Psychedelic drugs are drawing attention as potential new treatments for depression, with some expected to reach the U.S. Food and Drug Administration (FDA) this year. However, analysts at William Blair suggest that these therapies may not dominate the market for treatment-resistant depression (TRD), leaving space for companies developing more traditional neuropsychiatric treatments.
Currently, Johnson & Johnson’s esketamine nasal spray Spravato is the only approved therapy specifically for TRD. The product has seen significant growth, reaching $1.7 billion in sales in 2025—a 57% increase from the previous year—according to William Blair analysts. Despite its commercial success, Spravato’s administration requires patients to visit a healthcare facility and be monitored for at least two hours after each dose.
“We believe Spravato is an effective agent and a game changer for TRD patients,” William Blair stated. The analysts noted that while Spravato’s approval was based on studies showing mixed efficacy results between Phase 2 and Phase 3 trials, it still demonstrated better outcomes than selective serotonin reuptake inhibitors (SSRIs). They cautioned 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 Blair wrote.
Companies such as Compass Pathways and Definium are advancing their own psychedelic-based therapies toward regulatory submission. Compass Pathways’ psilocybin-based COMP360 recently reported positive Phase 3 data supporting its durability in TRD treatment. The company plans to meet with the FDA soon regarding a rolling submission, which could conclude by late 2026 if psilocybin is reclassified by the Drug Enforcement Administration.
William Blair compared clinical data from both Spravato and COMP360, finding that both showed reduced efficacy between mid- and late-stage trials, though COMP360’s decline was less pronounced. The analysts concluded: “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.”
Other companies are exploring psychedelics beyond TRD. AbbVie acquired Gilgamesh Pharmaceuticals in August 2025 for $1.2 billion; its lead candidate bretisilocin is moving into Phase 3 trials for major depressive disorder (MDD). Definium is also developing LSD-based DT120 in generalized anxiety disorder and MDD with three late-stage readouts expected this year.
Meanwhile, several biotechs are pursuing alternative approaches to depression treatment. Alto Neuroscience is preparing pivotal studies of ALTO-207—a combination of pramipexole and ondansetron—after early data suggested improved tolerability over pramipexole alone. While ALTO-207 showed better efficacy than Spravato in an initial trial with a small patient group, William Blair expects results may diminish in larger studies but still sees substantial market potential if approved.
Alto has faced setbacks; its BDNF-targeting drug ALTO-100 failed a Phase 2b trial in October 2024 due partly to patient adherence issues, and another candidate stumbled mid-stage in MDD testing last year. Nevertheless, William Blair remains optimistic about Alto’s ongoing programs: “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.”
Neurocrine Biosciences also continues development after acquiring rights to osavampator from Takeda; positive mid-stage results led Neurocrine to move forward with Phase 3 testing in MDD patients.
Denovo is working on liafensine targeting patients with specific biomarkers linked to TRD; recent results showed improvement over placebo on depression severity measures. Syndeio Biosciences launched last year with $90 million funding and is running Phase 2 trials on zelquistinel in MDD. Supurnus has initiated another study of SPN-820 after failing to meet endpoints earlier this year.
The growing pipeline suggests that neuropsychiatry may soon offer multiple new options—including novel drug classes—for patients who do not respond adequately to current treatments.
“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,” William Blair concluded.
