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An Elon Musk ally is seeking to seize control of psychedelic drugmaker Lykos Therapeutics, offering it a financial lifeline for its bid to garner US approval to use the party drug ecstasy as a mental health treatment.
Antonio Gracias, an early Tesla backer and former board member who backed Musk’s takeover of Twitter, made a pitch to Lykos investors in recent weeks on a plan that would grant him a controlling stake in the company in return for $30mn in equity and $70mn in secured debt, three people with knowledge of the plan said.
Gracias’s attempt to court Lykos comes as investors have grown more optimistic about the psychedelic sector because Robert F Kennedy Jr, president-elect Donald Trump’s nominee to run the US health department, has previously spoken favourably about the medicinal use of psychedelics.
The US Food and Drug Administration last year rejected a Lykos application to get therapy in combination with MDMA, commonly known as ecstasy, approved as a treatment for post-traumatic stress disorder, after an advisory committee raised concerns about the design of its clinical trials.
Lykos now needs a financial boost to stay afloat as it seeks another shot at approval, first by carrying out an independent review of its previous trials at the request of the FDA and then by running a fresh late-stage trial. Lykos laid off about three-quarters of its 100 employees and ousted its chief executive after its FDA application was rejected.
Under Gracias’s plan, Chicago-based speciality pharmaceutical group Paragon Biosciences would assist Lykos in its efforts to get its treatment approved and then launch the product, the people said.
Rick Doblin, whose non-profit Multidisciplinary Association for Psychedelic Studies (Maps) funded Lykos’s clinical studies and maintains a large minority stake in the biotech after it was spun out as a for-profit entity last year, backed Gracias’s plan, the people added.
Gracias, who is planning to invest through his family foundation, is seeking three board seats and would give two to Maps. Paragon would also be given an option to take a small stake in Lykos. Gracias is best known for founding $17.5bn venture capital fund Valor Equity Partners.
Lykos’s board is set to meet on Friday to consider Gracias’s proposal, as well as a rival plan from Lykos’s main shareholder, Helena Special Investments, which would give Lykos a fresh injection of cash through a bridge loan of $20mn-$30mn. Helena, which led Lykos’s $100mn funding round last year, wants to entirely decouple Lykos from the non-profit Maps, the people said. Both Maps and Helena have veto rights over any deal.
The potential board showdown marks the latest turn in the decades-long effort to legalise psychedelics as medicines, in which Maps has been at the forefront. About 13mn Americans, including many military veterans, suffer from PTSD, an area where there has been little innovation in recent decades.
Lykos, Helena and Doblin declined to comment. Paragon and Gracias did not respond to multiple requests for a comment.
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