The psychedelics sector is experiencing a resurgence of optimism in 2025 driven by a more favorable federal government under President Donald Trump’s administration, shifting state-level policies, and encouraging clinical trial results supporting the efficacy of psychedelic therapies.
The Trump administration’s openness to alternative regulatory pathways has rekindled hope among investors and researchers. Even the setback of the Food and Drug Administration rejecting Lykos Therapeutics’ MDMA-assisted therapy for post-traumatic stress disorder in August last year, advocates believe substances such as psilocybin could be made available via emergency use authorizations or through the rescheduling of psychedelic substances to a lower-risk category.
Since Trump's inauguration in January, shares of psychedelics-focused biotech firms have surged significantly, signally increased investor confidence in the sector’s potential.
The AdvisorShares Psychedelics ETF (NYSEARCA:PSIL), which tracks biotech and life science companies focused on psychedelic drug development, has surged 37% in the year to date. Notably performaers include atai Life Sciences (NASDAQ:ATAI, ETR:9VC), which has seen its stock rise 75% since January. GH Research has gained 70% and COMPASS Pathways is up 27%.
Political tailwinds
Support from key figures in the Trump administration is a driving force behind renewed investor interest in psychedelics.
Robert F Kennedy Jr, Secretary of the Department of Health and Human Services (HHS), has emerged as a vocal proponent. “Psychedelics are not just substances of recreation; they are powerful medicines that can heal trauma, depression, and addiction,” he said at a mental health summit earlier this year, calling for policy to align with scientific evidence and patient needs.
He also criticized the FDA’s “aggressive suppression of psychedelics,” particularly its decision to reject MDMA-assisted therapy last year.
At the FDA, newly appointed Commissioner Dr Marty Makary has emphasized accelerating access to innovative treatments, especially for veterans and patients with treatment-resistant conditions.
Analysts at Jefferies believe the new FDA administration seems to remain supportive in fostering the development of psychedelics for mental health.
“FDA commissioner Dr Makary believes psychedelics are a priority and can benefit various central nervous system indications, which is consistent with prior comments from HHS Secretary RFK Jr,” the analysts wrote in a note following Makary’s appointment.
The analysts also noted that the FDA has awarded breakthrough therapy designations to a range of psychedelics, including psilocybin, MDMA and esketamine as well as releasing a new guidance document on psychedelics back in 2023.
Alongside federal momentum, dozens of US states have introduced bills aimed at decriminalizing psychedelics or establishing therapeutic programs. New York, Missouri, and Massachusetts are among those considering legislation to expand access to psychedelic therapies.
These local initiatives reflect the federal government’s shifting position and contribute to a broader landscape of reform that could accelerate the mainstream adoption of psychedelics.
Spravato’s success validates psychedelic therapies
The FDA’s approval of Johnson & Johnson’s nasal esketamine spray Spravato as a standalone therapy for depression in January has served as a key validation of psychedelic-derived therapies.
While Spravato is not considered a “true psychedelic,” the approval is seen as a major milestone for the sector. Jefferies analysts believe ramping Spravato sales is evidence psychedelics can be commercially viable treatments for mental health conditions, even when their use is restricted to clinical settings.
This has been backed up by encouraging clinical trial data from several early-stage biotech firms in 2025.
BPL-003, a synthetic 5-MeO-DMT nasal spray developed by Beckley Psytech and soon to be wholly owned by atai Life Sciences, has shown rapid and lasting antidepressant effects in patients with treatment-resistant depression (TRD) and alcohol use disorder.
A single dose led to significant symptom reduction for up to three months. Results from a larger Phase 2b trial are expected in mid-2025.
In February, GH Research reported that its inhaled 5-MeO-DMT drug GH001 significantly reduced symptoms in patients with TRD. By Day 8, it yielded a 15.5-point improvement on the MADRS depression scale versus placebo, with over 57% of participants achieving remission.
And COMPASS Pathways is set to release Phase 3 data later this month for its synthetic psilocybin therapy, COMP360. Previous trials showed strong efficacy in TRD.
As political will, regulatory openness, investor interest and robust clinical data converge, 2025 is shaping up to be a potential inflection point for the psychedelics sector.