In recent years, interest in the therapeutic potential of psychedelics — including psilocybin, lysergic acid diethylamide (LSD), N,N-dimethyltryptamine (DMT), and 3,4-methylenedioxymethamphetamine (MDMA) — has surged. Clinical trials have increasingly reported positive therapeutic and safety outcomes, fueling significant investment and the rapid emergence of a psychedelic industry. Hundreds of biotech and pharmaceutical companies have launched over the past decade, and psychedelics are now considered a multibillion-dollar sector with exceptional growth projections.
This is a great bet for pharma, especially in disease states like psychiatry that were considered dead a decade ago. On average, the side effect profile from a psychedelic is considerably more benign than the side effect of even the most tolerable SSRI, and the efficacy far greater.
—Ben Spielberg, Stella Mental Health
At present, treatment options for post-traumatic stress disorder (PTSD) and treatment-resistant depression are far from ideal, and relapse is common. The FDA has approved more than 30 drugs targeting depression; however, an analysis of 21 antidepressants found that their efficacy in adults with major depressive disorder — although better than placebo — tends to be modest and often comes with various side effects.
There is an urgent unmet need to develop and test new treatment options, as almost one billion people worldwide have mental health conditions. In the EU alone, mental health problems affect more than one in six people, incurring an economic cost exceeding four percent of gross domestic product. Psychedelics are being investigated not just for symptom relief but for their potential to restructure neural circuits, delivering long-lasting improvement after only a few doses.
Currently, the only fast-acting, dissociative-psychedelic treatment approved in the US and Europe is Johnson & Johnson’s ketamine derivative, Spravato (esketamine), indicated for treatment-resistant depression. While effective, Spravato carries risks, including high blood pressure, sedation, and potential for abuse. This has driven the search for psychedelic compounds capable of delivering long-term mental health benefits with fewer side effects.
Moving into the mainstream
2025 marked a particularly active period for the sector. Johnson & Johnson acquired Intra-Cellular Therapies for $14.6 billion, and AbbVie purchased Gilgamesh’s bretisilocin program for $1.2 billion. Atai Life Sciences merged with Beckley Psytech to form AtaiBeckley, combining scientific expertise with a pipeline of psychedelic-inspired neuroplastogens targeting mental health needs. Meanwhile, Helus Pharma secured a $500 million financing deal with High Trail Capital to support late-stage development of their novel serotonergic agonists, HLP003 and HLP004.
Ben Spielberg, a leader at Stella Mental Health and founder of Bespoke Treatment, captured the optimism driving this investment: “This is a great bet for pharma, especially in disease states like psychiatry that were considered dead a decade ago. On average, the side effect profile from a psychedelic is considerably more benign than the side effect of even the most tolerable SSRI, and the efficacy far greater.”
Alongside this financial momentum, clinical development has accelerated. Seven Phase 3 programs are now underway, with five candidates holding FDA Breakthrough Therapy designations. Of these, four target depression, while the others focus on anxiety, PTSD, and severe alcohol use disorder.
Psilocybin- and LSD-based therapies dominate the late-stage psychedelic pipeline, though companies are pursuing markedly different strategies to balance efficacy, safety, and scalability. Many programs still rely on structured, clinic-based dosing paired with guided therapy sessions, while others are testing whether lower-intensity or microdosing approaches can deliver meaningful benefit with fewer logistical constraints.
Compass Pathways represents the most advanced example of this high-touch, clinic-based approach, combining supervised dosing with a structured framework of preparation, support, and integration sessions designed to ensure safety and optimize therapeutic outcomes. Compass Pathways’ COMP360, a synthetic psilocybin capsule administered during guided sessions, is being investigated for both PTSD and treatment-resistant depression. In a randomized, double-blind, placebo-controlled Phase 3 trial enrolling 258 patients with treatment-resistant depression, a single 25mg dose of COMP360 produced a 3.6-point reduction on the Montgomery-Åsberg Depression Rating Scale (MADRS) at six weeks compared with placebo.
These results are notable given that the trial enrolled 258 patients across 32 sites, making it one of the largest multi-center, randomized, double-blind, placebo-controlled studies of its kind. As Joel Latham, CEO and Director of Incannex Healthcare told DDN, “Regulators and payers want consistent, repeatable outcomes across sites and patient populations. Psychedelic therapies can be highly sensitive to patient selection, protocol integrity, and the quality of psychological support. That creates variability risk, which regulators will scrutinize.”
Other developers are exploring whether antidepressant effects can be achieved with substantially lower doses and less intensive clinical oversight. MindBio Therapeutics’ microdosed LSD candidate MB22001 produced a 60 percent reduction in depressive symptoms in Phase 2a trials, and over half of participants achieved complete remission. Participants also showed improvements in anxiety, stress, rumination, and quality of life, with benefits sustained for several months after treatment. While these early signals are encouraging, the study was open-label and enrolled just 19 patients.
GH Research is taking a novel approach with an inhalable DMT-based therapy, GH001. In a Phase 2b trial for treatment-resistant depression, GH001 produced rapid and substantial antidepressant effects. In this randomized, double-blind, placebo-controlled study of 81 participants, the therapy led to a 15.2-point improvement on the MADRS scale by day 8 and a 57.7 percent remission rate. GH001 was well-tolerated, with only mild or moderate adverse events reported, no sedation or dissociation at discharge, and most patients were ready to leave the clinic within an hour. Follow-up data at six months showed sustained remission in 77.8 percent of patients, many of whom required just one to four treatments over that period.
“It’s ultra-short duration and rapid onset distinguish it from longer-acting psychedelics and make it more compatible with medically supervised, scalable clinical models,” Christi Myers, Founder and Chief Innovator at Flow Integrative, told DDN. “Current development focuses on controlled inhaled and intranasal formulations that prioritize dosing precision, safety, and reproducibility. These efforts reflect a broader shift in the field — from exploratory psychedelic use toward precision-based medically supervised psychedelic care.”
Can we make psychedelic treatments that are non-hallucinogenic?
While the data emerging from psychedelic therapies are promising, developing these treatments in a clinical setting is far from straightforward. Hallucinogenic compounds pose unique challenges for trial design since patients can usually tell whether they received the active drug or a placebo, a phenomenon known as functional unblinding. This issue was central to the FDA’s rejection of Lykos Therapeutics’ MDMA therapy.
“Challenges around blinding and variability are largely a function of how certain therapies are designed,” said Eric So, cofounder and CEO of Helus Pharma, told DDN. “Our work is centered on novel serotonergic agonists engineered for predictable pharmacology that imparts reproducible therapeutic precision. Paired with protocols built for reproducibility, our design philosophy supports clear efficacy assessment and makes these therapies viable for real-world clinical use.”
An open question remains on whether the hallucinogenic experience is mechanistically necessary for durable benefit or if, in fact, it is nothing more than a costly side effect that forces the healthcare system into a high-touch delivery model.
—Joseph Tucker, Enveric Biosciences
Beyond the challenges of trial rigor, traditional psychedelic treatments often require long, resource-intensive clinic sessions, with supervised dosing, guided therapy, and careful monitoring of vital signs. This high-touch model can limit scalability and increase the logistical and financial burden on both providers and patients. As a result, there is growing interest in developing psychedelic-inspired therapies that retain the antidepressant or anxiolytic benefits without inducing hallucinogenic effects.
“An open question remains on whether the hallucinogenic experience is mechanistically necessary for durable benefit or if, in fact, it is nothing more than a costly side effect that forces the healthcare system into a high-touch delivery model,” Joseph Tucker, CEO of Enveric Biosciences told DDN. “If non-hallucinogenic neuroplastogens can demonstrate durable benefit without the ‘experience-management’ overhead, it sets the stage for them to become the platform for a scalable second wave of psychedelic-inspired therapeutics.”
Enveric Biosciences is taking exactly this approach. By developing non-hallucinogenic neuroplastogens, such as EB-003, the company aims to capture the therapeutic benefits of psychedelics while avoiding the long clinic times, supervision requirements, and functional unblinding issues that complicate traditional hallucinogenic trials. In doing so, Enveric hopes to create a more scalable and accessible model for treating depression, PTSD, and other neuropsychiatric disorders.
The future of psychedelics
Looking ahead, psychedelic therapeutics could redefine mental health care for conditions that have long been underserved, providing more durable and effective options. The sector’s trajectory will depend not only on regulatory approvals and the results of ongoing Phase 3 trials, but also on the development of scalable, safe, and effective delivery models that can reach patients beyond specialized clinics.
If these hurdles can be addressed, the commercial upside could be substantial. According to Roots Analysis, the psychedelics drug market — valued at nearly $2.8 billion in 2024 — could approach $13 billion by 2035, reflecting both strong investor interest and the unmet global need for novel mental health treatments. Ultimately, the next few years will reveal whether psychedelic therapeutics transition from niche promise to mainstream care, establishing a new paradigm for treating some of the most persistent psychiatric disorders.
