Eli Lilly Is Acquiring AtaiBeckley for $2.8 Billion. Cathie Wood Thinks Another Psychedelic Drug Stock Is an Even Better Bet.

The psychedelic medicine field looks like it's finally about to take off, and that's catching the attention of portfolio managers like Cathie Wood. Eli Lilly (NYSE: LLY) agreed on July 16 to acquire the biotech AtaiBeckley (NASDAQ: ATAI) for a $2.8 billion upfront payment, with as much as $1 billion more in potential milestone payments. To put it lightly, a psychedelic nasal spray for treatment-resistant depression (TRD) is not the kind of pharmaceutical asset Lilly would have even considered touching five years ago.

Cathie Wood's Ark Genomic Revolution ETF sold 1.1 million shares of AtaiBeckley on the deal news, and promptly bought nearly 400,000 shares of one of its peers, Compass Pathways (NASDAQ: CMPS), the psilocybin drug developer that Wood has been accumulating for months. So why does she think that Compass is the better bet here?

Ark Invest CEO Cathie Wood. Image source: Getty Images.

What Lilly just bought

Atai's lead candidate, BPL-003, is an intranasal formulation that's being tested in a phase 3 trial for adults with treatment-resistant depression, which is defined as inadequate response to at least two prior antidepressant regimens.

The first data readouts are not expected until early 2029, but investment bank Jefferies estimates that there could be peak sales of between $1 billion and $2 billion for the therapy if it's ever commercialized. For a big pharma stock like Lilly, that's small potatoes relative to its colossal revenue base of $65.2 billion in 2025.

But why would Lilly buy Atai now specifically? In short, a regulatory door that was once closed is now wide open.

President Donald Trump signed an executive order in April 2026 directing the Food and Drug Administration (FDA) to prioritize psychedelic drug review, and six days later, the FDA issued a Commissioner's National Priority Voucher (CNPV) to Compass' lead program; the voucher compresses FDA review to as little as one to two months post-submission. Then, in July, the FDA finalized its psychedelic medicine clinical trial guidance, addressing the problems with the regulatory process that derailed Lykos Therapeutics' MDMA-assisted therapy in 2024 and sent the psychedelics segment into a two-year period of hibernation and doubt.

Compass is closer to the finish line

Wood's recent inclination toward Compass rather than Atai is likely based on the fact that Compass is much closer to potentially reaching the market with its lead candidate, which is now something that's possible to actually do, given the favorable changes to the regulatory environment.

That candidate, COMP360, already met its primary endpoint in both of its phase 3 trials in TRD, reporting some fairly solid depression symptom reductions per the widely used Montgomery-Åsberg rating scale compared to the control group. Compass is targeting completion of its rolling new drug application (NDA) in the fourth quarter of 2026, with its forecast saying that the biotech will be launch-ready by year-end 2026, contingent on both a positive FDA review and the Drug Enforcement Administration (DEA) rescheduling psilocybin from Schedule I, the category for the most dangerous and least medically valuable drugs.

Importantly, Compass has $466 million in cash and equivalents as of March 31, so it has a runway into 2028, which is well past a plausible launch date for COMP360. It's also roughly two years ahead of AtaiBeckley's own timeline for reaching the market, assuming it ever does. That difference means Compass has a shot at getting to market ahead of the next wave of psychedelic drug developers targeting TRD.

Thus, buying Compass now is a bet on COMP360's approval and a smooth launch leading to the company capturing a slice of the TRD market. Wood probably doesn't have anything against Lilly, but it's practically guaranteed that Compass is proportionally exposed to more upside than Lilly after buying Atai because it's a biotech without any drugs on the market, and not a pharma juggernaut where new medicines getting approved barely moves the needle much of the time.

Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Eli Lilly. The Motley Fool has a disclosure policy.