Psychedelic therapies are becoming mainstream. Deutsche Bank thinks this drug developer could triple

Deutsche Bank believes AtaiBeckley is well-positioned to be a winner in the “Psychedelic Renaissance.” The bank initiated coverage on the drug developer with a buy rating and a $12 price target, which indicates a more than 250% gain from Friday’s close. Psychedelic therapies have grown in popularity in recent years, particularly as a mental health treatment. Drugs like MDMA , ketamine and psilocybin have been in clinical trials to see if they can be used to address mental health conditions that are resistant to other treatments. “Several psychedelic companies have emerged as bona fide drug developers, attracting attention from healthcare/biotech investors who usually invest in conventional therapeutics,” wrote Deutsche Bank analyst David Hoang in a Thursday note. “We count ATAI among these trailblazers, and believe it will become a leader in the nascent field of psychedelic medicine for mental health conditions.” ATAI YTD mountain ATAI year-to-date chart. AtaiBeckley has two key drugs it’s developing for treatment-resistant depression: BPL-003, an intranasal tryptamine derivative, and VLS-01, a buccal tryptamine derivative. Hoang models the potential sales of these drugs by using Johnson & Johnson’s Spravato, an intranasal ketamine derivative first approved to address treatment-resistant depression in 2019 , as a case study. The drug is now bringing in around $2 billion in annualized sales, and Hoang noted that consensus estimates suggest peak sales will be around $4 billion. Using that example, Hoang thinks BLP-003 U.S. sales could peak at $4 billion and VLS-01 at $2 billion. He added another drug by the company — EMP-01, an oral MDMA derivative used to treat seasonal affective disorder — could have peak sales of $1 billion. While the U.S. Food and Drug Administration may have been skeptical of psychedelic therapies in the past, Hoang said that friction has eased. “Upon FDA approval, a psychedelic drug is expected to undergo [Drug Enforcement Administration] (federal) rescheduling from Schedule I (no accepted medical use) to a more accessible Schedule (II-V) within 90 days, followed by rescheduling by most states over the next 30 days,” he wrote. “We believe the psychedelics space is now viewed as investable by healthcare investors and large pharma,” Hoang wrote. —CNBC’s Michael Bloom contributed reporting.