Shares of AtaiBeckley (ATAI +0.98%) surged on Thursday after the mental health-focused biotechnology company agreed to be acquired by pharmaceutical giant Eli Lilly (LLY +0.76%).

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A sizable premium for AtaiBeckley's shareholders

Under the terms of the deal, Lilly will purchase AtaiBeckley for $6.75 per share in cash. The healthcare leader will also pay up to $2.50 per share in additional milestone payments if certain development and regulatory goals are achieved.

AtaiBeckley's stock price closed at $5.36 on Wednesday.

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NASDAQ: ATAI

AtaiBeckley

Today's Change

(0.98%) $0.07

Current Price

$7.22

Key Data Points

Market Cap

$2.7BMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.

Day's Range

$7.08 - $7.22

52wk Range

$3.06 - $7.22

Volume

41.8M

Avg Vol

11M

The upfront cash equates to roughly $2.8 billion, while the potential milestone payments could amount to another $1 billion, for a total purchase valuation of about $3.8 billion for AtaiBeckley if all conditions are met.

The deal is projected to close in the third quarter, subject to shareholder and regulatory approval.

New methods for treating depression

Recent research suggests that a loss of the brain's ability to strengthen connections in regions that regulate mood could be a factor in depression and other mental health conditions.

AtaiBeckley's therapies are designed to support the growth of new neural connections -- a novel approach compared to traditional antidepressants that influence neurotransmitter levels.

"Across our portfolio, we're seeking to demonstrate that psychiatric illness is treatable at its biological root, not just its symptoms," AtaiBeckley CEO Srinivas Rao said. "Lilly's expertise and reach are expected to accelerate that work for people whose conditions have not responded to existing treatments."

AtaiBeckley's lead drug, BPL-003, is a synthetic form of 5-MeO-DMT -- a powerful, naturally occurring psychedelic compound -- administered as a nasal spray for treatment-resistant depression.

After BPL-003 showed an encouraging ability to reduce depressive symptoms in a Phase 2b clinical trial, the experimental drug was granted Breakthrough Therapy Designation by the U.S. Food and Drug Administration (FDA). BPL-003 is currently in Phase 3 trials.