Atai Life Sciences: State of the Company and Projections for the Future 

Atai Life Sciences Q2 financial results were released recently, alongside an update on the company’s pipeline progression. So, we figured it would be a good time to assess the state and future of the company.

Atai has long been considered one of the top companies in the psychedelic space. They got attention early on from retail investors because of a sizeable investment from venture capitalist and co-founder of Paypal Peter Thiel.

Let’s take a look at the company’s cash position and drug development program to see where they are at now.

Atai Life Sciences has a diverse drug development portfolio. Including its stake in COMPASS Pathway’s COMP360, the company has seven drugs that have all passed the pre-clinical stage of development and moved on to phase 1, or beyond. Below is an overview of the company’s progress on its drug development program. 

RL-007

This pro-cognitive neuromodulator is being tested to treat cognitive impairment associated with schizophrenia (CIAS). There are currently no medications available for this indication.

A phase 2b study has been initiated, and results are expected in the second half of 2024. This drug is the furthest along in clinical trials of any in Atai’s pipeline— apart from COMP360. 

GRX-917 (Deuterated Etifoxine)

A version of this drug is already approved in several other countries for the treatment of Generalized Anxiety Disorder. So, it has a strong potential. In phase 1 trials, the drug was shown to have much less sedative effects compared to commonly prescribed benzodiazepines. 

The program is set to progress into Phase 2 efficacy studies. However, there has been no news of the progression of this program since January 2023.

VLS-01 (DMT)

Viridia Life Sciences, a wholly owned subsidiary of Atai, was launched in 2020 to develop a DMT drug that is currently being tested for Treatment-Resistant Depression.

The phase 1 trial began in October 2022, and little has been reported since. The results were anticipated in the first half of 2023 but have not been released yet. 

DMX-1002 (Ibogaine)

In 2022, Atai invested $22 million into DemeRX’s ibogaine program. A phase 1 trial was carried out in 2022. Results were released on August 10, with Atai’s Q2 results. The safety profile was good, and they are planning on moving onto phase 2 efficacy studies. 

EMP-01 (MDMA Derivative)

Through Atai’s wholly-owned subsidiary EmpathBio, they are developing an MDMA analog for treating PTSD. There has been little information on the development of this program. 

It is difficult to see the potential of this drug, considering that MDMA is already close to FDA approval for the treatment of PTSD— via MAPS. 

PCN-101 (R-Ketamine)

After positive results from an initial phase 2 trial, the company decided to pivot to a subcutaneous administration, as opposed to IV. The future trials will also assess the possibility of lowering the dose to minimize dissociative effects. 

R-Ketamine is already less dissociative than traditional Ketamine. Atai wants to lower the dose enough that this could be used as an at-home treatment.

COMP360

As mentioned before, Atai holds about 20% ownership of COMPASS Pathways. COMPASS is currently pushing its synthetic psilocybin drug through clinical trials for three different indications. 

The drug is undergoing phase 3 trials for treatment-resistant depression and is expected to be commercialized in the next four years. Recent study results also show promise for treating anorexia nervosa.

Atai has one of the strongest cash positions of any biotechnology company in the psychedelic industry. As for the strength of the company’s drug development program, it is difficult to form a strong opinion of it until more data is available. 

Atai’s 20% ownership in COMPASS Pathways bolsters its pipeline quite a bit. This stake in one of the psychedelic industry’s top emerging companies strategically positions Atai to profit from what will likely be the second psychedelic drug to gain FDA approval and hit the market. 

COMPASS has said that they are expecting to gain FDA approval for COMP360 in 2027. This will be the second psychedelic drug to make it to market, and the next one will likely be a few years after that. The rest of Atai’s pipeline is well behind COMP360, though they are making progress. 

After a recent press release for the company’s drug PCN-101, some investors were concerned. The company wrote: “atai continues to work with Perception Neuroscience to explore strategic partnership options.” This could be taken to mean that the company does not have the cash to continue the clinical development of this drug, and there is likely some truth to that. However, it is not necessarily a bad thing. 

This is not the first time that Atai has expressed that sentiment in a press release. Even though Atai has a strong cash position, clinical trials are expensive, and the company has a lot of them underway. There is no possible way that a new company could financially sustain the clinical development of so many drugs until they start producing revenue.

Atai Life Sciences has utilized strategic partnerships to help diversify its pipeline without having to completely shoulder the bill for doing so. This actually mitigates risk for the company and investors.

It is impossible to accurately predict the outcome of a novel drug that has never been tested— that is what clinical trials are designed to assess. However, since clinical trials are so expensive, investors get antsy over unexpected outcomes. In other words, when the scientists find that their hypothesis— which is only meant to be an educated guess— is wrong, share prices drop. 

It is important not to get too caught up on short-term setbacks, but rather, look at what the whole picture says about the future of the company. 

Though Atai’s pipeline is not going to offer as quick of returns as some investors were hoping, they are still in a strong position to capitalize on the market. 

As of June 30, 2023, the company had $227.5 million in cash. Very few companies in the sector have more than $100 million in cash right now. And, many are running out of cash entirely.

Atai had a $45.6 million cash burn for the six months period. Since all of the drugs in its pipeline are in phase 1 or 2 trials, the burn rate is likely to go up in the coming years. Atai expects this cash runway to last until the beginning of 2026. In addition to the current cash on hand, the company has access to a large line of credit to help continue the progression of its clinical trials. 

Atai maintains a strong position in the industry. Though clinical trials may not be progressing as fast as some had hoped, that is the name of the biotech game. All signs point to a patient and calculated approach to bringing a drug to market, and the diversity of Atai’s pipeline mitigates risk. 

The next two years will give a better picture of the efficacy of the drugs in Atai Life Science’s pipeline and their true potential. For now, it is safe to say that the company is on the right track.