The US psychedelic industry is at a pivotal moment, moving gradually from clinical trials into early stages of commercialization, but still facing regulatory and societal hurdles.
Companies are promising breakthroughs that target the root causes of mental health conditions like depression, potentially enabling limited-dose treatments that could ease pressure on the mental health care system.
However, despite early optimism, the pathway to FDA approval for psychedelic therapies like MDMA and psilocybin remains complex, with recent developments highlighting both progress and pitfalls.
Individual states are moving ahead of federal policy. Oregon has legalized psilocybin therapy under strict regulation, and Colorado is following suit, creating early templates for legal, therapeutic use.
Other states like California are considering similar frameworks, while cities like Denver and Oakland have decriminalized certain substances.
At the same time, stocks in the psychedelic sector remain under pressure, trading in the red, with valuations remaining depressed relative to early hype cycles of 2019-2021.
“We see these hype cycles happen a lot now. But there’s just not enough capital to go around to fund 60 companies and not enough IP opportunities either. So now we’re down to five companies,” says Doug Drysdale, CEO of Cybin (NYSEAMERICAN: CYBN), a Toronto-based clinical-stage biopharma firm that is developing drugs based on psilocybin and DMT, to treat depression and anxiety disorders.
In an exclusive interview with Invezz, Drysdale explains how psychedelics offer more lasting relief from mental health disorders compared to antidepressants, which merely manage symptoms.
He also sees the appointment of RFK Jr. — a supporter of psychedelics — as Secretary of Health and Human Services as a positive signal for the industry, and believes it’s only a matter of time before Big Pharma moves to stake its claim in the growing sector.
Edited excerpts:
Doug Drysdale
Psychedelic-based meds changing the course of depression
Invezz: Could you give us an introduction into what psychedelics-based medicines are and how are they different from antidepressants?
Look, I think the first thing is that many of these compounds or the sources of these compounds have existed in nature for millennia. And, they have been used by indigenous peoples for thousands of years.
So, we have quite a lot of human experience of these compounds.
What we’re doing at Cybin, though, is taking those natural compounds and creating synthetic derivatives of them, making small modifications to them to make them more pharmaceutical-like, so they can fit within our healthcare system and be dosed in a safe way.
I think the fundamental difference between the effect of psychedelics and the effect of existing antidepressants is that most existing antidepressants are taken daily and they take quite a long time to work- several weeks before they’re really effective.
Ultimately, they’re simply addressing the symptoms of the disease- like blunting the depression, also blunting positive emotions as well, but not affecting the underlying disease and not changing the course of the disease.
What we’re seeing with our treatment is, after just two doses, and I don’t mean two doses a week or two doses a month, I mean just two doses, we see 75% of patients in remission from their depression and 71% still in remission one year later.
So, for the effects to be that durable and to last such a long time, after just two doses, clearly we’re changing something. And that is the fundamental difference, that for the first time, we are possibly being able to change the course of the disease of depression.
And so far, we’ve followed patients for a year. It might be that some patients have much longer benefits than that. We will find out as time goes by.
Invezz: How has the perception towards psychedelics evolved over the years since it was associated with counterculture?
Perception is changing but it is a challenge. Thankfully, we’ve had quite a lot of positive media coverage.
I think there’s a broad scientific acceptance now of the efficacy. There have been enough studies to tell us that these things work.
Our goal is to define the protocols and the dosing and safety envelope around them. But we have had 75 years of the war on drugs, right?
And we’ve been told for all this time that these molecules and these treatments are bad.
And now we’re telling people that if used in the right way, within a safe environment, they can be very effective. So, we’ve got a lot of work to do still to overcome some of that stigma that’s been created.
Development status of CYB003 and CYB004
Invezz: Your pipeline broadly includes development of the CYB003 and CYB004. What’s the status of their development? And what are the key milestones that investors should be looking for in the next 12 months?
So, CYB003 is a derivative of psilocybin. It’s a synthetic modified version of psilocybin, which is the active part of the psilocybin molecule.
We’ve gone from inception there to phase three in about three years, which is extremely rapid. This study started at the end of last year. And we’ll have the first phase three readout in 2026.
By mid-2025, we’ll start the second phase three study since we need to do two studies. So, that’ll be about six months behind that.
So, that’s well underway and in the final phase of development.
And then CYB004 is a deuterated version of DMT which is the active agent in ayahuasca. So, we’re studying a modified version of DMT right now for generalized anxiety disorder. It’s in phase two.
And we expect a top-line readout around mid-year this year as well.
How RFK Jr’s leadership of HHS could benefit the industry
Invezz: There is some excitement in the psychedelic sector with the appointment of RFK Jr as the secretary of the HHS as he is known to have backed psychedelics. What are the positive outcomes in the regulatory space that you could expect from his leadership?
Well, it can’t hurt, can it? I mean, to have the head of HHS being vocally positive about psychedelics is obviously a good thing.
My understanding is that his son had a positive experience with psilocybin when he was dealing with a depressive episode. So, it’s personal for him.
What I’ve heard him say is that he’s open to access to psychedelic treatments within a regulatory framework.
That’s good and fits very well with what we’re trying to do. We’re not advocating for these treatments to be broadly available like in a retail store.
We’re taking them through the FDA process, DEA process, proving that they’re safe and effective.
And, the goal is to make them available under prescription, with an administrator under supervision in a safe environment.
And then, obviously, gaining reimbursement, which provides the greatest access.
But to get there, we’ve got to go through the FDA process and DEA process. And, if the head of HHS can have a positive influence on that, then that would be welcomed, of course.
On the FDA disapproving Lykos’ MDMA-based therapy for PTSD
Invezz: When we talk of regulatory approvals, the non-approval of Lykos’ MDMA-based therapy for PTSD was seen as a sort of a setback for the entire psychedelics space. So, what were your key takeaways from the episode, especially when it comes to how to conduct your clinical trials and maintain safety and efficacy in that space?
I think it’s important to separate the FDA’s actions from both the public reaction and the advisory committee (Ad Comm).
The Ad Comm isn’t the FDA — they’re just providing guidance. In my view, the Ad Comm was somewhat off target, maybe even a bit sabotaged.
There was a lot of emotion and passion in that meeting, and we saw similar intensity in the public response to the rejection.
It just highlights how much people want access to these treatments, because the current options aren’t working.
But if you set aside all the noise and emotion, the FDA’s position is actually quite clear.
Lykos received a complete response letter (CRL), and those letters are very specific. They’ll know exactly what steps they need to take.
From what I understand, there’s some missing data they need to extract through further analysis of their existing research, and likely they’ll have to run another phase three trial to fill in the gaps.
I expect that by mid-year, they should be in a position — hopefully — to have a clear agreement with the FDA on their path forward.
Once that’s public, it will bring much-needed clarity, which would be positive for the whole sector.
I really don’t think these public conspiracy theories about the FDA being anti-MDMA are helpful. That’s just not the case.
The issues here were specific to this application. The Ad Comm focused heavily on functional unblinding, which honestly felt like a bit of a distraction. The level of attention it got seemed disproportionate.
The FDA has already provided guidance on designing trials to address functional unblinding, and we’re following that guidance, so we’re not concerned. I think all the Lykos issues were specific to Lykos.
Why are psychedelic stocks struggling?
Invezz: After an initial boom, the psychedelics sector has struggled to maintain investor enthusiasm with most stocks in the space in the red over a 4-5 year period. What do you think investors are misunderstanding about the space?
You’re right. There was an initial boom. Maybe 60 companies or so got started back in 2019-2020 or 2021. And that’s fairly typical.
We see these hype cycles happen a lot now. But there’s just not enough capital to go around to fund 60 companies and not enough IP opportunities either.
So now we’re down to five companies. They’re all public, all US listed. It’s just a matter of capital efficiency. The five companies are all in fairly late stages of development.
They’re all well-funded. They’ve all picked their own molecules on their own lane, and that’s what I would expect. So, I’m not really surprised about that kind of hype cycle.
It’s a shame that retail investors get caught in that stuff all the time. And right now, we’re in a bit of a different situation.
Right now, there’s a lot of distractions going on with some fairly radical changes that the administration is trying to make across the board.
It’s creating a lot of volatility. Interest rates are also still relatively high. Between that, all small-cap biotechs are impacted by volatility and high costs of capital.
So, if you look across the small-cap biotech spectrum, they’re all pretty beaten up right now. And it’s a bit of an odd sector, really-biotech- because there’s not really a lot of correlates across the sector.
It’s really much more about stock picking because each individual program is sort of standing on its own merits.
But our core biotech investors are still believers. They believe in the science. They believe in this massive opportunity to change the mental health landscape.
I think as we go forward, in the next sort of 18 months or so, we’re going to have this clarity from Lykos that I mentioned, which I think would be good for the sector.
Compass will have phase 3 data coming probably around mid-year this year. It’ll be a good large study readout. It’s always good to have those. We’ll have our own phase 3 data coming in 2026.
And, as you have more and more of these larger, credible data sets coming, it is just going to consolidate confidence in the science.
Psychedelic-based meds can free up significant capacity within the mental health treatment system
Invezz: Traditional antidepressants benefit from recurring revenue due to long-term daily use—how does Cybin plan to build a sustainable business model given the fewer required doses for psychedelics? Is it going to address a very niche space in the market? How will you also address questions of affordability?
First of all, unfortunately, it is a very large population- there are 21 million adults in the US with depression and 40 million adults in the US taking SRIs (serotonin reuptake inhibitors).
To put that into context, there are 7 million adults with Alzheimer’s disease. We consider Alzheimer’s disease to be one of those things that we think about as being very serious and a threat to society.
We do think about depression in the same way, but there’s 40 million people taking SRIs. So it’s a very, large unmet need. Look, I think if we can give two treatments a year, that would be amazing.
And there’s generally a trend towards less frequent dosing. If you look at immunotherapies, long-acting injectables, and gene therapies, that might be once in a lifetime.
But payers consider the total cost per patient per year. And, these depressed patients are fairly high-touch patients. They are seeing their doctor six or nine times a year. There are also many of them seeing a therapist.
Many of them have comorbid hypertension, diabetes, and many other things that are connected with their mental health. Mental health, metabolic health are very closely connected.
And even if they’re taking something like Spravato or esketamine, they’re visiting the clinic 26 times a year.
So if we can treat patients twice and then take them out of the system, then I think that frees up a lot of capacity within the mental health system. It saves payers a lot of money.
But also, there’s a real lack of psychiatric resources. Only 18% of psychiatrists are open to seeing new patients. They’re very busy.
You think about a patient that comes in for therapy, they’re coming back every week or every two weeks. It’s a long, slow process. So we can break that cycle and intervene pharmaceutically, free up a lot of resources and save a lot across the whole system.
Psychedelics too big an opportunity for Big Pharma to miss out on
Invezz: You said from 60 companies we are down to about five. So, do you see a big trend of consolidation taking place in the sector? Also, do you see Big Pharma also coming ahead and claiming the space in a significant way?
I think it’s inevitable that big pharma gets involved here at some point. This is the biggest breakthrough in psychiatric pharmacology in 40 years.
Like I said, the first time we’ve really been able to change the course of disease. And this is too big an opportunity for them to miss out on.
New treatments for depression are not even close in terms of effect size. And there are no new treatments for GAD (generalised anxiety disorder). There’s nothing that has been approved for GAD or PTSD in a long time.
So these are large, unmet needs. I think the challenge for those companies is figuring out how to fit these treatments and the commercial model within their business.
I mentioned the interventional psychiatry clinics across the US which we will be using to provide doses to patients under supervision. So, this won’t be a big pharma, boots on the ground, thousands of salespeople kind of model.
It’s more likely to be a very targetted sales and educational team that’s working with these clinics very closely, hand in hand, helping them with training and patient care and helping them with reimbursement and control distribution and all these things.
So it’s a little bit of a different business model for all the companies. But I think the economic opportunity is too big for them to miss out on.
Invezz: Talking about your corporate vision- do you have any expansion plans beyond the US- key geographies that you’re targetting or specific markets that seem exciting to you?
We’re running studies now, expanding into Europe. We’ll have also sites in Australia as well. So EU, Australia are definitely of interest, and some countries in Asia like China, for example.
Biotech stocks trading on volatility, not fundamentals
Invezz: Your commentary on the way things stand currently in the sector and the way forward
I think this is a unique situation. You rarely have such overwhelmingly positive clinical data that’s very de-risked, where the risk going forward now to approval is mostly execution.
We’re not concerned about efficacy. The efficacy effect sizes are very large.
And we’re in this volatile situation where stocks are all down and depressed. And so to me, this is, an exciting time to be getting into a lot of these biotech companies, not just us and psychedelics, but other biotechs too that are not trading on fundamentals. They’re trading down on volatility.
So this will all resolve itself at some point. Hard to call when that will be. But we are well-capitalized. We’ve got plenty of cash to get us through the phase three readout.
And we’re just sort of heads down at the moment and trying not to pay too much attention to all the noise.
The post Interview: Psychedelics changing the course of depression; stocks trading on volatility not fundamentals, says Cybin CEO Doug Drysdale appeared first on Invezz