atai Life Sciences (NASDAQ:ATAI, ETR:9VC) stock is poised to move higher following its planned merger with Beckley Psytech, as the combined entity will provide investors with maximum exposure to a promising therapy targeting treatment-resistant depression (TRD), analysts at Jefferies believe.
BPL-003, Beckley’s intranasal formulation of 5-MeO-DMT, is a short-acting psychedelic with the potential to deliver rapid and durable effects in TRD.
atai made a strategic investment in Beckley in January 2024, holding an approximately 34% stake in the private biotechnology firm before announcing the all-stock merger deal on Monday.
“We expect atai stock to climb higher, as the Street now has maximum exposure to BPL-003,” Jefferies analysts wrote. “The new entity atai Beckley has full ownership of BPL-003. The two parties can jointly execute on their shared vision of developing rapid-acting psychedelics amenable for a short two-hour time-in-clinic.”
They estimate potential peak sales of $1 billion for BPL-003, with a success-based valuation uplift to atai in the range of $1.3 to $2 billion, compared to roughly one-third of that under atai’s current ownership structure.
The merger is contingent on data from Beckley’s BPL-003 Phase 2b trial readout meeting pre-agreed upon success criteria, including achieving statistical significance on the primary endpoint and safety thresholds.
The analysts do not think the deal automatically means BPL-003’s Phase 2b TRD data has succeeded, but wrote that they were already optimistic about a positive outcome.
“To date, several datasets suggest BPL-003 can safely, rapidly, and durably benefit hard-to-treat depression,” they wrote.
Broader pipeline
The Phase 2b trial, which has enrolled 196 patients, compares single doses of 12mg and 8mg to a sub-active 0.3mg dose.
“We'd like to see a 5-point MADRS separation at Week 4 (primary endpoint) for a potential positive 50% to 100% stock move,” the analysts wrote.
Jefferies is also bullish on atai’s broader therapeutic pipeline, highlighting Phase 2 assets like VLS-01 (buccal DMT) and EMP-01 (oral R-MDMA).
“Importantly, these compounds can fit in the two-hour, in-clinic treatment paradigm established by [Johnson & Johnson’s nasal esketamine spray] Spravato in TRD,” they pointed out.
“Looking ahead, investor sentiment could improve with a friendlier administration. We’d flag how the Food and Drug Administration’s [Commissioner] Dr. Makary seems supportive of psychedelics.”
Jefferies maintained its ‘Buy’ rating on atai and $5 price target, implying upside of 116% at the time of writing.
atai shares traded up 7.4% at about $2.48 on Monday afternoon.