The long, strange trip to turn psychedelic drugs into approved medicines has hit a bad batch of developments in recent months. But two Canadian-incorporated companies developing mind-altering treatments for chronic mental conditions maintain they are still on track to get their products to market.
On Wednesday, NEO exchange-listed Cybin Inc. CYBN-NE said it had received approval from the U.S. Food and Drug Administration to begin expanded human efficacy, or phase 3, trials this year to determine whether the Toronto company’s synthetic variant of psilocybin, the key ingredient in magic mushrooms, works to cure patients with major depressive disorder.
Meanwhile, NASDAQ-listed Mind Medicine (MindMed) Inc., MNMD-Q which is incorporated in B.C. but managed from New York, said last week it also expects to launch its phase 3 trial this year to use lysergic acid diethylamide (LSD) to treat anxiety. Both companies will recruit hundreds of patients and expect to produce results in 2026.
The announcements are welcome developments after two recent setbacks for the psychedelic sector.
Lykos Pharmaceuticals, a spinout of Silicon Valley non-profit Multidisciplinary Association for Psychedelic Studies, was expected to get FDA approval in August to take its version of MDMA, or ecstasy, to market to treat post-traumatic stress disorder. Instead, the FDA turned it down, ordered further studies and scrutinized some of its results.
The Psychopharmacology journal pulled three articles on its trial data blaming protocol violations and “unethical conduct” at one study site. Lykos laid off most of its workforce, and founder Rick Doblin left the board.
Then, last month, Britain’s Compass Pathways PLC delayed Phase 3 results from its psilocybin-based drug for treatment-resistant depression until next year and laid off staff. Unlike Cybin, whose patients take its drug in addition to their regular antidepressants, Compass forces participants to stop taking their meds during trials.
One FDA concern hanging over both studies is the challenge of “functional unblinding,” said Bloom Burton analyst David Martin: If trial patients have experienced psychedelics before, they know if they are on drugs or placebo. That has prompted developers including Cybin to take extra precautions in trial designs.
The setbacks have hit psychedelic stocks, as “you’ve seen a bit of skepticism around the whole regulatory pathway with psychedelics because of what has happened” recently, Cybin chief executive officer Doug Drysdale said in an interview.
“So to get this FDA clearance is really good validation of our programs and shows that we have their support.”
Analysts remain cautiously optimistic: “It’s a shame we have faced some setbacks,” said Andrew Tsai, an analyst with Jefferies LLC. “But if management teams can execute new trials responsibly like a traditional biotech, there’s definitely potential value to be created.”
The benefits and mind-altering effects of psychedelic drugs have been known for a long time. A Swiss scientist accidentally took the first acid trip eight decades ago, and Merck synthesized MDMA in 1912.
Illicit drug use exploded during the 1960s and helped birth the counterculture movement, which led U.S. president Richard Nixon to sign the Controlled Substances Act into law in 1970. That labelled psychedelics as restricted Schedule 1 drugs deemed to have “no currently accepted medical use.” Other countries followed, including Canada.
While illicit recreational drug use continued official lab work all but stopped until 2000, when Johns Hopkins University researchers obtained FDA authorization to do trials. That revived interest in legalizing psychedelics and decriminalization efforts.
In the 2010s, the FDA began granting “breakthrough” status to psychedelic drug developers. Last year, it published draft guidelines advising researchers on designing clinical trials, acknowledging growing interest in their therapeutic potential.
Several developers have delivered strong results so far, including Cybin. It revealed early his year that three-quarters of patients with major depression disorder who took its drug in its initial human efficacy trial were in remission four months later.
Cybin’s coming trial involve two studies. The first will see 110 patients take two 16-milligram doses three weeks apart, while 110 take placebos. In the second, three 110-person groups will either take 16-mg doses, eight-mg doses or placebos. There will be an initial six-week study, after which patients will be followed for a year. Those whose depression returns or doesn’t improve can get additional doses.
Meanwhile, Spravato, a nasal-spray variant of the hallucinogenic anesthetic ketamine for treatment-resistant depression (which isn’t a psychedelic), is Johnson & Johnson’s fastest-selling drug: Revenue is on track to surpass US$1-billion this year.
The psychedelic renaissance has drawn support from an eclectic range of proponents, including two key advisers of U.S. president-elect Donald Trump – Elon Musk and Robert F. Kennedy – OpenAI’s Sam Altman and former Texas governor Rick Perry. New York Mets owner and hedge-fund billionaire Steven Cohen funds psychedelic research and invests in Cybin. Football star Aaron Rogers and Prince Harry have both benefited from psychedelics.
The proof points and big-name supporters have fuelled a surge in financings. Cybin has just over $150-million in cash, and MindMed has more than twice that amount. Both have seasoned pharmaceutical investors including RA Capital, Deep Track Capital and Octagon Capital.
But questions continue to swirl around the commercial viability of drugs that reorder the mind and take users on out-of-body journeys. Ketamine was blamed for the 2023 death of Friends star Matthew Perry.
Investors who piled in during the sector’s hype cycle in 2020 and 2021 got burned. Many companies died, were bought or shifted focus, including Cybin, which ditched an early strategy to grow magic mushrooms.
“We saw the market rapidly shifting and adjusted to ensure we were a best-in-class biotech company,” Cybin co-founder Paul Glavine said.
Questions remain about patent protection given many compounds were discovered decades ago. Meanwhile, regulated drugs would be expensive to administer, requiring a controlled environment and clinical supervision, while illicit recreational versions are cheap and abundant.
But the market for new, approved mental-health drugs could be vast: Major depression alone affects more than 300 million people globally, and there have been no new types of regulated treatments this century.
Depression, anxiety and PTSD “are bipartisan issues,” Mr. Drysdale said. “The government has a vested interest in finding new treatments for these patients.”
