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Psychedelic Stocks Fall as Advisory Panel Tells FDA Not to Approve MDMA

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A number of companies involved in the psychedelic space saw their stocks plummet during premarket trading earlier this week after an advisory panel counseled the U.S. Food and Drug Administration (FDA) against approving the use of MDMA as a treatment for post traumatic stress disorder (PTSD).

MDMA, commonly known as molly or ecstasy, is a stimulant and psychedelic drug that comes in powder or pill forms. Currently, the drug is classified under Schedule I of the Controlled Substances Act, together with drugs such as LSD, marijuana, heroin and peyote. Drugs under this classification are said to have no accepted medical use and a high abuse potential. However, numerous studies and trials conducted in the last couple of years have determined that the drug may be useful in treating PTSD.

It appears this wasn’t enough to convince the 11-member advisory panel, as nine of them voted against the drug’s use in managing the condition. Their decision was based on concerns that available evidence doesn’t demonstrate that the drug’s benefits outweigh its risks or that it was effective. The panel members also cited flawed research conduct and trials as part of their reasoning, noting that there wasn’t enough follow-up data on patient outcomes as well as diversity in trial participants.

While the panel’s advice doesn’t dictate the agency’s final decision on the matter, it is known that the agency has a lot of confidence in the advice it gets from its experts.

This announcement marks a huge setback for clinicians and companies in the United States who were hoping to exploit the therapeutic potential of psychedelics such as MDMA. Companies such as Mind Medicine, based in New York; Cybin, a Canadian company; atai Life Sciences, based in Berlin; and Compass Pathways, a British biotech company, have seen their stocks drop between 10–15% this week.

Lykos Therapeutics, the drug’s sponsor, has observed investor confidence reduce following the announcement. One of the trials demonstrated that MDMA therapy reduced many PTSD symptoms with minimal serious side effects.

Other companies that have been affected include GH Research, a clinical-stage pharmaceutical company focused on developing new treatments of neurological and psychiatric disorders, which saw a 3.5% drop in its stocks. Relmada Therapeutics, a biotechnology company that targets conditions of the central nervous system, also saw its shares fall by about 5%.

Surprisingly, some companies had their shares go up during this same period. Seelos Therapeutics Inc. (NASDAQ: SEEL), a biopharmaceutical company evaluating the use of psychedelics in treating neurological illnesses, saw its shares rise by almost 2%.

The FDA is slated to make a final decision on the matter in August 2024.

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