The commercial market for legal psychedelics is poised for significant growth in the coming years. MAPS’ Phase 3 trial is completed and moving towards FDA approval and Compass Pathways’ Phase 3 study, the next most advanced trial, is already underway. Legal psychedelics as commercially available treatments are close to becoming a reality.
With the industry and investors eagerly waiting to see what this commercial roll-out will look like, we do have a few examples of psychedelic medicines currently being sold in the market. One is off-label ketamine, delivered in clinics or through at-home delivery — and the other is Spravato, the only FDA-approved psychedelic to date.
Spravato, also known as esketamine, gained FDA approval in 2019 as a breakthrough treatment for individuals with treatment-resistant depression (esketamine is the s-enantiomer of ketamine). This is the first FDA approval of esketamine for any use. This landmark approval marked the first time a psychedelic compound was cleared for therapeutic use in the United States.
Spravato provides insights into market potential of legal psychedelics
With Spravato having been on the market for approximately 4 years, we can now gather perspectives into the commercial potential for psychedelic medicines.
Owned by Janssen, a major drug development subsidiary of Johnson & Johnson, Spravato is not only the first FDA-approved psychedelic for commercial use, but has the backing of a major pharmaceutical company. So how is it performing?
Initially, Spravato sales were nothing to write home about, with Janssen and J&J not revealing much about the drug’s commercial performance. But recently the company released sales figures and Spravato’s results were very encouraging.
As reported in J&J’s Q1 2023 results, Spravato sales in the 1st quarter 2023 sales were $131 million — an impressive 87% increase from Q1 2022 to Q1 2023. These figures made the psychedelic the fastest growing program in Janssen’s portfolio.
Dina Burkitbayeva, CEO of Freedom Biosciences commented in this note regarding the potential for psychedelics to succeed in mainstream pharma:
“..given that by pharma standards, success means hundreds of millions to billions of annual sales, SPRAVATO®’s recent sales indicate that yes, indeed, they can (succeed). We assume this will generate new investor interest in psychedelics and pique the interest of large pharmaceutical companies in developing, partnering with, and/or acquiring psychedelics-based drugs.”
According to Dina Burkitbayeva:
“It’s not uncommon for the sales of a new drug to take a few years to pick up and it usually takes 5-7 years post approval for a drug to achieve peak sales….This timeline is likely longer for SPRAVATO due to delays / slowdown related to COVID restrictions of in-clinic visits, which hit just a year after SPRAVATO approval in March 2019 and the magnitude of the treatment paradigm shift that SPRAVATO (and other psychedelic therapeutics) are needing to overcome.”
Spravato sales are finally hitting pharma’s high sales standards. What’s driving this turnaround?
A combination of positive research, insurance reimbursement by major payors, more psychiatrists comfortable with prescribing psychedelics, and more people seeking mental health treatment. And this trend should only increase as psychedelics continue to gain FDA approval and public and professional acceptance.
What about the next group of legal psychedelics?
So while positive sales news from the industry’s sole psychedelic does bode well for the future commercial outlook — how might it translate to other legal psychedelic drugs on their way to market?
Elemer Piros, biotech analyst and psychedelic stock expert at EF Hutton, had this to say:
“It looks like (Spravato) is heading to blockbuster status by next year ( > $1 billion in sales). I think Johnson & Johnson was totally unprepared for the logistics of the administration of this therapy. Two times 2 hrs at the clinic every week for the first month (16hrs), followed by 2 hrs weekly. And there was no reimbursement (insurance) code for the administration of the therapy at first.”
Looking forward to the next psychedelics coming down the FDA pipeline:
“MAPS and Compass have already put a preliminary CPT code for the administration of MDMA and psilocybin, more than a year before MAPS launches its drug.
And could drugs like Compass’ COMP360 perform even better than Spravato?
“All else being equal, COMP360 is a more efficacious drug than Spravato and it is much less cumbersome to administer it once or perhaps twice per year.”
“I feel comfortable that my projection of >$1 billion in sales by Compass and COMP360 in year 4 after launch is feasible.”
