Rising awareness and emergence of differentiated solutions for multiple psychiatric and mental health conditions is an ongoing theme of innovation in pharma but also adjacent and “convergence” fields in healthcare. Increasing incidence, certainly exacerbated by lockdowns and other measures implemented to curtail the spread of COVID-19, and the significant lack of innovation in the past represent the key ingredients for a resurgence, which is currently emerging.
Mental health is an imminent focus area of digital healthcare innovations
When looking at the multiple approaches adopted to tackle the mental health epidemic, it is clear that the field has been moving hand-in-hand with the rise of digital health solutions, which in itself is also a product of the current pandemic. We have recently commented on the digital treatments landscape, which is a fiercely competitive field considering that a majority of its innovators play in mental health and substance addiction segments, likely the two core therapy areas that can benefit most imminently from digital treatments. In addition to these, which require rigorous clinical development and formal regulatory and reimbursement frameworks, recent market dynamics have also stimulated the creation of B2C solutions aimed at improving overall wellness and quality of life, thus promoting a healthier mental state. While these approaches are not aimed at treating a pathological condition per se, they contribute to offering a “preventative” solution for subjects that can benefit the most from it due to their strong stress exposure and other risk factors. An example of these solutions represent:
- Platforms aimed at proactively monitor your mental health state
- Insomnia and sleep improvement solutions
- Online mental wellbeing communities
Traditional therapeutics that focus on the area, are at the center of pharma attention today
While digital solutions certainly represent an emerging field in the mental health space, market attention has recently shifted to the potential inherent in innovative therapeutic approaches for patients with full-blown pathological conditions. Psychiatry has historically been a neglected therapeutic area (including because of the difficulty to successfully develop candidates through approval) and there has been little innovation in the space for over 20 years, with only 7 new drugs approved by the FDA for psychiatric disorders since 2015 (source: Evaluate Pharma). For a majority of patients, therapeutic approaches today are mainly limited to Serotonin Reuptake Inhibitors (SSRIs) and Serotonin and Noradrenaline Reuptake Inhibitors (SNRIs) for depression and generalized anxiety disorders, and secondary antipsychotics for schizophrenia and bipolar disorders. However, high relapse rates, slow onset of action and high percentages of patients responding inadequately to approved therapies, represent a great unmet need that has prompted multiple companies to invest in the space and look for alternative approaches.
The promise of psychedelics
Historically, psychedelics have been confined to recreational, often illegal use, and have been placed as “Schedule I Category” as part of the US Substance Act of 1970, thus limiting their research potential despite preliminary evidence of efficacy for multiple psychiatric conditions. Accumulated research to date has suggested the potential for psychedelics to emerge as breakthrough therapies for psychiatric conditions refractory to conventional treatments, although special care and considerations must be undertaken to prevent misuse. Additionally, the progress in the field has been catalyzed by emerging regulatory momentum, starting with the FDA granting breakthrough therapy designation to MDMA for post-traumatic stress disorder in 2017.
High prevalence, increasing incidence, significant unmet need and increasing regulatory attention towards the subject matter have significantly contributed to the formation of a high number of companies focusing on psychedelics, to the point that more than 50 psychedelics focused companies are now publicly listed on equity exchanges in the US. In addition to publicly-traded psychedelic players, there are dozens of privately funded companies that continue to advance the industry. These companies have collectively raised more than $700m from multiple investors (source: CB Insights, Neuly), with a few selected players taking a platform approach to advance innovative solutions in the psychedelics and broader mental health space. Rising interest on the subject has contributed also to the increasing specialization of the financial investor ecosystem, as psychedelic-dedicated VCs are starting to emerge (e.g. the Conscious Fund, Palo Santo Ventures, Noetic Fund, re.Mind Capital). We anticipate that investors in private companies can achieve above-market returns considering the recent success of psychedelic companies in the public markets, the overwhelming rise of mental health issues, and the increasingly favourable regulatory environment that is coupled with a generally emerging openness of working with scheduled substances in a controlled manner that allows capturing the benefits these can bring while isolating and avoiding their risks as best as possible. Irrespectively of the “hype”, psychedelic companies are also starting to deliver results on the clinical front. Most notably Compass Pathways, the “first-in-class” company testing a psilocybin therapy, recently announced positive results from their Phase 2b trial evaluating their lead asset for treatment-resistant depression that could lead to advancing the asset to Phase 3 studies.
In summary, strong innovation on multiple fronts is happening in the mental health space which is currently observing significant disruption on both the digital therapeutics and pharmacological fronts.