It wasn’t too long ago that biopharma giants stayed away from developing psychedelic drugs—but positive clinical data plus a friendlier regulatory climate in Washington have prompted the largest drug developers to embrace the field.
The latest and most telling example of pharma embracing psych drugs came when Eli Lilly (NYSE: LLY) announced that it agreed to acquire AtaiBeckley (Nasdaq: ATAI) for up to $3.8 billion—of which Lilly will pay $2.8 billion upfront. The deal, set to close in the third quarter, expands Lilly’s neuroscience portfolio by adding the pipeline of AtaiBeckley led by BPL-003 (mebufotenin benzoate), a Phase III candidate for treatment-resistant depression (TRD) that is a synthetic form of 5-MeO-DMT administered intranasally. BPL-003 has been granted the FDA’s Breakthrough Therapy designation.
BPL-003 wowed analysts and others back in April after AtaiBeckley published positive data from a Phase IIa trial (NCT05660642) showing that a single intranasal dose of BPL-003 led to rapid and sustained reductions in Montgomery-Åsberg Depression Rating Scale (MADRS) scores from baseline in 12 TRD patients who remained on stable SSRI therapy throughout the study. Both the six patients dosed at 10 mg and six at 12 mg showed a 66.7% antidepressant response rate (defined as ≥50% reduction from baseline MADRS score) at Day 2, with five of six participants in the 10 mg cohort (83%) and four of six in the 12 mg cohort (66.7%) maintaining their response at Week 12.
“Especially with progress on BPL-003, we see the company as positioning itself well to becoming a significant player in the mental health therapeutics space,” Sumant Kulkarni, a senior analyst covering biotechnology with Canaccord Genuity, wrote on news of the positive data, adding: “We also still see this space as large enough to accommodate multiple approaches/competitors.”
$3.7B in projected peak sales
Kulkarni also raised Canaccord Genuity’s peak unadjusted U.S. sales forecast for BPL-003 to $3.7 billion by 2036 from $2 billion, after revising the firm’s model by raising the list price from $20,000 to $30,000 per annual treatment course (not accounting for insurance coverage), about the same price as Spravato® (esketamine), also a nasal spray marketed by Johnson & Johnson (NYSE: JNJ) for TRD plus some depressive symptoms in adults with major depressive disorder (MDD).
Spravato, a noncompetitive N-methyl D-aspartate (NMDA) receptor antagonist, crossed the $1 billion sales threshold during the second quarter, as it generated $584 million, up 25% quarter-over-quarter from $464 million in Q1—and up 43% from $734 million in the first half of 2025.
“Sales are tracking to reach annual sales guidance of $3-3.5B+ by 2027–28,” Jefferies equity analyst Andrew Tsai wrote in a research note focused on J&J’s second-quarter results. “Spravato’s trajectory supports the notion psychedelics can be commercially viable in hard-to-treat mental health disorders, by leveraging JNJ’s infrastructure.”
Given the data for BPL-003, Lilly got a bargain, Tsai wrote in a separate note on the Lilly-AtaiBeckley acquisition.
“We think the deal heavily favors LLY, as ATAI’s lead asset BPL-003 (intranasal 5-MeO-DMT) should have multibillion dollar peak sales potential,” Tsai wrote, rather than the $1 billion-plus that he thinks was implied by the deal price.
Tsai and Jefferies had previously forecast peak sales of between $1 billion and $2 billion—a range he said was “arguably conservative” since BPL-003 could, if it aces its Phase III trial, show superiority to Spravato, which is on track to reach up to $5 billion-plus in peak sales.
Positive implications
“At the same time, we appreciate LLY has significantly more resources to maximize the long-term value of ATAI’s psychedelic assets. In any case, the deal has (+) [positive] implications for the entire psychedelic space,” Tsai added.
Among pharma giants joining J&J in embracing psychedelic drug development in recent years:
- AbbVie (NYSE: ABBV), which last year acquired the lead pipeline program of privately held Gilgamesh Pharmaceuticals, the moderate-to-severe MDD candidate bretisilocin (GM-2505), for up to $1.2 billion.
- Otsuka Holdings (Tokyo Stock Exchange: 4578), which in 2023 acquired Mindset Pharma, a Canadian psych drug developer focused on psychiatric and neurological disorders, for C$80 million ($56 million).
With its deal for AtaiBeckley, Lilly becomes the latest pharma giant to perceive the positive implications Tsai cited.
“Treatment-resistant depression persists even after multiple treatments have failed. Millions of people are still searching for relief and desperately need a therapy that works,” Carole Ho, executive vice president and president, Lilly Neuroscience, said in a statement. “Advancing AtaiBeckley’s investigational therapies gives us a real chance to change that.”
Investors agreed with Lilly, giving the pharma a 1% increase Thursday, the day the acquisition was announced, from $1,156.63 to $1,169.17—no small feat since buyers typically stay flat or see their shares slide after announcing an acquisition. And not surprisingly, AtaiBeckley investors were enthusiastic about the deal, as its stock leaped 33% from $5.36 to $7.15. On Friday, Lilly inched up 0.8% to $1,178.58 while AtaiBeckley rose 1% to $7.22.
The AtaiBeckley buyout is Lilly’s eighth announced acquisition of a smaller biopharma this year.
Lilly is acquiring three infectious diseases vaccine developers—Vaccine Company for up to $1.55 billion, Curevo for up to $1.5 billion, and LimmaTech Biologics for up to $780 million—as well as in vivo chimeric antigen receptor T-cell (CAR T) developer Kelonia Therapeutics for up to $7 billion); JAK inhibitor developer Ajax Therapeutics for up to $2.3 billion; next-generation dual-payload antibody-drug conjugate (ADC) developer CrossBridge Bio for up to $300 million; and nonviral DNA delivery-focused drug developer Engage Biologics for up to $202 million cash.
The deal spree reflects Lilly’s desire to capitalize on the billions of dollars it is generating from sales of its obesity and diabetes drugs based on glucagon-like peptide 1 (GLP-1) receptor agonists alone or in tandem with a glucose-dependent insulinotropic polypeptide (GIP).
“If we see great ideas that we think we can use to help people that need them, of course we’ll do deals,” Daniel M. Skovronsky, MD, PhD, Lilly’s chief scientific and product officer and president of Lilly Research Laboratories, said on CNBC.
“Positive development”
David Risinger, a senior managing director and senior research analyst covering diversified biopharmaceuticals at Leerink Partners, said his firm viewed Lilly’s buyout of AtaiBeckley “as a positive development because it enhances LLY’s pipeline of potential neuroscience blockbuster candidates.”
That pipeline is led by five Phase III programs involving four drugs, none of them a psychedelic. Two of the programs belong to brenipatide, a dual agonist of both the GIP and GLP-1 receptors. Brenipatide is being developed for both MDD and alcohol use disorder.
Also in Lilly’s late-stage neuroscience pipeline are:
- Donanemab, which binds to deposited amyloid plaque in the brain and is being studied for the treatment of cognitively unimpaired Alzheimer’s disease.
- Ixoberogene Soroparvovec (Ixo-Vec), an intravitreal gene therapy being studied as a single one-time treatment for vision loss associated with neovascular (wet) age-related macular degeneration (AMD).
- Remternetug (LY3372993), which also binds to deposited amyloid plaque in the brain and is under study as a treatment of cognitively unimpaired/mild cognitive impairment due to Alzheimer’s disease, with potential for subcutaneous delivery.
In addition, AtaiBeckley “would provide differentiated exposure in psychiatry and reinforce [Lilly’s] broader effort to diversify beyond its cornerstone cardiometabolic franchise,” observed Evan David Seigerman, a managing director and head of healthcare research at BMO Capital Markets, as reported by Reuters.
AtaiBeckley was formed last November by the merger of atai Life Sciences and Beckley Psytech. The company’s stock has nearly doubled, soaring 98% over the past six months from $3.64 on January 16.
“Going mainstream”
“Psychedelic Medicine is going mainstream,” declared Steve Jurvetson, co-founder of Future Ventures, in a post on X. Jurvetson and Future were among early investors, along with Peter Thiel in atai Life Sciences.
AtaiBeckley is one of numerous psychedelic drug developers to show significant six-month gains since January: As of Friday’s closing bell, Compass Pathways (Nasdaq: CMPS) shares jumped 68% to $12.35, GH Research ballooned 69% to $28.71, while Definium Therapeutics (Nasdaq: DFTX) nearly tripled, zooming 194% to $44.29.
Interestingly, those three companies did not get a solid bounce from AtaiBeckley’s acquisition by Lilly. Since the deal was announced Thursday, Compass fell 7% from $13.31 pre-announcement, Definium dipped 3% from $45.66. GH rose 8% Thursday from $26.92 to $29.13, before sliding 1.4% the following day.
Bucking the trend was Cybin, d/b/a Helus Pharma (Nasdaq: HELP), which has climbed 11% since the Lilly-AtaiBeckley announcement, from $6.51 to $7.25. Its shares have slumped 6% since January—but soared 58% over the past month on positive news, such as the 88%+ enrollment rate of patients in Helus’ Phase III APPROACH pivotal trial (NCT06564818) of HLP003 in MDD, on track for topline data readout in Q4 2026.
“We see the potential for 150–200% upside [jump in stock price] if Phase III data in 4Q26 are positive,” Kulkarni wrote, making it the largest potential jump among psychedelic drug developers.
In addition to favorable data, the stock surges also reflect actions by President Donald J. Trump’s administration to encourage psychedelic drug development. In April, President Trump signed Executive Order 14401, directing the FDA and other federal agencies to accelerate research and improve access to psychedelic drugs, citing their potential as promising treatments for serious mental illnesses.
And on July 13, the FDA published “Psychedelic Drugs: Considerations for Clinical Investigations,” a final guidance designed to provide general considerations for developers of psych drugs, with recommendations for how to conduct clinical trials for the treatments.
“Rather than providing specific recommendations on study design, this guidance will present foundational constructs that all sponsors studying the therapeutic potential of psychedelic drugs, including sponsors without commercial drug development as primary interest (e.g., academic researchers), should consider,” the FDA wrote in the final guidance. “Sponsors are encouraged to request meetings with FDA for advice on a specific drug development program.”
Leaders and laggards
- Q32 Bio (Nasdaq: QTTB) shares nearly doubled, leaping 91% from $11.21 to $21.38 July 13 after the autoimmune and inflammatory disease drug developer announced positive 36-week topline results from Part B of the Phase IIa SIGNAL-AA trial (NCT06018428) assessing bempikibart in patients with severe or very severe alopecia areata. Q32 said it saw clinically meaningful efficacy data on the primary endpoint of mean percent change from baseline in SALT score, with a reduction from baseline of 35.3% in the prespecified modified intent to treat (mITT) analysis. The company also reported that 40.0% of patients (10/25) achieved SALT-20 response at Week 36 in the mITT analysis, while 30.3% of patients (10/33) achieved SALT-20 response at Week 36 in the ITT analysis of all enrolled patients.
- Veradermics (NYSE: MANE) shares yo-yoed this past week, climbing 12% from $110.17 to $123.70 Wednesday after the pattern hair loss drug developer announced positive topline results from its open-label Phase II Study 207 trial (NCT06527365) assessing VDPHL01, an extended-release oral minoxidil formulation, in women with mild-to-moderate pattern hair loss. Veradermics said most study participants reported improved hair coverage at Month 2, with approximately 88.9% of patients dosed once daily and 90.0% dosed twice daily reporting “improved” or “much improved” outcomes at Month 6. Participants dosed once daily showed a mean increase in non-vellus target area hair count (TAHC) of 22.7 hairs/cm² at Month 6, an average that rose to 23.3 hairs/cm² in twice daily dosed patients. The mini surge was short-lived, however, as investors more than gave back the gain, selling off shares to send them tumbling 14% to $105.83 Thursday amid possible investor questions about whether the good clinical news was already reflected in the stock price.