Changing Minds: Psychedelics as Legitimate Medicine

What It Covers

Connor Williams, Senior Research Analyst at RTW Investments, examines the evolution of psychedelic compounds from counterculture substances to legitimate psychiatric medicines. The discussion covers treatment-resistant depression affecting two million Americans, regulatory pathways for scheduled substances, and GH Research's breakthrough phase 2b results showing 15.5-point improvement on depression scales with five-methoxy-DMT.

Key Questions Answered

• •Treatment-Resistant Depression Market: Two million Americans fail two adequate antidepressant lines and qualify as treatment-resistant, with dramatically reduced odds of improvement. Traditional SSRIs like Prozac and Celexa work identically, causing pharmaceutical companies to exit psychiatry due to inability to differentiate branded drugs from generics. This created a decades-long innovation desert until biotech companies began developing psychedelics and novel mechanisms.
• •Regulatory Pathway Success: Johnson & Johnson's Spravato (s-ketamine) and GW Pharma's Epidiolex (cannabidiol) proved scheduled substances can be rescheduled and commercialized with legitimate medical data. Spravato crossed one billion dollars in annual sales treating treatment-resistant depression through nasal administration in clinics. The FDA now provides guidance documents specifically helping psychedelic biotechs design approvable development programs, signaling regulatory acceptance of this drug class.
• •Intellectual Property Challenges: Naturally occurring psychedelics like psilocybin from magic mushrooms cannot be patented as molecules, only as methods of use for specific indications. Many psychiatric applications were already described in 1960s literature, further limiting patent protection. The IRA's pill penalty gives small molecules shorter exclusivity periods than biologics, disadvantaging brain-penetrant psychiatric drugs that cannot use biologic modalities.
• •GH Research Innovation Model: The company developed five-methoxy-DMT as an inhaled treatment producing 10-15 minute psychedelic experiences versus six-eight hours for psilocybin. Their phase 2b data showed 15.5-point improvement on the MADRS depression scale with over fifty percent of patients achieving remission after one dose at seven days. This represents the largest drug effect ever observed in psychiatry, with duration enabling higher patient throughput for psychiatrists.
• •Electroconvulsive Therapy Underutilization: ECT remains the most effective antidepressant therapy available despite massive stigma from horror movie portrayals. Even without stigma, capacity constraints prevent treating all two million treatment-resistant patients in America with ECT. Transcranial magnetic stimulation offers similar electrical brain stimulation through magnetic fields with less stigma, but both medical device approaches cannot scale to meet total patient need.