Idealism gives way to economics in psychedelics
Money is pouring into the fledgling psychedelic medicine industry, with dozens of startup companies vying to be among the first to sell mind-expanding drugs for depression, addiction and other mental health conditions.
While psychedelics are still illegal under federal law, companies are jostling to try and patent key ingredients found in magic mushrooms, ayahuasca and other sub- stances that have been used underground for decades or — in some cases — for millen- nia by indigenous cultures.
Wall Street’s sudden exuberance for hallucinogens has rankled longtime advocates and philanthro- pists, who dreamed of mak- ing low-cost psychedelics widely available for mental health and personal growth. Instead, many now see a very different future for drugs like psilocybin and LSD: as expensive, specialty medica- tions controlled by a handful of biotech companies.
“It’s disappointing,” said Carey Turnbull, an investor and philanthropist who sits on the board of several psy- chedelic nonprofits. “All the air is getting sucked out of the room by these for-profit companies who say, ‘Wow, this stuff is awesome, if I could patent it I’d make a fortune.’”
Since 2010, Turnbull and his wife have donated mil- lions to fund psychedelic research at New York University, Yale and other top academic centers.
Promising results from those studies have sparked a wave of popular interest in psychedelics, amplified by books, documentaries and articles touting their poten- tial to reshape care for men- tal illness, trauma and endof-life care.
But in recent years, Turn- bull has pivoted to challeng- ing what he and other advocates consider frivolous pat- ents filed by companies entering the field.
Most psychedelic start- ups are backed by venture capitalists or tech investors looking for the next industry “disruptor.” Behind one of the biggest companies, Atai Life Sciences, is PayPal bil- lionaire Peter Thiel, whose enthusiasm for psychedel- ics is shared by many in Sil- icon Valley.
About 50 such companies now trade on public stock exchanges, including developers of psychedelic drugs, retreats and training pro- grams. Some analysts proj- ect the industry could grow to over $10 billion within the decade.
But recent y investors have pulled back, amid remind- ers of the stark challenges of converting illegal drugs into money-making medicines.
Atai laid off 30% of its staff last March after its depres- sion treatment failed in a key study. Stocks are down 80% to 90% from their highs across the industry with several smaller companies restructuring or declaring bankruptcy.
“They’re in this hype cycle, but then the reality of running a biotech com- pany catches up with you,” said Chris Yetter of Dumont Global, which trades in can- nabis and psychedelic com- panies. “You do drug trials and some of them succeed and some fail and every quar- ter your cash drains away.”
The cash crunch recently forced fundamental changes at the field’s leading non- profit, the Multidisciplinary Association for Psychedelic Studies.
For more than 30 years, MAPS’ efforts have been funded almost entirely by donations from wealthy indi- viduals and foundations — including Republican polit- ical donor Rebekah Mercer and the Steven and Alexandra Cohen Foundation, created by the hedge fund manager and New York Mets owner with his wife.
The group’s pharmaceu- tical arm, the MAPS Public Benefit Corp., is expected to win U.S. approval this year for the first psychedelic medicine accepted for review by the Food and Drug Adminis- tration: MDMA, or ecstasy, to help treat post-traumatic stress disorder.
But as investment opportu- nities have multiplied, char- itable donations have dried up. The group was recently forced to take on private investors to continue funding the drug company, which changed its name to Lykos Therapeutics.
“We’re a victim of our own success,” said MAPS founder Rick Doblin. “It’s heartbreak
because I had hoped to go the whole way with philan- thropy, but I was unable to raise the mega millions to do that.”
Psychedelics never fit the business model of the tradi- tional blockbuster drug: an exclusive, patent-protected medicine that patients take regularly for years.
None of the psychedelics currently being studied are new. Synthetic drugs like LSD and ecstasy have been off patent for decades. Naturally occurring substances like psilocybin, found in certain mushrooms, can’t be patented by themselves.
And then there’s the challenge of administering drugs that bring about intense, disorienting visions and experiences. All the drugs vying for FDA approval will have to be given under professional supervision, typically during several therapy sessions lasting about six to eight hours each.
All those hours and professional fees will drive up costs, which many analysts say could range from $5,000 to $10,000 for one course of treatment.
Psychedelic executives say the only way to defer those costs is to conduct large, rigorous clinical studies needed for FDA approval, which could compel insurers to pay for psychedelics. But funding those studies requires raising tens of millions from investors, who typically only back drugmakers with strong patents.