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atai Life Sciences Makes $50m Investment in Beckley Psytech

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NASDAQ-listed psychedelic drug developer atai Life Sciences has announced a strategic investment in—and collaboration with—its British privately-held peer, Beckley Psytech.

The investment, dated January 3rd in SEC filings, sees atai—which is without an in-house psychedelic candidate that’s proceeded to Phase 2 studies—gain exposure to Beckley’s two primary clinical programs: its intranasal 5-MeO-DMT candidate (BPL-003) under development for treatment-resistant depression (TRD) and alcohol use disorder (AUD), and intravenous psilocin (ELE-101) under development for major depressive disorder (MDD).

The former is being investigated in a Phase IIb study with a target enrollment of 225 moderate-to-severe TRD patients, among other studies, with a readout expected in H2 2024. The latter is undergoing a Phase I/IIa study, with topline results expected in H1 2024.

Those milestones were highlighted by atai CEO Florian Brand on a conference call discussing the deal:

Beckley and atai will hope that these candidates demonstrate efficacy alongside greater scalability, owing to their short(er) duration when compared to the likes of MDMA- or psilocybin-assisted therapies, for example.

atai founder and chairman, Christian Angermayer, said that these short-duration psychedelics “have the potential to offer similar clinical benefit to longer-acting psychedelics, in a more efficient and scalable way, which could lead to increased patient access.” By gaining exposure to these two candidates, he added, “we are building the largest portfolio of psychedelic compounds with prior clinical evidence”.

Beckley Psytech CEO, Cosmo Feilding Mellen, said that the two companies “share a vision for the future of mental health treatment”, adding that “we are excited to join forces on the journey to develop effective, accessible, rapid-acting psychedelic medicines for people in need.”

According to atai, this investment “reinforces atai’s position as the biopharmaceutical company with the largest and most diverse portfolio of clinical-stage psychedelic candidates”.

It might also be seen in the context of atai’s in-house pipeline, of which the only Phase 2 candidates (GRX-917 and RL-007) are not psychedelics. It does have exposure to Compass Pathways’ Phase 3 psilocybin candidate, COMP360, via an equity investment.

As such, today’s announcement could be seen as a signal that atai continues to explore a model of drug development that’s even more decentralised than its hub-and-spoke ‘platform’ model, that is instead limited to equity investments.

Indeed, in the subscription agreement, atai is described as being in the business of “venture capital investing”.

Both companies described the deal as a “strategic investment and collaboration”. Feilding Mellen suggested that one such area of collaboration might be in the development of “digital tools to optimize patient support”, as well as “planning for future commercialization”.

On the digital tools front, atai’s Viridia Life Sciences is developing DMT “in conjunction with digital therapeutics to deliver efficient, scalable treatments to patients on their own terms.” The digital product is being developed by one of atai’s several ‘enabling technologies’, Introspect.

Taking into consideration both in-house and external drug development candidates, atai’s pipeline looks decidedly more mature following this investment. On the psychedelics side, its two most mature programs are primarily geared towards TRD, though secondary indications and less mature candidates offer exposure to indications such as AUD, opioid use disorder (OUD), and PTSD.

atai’s Chief Scientific Officer, Srinivas Rao, was keen to differentiate between the company’s antidepressant candidates on the conference call discussing the deal. He discussed the following slide:

The investment takes the form of a $40m direct investment into the company, with an additional $10m in secondary share purchases from existing shareholders (as detailed in Schedule 1, Part 2 of atai’s Form 8-K).

That brings the aggregate investment to $50m, which entitles atai to a 35.47% stake in the company and three of its nine board seats. Through the agreement, atai also gains a time-limited right of first refusal on any future sale of the company, its assets or commercial rights; in addition to an indefinite right of first negotiation regarding BPL-003 and ELE-01.

For the full terms of the deal, including warrant coverage, refer to the Form 8-K.

‘Especially at times like we have at the moment, when biotech valuations are—in my opinion—distorted and unusually low’, Christian Angermayer said on a conference call discussing the investment, presumably hinting at the implied valuation, ‘founders need well-capitalised partners’. He later described valuations as “super low”, and suggested that Beckley Psytech was not open to a full sale of the company.

As of September 30, 2023, atai had cash, cash equivalents and short-term investments totalling $209m, according to its filings.

Pα Take: With this investment atai gains exposure to two rapid-acting candidates, both of which promise readouts in 2024 that could represent meaningful inflection points. When weighed against atai’s somewhat lethargic in-house psychedelic programs—none of which have commenced Phase 2 trials—it’s unsurprising that this deal was deemed “transformative” by one analyst on the conference call. While atai’s psychedelic portfolio is now significantly focused on depression (TRD in particular), the addition of two shorter-duration candidates offers a hedge against the commercialisation challenges that the likes of Compass, MAPS PBC, and its own platform companies like DemeRx might face with their relatively long-duration interventions. As alluded to by Angermayer, it looks like atai is taking advantage of depressed valuations, too… readers might remember that Beckley raised an $80m Series B (upsized from $50m) in the summer of 2021.

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