While there is not a reliable direct estimate of the total addressable market size of psychedelic therapy we can look to the global psychedelic drugs market which is on an upward trajectory, driven by promising research results and regulatory shifts. For example, the market value of the psychedelic drugs market is projected to reach $10.75 billion by 2027. This substantial value reflects the growing acceptance of psychedelic therapies for mental health conditions.
The psychedelic drug market can be broken out into four drugs: psilocybin, ketamine, LSD, and MDMA. Largely used to treat conditions such as treatment-resistant depression, opiate addiction, PTSD, narcolepsy, and panic disorder, psychedelic drugs can be purchased through hospital pharmacies, retail pharmacies, and online channels.
Key Players in the Market
Jazz Pharmaceuticals, NeonMind BioSciences, Cybin Corp., and Mind Medicine are among the prominent companies driving innovation in this space. There is also a heavy emphasis and promising growth shown by Startups who are also making their mark, capitalizing on the growing interest in psychedelic therapies.
There are only 6 companies in the space that have raised over $100M in total funding. Out of these 6 companies, 3 have gone public and 1 has been acquired.
The 3 top-funded companies that have gone public — atai, GH Research, and COMPASS — have all seen their market caps drop well below their IPO valuation. This may be another signal that investors aren’t as optimistic about the space.
Innovations and Emerging Technologies
Generative AI: Combining existing AI technologies with machine learning, generative AI has transformative potential. It can reduce application development time, enhance productivity, and create new therapeutic possibilities. Startups exploring generative AI could play a pivotal role in advancing personalized treatment approaches.
Digital Therapeutics: Software solutions are being developed to support psychedelic therapy. These include psychedelic integration apps for clinicians, electronic health records (EHR) designed for psychedelic professionals, and other tools to enhance therapeutic outcomes. These innovations bridge the gap between traditional therapy and modern digital platforms.
Applications of Psychedelics: Outside of mental health, there is promising evidence for application of psychedelics for inflammatory disorders. Based on the seminal work of Charles Nichols, certain psychedelic compounds appear to be potently anti-inflammatory at very low doses.
Headwinds and Tailwinds
The integration of psychedelic therapy into the healthcare system, especially within software startups, is influenced by a mixture of positive tailwinds and challenging headwinds. While there is promising momentum (tailwinds) for the incorporation of psychedelic therapy into mental health treatments, especially with the support of software startups in the field, significant challenges (headwinds) remain. These include regulatory barriers, insufficient research, potential health risks, cost, and ethical concerns that need to be carefully navigated to ensure the safe and effective use of psychedelics in therapy.
Tailwinds
- Demand for Effective Psychiatric Medication: Many psychiatric medications must be taken chronically and can have significant side effects, but classic psychedelics are typically well tolerated and could have substantial therapeutic effects after a few sessions.
- Growing Public Support: A majority of people in the U.S. with mental health issues such as anxiety and depression support the use of psychedelic-based therapy, according to a survey conducted by the Harris Poll in December 2021.
- Anti-addictive Properties: While it is possible to abuse psychedelics, proponents note that they are anti-addictive.
- Regulatory Advances: 20 states in the US have loosened regulations around psychedelics research, paving a path to a better scientific understanding of the drugs, regulatory approvals, and more widespread healthcare use. Regulations are even more psychedelics-friendly in Canada, where psilocybin is expected to be legal for recreational use within the next 5 years. The FDA has granted (in 2021) breakthrough designation to MDMA- and psilocybin-based therapies, signaling a shift towards incorporating psychedelics into existing healthcare infrastructure. .
Headwinds
- Regulatory Hurdles: Despite some progress, the FDA has not yet approved psychedelics for treating any disease, representing a significant barrier to widespread adoption.
- Insufficient Research: While research into psychedelics has ramped up in recent years, most of the studies have been relatively small Phase 1 or Phase 2 studies.
- Mental Health Risks: Psychedelics might trigger hallucinogen persisting perception disorder (HPPD) and psychosis.
- Cost Concerns: Psychedelic-assisted therapy is generally more expensive than traditional psychiatric medications, which could limit access.
- Ethical and Safety Concerns: There have been instances of psychedelic-assisted therapy being exploited for sexual exploitation, raising concerns about the ethics and safety of these treatments.
Notable Investors
Notable investors in the psychedelic therapy space include the Noetic Fund (investments in Compass Pathway, Tactogen, and Bexson Biomedical); Integrated (investments in Small Pharma, Beckley Psytech, and Tripp); Negev Capital (investments in Mindset Pharma and Wesana); JLS Fund (investments in Homecoming, Diamond Therapeutics, and Maya); and PsyMed Ventures (investments in Reset Pharma and Terran).
A few companies in early and growth stages we are following include:
Software Startups
Maya Health
- Total funding raised: $5.90M, Last raised: $3.50M Seed Round
- Notable investors: Ambria Investors, Aquanta Group, BWC Group, Inc,
- Description: Developer of a psychedelic practice management platform designed to track, manage, measure, and illustrate health outcomes. Offers personalized protocols and psychedelic-specific assessments to track dosages, wellness outcomes, and psychological measures, enabling psychedelic practitioners to ease their workload and serve more people.
- What we are excited about: When charted across time, multi-modal data trends can directly inform strategies for personalizing and optimizing care. Maya Health offers a new level of clarity to participants who can visualize their journey and easily engage with forms and assessments.
Homecoming
- Stage: Seed (Raised $3.1M to date)
- Homecoming is a digital offering for therapists to support patients in their journeys with psychedelic-assisted therapy. The platform provides coaches, therapists, and practitioners and allows patients to receive support both before and after their psychedelic experience. Notable Investors include Evolve Ventures, Bridge Builders Collaborative, JLS Fund.
- What we are excited about: Homecoming is tailored for the personal and specific needs of holistic health practitioners and their clients.
Heading Health
- Stage: Series A (Raised $13.32M in total as of June 2023)
- Heading Health is a platform providing and delivering a variety of personalized evidence-based mental health treatment services. The company leverages various services––telepsychiatry, teletherapy, transcranial magnetic stimulation (TMS), Spravato, sublingual ketamine, and nutritional therapy––to treat PTSD, Depression, Anxiety, OCD, Panic Disorder, and Bipolar Disorder at minimal cost. Notable Investors include Thiel Capital, Global Brain, One Mind Accelerator.
- What we are excited about: Heading Health prioritizes making mental healthcare accessible and affordable. Therefore, they accept a wide range of insurance plans and will reach out to other plans upon request.
Journey Clinical
- Stage: Series A (Raised $11.65M to date)
- Developer of an online platform intended to assist psychotherapists to grow their practice with psychedelic therapy. The company provides independent licensed mental health and private psychotherapy practitioners with the prescription services they need, enabling healthcare professionals to provide safe, effective, and transformative ketamine-assisted psychotherapy for their patients. Notable Investors include AlleyCorp, Calm Ventures, Vanterra Ventures.
- What we are excited about: Journey Clinical specializes in psychedelic therapy for veterans and first responders.
Ksana Health
- Stage: Raised $2M Seed in 2021
- Description: Ksana Health uses digital phenotyping to track sleep, phone usage, and physical activity to help determine insights about mood. The company’s mission is to use research and technology to deliver mental health care through remote behavioral monitoring and adaptive, continuous behavior change support. The company wants the measurement data to help give individuals insight into the effect of psychedelic therapy and will make for better therapeutic experiences. Notable Investors include re.Mind Capital, WPSS Investments, Panoramic Ventures, Telosity Fund, Palo Santo’s Venture Partners, Able Partners.
- What we are excited about: Ksana Health employs the Effortless Assessment Research System (EARS), which is the most advanced continuous behavioral health and Ecological Momentary Assessment (EMA) research system on the market. It accesses smartphone apps for passive data collection and then employs expert data science services to turn data into insight.
Overall, the psychedelic drugs market is on track to hit $10.75 billion by 2027, driven by advances in research and a shifting regulatory environment. Key players and innovative startups are exploring psychedelics like psilocybin and MDMA for mental health treatments, amidst growing market interest. Despite potential, the industry faces significant challenges, including regulatory barriers and ethical concerns. The adoption of new technologies like Generative AI is crucial for overcoming these hurdles and realizing the therapeutic potential of psychedelics.
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