Shares in biotech companies developing psychedelic drugs were higher on Wednesday after Washington DC and Oregon became the first areas in the US to decriminalise the ingredient found in magic mushrooms.
Voters endorsed ballot measures that suggest a growing acceptance of the idea psychedelics could be used as medicine for conditions such as anxiety, depression or post-traumatic stress disorder.
In Washington, the US capital, 76 per cent voted to make pursuing users and distributors of psychedelics the lowest law enforcement priority, according to the latest vote tally. Campaigners in favour of the measure argued that the plants and fungi should be treated as natural medicine.
In the West Coast state of Oregon, a measure to legalise psilocybin and allow licensed providers to give it to people over 21 was on course to pass with about 56 per cent support, and with more than 80 per cent of the votes counted.
JR Rahn, co-chief executive of MindMed, which is developing a therapy using LSD for anxiety disorders, said the votes were a “big move in the right direction”.
The drugs need to shake their reputation from the 1960s as “evil substances” and show how they are “potential medicines”, he said. “The biggest battle in the psychedelics industry has been dealing with a decades-old stigma.”
Psychedelics are still federally illegal, classed as a schedule one substance alongside cannabis and heroin.
But the US Food and Drug Administration has designated three potential medicines, one based on MDMA and two on psilocybin, as “breakthrough” drugs — a designation that speeds up regulatory review of experimental treatments with a potentially significant impact on people’s health.
Shares in Compass Pathways, the only for-profit company with a breakthrough designation for its work using psilocybin to treat severe depression, rose 9 per cent on Wednesday. The company was the first psychedelics biotech to go public on Nasdaq in September.
Most of its peers are listed in Canada where investors are more receptive to the risks of funding drugs that are currently illegal in the US, having seen success with the legalisation of cannabis north of the border. Shares in MindMed rose 9 per cent, while Field Trip Health rose 0.1 per cent.
Ronan Levy, co-founder of Field Trip Health, said the vote in Oregon would allow them to expand their network of clinics offering treatments with psychedelics south of the border. Their current therapies use ketamine, but the company would also be able to use psilocybin in Oregon.
The vote was “clear validation” for investors that there is a pathway to the legal use of psychedelics, Mr Levy said.
“These are not only potent treatments for people with mental health conditions, they also have pro-social side effects like increased creativity and empathy,” he said. “Particularly germane to today, they increase openness to other people’s viewpoints.”
Drugs were on the ballot in several areas of the US, alongside Tuesday’s presidential election, and five states voted to legalise cannabis. New Jersey, Arizona, Montana and South Dakota approved measures to legalise the drug for recreational use, while Mississippi voted to legalise it for medical use.
Marijuana company shares fell, however, because of signals that Democrats may not win control of the US Senate, as some polls had indicated they could — potentially setting back moves to decriminalise or legalise cannabis on a federal level.
Shares in Canopy Growth, a Canadian cannabis company, fell 7 per cent to $19.02, while Aurora Cannabis was down 10 per cent at $4.44.