As historic MDMA decision nears, even J.P. Morgan eyes psychedelic investments

With the stage set for the first psychedelic-based therapy to nab FDA approval this year, even J.P. Morgan can't resist the allure of compelling data and wide-open markets.

“We're actively looking and are in constant dialogue with several companies developing both psychedelic and nonpsychedelic [treatments for] mental health,” Gaurav Gupta, M.D., managing partner of the Life Sciences Private Capital team at J.P. Morgan Asset Management said in an interview Feb. 23. “To us, it’s an important space to be tracking.” 

Gupta’s acknowledgment tracks with financing data, showing January was the second-highest fundraising month on record for the psychedelic sector, according to Pitchbook and reporting from the Financial Times. The data show that more than $160 million was raised across five deals, with $100 million for Lykos Therapeutics on the heels of its FDA submission for an MDMA-assisted therapy to treat post-traumatic stress disorder. 

Unsurprisingly, Gupta pointed to the success of Johnson & Johnson’s Spravato as one of the genuine beacons of hope for investors. The goal, after all, is to back biotechs that are working on medicines that are commercially viable. Spravato is J&J's fastest-growing drug by far, raking in $689 million worldwide in 2023, up from $374 million in 2022. 

The drug is an intranasal spray of esketamine, a more potent version of the party drug ketamine. Patients given Spravato are monitored for two hours to make sure side effects don’t develop, a much shorter wait than the six-hour monitoring period for Lykos’ MDMA therapy. 

“What’s clear now is that there is a robust commercial and physician delivery infrastructure that can support medicines that have that more limited administration time of two hours or less,” Gupta said. He believes that the next wave of psychedelic companies will aim to achieve a similar administration time. 

Other investors seem to be considering adding psychedelics into their life science portfolios. David Allison, Ph.D., a managing director at Westlake Village BioPartners, said at this year’s J.P. Morgan healthcare conference that five or 10 years ago, the firm would have been categorically not interested in the space. 

“I think now it's, let's look at the development plan and see if there's a plan that makes sense that we could get behind,” he said. 

Fellow Managing Director Mira Chaurushiya, Ph.D., couched the interest by saying many of the outstanding questions around psychedelics square more in the care delivery space, rather than drug development. Healthcare services is not Westlake’s forte, the two said. 

“We would need to figure out the business case, and we haven't spent time there,” Allison said.