Psychedelics are a “game changer” in depression care, according to William Blair, but the complicated treatment regimens mean they will likely be supplanted by more-traditional options once they become available.
Psychedelic drugs could be heading to the FDA this year, pushed along by a wave of investor and patient enthusiasm. But analysts at William Blair say these treatments are unlikely to seize the entire treatment-resistant depression (TRD) market, leaving plenty of room for upcoming neuropsychiatry biotechs with more-traditional therapies in the hopper.
Johnson & Johnson’s esketamine nasal spray Spravato is the only TRD therapy currently on the market. The treatment has been steadily growing, becoming the standard of care in the indication with $1.7 billion in sales for 2025—representing 57% year-over-year growth, William Blair wrote Wednesday in a deep dive into the psychedelics space.
But treatment with Spravato can be burdensome. Patients can only receive treatment in a healthcare setting and must be monitored for at least two hours. The fact that Spravato has still breached the coveted blockbuster sales marker is evidence of the unmet need in TRD, William Blair concluded.
“We believe Spravato is an effective agent and a game changer for TRD patients,” William Blair said. However, the analysts added a caveat: J&J’s studies that supported the treatment’s approval yielded mixed results, with efficacy dropping between Phase 2 and Phase 3. The FDA agreed that, despite these results, Spravato appeared to have a better effect than more common selective serotonin reuptake inhibitors, but the analysts pointed out that potentially limited efficacy could be a roadblock for the space.
“This has raised several investor questions about whether the magnitude of effect for psychedelic treatment is sufficient for prescribers to use this class of therapy broadly or if the safety limitations associated with the ‘experience’ will keep use of this class to a more niche market,” William Blaire wrote.
This is a key question as companies like Compass Pathways and Definium work toward regulatory filings for their psychedelics in TRD and other types of depression. Will the market have space for more therapies with challenging treatment processes, or will they simply be a placeholder until more-traditional options arrive?
The Psychedelics Pipeline
Compass has multiple readouts expected this year for the psilocybin-based therapy COMP360 in TRD. Phase 3 data revealed in February showed the therapy’s durability and helped clear the path to the FDA, according to analysts. The company is planning to meet with the FDA soon to discuss a rolling submission with completion expected in the fourth quarter of this year—though a potential launch would require psilocybin be reclassified from a Schedule 1 drug by the Drug Enforcement Administration.
William Blair took a shot at reviewing the clinical data to date for Spravato and COMP360 in TRD to understand the possible treatment effects. Like Spravato, COMP360 also saw a decline in efficacy between Phase 2 and 3, although to a lesser extent than the J&J drug. The drugs do appear to be effective—enough to drive uptake in TRD.
“Ultimately, we believe psychedelic therapy will have a role in the management of TRD, but this will likely not be the only option, particularly if less burdensome therapies for prescribers are available,” William Blair wrote.
Working on psychedelics beyond TRD are Definium and AbbVie, which purchased Gilgamesh Pharmaceuticals for $1.2 billion in August 2025. The drug at the heart of the deal is bretisilocin, which is heading toward a Phase 3 trial in major depressive disorder (MDD).
Definium, on the other hand, is developing LSD-based DT120 in generalized anxiety disorder (GAD) and MDD. The company is expecting three Phase 3 readouts this year.
An Alternative to the Alternative
Many biotechs are working behind the scenes to be the alternative. William Blair flagged Alto Neuroscience as one such company, with ALTO-207 expected to enter pivotal studies this year. The drug is a fixed dose combination of a dopamine agonist used for Parkinson’s disease called pramipexole and the antiemetic ondansetron. Alto hopes the therapy can improve on the tolerability that has been seen with pramipexole alone, reducing nausea and vomiting to allow higher exposure, the analysts noted.
ALTO-207 has shown improved efficacy over Spravato in a Phase 2a trial—although William Blair noted that the patient population was small. And given what has occurred for J&J and Compass’s drugs, William Blair expects that efficacy could drop in Phase 3. Even so, the firm sees a $3 billion opportunity for Alto even if it only gains 7% market penetration.
Alto has had a tough time in the clinic, with two high profile failures in 2024 and 2025. The BDNF protein targeting therapy ALTO-100 failed in a Phase 2b test of patients with MDD in October 2024. One of the key factors was patient adherence, William Blair’s team noted at the time. Then the oral H3 receptor blocker ALTO-203 stumbled in a mid-stage MDD test.
William Blair still has faith in the ALTO-207 program, however. “While the failure of ALTO-100 casts some doubt on Alto’s Precision Psychiatry Platform approach, we do not believe a single failure of the approach indicates that the biomarker enrichment strategy as a whole is invalid.” Other key readouts to come for the company include a Phase 2b test in MDD for ALTO-300, an oral melatonergic agonist and serotonergic antagonist, expected in mid-2026.
Another potential rival to the psychedelics space is Neurocrine Biosciences, which took on ex-Japan rights to osavampator from Takeda in January 2025. The partners had been working on testing the drug together in MDD patients, with a Phase 2 study that read out in April 2024 showing a reduction in symptom severity. Neurocrine has since moved the asset into Phase 3. An earlier mid-stage test called SAVITRI enrolled patients with TRD as well, William Blair said.
Meanwhile, Denovo is developing liafensine for patients with TRD who are positive for the ANK3 biomarker, with September 2025 results showing an improvement over placebo on depression severity and a reduction in disability. And Syndeio Biosciences, launched in May 2025 with $90 million by former leaders of Karuna Therapeutics and Naurex, is working on a Phase 2 trial of lead program zelquistinel in MDD. Additionally, Supurnus, whose SPN-820 failed to meet the primary endpoint of a Phase 2b trial in TRD in February 2025, has initiated another study of SPN-820 in MDD, according to a February earnings release.
With a rich pipeline, the neuropsychiatry practice could be awash with new options—particularly new modalities—in the next few years.
“As more psychedelics [are] likely to come to market in neuropsychiatry the question remains how broadly these will be used at varying thresholds of efficacy given the unique safety profiles associated with the class.”
