines to patients would be for the FDA to approve them, allowing doctors to prescribe them to patients to treat certain conditions but likely only under particular settings. Such an approval from the FDA would likely mean the DEA would have to change the national scheduling of these drugs, says Lamkin, the legal scholar. If it refused, there’s the possibility for legal challenges.

But people in the field of psychedelic medicine aren’t too worried about the legal landscape. “I’ve frankly been surprised at how supportive and knowledgeable the regulators in the US and abroad have been,” Raz says.

Lamkin says he was astounded when the FDA designated MDMA and psilocybin as breakthrough therapies. “I’m not on the inside at the FDA, but given that they’ve encouraged this research and now the MDMA study results are so favorable, it doesn’t seem implausible at all that the FDA will approve it,” he says.

If psychedelic medications do get FDA approval, there are more questions about how to get these drugs into patients’ hands. Experts think it’s unlikely that these drugs will ever be available at a pharmacy, for example—so far, they’ve been shown to be most effective when the subject is monitored by a trained mental health professional present for the duration of the trip, often six or eight hours.

“You can’t make [taking these medications] like going to a fast food burger joint because, in order for it to work, you have to sit the patient at a table with a tablecloth and champagne glasses and have someone show up with a menu,” Sant-Cassia says. “What should happen is, you [the patient] take a strong psychedelic-based remedy and you are heavily involved in a therapist who helps you get better more dramatically and successfully.”

The need for the presence of a mental health professional presents another problem. The US already has a psychiatrist shortage; even those who might get trained to administer a psychedelic medication might have trouble making themselves available for the eight hours of the drug’s effect.

Patient access, too, is a concern. “The real question is, how do you make this egalitarian—affordable, convenient, and available?” Raz says. Eleusis, the company for which Raz is CEO, hopes to do this by setting up a scalable network of clinics around the country “that does one thing very well: Delivers these therapies,” as Raz puts it, in an effort to improve patient access. There are also questions as to whether insurance will cover the cost of the treatment as well as facilitator supervision.

There also need to be clear standards around the ethics and safety of administering the drugs, for both the therapists guiding patients and for the setting in which they do so. “When prospective subjects and patients are properly screened and prepared, when a session is properly facilitated, people can be safely ushered through these experiences and they can lead to positive psychological outcomes,” Grob says. “With psychedelics, everything gets amplified, so the impact of inappropriate behavior [by therapists] increases manifold…If we don’t [enforce the standards], the field will be hard to maintain.”

Not doing so means that a few irresponsible people could torpedo the entire field before it’s reached its potential. “I am afraid that there will be people who are more interested in money than they are in getting people the help and treatment they need. If the focus is on money, maybe you’d make a decision or take a shortcut that would impact the ability of people to get the help they need,” Mitchell agrees. “I think, ‘Oh man, it took us 40 years to get here, please do not knock us back by being pigheaded.’”

To reach that true potential, the stigma around psychedelics will have to fade away. It’s not impossible—marijuana, for example, became a lot less stigmatized once states decriminalized it. But it may take longer to destigmatize psychedelics because of how people use them. “People use cannabis very casually in a way that’s similar to alcohol. My understanding is that not many people use psychedelic compounds that way—it’s not something you do when you get home from work to chill out,” Lamkin says. “After you’ve done it it’s like, ‘Ok well I’m not going to do that for a good long while.’”

There’s already less stigma around psychedelics than there was even a decade ago, but Sant-Cassia thinks they have a ways to go if the drugs are someday going to reach all the patients in need. “You have to have a lot of mainstream patient awareness. And by awareness, I mean…your grandmother drops into the conversation that she’s going on a DMT trip to fix her post-divorce blues before she dies and no one thinks that’s weird. It has to get to that stage of normality,” Sant-Cassia says.

And there are more scientific questions to answer. There need to be more big clinical trials, like the one Mitchell was involved in, for the most promising applications for psychedelics. There also might be more conditions psychedelics could treat, especially as scientists start to expand the types of psychedelics they test. Mitchell wants to better understand the exact mechanisms for why the drugs have the effects they do so that researchers could fine tune formulations to do more of what’s needed to treat conditions (say, elicit feelings of religious awe) with less of what’s not (hallucinogenic effects perhaps). They want to see if microdosing could help, or if a drug that’s active for less time—say four hours instead of eight—could work just as well while putting less burden on clinicians.

Still, most experts think a psychedelic drug will hit the market in the next few years. They’re betting MDMA will be the first to market, simply because the research is well established, with psilocybin following next.

What could the field look like in five years? “You’ve got several drugs on the market, several companies have more than $10 billion in market cap. You’ve got a massive range of startups. Many that have gone bankrupt, are acquired, or just disappeared. You’ve got a fast-growing patient population. You’re starting to see countries you wouldn’t expect liberalizing legislation to have this happen quicker,” Sant-Cassia says.

Trucchio suspects the field will see some consolidation in the next few years. “As more capital flows in, it helps with the discovery process, but the benefits may accrue only among few companies,” he says.”Right now there’s a window for companies to get capital and set up and run studies. That can last for a few years.” He also suspects that second and maybe even third generation psychedelics—those that are optimized to provide a better experience for patients or have fewer unnecessary side effects—will have reached the market.

“The reality is, it’s the early days [for psychedelic medicine],” says Sant-Cassia. “It’s the beginning.”

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