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Words by Josh Hardman.
Billionaire investor Antonio Gracias has launched a bid to take control of MDMA drug developer Lykos Therapeutics via $100M of funding and a closer alliance to its nonprofit progenitor, MAPS.
Who Is Antonia Gracias?
Gracias heads up Valor Equity Partners, an investment firm with more than $15 billion in assets under management. It accumulated that pile of cash in large part through early bets on companies related to Elon Musk, most notably through being one of Tesla’s earliest institutional investors back in 2005, and then a major investor in SpaceX.
Those early bets on Musk generated huge returns, as well as loyalty: Gracias has been described as “the most hardcore of Elon Musk’s loyalists”. When the world’s richest man was trying to line up loose change to acquire Twitter, Gracias passed the hat around his network, and once Musk took control of the social media platform Gracias’ firm, Valor, acted as something of an outsourced finance division, helping devise and implement Musk’s sweeping job cuts and project its future financials.
Since his early investments in Tesla and the like, Gracias has invested broadly via Valor, with some major allocations in the biotech field. Those investments include companies spawned by his pal Jeff Aronin such as Marathon Pharmaceuticals and, later, companies produced by Paragon Biosciences, a biotech company incubator that Aronin came to found.
Aside from being an investor in many of Musk’s ventures and among his most ardent supporters, the pair also appear to have enjoyed drugs together, including psychedelics. Last February, a media flurry described concern among Tesla board members regarding Musk’s alleged drug use with other members of the Tesla board. The two board members mentioned at the time were Steve Jurvetson and Antonio Gracias, both major psychedelics advocates and donors.
On that note, Gracias has funnelled tens of millions of dollars into the psychedelics field through philanthropy. Those donations include $1M to MAPS back in 2020 via its Capstone Campaign, and $16M to Harvard in fall 2023, via his family foundation, to establish the Study of Psychedelics in Society and Culture. He has also funded work at Imperial College London’s Centre for Psychedelic Research, the Icahn School of Medicine at Mount Sinai, and elsewhere.
Gracias’ $100M Proposal
The Financial Times broke the news that Gracias is proposing a $100M deal to the ailing MDMA drug developer that would see him take on $30M in equity and $70M in secured debt. That would be realised via his family foundation, not his investment firm, according to people familiar with the proposal.
According to the FT, Gracias is also proposing that Paragon Biosciences, that biotech company builder run by his friend Aronin, would be drawn on to help develop and roll-out MDMA. Paragon might be able to take out a small stake in Lykos under the terms of the deal, too.
The proposal comes as a counter to Lykos’ largest investor, Helena, which led its $100M+ Series A announced early last year, who are offering a bridge loan of $20-30M.
Frustrated with Lykos' Direction, Doblin Backs Gracias’ Coup Attempt
MAPS founder Rick Doblin appears to be in favour of Gracias’ proposal, which would place Gracias and co. in the reigns, effectively dethroning Helena.
It’s a remarkable change of allegiances, given that only 18 months or so ago Doblin told an audience that he “very much trust[ed] working with Helena”, and that he was “honoured and proud” to partner with them.
But it appears Doblin’s primary allegiance is to his goal of bringing MDMA to market in a more generic, accessible form, which he has pursued relentlessly for decades now.
And it’s no secret that Doblin has been unimpressed by Lykos’ direction, which he perceives to increasingly resemble the tactics of more conventional drug developers and pharmaceutical companies, toeing the FDA line wherever possible.
We have seen hints of the increasingly fraught relationship between Doblin and Lykos over the past year or so, with the MAPS founder convinced that the for-profit spinout has focused too much on generating data and regulatory submissions and not enough on the more ‘political’ process that he believes is essential.
He disagreed, for example, with Lykos’ adoption of a ‘quiet period’ during its new drug application (NDA) review process, instead urging for a more proactive policy of communication regarding its therapy model and conduct of its trials. That extends to what he perceives to be the company’s lack of interest or confidence in responding to its critics, such as in the case of an October 2024 JAMA Psychiatry article that questioned the psychotherapy protocol employed in Lykos’ studies. Frustrated by the company’s apparent unwillingness to respond, Doblin and Michael Mithoefer sent in their own comment, as did Michael Alpert.
Taken together, it appears Doblin has been frustrated by Lykos’ slow creep away from MAPS’ founding vision for the spinout company—development and approval of MDMA-assisted therapy for public benefit—toward a more conventional pharmaceutical project to have midomafetamine capsules patented, approved and commercialised.
In fact, Doblin told the Board that it didn’t even deserve to retain the ‘MAPS’ element of its former name, MAPS PBC, following a disagreement over the company’s policy on how it might enforce its patent rights in the future.
Aside from disagreements over the company’s strategy and direction, it’s also a simple fact that Doblin has been effectively iced out, culminating in his resignation from the board last August. He is yet to see a copy of the Complete Response Letter (CRL) the FDA sent the company in response to its NDA, for example. If he had his way, the company would still be sharing all such correspondence with the agency publicly.
It’s perhaps unsurprising, then, that Doblin is open to Gracias’ proposal, which might bring him back into the fold and see the company align more closely with his philosophy.
But whether that mission alignment would ring true is an open question. Indeed, such alignment was something that Doblin thought he had found in Helena.
There are some red flags, for example, in Paragon’s Jeff Aronin, Gracias’ associate and serial investee. Aronin was mired in controversy when his company, Marathon Pharmaceuticals, announced that it would price its drug Emflaza (deflazacort) for Duchenne muscular dystrophy at just shy of $90,000 a year. Meanwhile, a cheap generic, flazacort, was being imported from overseas by patients for around $1,000-$1,600 a year.
Allegations of price gouging ensued, with Aronin compared to Martin Shkreli, drawing the ire of patient groups, senators, and even the pharma trade group and lobbying organisation PhRMA, which publicly called out the move. Aronin ended up resigning from his board position at PhRMA, desperately rowing-back his company’s pricing comments just four days after making them, and then selling the drug to PTC Therapeutics.
Despite this, many of Marathon’s investors, including Gracias (who was a director of the company) have stood by him, backing many of his subsequent ventures, including those spawned via Paragon.
According to those familiar with his Lykos proposal, Gracias would fund the company through his family foundation, not his investment fund Valor. Still, his role in funding what many view as price gouging projects by the likes of Aronin, and Aronin’s potential role in the future of Lykos via Paragon, might call the pair’s philosophy into question, given they suggest a track record of placing profits above patient benefit.
Questions Over Lykos’ Value, Commercial Prospects
But it’s not clear that Lykos could successfully price gouge MDMA for any lengthy period of time, which might assuage any concerns around Gracias’ motivations.
Aside from its hiccups on the path to approval, which culminated in the FDA’s rejection of its MDMA for PTSD NDA, Lykos also faces various commercial challenges that discount its future revenue potential and thus present valuation.
Chief among those is the company’s very questionable IP position, which we first discussed in our coverage of its patent filings last June.
Since then, a USPTO examiner has doubled down on criticisms presented in an earlier written opinion, citing an Awakn Life Sciences PCT—both alone and in combination with other prior art—as reason to reject all of Lykos’s patent claims as obvious.
What’s more, the MDMA drug developer’s attempt to rebuke that sweeping rejection with its own counterarguments fell flat, with USPTO finding all arguments unpersuasive and maintaining its rejection of all claims in the application, according to a final rejection mailed by the office in December 2024. (We will soon be publishing a much deeper dive into this saga.)
The Path Forward
Whether Lykos will go with Gracias’ deal or Helena’s bridge loan will be decided at a future meeting of the company’s board, but such negotiations will be complicated by the fact that both Helana and MAPS have blocking rights.
Regardless of who funds the company, the path to approval is by no means easy, with Lykos currently undergoing an external review of its existing Phase 3 data. That is expected to be followed by the launch of a fresh Phase 3 study, designed to address the FDA’s concerns.
But Doblin, the eternal optimist, thinks there’s a non-zero chance that the FDA might not require a new Phase 3 study at all after the external review is wrapped up. Speaking on a podcast recently, Doblin put the likelihood of that at 40%.
Gracias and co. might also be hoping that the incoming Trump administration, which is presumably replete with allies, what with Musk in a central position, could also help Lykos’ path to approval, though the particulars of this are not exactly clear.
Pα: This latest twist in the Lykos saga threatens a major overhaul of the company’s strategy and direction, with Gracias appearing to want to take the company back toward its nonprofit drug development roots and a more Doblinite philosophy.
But whether the board will come to accept Gracias’ proposal, and just how closely it will align with Doblin’s ethos, is yet to be seen. A major question surrounding the likelihood of the deal being accepted, for example, is whether it offers present investors an acceptable exit opportunity.
We will be following this story closely over the coming weeks. ∎
