Connect with us

Psychedelics

Psychedelics Companies Reeling After FDA Vote

Here’s what investors need to know. Shares of prominent psychedelics companies, including Compass Pathways, Atai Life Sciences, and Mind Medicine, experienced…

Published

on

Here’s what investors need to know.

Shares of prominent psychedelics companies, including Compass Pathways, Atai Life Sciences, and Mind Medicine, experienced a significant decline following an unexpected vote by the Food and Drug Administration (FDA) on June 4. Notably, none of these companies had their drugs under regulatory consideration, nor did the FDA or any federal agency issue a prohibition on psychedelic-based therapies. So, what exactly transpired, and why is this development crucial for investors to monitor over the next few years?

What Happened?

Despite a number of psychedelic drug candidates currently in clinical trials, no psychedelic medicines have reached the market due to longstanding prohibitions. Lykos Therapeutics, a public benefit company (PBC), aimed to change this landscape by becoming the first to commercialize an MDMA-based therapy for post-traumatic stress disorder (PTSD).

Understanding MDMA in Therapeutic Use

MDMA, commonly known as ecstasy or molly, is a Schedule I drug. However, psychedelic drug biotechs are exploring its potential to treat severe mental illnesses. The therapy involves administering the drug in conjunction with psychological support from a trained clinician, leveraging its effects to help patients navigate emotionally challenging experiences.

In its phase 3 clinical trials, Lykos Therapeutics published promising results in the influential journal Nature Medicine. Their MDMA-based approach helped patients report fewer PTSD symptoms, reflected in lower scores on structured questionnaires assessing PTSD severity. By contrast, the placebo group did not experience significant improvements. The side effects were generally mild and transient, aligning with earlier-stage trial findings.

Based on these data, Lykos’ therapy appeared nearly ready for FDA approval, with any remaining research likely focused on refining manufacturing protocols. However, during the FDA advisory committee meeting on June 4, regulators voted overwhelmingly against the program on two key questions. The first, concerning the treatment’s effectiveness for PTSD, resulted in a 9-2 vote against. The second, regarding whether the benefits outweighed the risks, ended with a 10-1 vote against.

Regulatory Feedback and Future Prospects

The advisory committee’s decision does not reflect an inherent opposition to MDMA-based PTSD treatments but rather a need for more clinical research to address specific efficacy, safety, and risk mitigation concerns. Many committee members acknowledged the potential value of Lykos’ program, suggesting it might eventually meet approval standards.

The advisory committee’s vote is non-binding. The FDA will conduct a binding vote with different members on August 11. Historically, the binding committee rarely diverges from the advisory committee’s recommendation, indicating Lykos’ commercialization attempt is unlikely to succeed this time. Nevertheless, a future attempt remains possible.

Implications for Other Psychedelic Biotechs

The FDA’s decision has left other psychedelic biotechs apprehensive. Compass Pathways, which is conducting a phase 3 trial on psilocybin combined with psychological support for treatment-resistant depression (TRD), is next in line to seek FDA approval. Its candidate, COMP360, will likely face similar scrutiny as Lykos’ MDMA therapy. Studying the FDA’s objections to Lykos’ application could help Compass mitigate risks.

Given this scenario, psychedelics stocks are now more precarious. The uncertainty surrounding regulatory approval for these interventions has increased, making them an even riskier investment in the already volatile pre-revenue biotech sector. This development also raises questions about the FDA’s previous positive commentary on psychedelic therapies.

Investment Considerations

For conservative investors or those nearing retirement, steering clear of psychedelics stocks until regulatory clarity improves is advisable. For those willing to brave the risks, focusing on mature players like Compass Pathways may be prudent, as they are better positioned to respond to regulatory feedback.

FAQs

Why did the FDA vote against Lykos Therapeutics’ MDMA-based therapy? The FDA advisory committee voted against the therapy due to unresolved efficacy, safety, and risk mitigation concerns, despite recognizing the potential value of the treatment.

What is MDMA, and how is it used in therapy? MDMA, known as ecstasy or molly, is used in therapy alongside psychological support to help patients navigate emotionally challenging experiences, particularly in treating PTSD.

Will Lykos Therapeutics try again for FDA approval? While the current attempt is unlikely to succeed, Lykos could make another attempt in the future after addressing the FDA’s concerns.

How does the FDA’s decision affect other psychedelic biotechs? Other psychedelic biotechs, such as Compass Pathways, are now more apprehensive and may face similar scrutiny when seeking FDA approval for their treatments.

Are psychedelics stocks a good investment? Psychedelics stocks are extremely risky, especially after the recent FDA decision. Conservative investors should avoid them until there is more regulatory clarity.

What should investors do now? Investors should consider focusing on more mature psychedelic companies with the resources to address regulatory concerns, while remaining cautious about the inherent risks.

Conclusion

The recent FDA vote against Lykos Therapeutics’ MDMA-based PTSD therapy has sent shockwaves through the psychedelics sector, impacting companies like Compass Pathways, Atai Life Sciences, and Mind Medicine. While the decision highlights the regulatory challenges facing psychedelic biotechs, it also underscores the potential for these therapies to eventually gain approval with further research and refinement. Investors should approach this sector with caution, prioritizing mature companies better equipped to navigate regulatory hurdles.

Read More

Trending