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The race to invest in psychedelic therapies
An insight paper by King & Wood Mallesons looks at the race to invest in the “exciting new market” of psychedelic therapies.
Jess Feyder
An insight paper, titled Emerging Psychedelic Therapies and Investment Opportunities, authored by KWM partners Suzy Madar and Matthew Swinn, along with solicitor Rosie Rand, delves into the investment opportunities in psychedelic medicines accompanying advances in clinical research and regulatory changes around the world.
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Breakthrough clinical research is enabling the development and delivery of new psychedelic therapies for a wide range of mental health conditions, including major depression, post-traumatic stress disorder (PTSD), and substance addiction.
Such developments represent an opportunity for the mental healthcare field in bringing a new treatment option to patients — whilst they also represent an opportunity for investors.
“Venture capital investment into psychedelic therapies has surged from a little over US$12 million in 2017 to US$360 million in 2021,” the authors noted.
Investment in psychedelic therapy is exploding
Whilst the practical application of psychedelic therapy is restrained by current laws in many countries, including Australia, interest in these medicines is exploding.
“Psychedelic plants and fungi have been used in traditional medicine for millennia,” said Ms Madar, Mr Swinn and Ms Rand, and in clinical studies, there have been “significant advances in the understanding of the therapeutic benefits of psychedelics”.
In 2017, two psychedelics were granted the status of “breakthrough therapies” by the US Federal Drugs Administration — “this has caught the eye of forward-thinking investors”, and the private sector has started looking closer at opportunities for investment.
“The race to invest in new psychedelic therapeutics and the production of psychedelics for medicinal purposes has started,” the authors stated.
Venture capital deals in the micro-sector have grown significantly since 2017. It was noted that in 2017, three psychedelic start-ups received a total of US$12.6 million in venture capital.
Throughout 2018 and 2019, the amount of venture capital invested in psychedelic start-ups rose to approximately US$100 million. In 2020, the figure more than tripled to US$346 million. In 2021, the strong upswing slowed, with funding reaching US$368 million.
Hurdles are slowing funding
Legal constraints have slowed funding for research and development.
Currently, in Australia, psychedelic substances are regulated under the Poisons Standard 2019, under the Therapeutic Goods Act 1989 (Cth), where they are classified as a Schedule 9 (Prohibited Substance), rendering them inaccessible for therapeutic use.
“As the results of more research and clinical data are generated across the world, we expect more intense calls for the down regulation of psychedelics to permit study and use in clinical settings,” illuminated Ms Madar, Mr Swinn and Ms Rand. If legal regulations are renegotiated, a continued upswing in investment will likely follow.
