Thursday’s announcement that Eli Lilly will acquire AtaiBeckley, a clinical-stage maker of psychedelic drugs, for up to $3.8 billion indicates Big Pharma’s increasing embrace of a long-stigmatized class of medications as alternatives for treating an array of mental health conditions. The news comes on the heels of positive clinical trial results of several different psychedelics, as well as President Trump’s executive order in April fast-tracking reviews of such drugs by the Food and Drug Administration. 

AtaiBeckley’s lead asset, BPL-003, is a synthetic form of 5-MeO-DMT — derived from the venom of Sonoran Desert toads —administered as an intranasal spray for treatment-resistant depression, a severe form of the illness that ​does not improve after standard treatments, which affects around four million Americans. A year ago, Atai reported results of its Phase 2b study of BPL-003, which demonstrated rapid and durable reductions in TRD symptoms. AtaiBeckley is developing several other psychedelics, including one related to MDMA, colloquially known as ecstasy. 

BPL-003 has been granted Breakthrough Therapy Designation by the FDA, a program that expedites drug development and review, and is currently in Phase 3 trials. “Phase 3 success by early 2029 could open up a $1-2 billion opportunity in TRD,” Jefferies analysts wrote in a note. More generally, they wrote, “our KOLs [key opinion leaders] confirm psychedelics could represent the biggest change to psychiatry and are possibly a paradigm shift, with patient demand already seeming insatiable.” 

5-MeO-DMT joins several other psychedelic substances — LSD, psilocybin (aka magic mushrooms), MDMA, ayahuasca and ibogaine — that biopharma disrupters have formulated and are successfully testing to treat depression, post traumatic stress disorder, anxiety, eating disorders and alcohol and drug addiction. 

Psychedelic drugs appear to temporarily loosen the brain’s rigid patterns of communication, allowing regions that don’t usually “talk” much to connect in new ways. In that more flexible state, especially when paired with therapy, people may be able to revisit trauma, depression or addiction from a different perspective and form healthier mental pathways. Some experts refer to this process as “rewiring” the brain. 

“There’s enough data generated so far that suggests that this class of drugs can deliver something more meaningful than what the orals have been able to do so far,” said Ami Fadia, a biotech analyst at Needham, referring to SSRIs and SNRIs, medications widely prescribed for more than three decades to treat a broad range of psychiatric illnesses. “A few years ago, some investors would not want to touch [psychedelics], but now I rarely hear that,” she said. 

Indeed, it’s been a long, strange trip for psychedelics. Psychiatric scientists began studying them in the 1960s, producing…