Hi, everyone. Welcome and thanks for joining us for the Atai Q2 earnings call. I'm Greg Weaver, CFO of Atai Life Sciences. We're very pleased to have you join us. I'm joined by our CSO, Srini Rao, our CEO, Florian Brand, and Stephen Bardin, our Deputy CFO, who joined our team last month and was most recently from BridgeBio. Today is my last earnings call as Atai's CFO. I'm very pleased and confident to be handing the CFO reins over to Stephen. He'll be taking on the role as of tomorrow, and I'll remain on as a advisor to the company through the end of the year. Stephen, you want to jump in and do an introduction?
Yeah, of course. Thank you so much, Greg. I'll keep this brief. I am incredibly honored to be selected as the next CFO of atai. My first month at atai has been incredible, and I'm thrilled to be joining this fantastic team, and I can't wait to make a huge impact in the field of mental health. Back to you, Greg.
Thanks, Stephen. It's great to have you on board. Today, the interview format will be led by two of our long-term analysts, Andrew Tsai from Jefferies and Judah Frommer from Credit Suisse. Over the next 30 minutes, Andrew and Judah will be asking us a series of questions on our Q2 activities, pipeline, and a business update. So forgive me for this bit, but as a reminder, our discussion today may include forward-looking statements about Atai's future results and performance, subject to risks and uncertainties that may cause actual results to differ. Atai does not undertake any obligation to update such statements, which speak only as of today. With that out of the way, and just before kicking off the interview, I'll briefly comment on the key financial takeaways for the quarter as we reported in today's earnings release.
First, our Q2 operating use of cash was $23 million, and it was in line with expectations. So no surprise there. Second, in addition, let me draw your attention to the other press release from Atai this morning, where we importantly announced that we've added a Hercules Capital debt facility of up to $175 million. Third, and really the critical point, is that with the combination of $312 million in total cash and the addition to the debt facility, it's approaching half a billion dollars. We have a very strong runway, which in combination with a pipeline prioritization and some thoughtful cost tightening, we now forecast runway extending into 2025. That's a full year beyond the earlier guidance and an important takeaway here. As we continue to exercise a disciplined use of cash in this challenging macro environment.
With that, let's move into the interview section here. I'll hand the mic over to Judah Frommer from Credit Suisse to introduce himself and kick us off. Judah?
Great. Thanks, Atai team, for having me and inviting me to participate. Greg, it's been great working with you and best of luck in your future endeavors. Stephen, welcome to the team as well. We're excited to work with you. Maybe just kicking off with a financial question. This has not been an ideal time, maybe outside of the last few days for mid-cap biotechs to be raising capital. In light of your recent news, you have reasonable runway and a broad pipeline already in clinic. How should we think about priorities for capital allocation over the next 18 or so months? How does your current runway factor into this?
Judah, we are very, very confident in the measures that we've taken to extend the runway, as Greg mentioned, by one year into 2025, because we believe that the combination of a non-dilutive financing, the debt facility of Hercules Capital of up to $175 million, combined with a very intentional, strategic, and thoughtful way of reprioritizing our pipeline, puts us into the position to now really execute and focus in a focused way on all the very meaningful POC data inflections that sit in the seven clinical programs and soon eight clinical programs that we are focused on going forward. We believe that this will be appreciated by investors and not need any additional funding. We don't anticipate any additional funding to actually deliver on those POC readouts. I think that's an important takeaway for investors.
Okay. That's really helpful. Should we read that as an inclination to further focus on later stage programs, potentially at the expense of earlier ones or business development activities? Should we continue to think of Atai as in the process of further building a broader neuropsych platform?
Yeah. We'd like to emphasize that we have over the last years built a very, very strong pipeline and platform already with many clinical programs, but also many enabling technologies that together with the clinical programs, in our perspective, have been proven very, very effective and efficient when it comes to in a very focused way develop those compounds. That puts us in a very strong position to have a great basis to execute on the current trials. To your point, we will focus more on the clinical programs and going forward. We can go into those a little bit further in this call for sure. On the BD side, we continue, and you know BD or M&A is in our DNA.
We have built Atai through aggressive M&A and BD. Especially in those depressed valuations that we are seeing, we continue to be very, very active and are on the lookout for assets, companies, technologies that can accelerate our existing pipeline or can be very complementary or complementing the existing pipeline and by basically adding programs with a near-term value inflection point. That is what we are active in with a focus in the near term future, definitely on clinical programs.
I was just going to reiterate something that Florian said. The programs that we selected and prioritized are all going to be in the clinic by the end of this year, and all of these will generate some meaningful clinical results, proof-of-concept type data within two years. That's really the way to think about it. That's been, you know, kind of the model here to in terms of prioritization over the next little bit.
Perfect.
Speaking of, like, you guys focusing a little bit more on the clinical stage portion, maybe my question is a more holistic question is, you know, as we think about, you know, for instance, industry peers, Compass, they are technically pioneering the space in a sense. You know, as you pursue later-stage studies, should we expect you to kind of follow Compass's footsteps? You know, in phase II, for example, they did dose ranging. Phase III, who knows if they do a placebo as a comparator, but could you kind of follow their footsteps in a sense?
Yeah, I would say that we're actually already following in their footsteps in many ways, right? Their first trial was, as you said, basically single dose ranging. That is exactly what we're doing with our Perception study, right? Single administration and dose ranging. You know, well, I can say something very definitively for Perception, we know that we're going to need multiple doses, right? It's a ketamine, a ketaminoid, and we know that multiple doses are required. The idea with that first study was to really get a good handle on duration of efficacy, of course, and magnitude of efficacy. That's the data that we're going to take forward to help design that next trial. Again, I imagine that Compass is doing something very similar.
Understood. Before I turn it over to Judah, you know, they are technically leveraging some digital tools in phase III, plus psychological support. You know, if it's apparent that FDA is on board with this, you know, could you incorporate these dynamics within your studies, even as early as phase II, for instance?
Well, you know, we've been working on digital technologies for a while now, right? We actually announced Introspect, which is one of the focus areas within the company, two years ago, over two years ago. Our digital technologies have matured to the point where they're in clinical testing now, really kind of more user acceptability type trials, but in ketamine clinics, so that we're getting all the data we need to really help, you know, and the content, right? We're testing content as well. We're actually going to be deploying these very soon in our phase I trials with both uncertain and EmpathBio . Phase I, of course, these are healthy volunteers, but they still require prep work, and they still require some support post-dosing. The digital technologies will be used there.
Of course, we, you know, we'll roll them out in subsequent phase IIs.
Yeah. Before, Judah, you jump in, I would like to remind investors quickly, I guess, actually, why we think digital therapeutics are important. If you remember, we are really about achieving clinically meaningful behavioral change in mental health patients and are intending to really achieve durable behavioral change. We pursue this through our three-pillar strategy. One is the focus on differentiated and more rapid acting pharmacological interventions that we believe have all strong neuroplastic effects that induce this window of behavioral plasticity that we then want to leverage exactly through those digital therapeutics, such as our Introspect app, to really help foster new habits through cognitive behavioral therapy elements and multiple other content elements that we believe can effectively be delivered through digital means.
This is the ongoing psychotherapeutic support elements, the pillar two of our strategy. Then along the way, use and harvest or harness that data that we gonna be collecting by digital phenotyping, for example, but also looking at biological biomarkers potentially here to move us to a more precision psychiatry approach of thinking about treating patients, given the very heterogeneous nature in this patient population. Very excited to see the first technologies applied actually in the first clinical study now with our DMT program.
Technically speaking, we could get some early data over the coming months with the digital tools, basically.
That's correct.
That's correct.
Awesome. Okay.
Yeah.
Right. Maybe just sticking with Compass for a second here. It sounds like we'll get details of their phase III trial design around October, I think, is the latest. What would you say you're looking for in terms of trial design that could carry a read across beyond maybe the digital components for pipeline programs at Atai?
Well, I think we have hit on one, of course, digital and seeing how, what their perspective is on that and, how they want that characterized, validated, tested. I think that'll be really interesting. The other piece is the one that I alluded to earlier, right? And that's the repeated dosing. How does the agency look upon that? What are the implications potentially for tox testing, right? What are they looking for there? What are they looking for in terms of long-term data? Are they looking for, you know, repeat dosing within that? You know, do they want to see meeting the ICH guidelines, so 100 subjects approximately at the end of the year? These are the sort of questions that obviously will impact us over time. There are other things that would be interesting.
I can't imagine they'll be very controversial, stuff like, you know, placebo versus dose control. I mean, there's lots of precedents for both. I can't imagine that'd be much of an issue. You know, the other ones around repeat dosing, et cetera, would be really interesting and obviously very impactful for our studies.
Okay, that's helpful. Just hitting on a couple changes that have gone on at Compass, given your minority stake there. Any quick thoughts on the anorexia nervosa indication? Have you guys interacted in a significant way with their new CEO?
Yeah, in fact, we have. We actually had a call, I believe, one and half weeks ago, with Kabir. We believe it's a great choice. Applaud the Compass board for that decision. I think he's definitely the right person and has also the right skill set to now move that company through phase three and hopefully to approval. Then has also the requisite experience of how to effectively commercialize drugs. I believe that is a very great setup for success for Compass going forward with him spearheading it and George also staying on board as chairman. I believe we have a very, very strong solution here for Compass. We also applaud them for going after anorexia nervosa.
This is a really significant unmet need in psychiatry, so there's no approved drug. We see a great potential for COMP360 here, given the early signals that we saw based on their open label trial, and believe that this is very worthwhile to pursue from our perspective.
Just one small follow-up. I was just curious if you guys think maybe the FDA deems their phase IIb as a pivotal study, potentially. I guess it's hard to say, but just curious if you have any thoughts.
I mean, clearly there's precedent for using phase II data as supportive data, right? If one of the phase three trials is sort of marginal, there's been certainly precedent where the agency will accept a phase II that was much more robust. Will they truly accept it as a pivotal? I don't know. I mean, you know, clearly during the earnings call, Compass did emphasize two, or at least more than one, certainly phase III study. It's not obvious whether or not they also were including a long-term follow-up study. We'll get more clarity over the course of the next little bit. I'm personally a little skeptical of that, but, you know, that doesn't.
Yeah. We'll see.
We'll have the data soon, so let's just wait.
Sure.
All right. Maybe switching gears to R-PCN-101, if we could. Certainly, the program we get the most inbounds on lately. With a couple readouts expected end of this year, can you remind us of design timelines, any bars for success for the phase IIA and how its clinical expansion into the U.S. has gone along with the drug-drug interaction study and the subQ bridging study? A lot to unpack there.
That is a lot to unpack. Yes, you know, just to level set with everybody, as I mentioned, It's a, you know, the phase II, the double-blind placebo-controlled study, again, following the footsteps of Compass. Single administration, it's IV. In this case, following in the footsteps of Janssen. We are looking at basically two doses of R-ketamine. One is sub-dissociative; the other one is sort of threshold dissociative. That's 30 mg and 60 mg respectively. And of course, third arm is placebo. 31 subjects in each one of those arms. Primary outcome measure is 20 MADRS at 24 hours. It's also looked at over the course of the next seven days and 14 days. That's the outline of the trial. Recruitment is going really well. Very excited about that.
This trial will, you know, we're completely on track for a readout by the end of this year. In terms of U.S. expansion, you know, we did, of course, announce an IND earlier this year. You can actually look on ClinicalTrials.gov. It's going really well. So far, there's 10 sites in the United States that are currently recruiting. There's three others that are in the process of coming up online. Again, going really well. Now, you also mentioned what you know in terms of what our threshold as well as success look like. It's important to go back to what our premise here is, right? That premise is at-home use. Our thoughts on that are pretty straightforward.
I mean, obviously, it has to have good efficacy, and we know what the MADRS MCID, you know, the minimum clinically important difference is up to two. We hope to see more than that versus placebo at 24 hours. The other element there is tolerability, specifically regarding dissociation. You know, as you guys are probably very well aware, esketamine is quite dissociative at the doses required for efficacy. We hope to be much lower in that regard, if not, you know, within the normal realm. That's really gonna be, that'll be an important factor, of course, in the decision-making process at the FDA to support at-home use. That's kind of the big picture there in terms of what we are looking for.
Okay. The other piece of at-home use is subQ. Yeah.
Yeah. subQ, you know, that's still in planning. You know, we're basically moving that forward towards initiation at this point. Yeah, I mean, basically right now it's IV. We have a subQ formulation that we'll be testing, looking for relative bioavailability of these two different routes of administration, understanding what the dose levels, what you need for comparability there.
Got it.
Of course, that would be what we take forward in subsequent trials. That's much more suitable, as you can imagine, for repeat dosing.
Sure.
You mentioned the DDI study as well. The DDI study is really focused on CYP3A4 inhibitors and CYP2C19 and looking at the impact of those compounds on the PK of R-ketamine. That trial is the clinical phase, all the clinical dosing and everything is completed at this point. It's under analysis now and again, expecting top-line or certainly before the end of this year.
Great.
I'm curious, you know, two points technically is the fundamental, you know, approvable, I guess, delta in a sense. Maybe the market or the street prefers something more similar to esketamine or what esketamine traditionally shows. Is that fair to think about as we think about the top-line data in terms of the delta of the drug versus placebo?
Yeah, I mean, I think it's a very valid point. You know, just kind of thinking through what you know, the approvability package for esketamine one was. I mean, esketamine was. It was basically they had three trials, TRANSFORM-1, TRANSFORM-2, and TRANSFORM-3, and then they had this long-term bit. Really, the only truly positive trial was the TRANSFORM-2, right? TRANSFORM-2 had a 4-point delta on the MADRS. And that's, you know, I think that was at 28 days. That's, you know, that's a good bar. But of course, that was a lot of going into the clinic, right? You know, the minimum bar for me, it's not great, but the minimum bar would certainly be 2+, but a rapid onset, right? That differentiates you completely from an SSRI.
SSRIs are weeks, if not a month or months to get efficacy. If you can get that same level of efficacy in 24 hours, that's a win, right?
Right.
With esketamine, you know, you're going there twice a week for four weeks. You're going there once a week for the subsequent four weeks. That's a lot of travel. It's a lot of time in commute, right? If we can do this all at home, I think we obviate a lot of that. I mean, you know, that I think that remains a very strong win for this compound.
How reliable, quote-unquote "reliable" or translatable do you think this data set would be, assuming it was successful? 'Cause I'm presuming it's done in an inpatient setting, whereas
Yes
... you know, eventually you wanna go at home. Do you have any color around that, around how you think about this?
Yeah, I mean, Well, there's two elements to that. The first is the PK piece, right? There's a, you know, changing of route of administration, so there will be an impact on PK. We're obviously generating data with our current administration protocol, which is 40 minutes continuous infusion. Of course, we need to understand what the PK of the subcutaneous formulation is. We've got some parameters that we want to match there, right? The AUC, the Cmax are all things that we want to look at. Of course, that's where that'll be driven by the phase I. You know, that will have some impact on efficacy. Of course, you're right, in-house may have a different effect. It should impact placebo and drug sort of similarly.
I mean, you know, generally going to a clinic is going to drive up your response. It's going to drive up your placebo response.
Right.
We may actually have a better signal-to-noise ratio if we're at home. Purely speculation. We'll have to see how this plays out.
Maybe one more question, I noticed in the press release, you know, the bridging study could complete within the next few quarters. As we think about the next steps afterwards, that technically is the gating step before you move to a subsequent study after this phase II.
Well, there's also some additional talks, some of the things that are also in process.
Right.
You know, there are a few pieces that have to come together. That is one of them, certainly. Yes, of course, we need that. We need those results, obviously to support the next trial.
Great. Thanks.
Of course.
Okay. If I could move us over to RL-007 and CIAS. You know, there have literally been dozens of compounds in CIAS that have failed, some with similar pathways even to RL-007. In your view, how much of that can be attributed to chemistry or target selection of those compounds versus trial design?
Well, let's focus on the chemistry bit for the moment. You know, in general, over the last several decades, there's been this concept of, you know, being really reductionist on the pharmacology, right? Trying to find that piece of pharmacology that's driving the efficacy and make very clean drugs for it. Certainly that's true with SSRIs is a good example, but also with atypical antipsychotics to some degree. But the reality is that dirty drugs tend to work a little bit better in most of these indications. The nice thing or the interesting thing about RL-007 is its polypharmacology. It's absolutely got a GABA-mediated activity, a GABA-B-mediated activity, but it also has glutamatergic and cholinergic effects. That is a point of differentiation compared to some of the other things that are currently in development, which are much more focused.
I think that's an interesting angle. Of course, it's consistent with our model, right? You know, we have existing clinical data, albeit in different groups. We have one in diabetic peripheral neuropathic pain. That is a population that probably in general has some degree of subclinical cognitive impairment, right? They are vasculopaths. That's why they have diabetic peripheral neuropathic pain. They presumably have some central vasculature compromise as well. We saw a signal there. We saw it in normal healthy volunteers. We saw some signal in our, you know, proof of mechanism type trial. We saw an inverted U-shaped curve, which is consistent with the hypothesis vis-à-vis, you know, cognitive effects. We saw a change on quantitative EEG that was sort of mirroring that as well. Again, consistent with our hypothesis.
You know, we got a lot of things going in our favor with this compound. Not disputing the fact that it's a challenging indication. Not trying to walk away from that at all. In terms of the clinical trial design, you know, it's an interesting question. There's been a lot of development for an extended period of time on endpoints for this, right? It's this MCCB. You know, this is the broad recognition of the unmet medical need with this indication, right? FDA has been all over this for a very long time. Other industry partners have been involved with this entire thing. Academics have been involved. You know, we have a nice consensus battery on what the endpoints should look like.
There has been evolution on that a little bit in terms of being more focused on some of the endpoints. That's something that that's been or subsets that's been ongoing. I think overall though, it's probably a lot to do with the pharmacology to some degree around the endpoints, and particularly the ability to now focus on subsets of those endpoints.
That makes a lot of sense. Then just where do we stand on potentially improving the dosing profile? What's the latest in terms of next steps on the decision about whether to pursue a phase IIb and go for an end of phase II meeting or do an additional phase IIa? What could preferred endpoint selection be? You touched on it there.
Okay, well, let me take that last bit first.
Mm-hmm.
We are indeed prepping for a phase IIb at this point. The endpoint is going to be the MCCB. You may recall in the last study, we saw Symbol Coding, which was, you know, very positive in that trial. Symbol Coding has very good overall correlation with the MCCB. You know, we take comfort in that in terms of you know, some degree of proof of concept. In fact, Symbol Coding is part of the MCCB.
Mm-hmm.
You know, that's why we've decided to move forward with that. The trial will be robust, and it will certainly support an end of phase II meeting, assuming of course positive results. Now, in terms of posology, this is one where this is an area that we'd love to improve on. We've got some angles there. Right now, we're dosing TID. There is a good argument to be made that you can make it BID. We could of course use formulation technology to make it QD, and of course that would be great, particularly keeping in mind this patient population. That's the only thing that we're looking at. We could bridge to that at a later point.
That's helpful. Thanks.
With that, we're unfortunately already out of time. I would really like to thank you, Andrew and Judah, for dialing in today. I found this very, very insightful and interactive. Thank you so much for
Of course.
Asking these inquisitive questions today. I would also like to express my gratitude to Greg for your service as CFO of atai and to drive forward our mission with so much passion. I'm really thankful for your service. You have been an instrumental part of our leadership team, and I'm also very grateful that you stay another couple of months until the end of the year to ensure a smooth transition when you're handing over your CFO job to Stephen. Stephen, really thrilled to have you here. You bring with you a lot of expertise and experience with that model that we are pursuing, so this decentralized way of developing drugs, and couldn't be more happy to have you on board.
A warm welcome for you and looking very much forward to work with you going forward. Ultimately, I would like to reemphasize, I guess, the key takeaways from my perspective to our investors. We have taken very, very strong and thoughtful measures to extend our runway by one year into 2025. We believe this has been the right strategic decision by adding a non-dilutive debt financing of up to $175 million, and a very intentional and thoughtful reprioritization of our pipeline. Because in our perspective, this puts us into a position to really focus on the key value inflection points in our programs, and seven out of eight are in the clinic right now. We assume to have eight in the clinic by end of this year.
There's a lot of proof of concept data sitting in there that we intend to report out over the next two years. With that, I thank everyone for dialing in, and wish everyone a very great day. Thank you.