- Atai Life Sciences has raised hundreds of millions as a private psychedelics company.
- Its IPO filing lays out its financials, patent strategy, and market plans.
- Insider pored over the psychedelic giant’s 446-page filing to find the key takeaways.
- See more stories on Insider’s business page.
Atai Life Sciences, the psychedelics giant backed by big name investors like Peter Thiel, will start trading on Friday.
The company was founded in 2018 and has gained momentum over the past few years, raising over $350 million from investors. In documents filed with the US Securities and Exchange Commission in late April, Atai said it plans to trade on the Nasdaq under the symbol “ATAI.”
Atai’s founders are Christian Angermayer, Florian Brand, Srinivas Rao, and Lars Christian Wilde.
The company started as a vehicle to fund psychedelics companies like Compass Pathways, which is focused on developing psilocybin-based medications for treatment-resistant depression.
Compass went public on the Nasdaq in September and now has a valuation of $1.56 billion. Atai owns 19.7% of Compass.
Atai has developed into a biotech platform company, Brand told Insider in an interview last year, meaning it invests in and works closely with companies looking to develop medicines for mental-health conditions using psychedelics like psilocybin, arketamine, and ibogaine.
Atai now has a portfolio of 10 therapeutic programs, around half of which are focused on developing psychedelics medications to treat mental illnesses.
Atai would become the second psychedelics company to IPO on a major US exchange after Compass. Other psychedelics companies — like Bright Minds, MindMed, Field Trip, and MagicMed — have recently listed or applied to list through acquisitions or uplisting from Canadian exchanges.
The banks leading the offering include Credit Suisse, Citigroup, Cowen, Berenberg, Cantor, RBC Capital Markets, and Canaccord Genuity.
Insider read through the company’s latest 446-page IPO filing, dated June 11, to learn more about its structure and strategy. Here are the seven key takeaways.
The company is targeting a $2.3 billion valuation
Atai will sell 15 million shares for $15 apiece, the company said. Underwriters will also have an option to buy another 2.25 million shares.
The company would raise about $225 million and reach a valuation of $2.3 billion.
Atai has had significant losses since it was founded and expects to continue to lose money
As a company focused on developing medications and then asking the US Food and Drug Administration to approve them, Atai doesn’t expect to make any money until its medications win clearance and are available for sale.
In 2019, the company posted a loss of $14.1 million. In 2020, its losses were about $170 million.
As of December 2020, Atai had $97.2 million cash on hand. In March, the company raised around $158 million through a Series D round, the filing says.
The company says it has not generated any revenue and does “not expect to generate any revenue from the sale of our product candidates for the foreseeable future.”
If its medications are approved, Atai says it could generate revenue from product sales, collaborations, and license agreements but notes that there is a risk that the company’s experimental products may not be approved.
One of the experimental treatments an Atai subsidiary is working on has progressed to a mid-stage trial in people. The rest are in early stages of research.
The company has 10 therapeutic programs in its pipeline, five of which are focused on psychedelic compounds
Over the past few years, Atai has acquired and incubated several portfolio companies, which are focused on either creating psychedelic compounds focused on treating mental illnesses or developing technology to aid treatment and research.
Atai has full ownership of three, a majority stake in five, and a minority stake in two of these companies. The company has options to acquire further shares in a number of its current portfolio companies.
Perception Neuroscience is developing a ketamine-based drug as a rapid-acting antidepressant that may have the potential to work as an alternative to Johnson & Johnson’s ketamine-based treatment called Spravato. Other portfolio companies are working with compounds based on ibogaine, DMT, and MDMA.
Not included among these 10 is Compass Pathways, in which Atai has a 19.7% stake as of May 4, 2021, according to the filing. Atai notes it has limited operational control or influence over Compass.
Patents are an integral part of Atai’s strategy as the company plans for what happens after FDA approval
Several of Atai’s portfolio companies have applied for patents.
Atai notes in its S-1 that its success “depends in large part on our ability to obtain and maintain protection of intellectual property, particularly patents, in the United States and other countries.”
The company added that it also relies on trade secrets to protect parts of its business and says that because trade secrets are difficult to protect, it uses confidentiality agreements with its collaborators and scientific advisors as well as non-competition agreements with employees and contractors to protect its business.
Perception Neuroscience, Recognify, DemeRx IB, GABA Therapeutics, and Neuronasal all either own issued patents or have patents pending in the US and other countries. The patents range from pharmaceutical composition of compounds to methods of use and treatment. Atai says that IP is handled directly by its individual platform companies and the company is not actively involved in the management of IP.
Under a section entitled “risks associated with our business,” Atai notes that third parties that claim infringement, misappropriation, or violation of their intellectual property rights may “prevent or delay development and commercialization efforts.”
The company’s largest shareholders will have stakes worth hundreds of millions after the IPO
Two investment funds — Apeiron Investment Group and Galaxy Group Investments, — have at least a 5% stake in Atai as of June 11. Kendall Capital Markets, which was listed as having a 5.2% stake in the company in Atai’s original IPO filing, has been removed from the list.
Apeiron Investment Group, Angermayer’s family office, owns 29 million shares, or a 21.1% stake ahead of the IPO. The stake is worth about $435 million.
Galaxy Group has a 6.7% stake, worth $138 million.
Florian Brand, Atai’s CEO, owns 6.1 million shares of the company, or a 4.3% stake, worth $92 million.
Thiel, the billionaire VC known for cofounding PayPal, invested in Atai’s Series A, Series C, and Series D rounds, according to PitchBook. He invested via his Thiel Capital fund and as an individual. His stake isn’t listed in the filing.
Atai will use the IPO proceeds to fund the development of psychedelic-based medicines
Atai plans to use the proceeds from the IPO, for the most part, to fund the development of the 10 therapeutic programs in its pipeline.
Around $40 million to $50 million of the funds will be earmarked for Perception Neuroscience’s ketamine-based drug development. Recognify, which is developing treatments for cognitive impairment associated with schizophrenia, will get between $30 million and $40 million, while some funds will also be dedicated to Atai’s other therapies and developing technologies.
The company notes in its filing that it plans to use between $75 million and $85 million to fund future acquisitions and development opportunities.
There are plenty of risks to investing in Atai — including the rocky path to market and the high failure rate of companies developing medications
Biotech companies that don’t yet have any approved medications on market carry high risk for investors, because clinical trials are expensive and often fail.
Atai is no exception, and the company lays out a plethora of additional risk factors in its S-1 filing, including the time and funding necessary to undergo clinical trials, the need to meet requirements set forth by regulatory bodies, the risk of dealing with substances regulated by the US Drug Enforcement Administration, and the cost of commercializing any products that are given approval.
In addition, the company says that its overall value may rest on the shoulders of a single — or select few — of its companies and programs because of the uncertain nature of clinical developments.
But if any of Atai’s companies are successful, approved, and commercialized? The company says it believes that several of its medications have the potential to treat common mental illnesses and compete in markets where annual sales top $1 billion.
This article was originally published on April 22. It was updated on June 11 with information from Atai’s most recent filing.