Psychedelics, Solid Tumors Will Be Key Focuses for Investors in 2024

Pictured: A suited arm pointing a dart at a bullse

Pictured: A suited arm pointing a dart at a bullse

After oncology and neuroscience headlined biopharma investment in 2023, experts anticipate increased interest in the autoimmune and obesity spaces this year.

Pictured: A suited arm pointing a dart at a bullseye/Nicole Bean for BioSpace

Investment in cancer and neuroscience-focused companies dominated in 2023, and experts told BioSpace these two therapeutic areas will continue to attract funding.

This year, investors may take a particularly keen interest in certain modalities—within neuroscience, psychedelics will be a focus, they said. And when it comes to oncology, solid tumors are in the crosshairs. However, these two areas won’t be the only game in town, our sources said, with autoimmune disorders and obesity also piquing the interest of biopharma investors.

Emerging Market for Psychedelics

Bristol Myers Squibb’s $14 billion acquisition of Karuna Therapeutics and its schizophrenia candidate KarXT propelled the neuroscience space to number two in terms of M&A activity in 2023, according to an IQVIA report.

When it comes to the neuropsychiatric space specifically, Ansbert Gadicke, managing partner of MPM BioImpact, is bullish on the potential of psychedelics. Gadicke said the field has been held back by the fact that compounds such as psilocybin are naturally occurring and therefore lack novelty, making them ineligible for intellectual property protections. “The early results are really based on those natural substances,” he told BioSpace. Recently, however, pharmaceutical companies have synthesized new molecules that mimic the function of the compound “but may have better properties”—and are eligible for IP protection.

Gadicke noted that psilocybin has a long-acting psychoactive effect, requiring patients to be supervised following administration. “You can’t give someone a magic mushroom and then send them home,” he quipped.

But newer chemical compounds “are somewhat shorter acting, so the time where patients need oversight is reduced and much more manageable,” he said. Some of these compounds already have composition of matter IP.

Once harnessed, Gadicke said psychedelics have great potential in neuropsychiatric indications such as depression. He noted that sales generated by J&J’s ketamine-derived nasal spray Spravato, which was approved in 2019 for treatment-resistant depression, help the entire class. “The efficacy is just dramatically better with these . . . psychedelics than what you see with the sort of historic antidepressants.”

An Appetite for Next-Gen Solid Tumor Drugs

Oncology was the decisive leader in 2023 M&A funds, representing nearly half of the deal value, according to IQVIA. Similarly, cancer-focused companies took home $1.4 billion of a total $3 billion in early-stage investment funds, per J.P. Morgan’s 2023 Annual Biopharma Licensing and Venture Report. Ben Kim, a partner at Playground Global covering the life sciences, sees continued investor excitement in the space.

“I still think the oncology space is going to have a lot of hype and activity, just because the markets are huge,” Kim told BioSpace. “[Numbers of] cancer patients are always growing in the U.S. and there’s a dire need to treat those patients, especially patients with solid tumors.”

Currently, he explained, next-gen therapies have had more success treating blood-based cancers. He cited the example of CAR-T therapies that are “getting approved left and right” due to their strong efficacy in hematological malignancies. “But we still don’t have a really good grasp on solid tumors,” he said, because it is “fundamentally hard” to pierce through solid tumor tissue. Therefore, he anticipates a lot of M&A activity involving novel therapies for solid tumors, particularly well-engineered biologics.

One example of this, he said, is Merck’s $680 million acquisition of Harpoon Therapeutics in January. Harpoon’s lead T cell engager candidate, HPN328, targets the ligand DLL3, which is expressed at high levels in small cell lung cancer and neuroendocrine tumors. The candidate has shown “nice data” in targeting DLL3, Kim said, and was “very competitive” against Amgen’s DLL3 asset tarlatamab. He added that he believes these data are what attracted Merck.

Providing further evidence of the market’s interest in T cell engagers for solid tumors, Kim said, is its response to a pair of Phase Ia data readouts reported last month by Janux Therapeutics. Positive efficacy and safety data from Janux’s candidates in metastatic castration-resistant prostate cancer and late-stage solid tumors sent the San Diego–based biotech’s stock soaring 172%. “Even though it’s a Phase I readout, given the promise and the potential of going after these solid tumor targets, I think it’s a pretty nice validation of the market,” Kim said.

Next Up: Autoimmune and Obesity

While autoimmune conditions came in fourth in terms of early-stage investment last year, according to J.P. Morgan’s 2023 Annual Biopharma Licensing and Venture Report, Gadicke said it could move into third place this year, usurping ophthalmology.

The autoimmune space is “more or less exploding right now and will get much larger this year,” Gadicke said. “That always happens when you have a major need, and suddenly people see progress that’s bigger than expected.” To illustrate this progress, Gadicke pointed to a 2022 study that showed five lupus patients were in remission eight months after treatment with a CAR T cell therapy. Last month, the study leaders reported that eight lupus patients were in remission fifteen months after treatment.

Biotech entrepreneur Andrew Pannu said the metabolic space is “huge,” headlined by obesity and GLP-1 drugs. “We’ve seen all of the major players already get scooped up, so it’ll be interesting to see what venture investments go into that space to fund new companies, new ideas.”

Recently acquired obesity players include Carmot Therapeutics, which was taken over by Roche in a $2.7 billion deal that closed in January 2024, and Inversago Pharma, which was scooped up by Novo Nordisk in August 2023 for more than $1 billion.

Kim also highlighted obesity as an emerging therapeutic space and said he believes GLP-1 drugs with fewer side effects will be coming through the pipeline.

Finally, Pannu said the inflammation and immunology (I&I) space could be attractive because of its “pipeline-in-a-product” potential. “Pharma is clearly enamored with assets that . . . can expand into adjacent indications and build a monster brand,” he said. “We see this in oncology, but it’s really the most common in I&I.” In I&I, he said, a drug that works well in rheumatoid arthritis could also work in psoriatic arthritis. He added that it will be interesting to see whether these cross-indication drugs start to emerge in the CNS space, where it’s less clear whether different conditions have overlapping pathways.

Kim said that, overall, the trend over the past two years has been toward acquisitions following a late Phase II or early Phase III readout to reduce risk. Now, he sees the situation returning to pre-COVID times when companies were scooped up after earlier data. This is because the smaller biotechs who have “survived the nuclear winter” stayed focused, believing in the science, “and now that’s really showing that promise.”

Heather McKenzie is a senior editor at BioSpace. You can reach her at Also follow her on LinkedIn.