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Psychedelics are projected to enjoy a compound annual growth rate (CAGR) of 55% and achieve a $7.2 billion valuation by 2029. A recent report from data and analytics firm GlobalData revealed that the psychedelic drug market is poised to experience robust growth before the end of the decade thanks to positive developments on the legislative and regulatory side.
The past couple of years have seen an exponential rise in public and scientific psychedelic interest thanks to a plethora of studies associating hallucinogens such as psilocybin, LSD and ayahuasca with significant improvements in mental health. A growing body of research has revealed that psychedelics can offer long-term relief against mental disorders including treatment-resistant depression, post-traumatic stress disorder (PTSD) and eating disorders at relatively small doses and with few side effects.
Compared to traditional antidepressants that require daily use and often have a myriad of adverse side effects, psychedelics are a potential game-changer for psychiatry that could make mental health treatments safer and more effective than they have ever been before. Results from initial studies are so promising that institutional investors and big pharma are already pouring millions of dollars into the research and development of psychedelic-based treatments for several mental health problems.
Psychedelics’ proven effectiveness against conditions such as PTSD and major depressive disorder that so often affect veterans and first responders has garnered the novel drugs plenty of support among the general public and legislators. However, federal prohibition has consistently been a thorn in the side of the nascent psychedelic drug market, making it extremely difficult for scientists to study the potential benefits and risks of psychedelics and hindering extensive research.
While we do know that psychedelics deliver their effects by acting on neural receptors such as serotonin 5-HT2A receptors, a deeper understanding of their underlying biological mechanisms is needed to develop safer and more effective psychedelic-based drugs.
Regulators have also noticed the therapeutic potential of psychedelics and are taking steps to ease psychedelic research and promote further studies. The Federal Drugs Administration (FDA) released draft guidance for running psychedelic-based clinical trials in June, putting psychedelics on track to gaining regulatory acceptance in the country and reaching the mass market.
GlobalData’s pharma analyst Kevin Marcadia predicted that Cybin’s CYB-003, Small Pharma’s SPL-026 and Atai Life Sciences/Otsuka Pharmaceutical’s PCN-101 would be the top psychedelic drugs by 2029 with a market share of 52%. CYB-003 is poised to launch in December 2027 as a treatment for major depressive disorder, PCN-101 will launch in December 2025 and SPL-026 will launch in 2027.
Marcadia noted that the June guidance from the FDA represented the regulatory agency’s willingness to remove the barriers to psychedelic research and could potentially spur further regulatory reforms and accelerate psychedelic drug development. Companies such as Mind Medicine Inc. (NASDAQ: MNMD) (NEO: MMED) (DE: MMQ) already have ongoing psychedelics R&D programs and any easing of the unsupportive regulatory climate will only spur them on.
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