What Eli Lilly’s psychedelic investment could mean for the emerging field

Big Pharma companies are increasingly investing in psychedelic medicines.

Multiple smaller drugmakers have released Phase 3 clinical trial data this year showing their psychedelic medicines significantly improved symptoms of mental health conditions for which current treatments are often not very effective, such as treatment-resistant depression.

The federal government has also shown increased support for psychedelic medicines, with President Trump signing an executive order in April to accelerate research and development.

In July, Eli Lilly, the largest pharma company in the world by market capitalization, announced plans to spend $2.8 billion to acquire AtaiBeckley, a mental health biotech that’s developing a psychedelic drug for treatment-resistant depression and alcohol use disorder. The acquisition was finalized on Sept. 11.

Otsuka Pharmaceutical’s US subsidiary in June also finalized its $700 million acquisition of Transcend Therapeutics, a biotech developing a psychedelic called TSND-201 for PTSD. And last year, AbbVie, another one of the largest pharma companies in the world, acquired a psychedelic compound for major depressive disorder called bretisilocin from Gilgamesh Pharmaceuticals for approximately $1.2 billion.

The latest deal from Lilly “continues to support the notion that Big Pharma may be accepting, or more willing to accept, the potential benefit of a psychedelic that maybe once was quite stigmatized,” Andrew Tsai, a managing director at investment banking firm Jefferies, told Healthcare Brew.

A lucrative deal

In Phase 2 clinical trial results released in March, AtaiBeckley’s experimental medicine, known as BPL-003, reduced participants’ scores on the Montgomery–Åsberg Depression Rating Scale—a tool clinicians use to measure depression severity—by a mean of 54.5% the day after receiving the medication. No serious adverse events were reported. Earlier the same month, the FDA gave AtaiBeckley the green light to begin Phase 3 studies.

BPL-003 is an intranasal spray like Spravato, Johnson & Johnson’s ketamine-derived depression treatment. But it’s made instead from 5-MeO-DMT, a lesser-known psychedelic compound found in plants, fungi, and the Sonoran Desert toad.

Like Spravato’s, BPL-003’s psychedelic effects are relatively short-lived, which means patients may only need to be observed for a couple hours after they receive the medication, according to AtaiBeckley’s Phase 2 trial results. In the trial, the median time from receiving the dose to being ready for discharge was 98 minutes. Spravato also requires about two hours of clinical observation. Comparatively, psychedelics like LSD or MDMA have effects that can last up to 12 hours and require much longer periods of observation.

The similarities to Spravato may make regulators more confident that BPL-003 could be successful, according to Tsai. Spravato has been very profitable for Johnson & Johnson since it was approved in 2019. In 2025, it brought in $1.7 billion worldwide.

A boost from the feds

At the same time as major pharma companies are investing more into psychedelics, the federal government is taking steps to push forward the process of getting treatments like these to market more quickly.

Trump’s April executive order, for example, also gave Commissioner’s National Priority Review vouchers to three companies with treatments in development: Transcend Therapeutics, Compass Pathways, and Usona Institute.

The vouchers are meant to speed up the FDA’s process of reviewing drug applications from the standard 6+ months for other priority review programs to one to two months, according to the FDA website. Compass plans to submit its final submission for FDA approval by the end of 2026, while Transcend’s and Usona’s psychedelic compounds are still in Phase 3 trials, which are set to be completed in 2029 and 2027, respectively.

Eli Lilly, AtaiBeckley, and Otsuka Pharmaceuticals did not respond to Healthcare Brew’s request for comment.

On Sept. 9, a handful of FDA officials released a paper in the New England Journal of Medicine detailing the agency’s updated guidelines for developing and approving psychedelics.

In it, the agency addressed some of the historical challenges to approving this class of medicines, such as the fact that placebo-controlled studies aren’t always practical because patients can often tell whether they’ve received a psychedelic. That was one of the sticking points leading to the FDA’s 2024 rejection of an MDMA-based treatment for PTSD from Lykos Therapeutics.

The FDA said in the paper it’s now open to other clinical trial structures, such as giving the control group a low dose of a psychedelic medicine and comparing it to the full dose.

Then, on Sept. 14, the FDA held a four-hour public hearing on psychedelic drugs. Stakeholders including doctors, pharmacists, and therapists shared their opinions on how to safely regulate the use of such treatments, Reuters reported.

Beyond the government, wealthy members of Elon Musk’s inner circle are also aiding efforts to mainstream psychedelics. Two SpaceX directors have poured millions into companies developing psychedelic treatments, the Wall Street Journal reported earlier this month.

A cautionary tale

Eli Lilly’s deal “certainly helps” move psychedelic medicines closer to the mainstream, according to Tsai. However, there is room for caution.

Victoria Cvitanovic, of counsel at Rudick Law Group, where she also serves as data privacy officer, told Healthcare Brew that a large investment like Lilly’s is “exciting.” But, it’s unclear if investors will stick around if they don’t see a quick return.

Clinical trials are a slow process, and even once a drug receives approval, payers must still make coverage determinations before a medicine can be widely accessed, she noted.

Investors should plan carefully for common drug development challenges or delays, Cvitanovic said, adding that she hopes the current buzz around psychedelics “is not affecting decision-making to enter the space as much as the real need we have for dedicated individuals who are committed to the betterment of all of our medical care.”