One pill makes you larger
And one pill makes you small
And the ones that mother gives you
Don’t do anything at all
– Grace Slick, White Rabbit 1966
Much has been written about the meaning of the 1960s psychedelic rock band Jefferson Airplane’s mesmerising song White Rabbit.
To add to the commentary, the lyrics above suggest “The Acid Queen” Grace Slick may have foreseen the major challenge facing companies advancing psychedelic-assisted psychotherapies today.
Scores of clinical trials for psychedelic drugs such as psilocybin (the active ingredient in magic mushrooms), MDMA (aka ecstasy) and LSD are underway around the world to help treat depression, trauma, chronic pain, and many other disorders and ailments.
But the consciousness-altering trips these drugs deliver to trial participants make it near-impossible to hide who is getting an active substance and who has been assigned a placebo.
For example, trial participants would assume they were on the real thing if after taking their micro doses they suddenly started believing that imposing “reciprocal tariffs” on tiny islands in the sub-Antarctic ruled by musk-flavoured penguins and orange seals made geopolitical sense.
These “functional unblinding” outcomes lead to uncertainty about the validity of clinical study data because if participants know they are receiving the drug this will affect their expectations and whether or not they report improvement.
This was one of the key reasons cited by the US Food and Drug Administration (FDA) last year when it shocked the psychedelics world by declining Lykos Therapeutics’ therapy combining MDMA with psychotherapy to treat post-traumatic stress disorder (PTSD).
Aussie leadership
Australia was the first country in the world to classify psychedelics as medicines at a national level when in July 2023 it rescheduled MDMA and psilocybin from Prohibited Substances (Schedule 9) to Controlled Substances (Schedule 8).
This allowed authorised prescribers to administer MDMA and psilocybin for the treatment of PTSD and treatment-resistant depression respectively ,outside of clinical trials.
To be an authorised prescriber, a psychiatrist is required to follow a clinical treatment protocol and obtain approval from a human research ethics committee.
Blinding again the problem
But there are significant questions about the efficacy psychedelics. A new study Safety and efficacy of MDMA-assisted psychotherapy in post-traumatic stress disorder (Yong et al 2025) assessed the current evidence regarding the safety and efficacy of MDMA-AP compared to psychotherapy alone among adults with PTSD.
Published in the Australian & New Zealand Journal of Psychiatry, the study looked at 14 “systematic reviews” around the world, of which only four were regarded as of “high-quality”.
The study said “certainty of evidence for efficacy was rated as low or very low in the systematic reviews due to challenges in blinding, limited generalisability, and small sample sizes in clinical trials”.
In went on to say “all reviews reported concerns regarding unblinding among participants and investigators after MDMA administration, which contributed to risk of bias in outcome assessment or expectancy bias.
“The challenge in blinding is not unique to MDMA and is commonly raised in other drugs with psychoactive properties, such as ketamine, benzodiazepines, gabapentinoids, opiates and stimulants”.
$10 million psychotherapy program
Meanwhile, ASX-listed Medibank Private recently announced it has allocated $10 million to a psychotherapy program for eligible customers with acute mental health conditions such as PTSD.
Medibank will be collaborating with the Australian National University to look at clinical outcomes involving MDMA-assisted therapy (MDMA-T) as well as broader economic impacts.
PTSD is a debilitating mental health condition and major public health concern due its impact on daily functioning, association with suicidal ideation, chronic disease and premature death. It’s experienced by an estimated 11 per cent of Australians in their lifetime.
Last month AustralianSuper disclosed it was now a 5.6 per cent shareholder in Medibank Private after steadily building its shareholding over a number of months.
Need for more effective interventions
Elsewhere on the ASX Emyria, a developer of new treatments for mental health and neurological conditions, says many patients experience limited relief from existing treatments like antidepressants and cognitive behavioural therapy (CBT).
“There is a clear and urgent need for more effective interventions, particularly for the 800,000 Australians who could benefit from breakthrough therapies like MDMA-assisted therapy,” the company says.
Emyria, – which has Tattarang, the private investment group owned by Andrew and Nicola Forrest as a 5.8 per cent shareholder – also supports psilocybin-assisted therapy for treatment-resistant depression (TRD).
At a recent presentation at the Euroz Healthcare Forum, Emyria provided the ‘case study’ below to show the claimed benefits of MDMA-AT.
Propriety, novel formulations
Tryptamine Therapeutics (Tryp) is a clinical-stage biopharmaceutical company focused on developing proprietary, novel formulations for the administration of psilocin in combination with psychotherapy to treat diseases with unmet medical needs.
Tryp’s lead asset, TRP 8803, is a proprietary, scalable and innovative formulation of IV-infused psilocin (the active metabolite of psilocybin).The company says it has the potential to alleviate various shortcomings of oral psilocybin.
Earlier this month Tryp announced it had signed a “world-first” agreement with Swinburne University of Technology to undertake an open-label study to assess the safety and efficacy of TRP-8803 when administered with psychotherapy in adult patients with Binge Eating Disorder (BED).
Tryp has also has also just completed a Phase 2a clinical trial for the treatment of fibromyalgia in collaboration with the University of Michigan and has initiated a Phase 2a clinical trial with Massachusetts General Hospital for the treatment of abdominal pain and visceral tenderness in patients suffering from irritable bowel syndrome.
In Kennedy we trust
Back to the US FDA whose Lykos decision which came as shock not only to the privately-owned Lykos but the growing number of listed companies promoting psychedelics – the largest including Atai Life Sciences, Compass Pathways, Cybin, Mind Medicine, GH Research and Bright Minds Biosciences.
The psychedelics sector has been hoping the Trump administration -and in particular the new US Secretary of Health Robert F. Kennedy Jr – will do something that overturns or overrules the FDA .
Last year Kennedy was raging about the FDA’s “aggressive suppression of psychedelics” (see above). Kennedy’s confirmation hearing was on January 29 – which would appear to have been the trigger for a speculative rally that has since subsided (see chart below).
Reasonable recommendations?
Asset owners considering whether to experience psychedelic investments should keep a close eye on how or whether US FDA barricade can be broken.
The US Reason Foundation has come up with some “Executive Order recommendations” as to how the clinical trials regime could be reformed to achieve this.
Its Psychedelic Drug Policy Recommendations for the Incoming Trump Administration paper suggests removing the requirement for a placebo arm of a clinical trial, and allowing observational (real-world evidence) data as support in drug trials.
For example, if there is data that the legalization of psilocybin does not increase hospitalisations, the FDA could consider this evidence that the drug’s benefits outweigh its risks to public safety.
Assuming such clinical trial standards were introduced, then an Executive Order could be signed requiring the head of the FDA to review the August 2024 decision to send MDMA back to additional Phase 3 clinical trials.
Reason also says the FDA should be required to fast-track non-novel “legacy” psychedelic substances (e.g., psilocybin, MDMA) for drug approval based on observational data and permit their sale as generic pharmaceuticals.
Many classic psychedelics, including psilocybin, MDMA, and LSD, cannot be patented because they are no longer considered “novel,” a key criterion for patentability, the paper says.
Reason argues this “lack of patentability means the commercial benefit of pursuing FDA approval for a new drug is limited, creating a perverse incentive that dissuades drug sponsors from developing natural and potentially highly effective drugs.
“The high costs of drug approval instead create an incentive for drug makers to only pursue the development of synthetic substances”.
Psychedelic supporters
There are also plenty of billionaire psychedelic supporters that may also be able to support the cause.
Elon Musk is a fan, of psychedelics, revealing he had prescriptions for ketamine to treat depression.
Musk ally and former Tesla director Antonio Gracias – who is currently helping Musk’s Department of Government Efficiency (DOGE) eliminate claimed widescale social security fraud – is also a psychedelics believer.
Back in 2023 the Gracias Family Foundation gifted Harvard University funds to create a Study of Psychedelics in Society and Culture.
Gracias has also reportedly made an offer to acquire a controlling stake in Lykos to help the company make the long trip through Phase 3 again.
PayPal co-founder Peter Theil is a major investor in Atai Life Sciences, which in turn is a major shareholder in Compass Pathways.
Google co-founder Sergey Brin, who reportedly enjoys magic mushrooms, has helped fund Soneira, a start-up for psychedelic treatments based on Ibogaine.
Open AI CEO Sam Altman, who recently opened up about his psychedelic experiences that helped him overcome anxiety, is also investing in psychedelic therapies.
Slick, by the way, also tried to help a US president to view the world a little differently. She famously – but unsuccessfully – plotted to spike Richard Nixon’s tea with LSD when she visited the White House in April 1970.
