Hi everyone, I’m Greg Weaver, CFO of atai Life Sciences. And I’m pleased to welcome you to our First Quarter 2022 Earnings Management Interview. I’m joined today by my colleagues, CEO, Florian Brand; and CSO, Srini Rao. We thought we do things a bit differently this time by hosting a conversation with two of our analysts, Charles Duncan from Cantor, and Ritu Baral from Cowen and we’re super excited to have them here with us today. Over the next 30 minutes Ritu and Charles will be asking us a series of questions on our Q1 activities and progress made in our pipeline developments. As a reminder, our discussion today may include forward-looking statements about atai’s future results and performance, which are 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. Before moving to the interview, I’d like to briefly comment on our first quarter cash and operating expenses as reported in today’s Q1 earnings release. Our first quarter use of cash, total operating expenses, R&D and G&A expenses were generally in line with expectations. The total use of cash of $27 million for the quarter and we ended the Q1 with $335 million in cash. And we reiterate our guidance with runway into 2024. I’d like to emphasize the strength of that cash position with liquidity on hand to reach multiple key clinical milestones over the next two years and with our continued discipline management of our cash resources. With that, I’ll hand the call over to Charles to kick off the conversation. Charles?

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Yes. And also thanks from my side, first of all for joining this new approach or this new format that we are hosting Charles and Ritu. And yes, to answer your question Charles, yes, we are facing turbulent times. And if we look at the XBI biotech index, we basically where we were five years ago or below where we were five years ago in May 2017, despite all the value that has been generated over those five years across therapeutic areas, across companies, and many of those companies are now trading below cash or at cash. So broadly, I think it’s a fair statement in my perspective to say that we – it’s a great opportunity to investors to invest in biotech very broadly. As a result of basically the current prices that, that we are seeing and this undervalued sector. If you look at neuropsychiatry, the therapeutic area that we are active in and at atai in specifically, or in particular, I believe we – there’s an even greater opportunity for investors. And let me explain to you why. Number one and as you know, we’ve just discussed that in the past before the pandemic that we are already approximately 1 billion people globally suffering from mental health disorders and COVID as we’ve – we are learning through recent studies that are coming out have – are making this number very likely to grow even further sadly. At the same time, we’ve seen very, very little innovation over the last decades in the neuropsych space. So the unmet need has unfortunately not been met with a lot of progress in terms of drugs being approved. If you look at the neuropsychiatry space only 17 drugs have been approved since 2015 compared to around about 108 drugs in oncology. And we basically started atai to with a very unique model to de-risking on an asset level, as well as a very diverse pipeline with multiple shots and goal. And as Greg mentioned, we have a cash position that with $335 million, that puts us in a very fortunate and strong position to execute on this pipeline in a very rigorous way. And you mentioned PD opportunities, yes, those valuations are – you’re very much aware of that development and our business model has always been to also acquire new very complimentary assets through our pipeline and we will remain active screening the market. And yes, having a very close look, a continued close look at potential new opportunities in the BDI space.

Very good, bad news, good news. So Ritu, any thoughts?

Florian, thanks for including me as well in this new format. On that, on your 81% of cash position and given a unique strategy that atai has, which is I guess digital technologies as complements to drug therapy. How much flexibility does that initiative have? As far as how you calculate out that runway? Could you deemphasize it and have the runway go a little further? But you would offset that given that digital therapeutics as – digital therapeutics, digital services in neuropsych as sort of an emerging field, emerging aspect of psychiatric care.

Yes. How we think about effectively treating mental health disorders and achieving sustained and clinical meaningful behavioral change in mental health patients is on the one side having novel differentiated pharmacological agents becoming approved that open basically a therapeutic window through the neuroplastic and behavioral plasticity strong effects on that side that – and then combining them to your point with digital therapeutics that allow for a very sustained or sustaining that effect in a very, very durable way. So it’s an integral part how we think about and treating those disorders and we are committed to fully funding also the digital unit as it’s essential especially with the psychedelic assisted therapies to bring them through the clinical trials. In terms of cash management and Greg mentioned that we are very much disciplined. We are continuously reviewing our portfolio especially once data come comes out and we are also updating of course our own assumptions in terms of likelihood of success and most effective character – and that’s basically part of the model that continue spacing basis make new capital allocation decisions, and also shift capital along the way. As we stand here today, again those $335 millions are sufficient capital to hit all the R&D catalysts that we have communicated, including the digital therapeutics that we have in development.

Great.

I guess one thing I’ll –sorry, Ritu. I was just going to say, one thing I can add is that as both of you know the risk associated with drugs are higher or relatively high, particularly early on. So I would say, the risk associated with the digital therapeutics is actually much less, right? So we’re using [indiscernible] technologies in a sense, right? These are therapeutic approaches – psychotherapeutic approaches that have been widely used, they’re being adapted to this new format, but we know that they’re beneficial. So I would say, overall, the risk associated with those is significantly less than the risk associated with the drugs themselves. But of course we have multiple shots on goals with respect to the drugs.

Good point. Let’s dive into some of the questions on the pipeline now. And maybe start with Perception PCN-101. That trial was ongoing, but as you look at the lessons and landscape, what do you think with the biggest mistakes in the commercial profile and launch prep for SPRAVATO. That product has vastly underperformed and missed expectations with really modest commercial uptake? What are the lessons learned for you guys as you think about the PCN-101 opportunity?

Sure. Yes, let me give a high level perspective and then hand it over Srini. So I think it’s important to emphasize that we are differentiated from esketamine, our target product profile, and also commercial profile that you mentioned is differentiated from SPRAVATO, esketamine with Rketamine that we are developing for at home use. That have – having said this, a lot of our therapies are of course thought to be administered in the clinic, for instance, our DMT program. And so observing what J&J with SPRAVATO has done entails a lot of things that we can build upon and learn from. But I think it’s also very important to emphasize that in the meanwhile we have over a thousand clinics, licensed clinics in the U.S. that actually can administer SPRAVATO. I think that’s great news for patients and it will build as a basis for our rollout or it can serve as a great starting point for our rollout as we are actually designing the duration of effect to neatly slot into the therapeutic and into the window that or into the paradigm that J&J has established with SPRAVATO. So for us, it’s actually in this case, a good thing, not to be the first mover, but learn from the first mover and use basically what has been built out by the first mover to our advantage. So these are some high level perspectives. And Srini, maybe you want to comment further on this one?

Yes. No, I think you’ve hit all the main points as regards commercial. So that’s always – as Florian mentioned, this duration of efficacy question has always been front and center. So we can in fact utilize this infrastructure. Why build when you can sort of use, right. So that’s essentially what we’re trying to do with several of our programs. So certainly Salvinorin A and the DMT program that Florian mentioned.

And ultimately, I think, one of the key takeaways is to be very proactive and early on engage with stakeholders, payers, physicians, patient groups, efficacy groups to early on educate and raise awareness and educate the whole landscape. As we are – as this is – this was a paradigm shift in psychiatry with SPRAVATO, I think that’s really important to emphasize. And also here, of course, we cannot only build on the infrastructure, the clinic infrastructure that is being built out, but also on the capacity building that was done in the past.

Got it. And then as you think about the PCN-101 clinical program into Phase 2 into Phase 3, especially your ideal Phase 3 trial design populations, endpoints, as you think about potentially multiple Phase 3s. How would you compare and contrast that to what was done in the SPRAVATO Phase 3 program?

Well, as you know, right now, we’re still in the midst of Phase 2, right. So obviously the Phase 3 program is going to be informed by the results of that trial, particularly with regards to redosing things of that nature. In general, there were – I mean, there’s a lot of unique trial designs that Johnson – yes, Janssen had in their Phase 3 program with the shorter trials and the longer ones as well with transforms one through three. We are developing the compound for at home use, so we can certainly model based on other compounds that have been recently approved for at home use, right. So you think about – whether it’s – the Sage program, et cetera, I mean, for the most part, some of the key trials or longer duration, looking at primary endpoints, like the matters today to atai 8 to 12 weeks. That would probably be the easiest for an at home therapy, but again, there’s going to be some decisions that will have to made once we get the results.

Great. With that, I’ll turn it back to Charles.

Super. Thanks, Ritu. So I just have to jump in here and really sticking with the theme of innovation for treatment resistant depression patients and this program that you’ve been talking about. But also, frankly, thinking about an investment that you’ve made. So despite waiting for the COMPASS disclosure on its plans forward with COMP360 following its end of Phase 2 meeting with agency. I wanted to ask you what your key takeaways were from the data that you saw from their pretty rigorously conducted Phase 2b. As well as really ask you what would you like to see in terms of next steps when they talk about their Phase 3 in terms of being able to gauge probability of success for that program?

Yes. Well, we certainly talked about the results in previous calls, of course, the most important thing was the rapidity of onset. That was really one of the most robust demonstrations of rapidity of onset. Durability of effect was really quite key for me. The whole premise with this compound with this class of compounds is a single administration of drug give long-term efficacy. And of course, in the absence essentially of side effects, because you’re not taking the drug in the intervening period. So that was always the appeal, those results were replicated. In other words, the academic study results showing this long duration of efficacy was replicated in this trial quite robustly. And of course there was good safety. That was also demonstrated. So all these things were really exciting, that’s what of course motivated us to increase our stake in COMPASS. Now, in terms of what we’d like to see of course is clearance and move forward with their Phase 3 program. I mean, the details of that are TBD. I imagine just like we are going to learn a lot from the Perception study, they have clearly learned a lot from this Phase 2b and I’m sure they’ll take those forward. A couple things that we’ve learned for our programs obviously relate to repeat dosing. So the DMT program we always anticipated, we do repeat dosing. That’s something that we’re incorporating in. I imagine they’re doing the same, but of course I’m not sure. I don’t have any insight what their – the details of their plan.

Yeah, got it. It’s very helpful Srini, anything else Florian or Greg on that before I move on?

No, I think it also ties into our approach, how we think about using also digital therapeutics going forward and biomarkers to be more flexible when it comes to assessing when it’s the right time, to re-dose someone. So that is not that static, but it really given our very heterogeneous patient population that we developing our compounds for really takes this into account. And that is kind of one of the key areas that we’ll basically working on our biomarker driven precision approaches and hope to integrate this in a very holistic way than our treatment paradigm.

Got it really super, very interesting differentiate paradigm for depression patients. Let me move on little quickly to the most recent progress that you’ve had with Recognify and its candidate RL-007, which is being evaluated for cognitive impairment associated with schizophrenia. So as you know there are a range of cognitive functions that are affected in patients with schizophrenia, there’s about a decrease of one to two standard deviations compared to the general population in terms of cognitive function. And as you know, also screening one core pharmacological treatment class for schizophrenia are the anti-psychedelics and unfortunately they add to the targeted dysfunction for this fortunate patient population. So atai is obviously investing in Recognify with RL-007 for CIAS, and it’s a cholinergic, glutamatergic and GABA-B receptor modulator. So my question is really why do you think that that can work? Why is modulating the activity of these receptors going to be useful for translating to clinical benefit in these patients?

Yeah, that’s a good question. So cognition is complicated, right? So there’s certainly many neurotransmitter systems that are involved, but people have investigated different neurotransmitter systems. So they’ve basically taken all of these, the glutamate, cholinergic, et cetera and play with molecules and of course, some of the ones that are in development now do focus on a single receptor system. But again, it’s complicated, there’s a balance that’s associated with optimum cognitive effect. That is what we think is a unique feature of this drug, right? So this is a drug that’s sort of modulating in a more gentle fashion. All of these systems, different patients may have deficits in different systems. We don’t know. Again, it’s heterogeneous, perhaps not as heterogeneous as a mood disorder, but there’s a lot of heterogeneity certainly vis-a-vis of the cognitive impairments. This could be a means of having a more broad effect. I mean, that’s generally how we think about this compound.

Okay, good. And perhaps more durable and effective, so looking forward to that, I guess. In terms of being a steward of capital, you know, for Florian, really, if you think about it, what are the key data that from your previous work and looking at RL-007, that gives you confidence to move forward into a Phase 2 clinical proof of concept study with this candidate. In particular, what is it about the quantitative EEG data that could tell you that there is potential activity that may translate into therapeutic benefit with this compound?

Yep. No, I’m very, very happy to address that. And I think what’s really convinced us to move that forward was the consistent pro-cognitive effect, clinical meaningful pro-cognitive effect that were observed first in healthy volunteers and then also in our Phase 2 biomarker study that we reported out several months ago. And that in combination with supportive qEEG data was then basically for us really reassuring to drive this forward based on the most relevant doses 20 milligram and 40 milligram to move this into a full clinical proof of concept study. And yeah, would invite Srini to further comment maybe more on the qEEG technical details that we saw and why also he’s very excited about the compound.

Yeah. I mean, I think in terms of big picture, what we saw was consistency, right? So we anticipated inverted U-shaped curve for the reason that I just outlined right, cognition is complex. So we anticipated seeing that based on previous studies, we saw it. We saw an inverted U-shaped curve with respect to quantitative EEG. We saw the same curve with respect to cognition and I think that’s the important. There was this nice pattern that was internally consistent, and that gives us a lot of faith in these data to move forward.

Yeah. I’m okay with inverted U-shape dose response. It is complex. Yeah. But that’s the opportunity for two.

That’s exactly right.

Thanks. So let’s move to your GABAergic program, GRX-917 your GABAergic mechanism candidate for anxiety disorders. Can you guys talk to the differential mechanism of this drug around GABA, around other mechanisms to benzos or the numerous positive allosteric modulators that we’re seeing in the clinic these days, especially for MDD and bringing that to anxiety disorders?

Yeah, absolutely. So this is a pretty unique drug. The benzodiazepines are direct agonists of GABA, right? So they activate that channel. They basically suppress the activity of neurons and that’s how they’re giving you an anxiolysis. It’s a pretty blunt instrument, those GABA receptors all over your brain. The positive allosteric modulators definitely improve on selectivity, right? So anything because they do require the endogenous ligand, the presence of that to really have an action at all. This compound etifoxine and by extensions GRX-917 are very different. So they’re actually increasing the production of the endogenous ligand, which are neurosteroids. One of which is allopregnanolone. Of course, that was approved in 2019 for postpartum depression. So this gives you a better safety profile at least that’s what our thought is. And certainly that’s reflected in the etifoxine data. So you can – if you pump it allopregnanolone, you basically get an anesthetic, right. I mean, that’s the downside allopregnanolone. And frankly, even some of the PAMs are quite sedating, but that’s not really been seen with etifoxine. So it’s very unique in that manner because the way I like to think about it is you’re not cutting the brakes, right. The control systems are still there. The body’s only going to crank out so much allopregnanolone, no matter how you – how hard you crank on the TSPO protein.

Based on the preclinical data and the competitive preclinical data, what you’ve seen so far? Do you – how do your expectations for things like sedation and somnolence? The big issues that you mentioned, how do they stack up versus benzos versus the GABA PAMs?

Yes. So with, I mean, again, there’s lots of use history here, right? So this is a drug that came out. Etifoxine is obviously a compound that came out a long time ago in 1979. So lots of experience, clinical experience with this, sedation is not really particularly prominent and it’s certainly nothing like any other compound like a benzo or any of the adverse event tables that we’ve seen with, for example, [indiscernible] Yes, so those – we’ve seen those AE tables have been made public and there’s significant sedation there. We don’t really see that with etifoxine. We ran our own trial of etifoxine because there was no data set or we didn’t know what the PK was. We wanted to look at quantitative EEG parameters. We didn’t find sedation there either. So our anticipation with the Phase 1 trial with 917 is that we probably won’t see much in the way of sedation. There’s certainly nothing different pharmacologically mechanistically between those two compounds.

Got it. I’ll turn it to Charles for the next program.

Yes. So just I don’t know if we have a lot of time left, but I wanted to ask you a question because I’m intrigued with this really trying to think about the importance of the experience that patients are having. So coming back to treatment resistant depression, I guess I’m wondering as you think about your VLS-01 program, Viridia investment, the buccal transmucosal film, which contains DMT – for TRD, I guess I’m wondering how is Atai thinking about short versus long-acting psychedelics and that experience and the importance of that for really driving good therapeutic benefit and really considering it relative to kind of the emerging treatment landscape with Compass and some other companies out there.

Yes. I think they’re very interesting scientific considerations as well as commercial considerations to factor in here and we address some of them in this already. On the commercial side, again, we are designing our programs in DMT Viridia is basically part of those to fit into this [indiscernible] pragmatism and we believe this is a good way and a good way to accelerate commercialization with those therapies. So that’s on the commercial side why we optimize the duration of effect for roundabout like a 45-minute an hour-ish window in terms of psychedelic duration. And on the scientific side, I think, or data that has been coming out here is of course Compass we’ve discussed that program rapid onset of effect, durable effect very, very promising compared to what we’ve seen before in TRD or depression more broadly. And then of course there’s, the data of [indiscernible] DMT that shows very, very rapid onset as well and a very, very short duration of effect. And in this case, we have open label data, so it has to be taken a little bit with a grain of salt. But I think the interesting discussion is do you like what’s the best treatment window we believe. And that’s where we’re starting that the more gentle PK is probably a good start to point. So we don’t think like the – a 10-hour LSD or four to six hour that we see with Compass is ultimately needed, but also 15-minute might not give the ideal therapeutic effect. And so this is the high level assessment. I don’t know Srini if you want to – do you want to add to that?

No, I think you did a great job with that. So we always anticipate some amount of redosing, right? So and part of that was in consideration of the fact that we’re looking for shorter psychedelic effect. So I don’t know to Florian’s point, how much psychedelic affect you need for x amount of efficacy or the durability of that response. That’s a really important question. That’s what we hope to resolve as we move forward with our Phase 2a program with both VLS-01 as well as the Revixia asset.

Yes. And based on all the data, I think for the second generation compound that’s the [indiscernible] most reasonable starting point. And of course with our third generation compounds, we’re also looking at then what’s the driver here? Is it – is there also, can you basically decouple the psychedelic experience from the neuroplastic effect and compounds with strong neuroplastic effect and no psychedelic effect? Is there a benefit to basically drive these forward as well in a complementary fashion? So that’s then the third generation compound that we are looking at with EntheogeniX for instance, one of our drug discovery engines.

Thanks for the color.

Thanks, Charles. My apologies. I might just jump in from a housekeeping perspective and 30 minutes has gone by very, very quickly as we knew it would. I think I might wrap it up here and just first thank you Ritu, thank you Charles, for great questions. It’s been a great conversation and we really enjoyed the 30 minutes together. Might leave investors with just a couple quick thoughts here as takeaways from my perspective, these are very turbulent times. These financial markets are very, very rough as we sit here in the middle of Q2 of 2022. I think those that were here and can reflect back on these dips from 10, 15, 20 years ago, and have seen this before. This company’s – we’re in a good position. We’ve got the resources to weather this storm. We’ve got a strong treasury. We’re going to fund these programs with discipline to move them forward to reach the milestones that you’ve heard about today. We’re very focused in our sweet spot here in clinical development, focused on the patients in need and very optimistic about the future, both near term, and despite the markets both near term and long term. And with that, again, thank you for listening and we’ll see you again next quarter and have a great day. Thanks very much.