L.E.K. looks into $8 billion psychedelic drug market potential

06 May 2021 Consultancy.uk 5 min. read

In a new exploration, global strategy advisory L.E.K. Consulting has taken a look at a medical psychedelic drugs market being touted for its $8 billion potential within the next five-odd years.

It feels as if almost overnight the legal marijuana market has gone from a mere pipe-dream to an $8 billion industry in the US alone – with wild predictions for the European market to grow to as big as €123 billion by 2028. Ironically, that rapid evolution appears to have served as somewhat of a gateway for further experimentation and research into the potential therapeutic benefits of other illicit drugs, including psychoactives such as psilocybin, LSD and MDMA.

Citing an increasing public acceptance around the use of such drugs in the treatment of mental health disorders, coupled with the growing prevalence of such disorders, market research consultancy Data Bridge has pegged the medicinal psychedelic drugs market to be pushing $7 billion by 2027, up from around $2 billion in 2019. L.E.K. Consulting’s report takes a look into its commercial potential and future challenges.

L.E.K. looks into $8 billion psychedelic drug market potential

“As the market senses the repositioning of psychedelics from dangerous to therapeutic, there has been an influx of recent investment and the creation of a raft of specialist companies focused on advancing psychedelics through to commercialisation,” says London-based L.E.K. partner Adrienne Rivlin. “With many of the barriers to widespread psychedelic use fading and with larger trials underway, approval timelines within the next two to three years appear likely.”

In compiling her report, Rivlin first notes the growing incidence of mental health issues around the world, exacerbated by the global Covid-19 pandemic and widespread public lock-downs. Conditions such as depression, anxiety, PTSD and addiction are also notoriously difficult to treat, with high relapse rates and medicines which are commonly ineffective or intolerable due to their side effects – amounting to a projected $6 trillion global cost by decade’s end.

Drugs versus mental illness

This mental healthcare ‘crisis’ has seen the market for conventional treatments grow to a worth of more than $25 billion per year, with that number forecast to blow out to $40 billion in less than five years from now. Yet, with a raft of recent clinical trials demonstrating the efficacy of certain alternative drug treatments, along with added advantages such as being quick-acting, long-lasting, and more easily tolerated, L.E.K. believes that that market is now primed for disruption.

“Remarkable recent successes in psychedelic clinical trials may soon offer hope for patients, particularly MDMA for post-traumatic stress disorder and psilocybin for depression and anxiety,” the consultancy states. “As a result of these successes – coupled with the US Food and Drug Administration’s breakthrough’ designation, inward capital investment and evolving sentiments – we are at the dawn of a new era in treatment for mental illness.”

L.E.K. looks into $8 billion psychedelic drug market potential

Still, L.E.K. believes there are four primary hurdles that will need to be addressed for the psychedelic drugs market to move toward maturity. The first, and probably most profound, is the cost. Generally, the most successful trial programmes to date have included the administration of psychedelics in conjunction with ongoing guided therapy – in effect bringing two expenses together. Such an approach will also necessitate specialised training, and sessions are typically lengthy.

Further to that, public reimbursement regimes for psychological therapies tend to be less well developed and funded in advanced economies than programs for drug subsidisation alone, while affordably scaling production will present its own problems. Incredibly, supply constraints due to the difficulty in isolating active ingredients and providing uniform doses of pharmaceutical-grade psilocybin for clinical trials has pushed prices out to as high as $10,000 per gram.

One of the biggest barriers to realising full market potential however is in the transition toward a broader ‘wellness’ market, that is, psychedelics being legalised for non-medical or perhaps even recreational use as is being seen with the cannabis revolution, such as through home micro-dosing kits or the establishment of drug-enhanced spiritual retreats. This, says L.E.K., will test the trust and credibility of companies seeking to capitalise in both the medical and retail spaces.

“Large-cap biopharmaceutical companies that have largely scaled back efforts in psychiatric research may wish to re-enter the space through acquisition, licensing, partnering or developing competing products,” the report concludes, noting the underappreciated challenges across the clinical, regulatory, manufacturing and commercial spaces. “Biopharmaceutical companies should address these proactively now to ensure the best chances of success going forward.”

In 2020, another report by Prohibition Partners similarly suggested that the cannabis market in the UK could grow to over $3 billion in revenues by 2024. However, that estimation relied on the estimation that recreational cannabis use would become legal in mid-2021, and no such move has been made by the Conservative Government, or appears likely to be on the agenda any time soon.