An analyst and an executive unpack developments in the rapidly changing landscape of psychedelic commerce and drug development

A lot has happened since we began a series of conversations about the potential of psychedelics and mental health with Michael Pollan in early October. Colorado voters approved a ballot measure to legalize psilocybin sessions at state-regulated “healing centers.” In Oregon, a large number of small counties voted to opt out of allowing legalized psilocybin centers to operate within their boundaries – two years after voters statewide approved a measure to legalize psilocybin products and services.

A peer-reviewed analysis of the largest psychedelic clinical trial to date – from Compass Pathways – was released. MAPS (the Multidisciplinary Association for Psychedelic Studies), a leading force in advancing psychedelics research completed its second Phase 3 trial for MDMA – commonly known as Ecstasy – in people with post-traumatic stress disorder. And the National Institute for Mental Health (NIMH), the largest funder of mental health research in the world, announced new guidelines for applicants seeking funding to study psychedelics. 

In our most recent interview, MindSite News Founding Editor Rob Waters spoke with Josh Hardman, founder of the consultancy firm Psychedelic Alpha, which publishes a weekly newsletter, and Dick Simon, co-founder and CEO of Sensorium Therapeutics and the chair of the advisory council for the Center for the Neuroscience of Psychedelics at Massachusetts General Hospital.

Here’s part one of our interview, edited for brevity and clarity.   

Rob Waters: Let’s start with how you each got into the psychedelic space and what you’re doing now. Dick, let’s begin with you.

Dick Simon: I knew nothing about the psychedelic space, but I got interested when a close friend’s son’s life was essentially saved by psychedelics. He was suffering from a host of different mental health conditions, including suicidality, and the prognosis was somewhere between totally grim and horrible. Out of desperation, they had him work with someone utilizing psychedelics. He went from someone who had that horrible prognosis to a vibrant human being leading a totally normal life with relationships and work and everything else. I became more curious and started looking at some of the early trials. 

Also, we have mental health issues in our family, so I was very conscious of the need for better tools. No matter what your resources are, the medicines we are currently using for psychiatric disorders leave a tremendous amount to be desired. 

Dick Simon, SEO of Sensorium Inc. and chair of the advisory board of the Center for the Neuroscience of Psychedelics at Massachusetts General Hospital.

I had done prior work around destigmatizing and helping people communicate, so I thought this could be a great opportunity to get involved and help those who understand the potential benefits of psychedelics to communicate with those who grew up on “just say no to your brain on drugs.”

Tell us about the Center for the Neuroscience of Psychedelics at Mass General and your role in it?

Simon:The Center for the Neuroscience of Psychedelics at Mass General – which is Harvard’s teaching hospital – is led by Dr Jerrold Rosenbaum, who has been running psychiatry at MGH for 20 years and is one of the premier psychopharmacologists in the world. I’m chair of the advisory council. The opportunity for MGH and Harvard to get involved was exciting. It’s an incredible research organization, and you know great things will be learned. 

The brand of Harvard and Mass General helps establish the validity of the space. Harvard is where Timothy Leary started this path – he got driven out of Harvard and the research was prohibited for 50 years. Now Harvard’s back in the space, which is a signifier of establishment acceptance of its possibilities. To be clear, MGH is not in this to advocate for psychedelics; they’re in it to research, to start seeing things and asking: Why is this working, and how can it work better?

Josh, same question for you.

Hardman: My story of psychedelics starts at an institution that has a warm history with psychedelics: the University of California at Berkeley. I was there on my year abroad as a 20-year-old student coming from an uptight family in a middle-class, rural part of England. 

Josh Hardman, founder of Psychedelic Alpha.

Suddenly I was launched into the Berkeley counterculture: My academic advisor sent me out with a list of names: hippies, Black Panthers, people in the San Francisco Mime Troupe. I was to sit with them and talk to them about why this apparently spontaneous cultural and political awakening happened in the mid-century and beyond. And every question I asked them – trying to force it in a structural political-economic analysis – they kept coming back to drugs. 

To me, this was kind of a tired cliche – the counterculture psychedelic flower power. But the more I spoke to them, the more I became interested in the role of psychedelics in the kind of cultural and political awakening in the mid-century. Ultimately, I was forced to drop it – I came back to England and worked in research institutes doing economic analysis and all sorts of boring stuff. But all the while, I had this interest. Imagine my surprise when I came across VCs, investors, biotechs and institutions like King’s College London and Mass General looking at psychedelics.

At first it just seemed like the total opposite to what I’d seen with the ravers, the hippies, and Indigenous folks. Now you have the cold hard fluorescent light of the laboratory looking at this. My main interest four years ago was in this interplay, the juxtaposition of these two routes, and I could see a lot of ways that these two groups weren’t going to get on. 

Ironically, I became a proponent of the medical model and began tracking these companies and psychedelic research. I came in as a skeptic of the commercialization of psychedelics but came to see the benefits of the biopharma model in terms of providing access and also getting these drugs approved by institutions that have been terrified of them for the last 50 years.

You advise some psychedelics companies, but you don’t personally invest in them, so your analysis isn’t tainted by investment?

Hardman: Yes, Psychedelics Alpha is funded out of my own pocket, and we don’t have any shadow funders.

Let’s look at some new developments, including the review in the New England Journal of Medicine about the use of psilocybin for serious depression that hasn’t responded to other therapies. Josh, can you walk us through the findings?  

Hardman:  The publication was a peer-review of the topline results published last year by Compass Pathways, which has since announced their Phase 3 program. Essentially, Compass gave one session of psilocybin therapy along with therapy. This was people with treatment-resistant depression who had already tried other lines of treatments, like SSRIs or talk therapy. The findings were that one in five people were “sustained responders,” meaning they had a significant decrease in their rates of depression at week 12. 

Some people are surprised when they hear that, because 20% doesn’t sound that amazing or transformative even though this is a very difficult-to-treat population. When these results were announced last year, the company’s stock price took a huge dive. In addition to these somewhat lackluster findings, there were some concerning safety signals with serious adverse events among these treatment-resistant depression patients. 

Some of this is to be expected – this patient population is very vulnerable to things like suicidal ideation. But there are genuine questions which the company is now going to have to resolve in phase 3. One in five people responding to psilocybin is way less than what we’re seeing in MDMA trials for post-traumatic stress disorder (PTSD), where two-thirds are responders.

Simon: Treatment resistant depression is really a terrible thing. Suicidality in this population is a constant concern. For many, nothing else is helping, so even 20% is progress. There are such high expectations, and I think part of the stock-price drop came from there. Even if it doesn’t help everyone, it helps some people and I think that may get lost in the idea that this is supposed to cure everything instantly.

Let’s talk a little about the MDMA findings from MAPS.

Hardman: MAPS has finished its second Phase 3 trial of MDMA therapy for PTSD. They had around 200 patients and, as Dick alluded to, the results are stunning, with data showing that two-thirds of the participants are in remission. They hope to submit their new drug application to the Food and Drug Administration in the first half of next year. So MDMA could be an approved treatment for PTSD in the United States and available as early as 2024. So that’s really promising.  

It’s important to note that these were people who had at least seven years of really terrible PTSD for which they’d tried many therapies, and 67% of patients were in remission at the end of Phase 3. Even in the group that received the placebo and not MDMA, one third of patients recovered. So we can see how stellar the therapy was and how intensive it was. Some of it might be related to expectancy ­– the excitement of getting such a novel and hyped therapy inducing a placebo effect.

Right. People didn’t just get the drug or a placebo – they also got companion psychotherapy. So either the power of the placebo was really strong or the therapy played a really critical component.

Simon:  Instead of therapy or placebo effect, I would say and.

Hardman: Which shows that as a world we need to be investing in proper therapy just as much as we invest in psychedelic therapy. That’s my soapbox, anyway.

The NIMH and NIDA, the National Institute of Drug Abuse, have begun funding psychedelics research in the last couple of years. And NIMH just released guidance for psychedelics research applicants. Without getting too deep in the weeds, Josh, what does that guidance say?

Hardman: I wrote like a 40-tweet thread on it which is vanishing from my memory now. Effectively the NIMH said they’re glad to fund psychedelic research but they’re frustrated with the use of animal models and making too many assumptions about the effects that we’re going to see in humans. The NMIH is advocating for a reverse translational approach – i.e. you have to have some idea of what drug efficacy looks like in a human, and then you might go back to animal models. But even putting out guidance was positive because it suggests they’ve been getting enough applications that it’s worth clarifying their position. 

It’s important because for the last 50 years they’ve mainly been funding research on drug abuse potential, including one famous NIDA-funded study that confused MDMA with methamphetamine.

(Note: In an apparent accident in 2003, scientists at Johns Hopkins University injected monkeys with methamphetamine thinking it was MDMA. It caused brain damage to the monkeys and provoked a blitz of alarmist publicity: “It sends an important public-health message – don’t experiment with your own brain,” Alan Leshner, a former head of NIDA and then the publisher of the journal Science, said at the time; Science later retracted the study.)

People used that erroneous finding for a long time to say MDMA was toxic. So, seeing an honest interest in funding psychedelic research from federal agencies – I choose to see that as progress, although the dollars are still miniscule compared with other funding.

Simon: A $30 million grant is a big deal, but against the scale of what NIMH and NIH would otherwise be funding, we’re just seeing the start of it. To this point, almost all the funding is still coming from philanthropic or commercial sources. In other areas of health, that’s no longer true.

What is the universe of funding for psychedelics research – how much of it is private and how much is from the government?

Hardman: We track the amount of fundraising in public and private rounds amongst companies, and last year it was just shy of $2 billion. This year it’s quite a bit less. It’s probably a few billion in the last few years of private investment, and philanthropy is a few hundred million, maybe more. State investment is under $100 million worldwide. That is dwarfed by private investment.

Simon: Until you had a few commercial players, 100% of the funding was philanthropic. When the commercial players demonstrated commercial possibility, there was a flood of investment. Compass Pathways going public did a lot to launch that. There have been a lot of public company fundings, and also tremendous interest and high valuations in early-stage private companies. A lot of that has shifted now with the change in market conditions.

A lot of that early philanthropic funding went to MAPS, which really drove this engine on its own for a long time.

Hardman: Yes, and now MAPS is having to look for more innovative models of financing, because early philanthropists who funded MAPS are saying, “Why would we donate when we could invest or offer you a loan?” Which is a shame, because it could have been this incredible instance of a nonprofit taking a drug all the way through approval. But for the last $100 million they need to get though the approval process they’re having to solicit loans and different kinds of project-based financing.

And obviously some stuff is lost by that. A lot of money is going to clinical research now, and less for fundamental basic science, which is obviously super important. But when you can invest in a company going through clinical trials, it’s more sexy and exciting for investors. There is definitely something lost when we lose philanthropy’s interest, but maybe they will get involved with the work of Mass General. 

Simon: Yes, MGH and places like the UC Berkeley Center for the Study of Psychedelics. Many leading institutions now have such programs. We’re also seeing philanthropic dollars going into advocacy like Colorado’s ballot initiative.

Let’s talk about Sensorium. It’s a privately held company that’s doing something unique – using AI and a library of psychoactive plants and induced pluripotent stem cells to develop psychedelic compounds as therapies. Tell us about this approach.

Simon: Sure. The concept is that everyone is focusing on a dozen or so psychedelics – psilocybin, LSD, and so on. Our thesis is that what people are not doing is looking at the thousands of plants and fungi that have a long history of human use for a range of different mental health or other central nervous system conditions. We’re calling this the biodynamic discovery platform. It’s a platform for analyzing: Out of that universe of thousands of psychoactive plants and fungi, what is the active molecule that’s creating the effect? First we’re creating what we call the NeuroNatural library, which will become the world’s largest compilation of plants and fungi that have psychoactive effects – psychoactive but not psychedelic, to be clear.

Does that mean you’re excluding psychedelics?

Simon: No, but we’re not focusing on them. A lot of the effect of psychedelics is their relationship to neuroplasticity, or the brain’s ability to change. Psychedelics tend to accelerate that change dramatically. When people are depressed, you could say there’s a rut you’ve gotten into. Using a mountain-skiing analogy, it’s like you’ve always gone down a tried-and-true way but it’s not great. And now four feet of fresh powder are laid on top. And it enables, with therapy, the opportunity to develop other routes down that are different and potentially better.  

What we’re doing is looking at using induced pluripotent stem cells, which are essentially skin cells that can be converted into nerve cells or neurons to figure out the mechanism of action – how are these thousands of plants and fungi working?  We look at what receptors they connect to and evaluate their potential use as pharmaceuticals in a modern context. This creates a massive amount of data on each of the substances, and we’re using machine learning to distill that down to identify the leads we ought to be looking at. 

Our first drug is related to treating people for anxiety. Right now, there are two primary drugs for treating anxiety. SSRIs, also used for depression, don’t work in a third of people. For those who are helped, they cause serious side effects in 40% of people ranging from weight gain to sexual dysfunction.

The other is benzodiazepines which are very addictive. Even though doctors hate benzodiazepines and are concerned this will be the next opioid crisis, in the US alone, there were 90 million prescriptions for benzodiazepines for 30 million patients. There’s a tremendous need, and our model will develop better drugs without a lot of the toxic side effects.

Our first compound comes from an alkaloid in a succulent that has been used for an extended period of time. It needed additional medicinal chemistry so it could be used in contemporary context as a daily pill instead of a tea you need to sip all day or bark you chew on.

We’re developing neurons and neuronal networks, sometimes called “mini-brains,” to look for plasticity (growth of neurons or changes in neural connections) from these compounds. Unlike cancer or other conditions, animal models don’t translate well to psychiatric behavior. We’ll start with what already has strong signals of efficacy, then we’ll reverse-engineer and enhance it. That’s the idea behind Sensorium. And in this difficult funding space, we were able to raise 30 million dollars.

What potential do psychedelics have for neurological conditions like Alzheimers and dementia?

Hardman: We’re seeing this shift in psychedelics research from the kind of Trojan Horse indications, which were mainly mental health-related – depression, anxiety, and PTSD – to neurodegenerative and even neurodevelopmental disorders. The research is at a very early stage, but research on neuroplasticity, neurogenesis and spine growth may lend themselves well to something like dementia and Alzheimer’s in a targeted way.

Simon: There’s the thought that it may be helpful with Parkinson’s and other diseases in which the brain or nerve cells are not working correctly. You may be able to have a positive effect  – essentially in anything – if you’re able to rewire the brain. 

Hardeman:  It does seem like psychedelics can work for many conditions, but some people feel psychedelic researchers are going around with a hammer and trying to find nails. I think it is super important to discuss these unifying theories of consciousness and psychedelics and mechanisms of action to convince people this is science. That’s why fundamental research and the work of MGH is super important. Because you need a convincing explanation of how these drugs work.

Next week: Part two – How can psychedelic researchers adapt to the new funding landscape?

Type of work:

Rob Waters, the founding editor of MindSite News, is an award-winning health and mental health journalist. He was a contributing writer to Health Affairs and has worked as a staff reporter or editor at...