The drugmaker that hopes to legalize MDMA is cutting 75% of its staff after the FDA rejected the drug

• Lykos Therapeutics is cutting 75% of staff after FDA rejected its MDMA drug for mental health.
• The FDA's decision marks the first time the agency considered a psychedelic for medical use.

US drugmaker Lykos Therapeutics is cutting most of its staff after the Food and Drug Administration rejected its MDMA drug for mental health treatments.

Lykos will lay off 75% of its staff, or about 100 employees, and the remaining team will focus on ongoing development and working with the FDA, the company said in a statement on Thursday. Its founder, Rick Doblin, will also exit the privately-held company's board.

"As we prepare to address the FDA decision, we need to focus on delivering the FDA the robust clinical data necessary to support the approval of this potential new treatment," Amy Emerson, the CEO of Lykos, said in the statement.

The company said it is planning to resubmit its research to the FDA because it believes that MDMA, which is also commonly known as ecstasy or molly, can help people with post-traumatic stress disorder, including veterans and survivors of sexual violence.

This is the first time the agency has considered a psychedelic for medical use.

If the FDA ruled in its favor, Lykos had the potential to become a multibillion-dollar company.

Johnson & Johnson sells an esketamine nasal spray called Spravato for depression. It's one of the few new treatments for mental illness approved in recent years, and it had global sales of about $500 million in the first half of the year, per the company's latest financials.

MDMA is a Schedule I drug under the Controlled Substances Act, along with heroin and cannabis. The classification is given to drugs with a high potential for abuse and no currently accepted medical use in treatment in the United States, according to the Drug Enforcement Administration.

Possible effects of using MDMA include depression, anxiety, and paranoia, while overdose effects include heart and liver failure and death, per the DEA.