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Shroom Shmooz

A topsy turvy year for psychedelics thus far. The psychedelic industry began 2024 with great expectations but ended the first half of the year with uncertainty. This year was set up to be the year in which a psychedelic substance would finally make its critical breakthrough and be legally inducted into the medical professional’s toolbox for the treatment of a mental health disorder. However, the FDA panel vote against approval of Lykos Therapeutics’ (formerly MAPS PBC) MDMA-AT candidate to treat PTSD in June, surprising to many, raises doubts over the timing of approval. Over to the FDA as to what happens next. Consequently, the second half of 2024 for psychedelics is up in the air, with the ball now firmly in the regulator’s court. Our note highlights several scenarios that could unfold. The FDA is scheduled to decide on Lykos’ new drug application (NDA) on August 11 (Prescription Drug User Fee Act [PDUFA] date). The FDA Advisory Committee’s recommendation is not binding on the FDA, so it is possible that it could ignore the recommendation of its independent advisory committee and approve the therapy. However, we think it is more likely that the regulator will request more data from Lykos, which might involve a postponement of the PDUFA date. Ramifications for the psychedelic sector. The recent turn of events has taken some of the wind out of the sails of the sector. However, the main potential fallout from the current uncertainty is not the risk of rejection of psychedelics as a viable alternative to treat hard-to-treat mental health disorders, but rather the impact on the rollout progress of these treatments. The funding environment may also become tougher, but this is likely to have a greater effect on the smaller psychedelic drug developers struggling for cash, which could accelerate M&A and consolidation opportunities within the sector.