By Kamal Choudhury and Christy Santhosh
May 18 (Reuters) - U.S. President Donald Trump's executive order to accelerate psychedelic drug development has raised hopes among companies developing the drugs that it could help attract more capital, but researchers cautioned that new treatments are still a long way off.
Nine executives and investors interviewed by Reuters said the order could shorten administrative timelines and improve coordination between the U.S. Food and Drug Administration and the Drug Enforcement
Administration.
Several companies said new funds are still just a hope, but Joseph Tucker, CEO of psychedelic drug developer Enveric Biosciences, told Reuters the company raised $5 million when the news of the Trump order emerged.
Dane Stevens, CEO of Optimi Health, said his company fielded many calls almost immediately after the order, as potential investors sought to better understand the sector.
"When there's things that happen from executive orders, the phone rings," Stevens said.
But seven researchers working to find the medical benefits of the drugs said any new treatment first requires costly, time-consuming research, and that most psychedelic drugs are still in the early stages of development and are a long way from hitting the market.
"I'm cautiously optimistic, but I'm not throwing a funding party yet," said researcher Gül Dölen, a professor at the University of California, Berkeley, whose work explores how psychedelics may reopen 'critical periods' — windows of heightened brain plasticity that make it easier to relearn behaviors and process trauma.
The FDA highlighted slow development timelines and difficult trial designs in its 2024 decision to decline approval of Lykos Therapeutics' MDMA-assisted therapy for PTSD.
A sign the FDA is shifting gears came in April when it granted expedited review to three companies, Compass Pathways, Usona Institute and Transcend Therapeutics, all studying psychedelic treatments for mental health conditions.
INVESTORS SEE LOWER RISK
Sa'ad Shah, co-founder of Noetic Fund, a venture fund with investments in psychedelic companies, including Compass Pathways, Definium Therapeutics and AtaiBeckley, said the sector has historically attracted capital from family offices and high-net-worth individuals.
Now, he hopes the executive order will bring in institutional investors such as sovereign wealth funds and public pension plans to the sector by reducing the regulatory uncertainty that had kept them on the sidelines and signaling that the sector has credible government backing.
Shah and Sri Teja Mullapudi, Noetic's scientific lead, said faster FDA engagement could save clinical-stage companies "tens of millions of dollars" by compressing some review timelines from 10 to 12 months to as little as one or two months.
Still, investors said the benefits will not be evenly distributed. Late-stage developers with breakthrough therapy designations or pivotal data are likely to benefit first from expedited reviews or priority vouchers.
For earlier-stage companies, the effect is "more fuzzy" but still positive because more investors may now consider psychedelics an investable category, said Matias Serebrinsky, co-founder of investment firm PsyMed Ventures.
COMPANIES SEE FASTER PATH
Robert Barrow, CEO of Definium Therapeutics, which is developing an LSD-based therapy for generalized anxiety disorder, said faster regulatory processes could improve efficiency and reduce waste.
The order's instruction that the Drug Enforcement Administration (DEA) begin work on scheduling controlled substances after late-stage data are available, rather than waiting until after the FDA approval, in particular, could help, he said.
The DEA assigns drugs to schedules that determine how tightly they are controlled and whether they can be prescribed. U.S. authorities recently moved to reclassify cannabis to ease research and investment hurdles.
Srinivas Rao, CEO of AtaiBeckley, said the order's emphasis on improving communication between the FDA and the DEA on clinical trial protocols and site approvals could shave "several quarters" from development timelines.
AtaiBeckley is developing BPL-003, an intranasal formulation of 5-MeO-DMT for treatment-resistant depression.
FUNDING AND COVERAGE CONCERNS TEMPER OPTIMISM
Funding such treatments has been difficult, some researchers told Reuters, because of the government's historical stance against the use of psychedelic drugs. Removing the regulatory hurdles cracks open a door for more independent study, they said.
PsyMed's Serebrinsky said the executive order may speed up reviews, but does not provide clarity on insurance reimbursement hurdles for psychedelic therapies.
"Who's going to pay for it?" Serebrinsky said. "That is an unanswered question, and the EO sort of does not give us full answers."
Clinical experts cautioned that enthusiasm should not obscure the risks, especially around ibogaine, a powerful psychedelic derived from the African iboga plant that featured prominently in the political push by Trump.
Ibogaine has been promoted by veterans' groups and addiction advocates as a potential treatment for PTSD and substance-use disorders, but companies remain far from bringing an ibogaine-based therapy to market, with most studies still in preclinical or early-stage development.
(Reporting by Christy Santhosh and Kamal Choudhury in Bengaluru; Chris Prentice in New York; editing by Caroline Humer and Shinjini Ganguli)
