Eli Lilly’s plan to acquire psychedelics developer AtaiBeckley for up to $3.8 billion has been described as a significant validation for the emerging drug class, but analysts do not expect it to spark a widespread wave of mergers and acquisitions in the sector, according to comments made on July 24.
Jefferies Managing Director Andrew Tsai said, “I don’t view it as floodgates open where all 20 big pharma companies look at psychedelics in a serious manner—it could just be a handful, ultimately.” Tsai noted that few large pharmaceutical companies are currently active in neuroscience, and some such as AbbVie and Otsuka Pharmaceutical have already made their own deals involving psychedelic compounds.
Otsuka recently closed a $1.2 billion deal for Transcend Therapeutics and its methylone program TSND-201, while AbbVie acquired Gilgamesh Pharmaceuticals’ lead depression candidate last year for $1.2 billion. Johnson & Johnson also sells Spravato, an inhaled form of ketamine used for treatment-resistant depression.
Tsai said there are not many psychedelic biotech firms available as acquisition targets: “I don’t think there’s that many to pick from.” The most likely candidates mentioned include Compass Pathways—which has advanced its synthetic psilocybin candidate COMP360 through two late-stage trials—and Definium Therapeutics (formerly MindMed), which recently reported Phase 3 efficacy data for its major depressive disorder treatment.
H.C. Wainwright analysts called Lilly’s proposed acquisition of AtaiBeckley “the clearest strategic validation to date” of psychedelics as an emerging pharmaceutical category, but cautioned that the transaction should not be seen as “supporting a uniform re-rating of every psychedelic developer.” They added that the deal legitimizes psychedelics but does not guarantee broader industry momentum or valuation increases across all companies in the space.
Tsai suggested Big Pharma may wait until after regulatory approval and initial sales before pursuing further deals: “Maybe Big Pharma is willing to pay only if they see sales pick up, so it might not be [until] six to nine months later after the launch,” he said. He concluded that while multiple antidepressants already exist on the market with strong sales records, there is room for several successful entrants among psychedelic developers.
