Breaking Boundaries: Medical Psychedelics

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Breaking boundaries: Australian companies venture into the medical psychedelics market

 Australia is the first country in the world to legalise the use of psychedelic drugs for mental illness.

Anna Rzhevkina

Australian companies are establishing themselves in the emerging market of medical psychedelics after Australia became the first country in the world to legalize the use of psychedelic drugs for mental illness.

From July, psychiatrists can prescribe MDMA, commonly known as ecstasy, and psilocybin (magic mushrooms) for psychedelic-assisted therapy to treat conditions, such as depression and post-traumatic stress disorder.

The initial access to these therapies, however, is expected to be limited due to high costs. Tania de Jong AM, co-Founder and Executive Director of Mind Medicine Australia, a non-profit advocating for the use of psychedelic-assisted therapies, in an interview with FNArena, estimated the costs of therapy at about $10,000–15,000.

Stephen Bright, director of the charity Psychedelic Research in Science & Medicine, quoted by The Sydney Morning Herald, however, gave a much higher estimate of $30,000. In addition, amid the health workers shortage, there are concerns that few psychiatrists will be qualified to provide access to psychedelic medicines.

A flexible state of mind

De Jong said that Mind Medicine Australia's (MMA) goal is to make sure that people get access to treatments for the lowest possible prices. Her interest in psychedelic-assisted therapies arose seven years ago when she read about their positive impact on a patient dealing with intergenerational Holocaust trauma – a cause close to her heart as the daughter and granddaughter of a Holocaust survivor. “Most of us, human beings have some kind of trauma. Either our own, or of our family, or we have a collective trauma,” she said.

According to De Jong, medical psychedelics take patients into a “completely altered mindset.” Typically, individuals with mental illnesses are trapped in negative thinking patterns established during childhood. “Psilocybin creates a more flexible state of mind, which lasts for a few weeks after the medicine session. During this period, patients, with the help of skilled therapists, can make significant changes in their lives, whether it’s in relationships or work situations,” explained De Jong.

MMA first applied for the legalization of MDMA and psilocybin about four years ago, providing the Therapeutic Goods Administration (TGA) with data from over 200 trials. However, it was the second attempt in 2021 that eventually proved successful. In March this year, MMA partnered with Canadian GMP psychedelics manufacturer, Optimi Health, for the supply of MDMA and psilocybin to Australia.

According to De Jong, the trials have shown no serious adverse effects for thousands of patients, with side effects limited to nausea or headaches. However, the Royal Australian and New Zealand College of Psychiatrists has expressed a more cautious view. In recently issued memorandum, it emphasized the importance of properly preparing patients, noting that psychedelic substances have the potential to cause adverse psychological reactions or negative experiences, such as fear and panic.

Suzy Madar, Partner at King & Wood Mallesons, told FNArena that investors are justifiably cautious, however, the interest in the medical psychedelics market is growing in Australia and worldwide.

Australia eyes domestic production

The challenges, such as high therapy costs and lack of healthcare professionals, have not discouraged companies from gaining a foothold in the market. Cortexa, a joint venture between Vitura Health ((VIT)) and PharmAla Biotech, in July, placed the first drug order for the Australian commercial market, worth about US$300,000. Initially, the company will import products from Canada, but it plans to launch domestic manufacturing in the future.

"The long-term view on Cortexa is that it must – and will – stand on its own two feet in the Australian market, which we believe is more than capable of supporting manufacturing operations domestically," Nick Kadysh, Chief Executive Officer of PharmAla said in a statement.

Reset Mind Sciences, a subsidiary of medicinal cannabis company Little Green Pharma ((LGP)), also aims to be at the forefront of domestic medical psychedelics production. The company has recently completed the construction of a mushroom cultivation clinic to develop synthetic psilocybin.

Moreover, Australia’s Commonwealth Scientific and Industrial Research Organisation (CSIRO) has started working with local medtech companies to improve existing psychedelic products and develop new ones. “By working with local industry to improve drug design and the patient experience, CSIRO can push Australia into a leadership position in the development of these potentially life-changing medications,” CSIRO scientist Adjunct Professor Peter Duggan said in a statement.

Madar underscored the launch of manufacturing in Australia will not happen overnight. “It does take time to develop high standard medical grade compounds for use in trials and studies,” Madar said, specifying that a lot also depends on the market, and when it reaches the point when manufacturing of MDMA and psilocybin in Australia will be more cost-effective than importing from established companies in Canada.

Who will pay for medical psychedelics?

Currently, neither Australia’s Medicare system nor private health insurers cover the costs of psychedelic-assisted therapies for patients. Madar expects this to change. “Given the cost of mental health conditions to the public health system, robust health economic data that establishes the safety and cost-effectiveness of these new treatments could change the position quickly,” she said. De Jong also said that health insurers are starting to express interest in subsidizing the treatments.

According to the Australian Institute of Health and Welfare, 44% of Australians aged 16–85 have experienced a mental disorder at some time in their life. A severe mental illness affects about 5% of the population or 800,000 people. When the Therapeutic Goods Administration made the decision to approve the use of psychedelic medicines, it acknowledged the limited treatment options available for patients with treatment-resistant mental illnesses.

As the interest in medical psychedelics continues to grow, Incannex Healthcare ((IHL)) is preparing to launch the first clinic for psychedelic-assisted therapy in Australia. Its unit, Clarion Clinics Group, has leased a property in Melbourne, and the clinic is scheduled to open in September, with the capacity to treat approximately 600 patients annually during normal working hours.

Incannex Healthcare director for psychedelic clinics Peter Widdows anticipates the Australian market for psychedelic-assisted psychotherapy will exceed $2bn per annum and the global market is estimated to be closer to $60bn.

The company views the clinic as a commercial-scale prototype, with potential plans to open more than 80 additional clinics in Australia and eventually expand overseas if operations prove successful.

Madar anticipates a gradual adoption of medical psychedelics approval in other countries, following Australia's lead. Currently, Switzerland, Canada, and Israel permit clinicians to use certain psychedelics under specific circumstances for severe conditions. Moreover, the US Federal Drug Administration is projected to approve MDMA-assisted therapy for post-traumatic stress disorder in April or May 2024.

While the psychedelic medicine market in Australia is still in a nascent stage, it faces various challenges including a strict regulatory environment, a shortage of well-trained healthcare professionals, and a complex supply process. Nevertheless, both companies and investors are optimistic about the potential opportunities.

 “There will be ups and downs in excitement as with any market, particularly in emerging markets like this one but long term investors feel very positive about the market’s future,” Madar said.

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