Behind the 2025 “shroom boom” hides a bad trip

Political economist warns psychedelics may be too unruly to become profitable products for mental health treatment.

Investor appetite in corporate psychedelia is returning, but the sector faces fundamental barriers to profitability, according to new research.

The paper by Dr Sandy Brian Hager, Reader in International Political Economy at City St George’s, University of London is published in Finance and Society and argues there’s a mismatch between psychedelics and the economics of drug development.

Consequently, pharmaceutical startups might change the face of psychedelics: some are looking to develop extremely intense, short-term effect drugs; others are looking to engineer the trip out of the experience entirely.

From boom to bust

The paper analyses the financial results of the top five for-profit psychedelic pharmaceutical companies between the industry’s inception in 2016 and 2021 and draws on economic theory around capital and financial cycles.

Hype around the revolutionary benefits of psychedelics in treating mental health inspired an economic boom. Hundreds of startups launched and investor money poured in.

A series of setbacks rattled investors – weak trial results, rising interest rates, the US Food and Drug Administration (FDA) rejecting MDMA treatment for post-traumatic stress disorder – and the industry went into freefall.

Now in 2025, political winds are shifting, trials are delivering stronger results, and Big Pharma, long wary of psychedelics, is finally showing interest, hinting at the promise of another “shroom boom”.

Dr Hager’s paper suggests investors should remain cautious, as issues around patenting and drug trials may yet choke drug development.

Economic and medical constraints choke development

The research identifies two major obstacles to profitability: weak intellectual property (IP) protection, and the unpredictable nature of the psychedelic experience making conducting standardised medical trials challenging.

Developing a new drug can cost $1-2 billion, and investors will only put up that money if they believe companies can recoup it later through patents. IP is therefore a major concern.

Some psychedelics, like magic mushrooms (psilocybin), are naturally occurring and unpatentable; others, such as ayahuasca, have long histories of Indigenous use, leaving little scope for patent law. Even synthetic drugs like LSD have patents that expired decades ago.

Because drugs like psilocybin work best alongside hours-long guided therapy, their effects are hard to standardise and test in lab settings, making commercial scaling difficult.

This unruliness casts doubt over the future of corporate psychedelia.

A changing face of psychedelics

Pharmaceutical companies may yet find ways around the obstacles, whether through short-acting compounds or entirely new drug classes.

Some are developing short-duration psychedelics such as 5-MeO-DMT, which cause extremely intense trips lasting only minutes.

Other companies are looking to engineer the trip out of the experience altogether, creating a new class of drugs called neuroplastogens.

These aim to trigger the same brain changes as classic psychedelics without the hallucinations.

Dr Hager said:

“When startups first began launching, corporate psychedelia looked set to fulfil its vision: delivering big returns for investors and offering a long-awaited solution to the global mental health crisis.

“Then weak trial results and rising interest rates sent the sector into a freefall.

“The unruliness of psychedelics gives us reasons to be cautious about the long-term future of for-profit psychedelic medicine.

“In bending psychedelics to fit the pharmaceutical model, they risk becoming indistinguishable from the very drugs they were meant to replace.

“For all the hype of a mental health revolution, psychedelics may deliver nothing more radical than business as usual.”

Read the full article here.

ENDS
 

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• Email: eve.lacroix@citystgeorges.ac.uk / pressoffice@citystgeorges.ac.uk 

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