- A committee of the U.S. Food and Drug Administration has rejected a drug application to treat PTSD with MDMA-assisted therapy citing insufficient evidence, causing numerous psychedelic stocks to dip into discount territory
- Stocks caught in the downturn include Numinus Wellness, PharmAla Biotech and Optimi Health
- MDMA boasts numerous clinical studies showing its efficacy against PTSD, which represents a more than US$15 billion global treatment market
A committee of the U.S. Food and Drug Administration has rejected a drug application to treat PTSD with MDMA-assisted therapy citing insufficient evidence, causing numerous psychedelic stocks to dip into discount territory
Lykos Therapeutics, the company behind the application, is a public benefit corporation tied to the Multidisciplinary Association for Psychedelic Studies, a non-profit research and educational organization that has been developing medical, legal, and cultural contexts for the beneficial use of psychedelics and marijuana since 1986. The drug company will receive the FDA’s verdict in August after a successful phase-III trial, potentially granting it a first-mover advantage in the global market for PTSD treatments, which stands at more than US$15 billion and is expected to surpass US$27 billion by 2033, but it must first contend with a number of allegations against its research that are made for TV as much as for the laboratory. These include:
- A report from the Institute for Clinical and Economic Review that alleges researcher bias, patient coercion and unreliable data about symptom improvements.
- A patient report of inappropriate physical contact by two therapists involved in Lykos’ phase-II trial while she was under the influence of MDMA.
- Evidence of the deliberate admission of adverse events.
While Lykos has waved off these claims, the FDA tapped its Psychopharmacologic Drugs Advisory Committee (PDAC) for an independent, non-binding opinion to aid it in making an informed decision come August.
After meeting on June 4, PDAC voted against the FDA’s approval of MDMA for PTSD, with only two of 11 members believing that Lykos’ data demonstrates MDMA’s effectiveness, and only one member believing that the benefits of MDMA outweigh its risks for treating PTSD.
According to data from Jama Health Forum, between 2010 and 2021, the FDA has coincided with committee approvals 97 per cent of the time, while it has coincided with disapprovals only 67 per cent of the time.
Psychedelic stocks drop in response to PDAC decision
After PDAC voted down Lykos’ proposal for MDMA-assisted therapy, a number of microcap psychedelic stocks took a tumble, despite the non-binding nature of the decision, and a growing pool of phase-II data that shows MDMA to be effective against PTSD, suggesting it is only a matter of time before drug formulations make it to the U.S. market, unlock billions in value, and propel already legal medical markets in Canada and Australia. Here are three stocks to consider:
- Numinus Wellness (TSX: NUMI), which develops and delivers psychedelic-assisted therapies, and has treated more than 40,000 patients, suffered a 40 per cent dip in its share price, even though its path to profitability does not depend on the commercialization of MDMA. The stock has given back 80.43 per cent year-over-year.
- Shares of PharmAla Biotech (CSE:MDMA), which researches, develops and manufactures MDXX-class molecules, including MDMA, dropped by more than 31 per cent on the news, despite its global clientele residing outside of the United States, and chief executive officer Nick Kadysh believing that business will pick up after the committee’s decision, as it motivates new researchers to innovate in the psychedelic space. The stock is down by 55.17 per cent year-over-year.
- Finally, shares of Optimi Health (CSE:OPTI), a licensed psychedelics pharmaceutical manufacturer specializing in psilocybin and MDMA, have given back about 12.75 per cent this week, in blatant disregard of the company securing a regulatory pathway to ship MDMA and psilocybin worldwide after the award of a Drug Establishment Licence from Health Canada. The stock has given back 52.66 per cent since inception in 2021.
Regardless of the Lykos proposal’s ultimate fate, investors should keep a broad-market perspective and remember that psychedelic compounds are being studied under three phase-III trials and 34 phase-II trials to date, granting the space a robust pipeline for future due diligence beyond the US$15 billion PTSD treatment market.
Join the discussion: Find out what everybody’s saying about these psychedelic stocks on the Numinus Wellness Inc., PharmAla Biotech Holdings Inc., and Optimi Health Corp. Bullboards, and check out the rest of Stockhouse’s stock forums and message boards.
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(Top photo of PharmAla’s LaNeo MDMA capsules: PharmAla Biotech)