‘A rising tide scenario’: Why other Big Pharmas could follow Lilly into psychedelics

Biotech ‘A rising tide scenario’: Why other Big Pharmas could follow Lilly into psychedelics By Will Maddox, Darren Incorvaia Jul 20, 2026 4:00am psychedelic drug Eli Lilly Helus Pharma Compass Pathways After Eli Lilly dived into the psychedelics space with a $2.8 billion upfront acquisition of AtaiBeckley last week, industry experts told Fierce that the deal would give the space added momentum. The acquisition comes amid a months-long M&A spree for Lilly, which will now gain AtaiBeckley’s BPL-003, a fast-acting intranasal formulation of the psychedelic substance 5-MeO-DMT. A phase 2b trial has linked BPL-003 to statistically significant improvements in patients with treatment-resistant depression. For Gavin Clark-Gartner, managing director of biotechnology equity research investment for banking advisory firm Evercore, the buyout is a “rising tides scenario” that could buoy the fortunes of other psychedelics biotechs aiming to treat mental health conditions. “In order for the field to be successful, you want multiple options,” Clark-Gartner told Fierce. “There is a huge patient population with depression. You aren’t competing for rare disease patients.” Citeline senior analyst Emma Wille agreed that psychedelics therapies are “a big fat group project” where “if one succeeds, others will have an easier time.” It wasn’t always such a sunny outlook. When an FDA advisory committee rejected Lykos’ MDMA treatment for post-traumatic stress disorder in 2024, it increased skepticism about whether psychedelics would ever make it over the regulatory finish line. “The investment community took the whole sector and threw it into one big mess and said, ‘This is a problem area,’” Marc Goodman, senior research analyst and managing director at Leerink Partners, told Fierce. But in the years that followed, Goodman noted that companies in the space have professionalized their work, backed up by positive readouts and some eye-catching deals. A year ago, AbbVie got in on the action by penning a $1.2 billion deal for Gilgamesh Pharmaceutical’s bretisilocin program for patients with major depressive disorder. Then in March 2026, Otsuka Pharmaceutical—which already owns psychedelic biotech Mindset Pharma—paid $700 million for Transcend Therapeutics and its MDMA analog for patients with post-traumatic stress disorder. Then there’s the political climate. Transcend was one of three companies working on psychedelic drug candidates for mental health conditions that received priority review vouchers in April thanks to a newfound enthusiasm for the space by the Trump administration. Another recipient of these vouchers was British biotech Compass Pathways, which is working on a psilocybin-assisted therapy to treat depression. That asset, a synthetic form of psilocybin dubbed COMP360, has already secured a rolling review from the FDA and the company hopes to launch the therapy in the first half of 2027. A spokesperson for Compass told Fierce that Lilly’s acquisition of AtaiBeckley “represents further validation of both the psychedelic sector and the growing body of scientific evidence supporting innovative approaches to treating serious mental health conditions.” Definium Therapeutics, which continues to share positive data about its LSD-based depression treatment, agreed that Lilly’s deal “reinforces the growing recognition of the long-term potential of psychedelic medicines.” “Additional investment that advances scientific rigor and strengthens the foundation for clinical implementation will help accelerate patient access,” Beth Calitri, Definium’s vice president of corporate communications, told Fierce. The FDA followed the vouchers with a finalized guidance for psychedelic drug developers this month. This guidance “signals these drugs are approvable,” Holly Fernandez Lynch, a medical ethicist and regulatory expert at the University of Pennsylvania School of Medicine, told Fierce, “which likely goes a long way toward companies viewing psychedelics as a strong investment.” Fernandez Lynch has in the past expressed concern about the vouchers. They were issued through the controversial Commissioner’s National Priority Voucher program on direct orders from Trump, who himself has suggested he was influenced by a text message exchange with podcaster Joe Rogan. “That's completely absurd and really terrifying,” Fernandez Lynch told Fierce back when the vouchers were issued. But aside from this strange political context, Big Pharma buying more into the psychedelic space “is a very natural development,” she said. At the end of day, Fernandez Lynch doesn’t see any reason why psychedelics should be treated any differently than other experimental medicines. Things are also looking positive on the commercial front. Johnson & Johnson launched its ketamine treatment Spravato in 2019, which continues to impress. The Big Pharma recently disclosed that the esketamine nasal spray pulled in $584 million in sales in the second quarter, up 25% from the first quarter. Because ketamine's primary effect is anesthetic, Spravato is not typically considered a traditional psychedelic, though it does produce dissociative effects and is used recreationally. Still, all this momentum is sure to attract more Big Pharmas into the space, Leerink’s Goodman suggested. “Everybody's looking at the market and saying, ‘If J&J can do this with Spravato, why can't we?’” he said. “I don't understand why Big Pharma wouldn't want to be interested in this space now. It's just a matter of the de-risking from a clinical and regulatory perspective.” If the appetite for buying psychedelic biotechs is growing, who else is on the menu? “If you're looking at potential future M&As, you should be looking at any of these companies that have positive phase 2 or 3 data,” Citeline’s Wille said. “We're looking at drugs that have had good top-line readouts rather than cheaper, earlier-stage drugs. [Pharmas] will pay more and they'll wait longer to acquire.” Rayyan Zafar, Ph.D., a neuropsychopharmacologist and psychedelic scientist in the department of brain sciences at Imperial College London, suggested that companies “developing novel chemical classes of compounds and novel routes of delivery, short-acting drugs … might be favored.” Zafar noted Irish biotech GH Research and its inhaled DMT product, currently in phase 2b for treatment-resistant depression, as a possible M&A target. Analysts said treatments that can take advantage of the existing Spravato infrastructure will be more attractive. While patients who take J&J’s drug are dosed and monitored in a community clinic over the course of two hours, many psychedelic drugs take more time and produce a more intense experience, which has additional logistical requirements. As a result, some psychedelic treatments in development require five or more hours for observation. Definium’s LSD-based treatment, for example, requires patients to be supervised for eight hours. “There are many things that are going to need to be adapted, so not all of the infrastructure is in place,” Clark-Gartner said. “It’s not flipping a switch from what's there from Spravato. It will take time, but the pieces are there.” Analysts also suggested there will be a variety of preferences in dosing frequency and intensity of experience that will provide opportunities for companies to find their niche, develop a drug and perhaps be the next AtaiBeckley. “Like any new industry, there is space for a lot of trip modalities,” Wille said. “There are a set of people who will prefer the fact that there is an experience associated with the hallucinogen, and then there will be people who don't want that. That's going to develop slowly as this industry builds out.” From a pharma perspective, it’s “not crazy to have one of these psychedelics in your portfolio in addition to a simple pill for depression,” Goodman said. “Big Pharma is interested in drugs that can be large, and I think Spravato indicated that you can have a large drug in this area,” he added. psychedelic drug Eli Lilly Helus Pharma Compass Pathways Leerink Partners Otsuka Pharmaceutical Gilgamesh Pharmaceuticals mergers and acquisitions Deals Biotech