The latest quarterly sales figures for Johnson & Johnson (NYSE:JNJ)’s esketamine nasal spray support the notion that psychedelics can become commercially viable for mental health, analysts at Jefferies believe.
Fourth quarter Spravato sales grew by 5% quarter-over-quarter to $297 million driven by increased physician and patient demand.
The implied run rate of $1.2 billion is at the low end of J&J’s peak sales guidance of $1.5 billion-plus.
“Spravato's continued sales acceleration in treatment-resistant depression and major depressive disorder suicidal ideation provide evidence that psychedelics can generate meaningful sales in hard-to-treat central nervous systems (CNS) disorders, even if their ultimate use were restricted to hospitals or treatment clinics (versus at home), incrementally increasing the perception psychedelics are an investable space,” they wrote in a note to clients.
They believe that while the drug class is in its early stages, existing players such as atai Life Sciences (NASDAQ:ATAI, ETR:9VC) are trading at cheap enterprise value valuations and will eventually leverage the global infrastructure built by J&J.
“J&J's commitment to building out the infrastructure (e.g., working with hospitals/physicians, securing reimbursement with payors/countries, marketing the drug) should only help facilitate the adoption of future psychedelics,” they wrote.
“We believe there are 4,500 interventional psychiatry clinics in the US (up from approximately 100 in 2019), which could be doubling every two years.”
For atai, the analysts look forward to upcoming trial results from a Phase 2b trial of BPL-003 (intranasal 5-MeO-MDT) in treatment-resistant depression, being carried out by Beckley Psytech.
Analysts expect positive data along with a potential Breakthrough Therapy Designation.
atai also holds a stake in Compass Pathways (NASDAQ:CMPS), which is expected to release datasets from its pivotal Phase 3 trial of COMP360 (psilocybin) in treatment-resistant depression in the second quarter of 2025 and second half of 2026.
The analysts acknowledged that uncertainty about the approvability of psychedelics has risen after Lykos’ MDMA-assisted therapy for post-traumatic stress disorder was rejected by the Food and Drug Administration (FDA).
“Although the FDA's 2024 rejection of MDMA has been a setback for the industry, the issues raised seem addressable by sponsors,” they wrote. “We look forward to upcoming data from COMP360 and atai.”