Psychedelics industry on a high: Preparing for an even bigger 2021

Psychedelic medicine is emerging as a breakthrough for mental health despite strict regulations and stigma against them. After years of research, drugs like ketamine and psilocybin are finally gaining the credit needed to progress into market-ready pharmaceutical products.


Since the start of the pandemic, the global healthcare system has experienced a setback as frontline workers struggle to keep up with the rising COVID-19 cases whilst still providing care to those with other illnesses. The pandemic has prompted an all-time high in depression and anxiety with 19.7 percent now living with a mental health condition in the UK alone, including front-line workers, who are also at a higher risk of suffering from post-traumatic stress disorder (PTSD). Drug overdoses have increased 42 percent since the start of the pandemic and mental health could cost the global economy up to 16 trillion USD annually by 2030, according to national drug abuse data. With such numbers, the market for psychedelic medicines for untreated mental health issues is vast.


The US Food and Drug Administration (FDA) has begun accepting the potential benefits of psychedelic medicine, approving several treatments in recent years including Johnson & Johnson’s Spravato Esketamine, a nasal spray containing ketamine to help treat patients with depression, gaining approval in March 2019, paving the way for other novel drug developers and rapidly mounting interest in the sector. More recently, the FDA granted Breakthrough Therapy designation, a process designed to expedite the development and review of drugs that are intended to treat a serious condition, to MDMA and psilocybin for treating major depressive disorder, post-traumatic stress disorder (PTSD) and treatment-resistant depression after a group of Silicon Valley and Wall Street executives donated 30 million USD.


London based mental-health care company Compass Pathways is the most valuable and well-known company in the industry, with a total addressable market of 1.12 billion USD by 2024. The company raised more than 115 million USD to fund and bring to market a psilocybin treatment for depression, which is derived from magic mushrooms, gaining support from billionaire and PayPal co-founder Peter Thiel and ex-hedge fund manager Michael Novogratz. In September, the company became public on the Nasdaq at 17 USD per share, making it the first psychedelic company to be listed on a US exchange. Similarly, Mind Medicine made the latest jump into the psychedelic field. The company raised 24 million USD in a pre-IPO round and, since becoming public, its stock has more than doubled.


A wave of legislation on cannabis in Canada and over 15 US states has favoured increasingly relaxed attitudes around psychedelic drugs as well as promoted awareness of these drugs’ medical potential. The psychedelic drugs market is forecast to grow at a CAGR (Compound Annual Growth Rate) of 16.3 percent, reaching 6.85 billion USD by 2027, fuelled by the growing acceptance and the rising prevalence of mental health disorders. A growing number of investors propose that psychedelics are “the new cannabis” opportunity, generating real business and more importantly, healing millions of people.


Economically, there are several reasons for the UK government to be considering psychedelics, including reducing the huge cost to the NHS’ overstretched mental health services which has been brought to light as a result of the pandemic. Moreover, as patents on many traditional antidepressants begin to expire, 2021 will be the time psychedelic therapy highlights the limitations of current mental health care treatments and offers a bold alternative.


By Josie Grist

Sector Head: Hermione Scott