The market for legal psychedelics is set to experience significant growth in the coming years. The completion of MAPS’ Phase 3 trial and the ongoing Phase 3 study by Compass Pathways are paving the way for commercially available psychedelic treatments. While the industry eagerly awaits the rollout of these treatments, there are already a few examples of psychedelic medicines being sold in the market. One such example is off-label ketamine, administered in clinics or through at-home delivery. Another example is Spravato, the only FDA-approved psychedelic to date.
Spravato, also known as esketamine, obtained FDA approval in 2019 as a breakthrough treatment for individuals with treatment-resistant depression. This approval marked the first time a psychedelic compound was cleared for therapeutic use in the United States.
Spravato and the Market Potential of Psychedelics
With approximately 4 years on the market, Spravato offers insights into the commercial potential of psychedelic medicines. Owned by Janssen, a major subsidiary of Johnson & Johnson, Spravato is not only the first FDA-approved psychedelic for commercial use, but it also has the backing of a large pharmaceutical company.
Initially, Spravato sales were modest, with Janssen and Johnson & Johnson keeping quiet about the drug’s commercial performance. However, recent sales figures have been encouraging. In the first quarter of 2023, Spravato sales reached $131 million, representing an impressive 87% increase compared to the same period in 2022. This makes Spravato the fastest-growing program in Janssen’s portfolio.
Dina Burkitbayeva, CEO of Freedom Biosciences, commented on the potential success of psychedelics in mainstream pharma, stating that Spravato’s recent sales indicate its ability to generate significant revenue. It is projected that Spravato could surpass $1 billion in sales next year, with Janssen Pharmaceuticals forecasting sales of up to $5 billion by 2025.
Burkitbayeva also noted that it is not uncommon for a new drug to take a few years to gain traction in the market, and it typically takes 5-7 years post-approval for a drug to achieve peak sales. The timeline is likely to be longer for Spravato due to COVID-related delays and the paradigm shift in treatment that Spravato and other psychedelic therapeutics are attempting to overcome.
Factors driving the turnaround in Spravato’s sales include positive research, insurance reimbursement, an increasing number of psychiatrists comfortable with prescribing psychedelics, and a growing number of individuals seeking mental health treatment.
What About the Next Generation of Psychedelics?
While the positive sales news from Spravato bodes well for the future commercial outlook, it is important to consider how this success might translate to other legal psychedelic drugs in the pipeline.
Elemer Piros, a biotech analyst and psychedelic stock expert at EF Hutton, expressed his view that Spravato is on track to achieve blockbuster status in terms of sales. He also mentioned that Johnson & Johnson was unprepared for the logistics of administering this therapy, which initially lacked reimbursement codes. Looking ahead to other psychedelics awaiting FDA approval, Piros stated that organizations like MAPS and Compass have already put forth preliminary codes for the administration of MDMA and psilocybin, signaling a positive outlook for future treatments. With drugs like Compass’ COMP360 showing potential as more efficacious and less cumbersome to administer, Piros projected sales of over $1 billion for COMP360 by year 4 post-launch.