Hi, everyone and welcome to the Atai Life Sciences Third Quarter Earnings Call. I am Stephen Bardin, CFO of Atai and I am very pleased to have you with us. I am joined by our CEO and Co-Founder, Florian Brand as well as our CSO and Co-Founder, Srini Rao. Today, we will be speaking with two of our long-term analysts; Andrew Tsai from Jefferies and Ritu Baral from Cowen. Over the next 30 minutes, Andrew and Ritu will be asking us about recent progress across the pipeline and upcoming catalysts. And now for the standard reminder that 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. Before kicking off the interview, I’ll comment on the key financial takeaways included in today’s earnings release. First, our Q3 operating use of cash was $28 million and was in line with expectations, so no surprises there. Next, I want to remind everyone of our previously announced debt facility with Hercules, which provides access to up to $175 million. Back in mid-August, when we closed the facility, we drew down an initial $15 million. We ended Q3 with $304 million in cash. This cash balance plus the Hercules facility gives us a strong capital position. We reiterate our cash runway extending into 2025. Let’s start our interview section. I’ll hand the mic over to Ritu from Cowen to get us started. Ritu?

Thanks, Stephen. Florian, there has been a lot of news flow around our company as of late. Before we get to it, could you please provide a brief high level summary of your most recent progress and upcoming milestones for the ones who might not be too familiar with it, with Atai?

Absolutely, Ritu. Great to have you back, both of you, Andrew and Ritu, on this earnings call interview format. Quickly as a recap, our ultimate goal at Atai is to achieve clinically meaningful and sustained behavioral change in mental health patients. As of today, we have 8 drug development programs in the clinics, and we also have 4 enabling technologies that we deem to be very complementary with those 8 programs. And all of those 8 programs target several major indications, neuropsychiatric indications. In addition, all of these programs have either already achieved proof of concept, in the case of COMP360, or have a path to efficacy data over the next 2 years. And we expect that these upcoming efficacy datasets are really going to be value inflection points for Atai. Looking at last quarter, very briefly, in addition to multiple clinical trial initiations, we have announced two very encouraging positive initial Phase 1 results with GRX-917, our deuterated etifoxine compound and with KUR-101, our deuterated mitragynine compounds. Both of them showed very, very intriguing PK/PD results and encourage us to drive the development of those programs further. And then last but not least, of course, we have PCN-101. We announced that we completed our enrollment in this study. So that’s the Phase 2a proof-of-concept study in TRD with R-ketamine, and we are very much looking forward to the data coming out of this trial around the end of this year.

So Florian, speaking of PCN-101, can you share more details about the planned target clinical profile of that drug?

Sure. So our plan with PCN-101, R-ketamine, is really to be differentiated from other depression treatments on the following dimensions or elements, we are targeting unsupervised at-home administration; rapid onset of effect, within 24 hours; and we are looking or anticipating an intermittent dosing regimen, so looking at approximately two times dosing per week. And of course, we’re very much focused on developing this compound in treatment-resistant depression, so not MDD but TRD.

And if the profile forces you to choose, the PK/PD forces you to choose, would you aim for a therapy that has stronger efficacy or one that is far more tolerable than current treatment options? How do you see the biggest unmet need and the biggest opportunity?

Yes, the key for this program is really demonstrating data that allows at-home use. And that’s why we also like to demonstrate dissociation or sedation – and sedation profile of PCN-101 that allows that to happen, so basically to administer this compound at home without supervision. While in terms of efficacy, we’re looking, in terms of our internal product goal, to be comparable to other approved depression treatments, such as esketamine is kind of the prominent other enantiomer within ketamine.

Got it. And if you do reach that, the previously disclosed target safety risk ratio of 2, I think sedation and dissociation. Exactly what does that risk ratio of 2 mean practically and what’s the math behind that analysis?

Yes. So let me jump in on that point. Basically, the risk ratio is – the way we are calculating risk ratio is very similar to what was used with SPRAVATO in their summary basis of approval. Essentially, you can – there are normal ranges for both MOAA/S and CADSS, and you can just basically break the patients into those that were abnormal and normal in each arm, right? So now you have a percentage. And of course, that gives you – you can then take those percentages and compare them across arms. And that’s essentially how you generate a risk ratio, right? So if it’s 20% abnormal or sedated, for example, and drug arm, it’s 10 and a placebo arm obviously, that’s a risk ratio of 2.

So rather than on an individual basis, it’s more of a population analysis on a pioneering basis.

That’s exactly right. And the agency looked at normal versus abnormal and they also looked at more severe incidents. So severe sedation, for example, was something that they also look at. So this is the general tack that we’ll be taking. And of course, the idea, as Florian mentioned, is that we are really targeting at-home use. And the reason that we define risk ratios of 2 is it’s a criteria to say that’s comparable in many ways to placebo. That’s essentially the argument. So we know that for sedation, there are plenty of drugs out there that are quite sedating, and in fact, sedating many-fold higher than placebo. There is less data around dissociation per se, but there is certainly data around hallucinations that can be quite prominent. Eszopiclone is a fantastic example, that’s Lunesta. So, [indiscernible], it’s pretty widely used, 0% hallucinations for placebo, 3% hallucinations on the drug. So I mean you get a sense of how prominent – from a risk ratio perspective, you see how prominent some of these side effects can be. So we are saying, okay, fine, let’s get a number, let’s get a ratio that’s comparable to placebo markedly better, markedly better than SPRAVATO and put our best foot forward in that regard.

And so what’s the practical profile of a drug like that, that will best address that unmet need, that at-home need? How far can you push that? And what’s a good comp? Maybe other than Lunesta, are there other at-home profiles that would represent a good comp for what’s accepted?

Yes, that’s an interesting question. So the FDA in the approval of SPRAVATO did something that I think is a little unusual. So when you talk about dissociation normally – or just talk about any adverse event, sedation, et cetera, you normally are thinking about adverse events, right? So these are the spontaneous adverse event, right? In the case of SPRAVATO, there was a focus on two instruments that were specifically designed to measure those particular outcomes, sedation and dissociation. So sedation, they use MOAA/S and dissociation, they use CADSS. And that was our point – that was the basis of everything. There is a certain logic to that. Adverse event rates can change as the doctors get trained on something. So dissociation is kind of a tough one to pick up on. I mean, what does that mean? What does the patient report to a doctor when – I’m dissociated, right? So you have to map certain terms that the patient is using onto a term or metrics, I prefer term, and that can get a little bit complicated, using CADSS, using MOAA/S that’s the entire issue. So the reason I bring that up is we don’t have an exact analog in that regard. It turns out the Nidra has either the CADSS or the MOAA/S in the label in the United States to the best of our knowledge. And we did a fair amount of exploration in that regard. So we went back to, again, hallucination rates and things of that nature. Certainly, BELVIQ is an interesting one, BELVIQ or lorcaserin is an interesting analog. It’s more around multiples. So we know that at multiples that drug is hallucinating – creates quite pronounced hallucinations. That’s an interesting kind of product because that’s kind of what we’re trying to get to here, right? Dissociation, but we’re trying to get to a therapeutic index or trying to get a multiple of the therapeutic dose and results in dissociations are very analogous in many ways.

Thanks. Andrew?

Sure. Thanks, Ritu. So like I think you guys – we touched on safety enough, but I do want to stay on PCN-101 because it could be a big data readout for you guys. So on that framework maybe let’s shift to efficacy then. How did you decide 5 points versus placebo at hour 24 to be the bar? What went into your calculus? Why not 4, why not 3, why 5?

Well, as Florian mentioned, what we’re looking for ultimately in our label, based on the pivotal studies, is on the order of 4 points MADRS change at the final endpoint, which could be 4 weeks, 6 weeks, et cetera. We have – clearly have not got that – we haven’t guided on that we don’t have a good sense of that just yet. So that’s what we’re looking for ultimately. So we got a backtrack from there, in essence, right? So what should it look like considering this is a Phase 2 trial, this is a single dose study, it’s a different formulation, it’s our first experiment in this regard, that’s how we kind of backtrack and that’s how we got to 5. Also, you can triangulate on this number. So if you look at other trials of ketamine and esketamine that have similar signs, on the order of 30 patients per arm, your numbers are in the 5 kind of range, 5 to 7, somewhere in that range. So again, these are sort of the two different data points that we use to triangulate on the number.

I see. I see. And so naturally, Wall Street tends to compare across trials. And maybe when you report the data, they might be tempted to compare what SPRAVATO shows at hour 24. So I guess why would that be fair or if not, why is it not fair to compare directly, I guess?

It is potentially depending on the study, right? So the larger studies the [indiscernible] 2018, those types of studies are not unreasonable in terms of the size. I think where you’re headed with that is focusing on that very first Phase 2a trial that J&J conducted with the IV form of esketamine. There are some things – there are some features of that trial that may have exaggerated the magnitude of efficacy there. First of all, it’s a small study, right? It’s only 10 per group. In fact, the 0.2 mpk group was only 9 subjects. So that’s certainly one issue. It’s – they had many – fewer sites, and we do well over 22 sites. They had 9, so that – and we don’t know how many of those are actually actively recruiting, of course. So that may be another factor. The most important factor, however, is that esketamine was quite functionally unwinding in that trial, right? So if you look at the CADSS, the CADSS numbers for placebo were very small. The CADSS number for either 0.2 mpk or 0.4 mpk were really quite high. So by definition, there was a very pronounced functional unwinding that was occurring in that trial that could very well sway the results. Obviously, that is not something that we’re anticipating with the doses that we chose in our Phase 2a trial.

Makes sense. And so like bigger picture, what would cause you to reassess moving forward? What is the scenario in which you say maybe we shouldn’t go into a Phase 2b or something like that? What would you see on efficacy or safety?

On efficacy, I think you mentioned it before. So this is really a single dose study, right, of PCN-101. While the TPP actually foresees multiple doses per week as we discussed earlier. So it’s important to remember that this very first study is really all about testing whether – as Srini mentioned, whether we have a greater therapeutic index compared to other approved treatment options. And regarding potential thresholds, I won’t go into any specifics, but what I can tell you is that, of course, efficacy of a single dose below what is considered to be clinically meaningful would certainly lead to us reassessing the current clinical development plan in treatment-resistant depression. But let me emphasize also that based on all the existing preclinical and clinical data that we have from third parties internally studying R-ketamine that we remain very confident to achieve the objective that we guided on, disclosed and discussed in our R&D Day in terms of trial objectives for this specific Phase 2a.

Okay. Alright. Thanks. And Ritu, I’ll give – I’ll hand it back to you.

Thanks, Andrew. So how did you guys select the two doses for this trial? And would you consider bringing two doses with two different profiles, again, going back to that safety versus efficacy question forward into Phase 3?

Yes. So the dose selection was based on our Phase 1 full stop. So we conducted that trial 2 years ago now, and we’ve looked at a range of doses up to 150 milligrams of 30, 60, 90 and between. And we picked doses that were consistent with our hypothesis around therapeutic index. And what I mean by that is we picked one dose that was sub dissociative essentially or – and then the other one – and that’s 30 milligrams, of course. And the other one that is essentially threshold dissociative, 60 milligrams. So this allows us to properly test our hypothesis that we will have a therapeutic index, pretty much by definition, based on the results from our Phase 1 healthy volunteer study. Now to your second question about whether we go forward with additional doses, I mean, yes, potentially, of course, I mean it depends on the results of the study as well as subsequent trials. But there is a rich history of bringing forward multiple doses. Doctors love that in general to have that flexibility. And exactly right, I mean there may be sort of different balance of efficacy and tolerability at the two different doses that may be very important, again, from a physician’s perspective vis-à-vis a particular patient that’s sitting in front of them.

So as you think about your subcu bridging study, what are you trying to replicate from a PK/PD perspective from the IV? Is it the peak? Is it the AUC, total exposure? I mean, I guess, what feature of that PD do you think is most important to confer anti depressive effect through this mechanism?

It’s a fascinating question in a sense that there is a lot of discussion on this. I mean, what is driving the efficacy of ketamine and esketamine. Is it the AUC? Is it the Cmax? There seems to be some coalescence around the concept that it’s a Cmax-driven effect with esketamine. I don’t know how strong that data really is, but that seems to be where people have come to. However, if you think about [indiscernible], which is another glutamatergic compound that has NMDA antagonism, it seems to be more AUC. And so far as the half-life of dextromethorphan, the content – when buprenorphine is around is really quite long. So it’s just kind of sitting around there. You’re building up a level over the course of the first 5 days or so – 4, 5 days. So in that case, it’s probably AUC. It’s probably not being driven by Cmax. So we have these two data points that are a bit discordant. In the end, the most important thing that we really need to get a handle on is the true bioavailability. One anticipates the bioavailability from a subcu perspective should be 100%, right? I mean there is not likely to be any kind of – or close to 100%. There is not likely to be any local metabolism, for example. But nonetheless, that’s the most important thing that we really want to assess first. And then, of course, we will look more closely at Cmax. Overall duration of effect is another one, the total time. So all these factors – I mean, all these things will be looked into. Then you basically do the lineup against the effective doses. And you may do – depending on what those numbers look like, you may do some bracketing right? So you may pick a dose, for example, let’s just say 30 is effective. You may pick a dose that actually replicates the AUC and then another one that might be a little different on AUC but actually replicates the Cmax. So this is pretty much what J&J did in their development. So they went, as we’ve discussed, from that IV trial to an intranasal, but they did do dose ranging around the intranasal once again.

Got it. Andrew?

Great. Well, at the end of the day, I think it’s just placebo-adjusted efficacy of 5 is ideally what you want to see. And then on safety, something comparable to placebo on sedation, dissociation, hallucination, something significantly less than what is provided here. Is that kind of a fair takeaway?

Perfect summary, yes.

Alright. Very good. And so maybe we can shift to Compass actually. They recently announced their Phase 3 plans. And in my notes, it’s actually pretty different. One is a placebo controlled. Another one is a repeat dose, I believe. So, there are obviously different – two different studies after meeting with the FDA. So in your view, is the FDA flexible with them doing either option or is it your view that the FDA wants sponsors as they move to Phase 3 to do both types of studies?

I mean it’s an interesting question. We don’t – the short answer is we don’t know for sure, right? We have the information that Compass provided to us. What I can say more broadly, however, is that the FDA is comfortable with different sorts of controls depending on the drug and depending on the indication. So there is the ICH E10 guidance. It says dose control is okay and placebo is kind of a dose control, dose zero, right? So they are fundamentally okay with that. MAPS is obviously doing placebo-controlled only. Why Compass settled on one that’s dose-controlled and the other one is placebo-controlled? Really, not 100% certain. On the other hand, it is interesting. It’s helpful as we move forward to our own programs. So obviously, something that we will take under advisement as we design those next trials.

And maybe one more on Compass is they are even using integration as well as adding digital support now in Phase 3. Just how important to you, in your view, is the use of these tools in terms of maximizing the outcome, I guess? Is there a way to quantify or is this – is it your view that these tools serve to augment the psychedelic or – go ahead and talk about what you think, I guess.

Yes. I mean, certainly, this is an area of significant focus for us, and you guys have been with us for quite some time. This is something that we’ve talked about for a long time. The original concept behind IntroSpect really came together in late 2019 and IntroSpect itself was formed in early 2020, as I recall. So this is something that’s been really near and dear to our hearts. The reason for that is that digital therapeutics offer a potential means of allowing for scalability but also reproducibility, if you will, or standardization of therapy. So there is a strong suggestion that – well, certainly, prep work is important, right? And that’s something that Compass has also indicated. I mean it is a very unique experience. Psychedelic experience is very unique. And if you’re uninitiated, that can be very disconcerting. Telling the patient what to expect, setting intention, setting expectations, all these things are really critical prior to the psychedelic effect. There is this concept, of course, of behavioral plasticity that occurs after the administration of these compounds. It’s interesting to think about really harnessing that behavioral plasticity to effect behavioral changes. And that is also a central motif in our strategic vision, right? This concept of behavioral change, it’s one thing to just change a symptom. And then SSRI, for example, can do that. But it’s another thing to actually be able to change behavior to allow for a more durable response, right? So whether that behavior is improved socialization or improved exercise or something, if you have this period where there maybe more flexibility, there maybe more malleability to change some habits, that’s fantastic and one should really kind of take advantage of that. That’s what we want to do with our digital therapeutics. So yes, it’s really important to us. It was fascinating that there was non-factorial design. The caveat that I’ll – and we highlighted that in our R&D Day. The caveat, of course, is how is Compass viewing these digital – or these therapies, right? Do they – we have been very specific in indicating that we would love to have these – our products develop as combination therapies, right? So combination therapy being a term of art, it’s a drug and a device, put together, inseparable in their label. That’s obviously our vision, and that’s something that we are working towards, not – again, Compass has not provided guidance on how they are approaching it.

Thanks. Makes sense. Ritu, I’ll turn it back to you on other questions about the pipeline.

Thanks, Andrew. So I want to move to 007. As you look to the next trial, the Phase 2a trial for RL007 in CIAS, how did you choose that primary endpoint, the MCCB scale efficacy endpoint for this trial? And would it be an approvable pivotal endpoint? And then that secondary endpoint, the VRFCAT, what does that assess?

So the MCCB is, in fact – has been, in fact, supported in the past by the FDA as an approval endpoint for CIAS. And actually, they have been involved or there was – it was – or it has been developed with the FDA’s input – while – and while the MCCB broadly assesses cognition, the VRFCAT assesses the impact of changes in cognition and function by basically simulating activities of daily living. So that basically went into also the decision, of course, around endpoints for this specific trial.

And how did you choose the 20-milligram and the 40-milligram doses for this study?

So the doses were essentially selected based on our biomarker study in patients where we read out the data or where we published the data earlier this year. And the 20-milligram, 40-milligram doses both showed clinically meaningful pro-cognitive effects, both of them. And that basically then was also the basis to go forward with those doses in the larger Phase 2b study that we anticipate to initiate still this year.

Great. Andrew?

Thanks. And maybe one more on that topic, I believe Biogen actually sailed with their CIAS asset this year. Does that kind of shake your confidence at all? Do you know if they had any biomarker changes in their initial datasets? Presumably, you are following that asset, I guess.

We are following that asset. We’re certainly following aspects of the path that they placed. This is obviously a challenging indication. There is no doubt about that. That, of course, is part of the appeal of this indication. Obviously, there is a huge unmet medical need here. The cost of these patients to society and, of course, the personal cost is very, very high. So even small changes in cognition and as reflected in the VRFCAT, for example, and of course, ultimately in natural actual activities of daily living, that’s going to be pretty key. So in terms of biomarker data, I will – I don’t recall seeing anything published on that personally. So it will be interesting to get a better sense of that or even get a more granular read on the results that they had.

Already hitting the top of the 30 minutes, unfortunately, so thank you so much, Andrew and Ritu, for being with us today, really grateful that you joined again.

Thank you.

And we covered a lot of programs in this session and that, I believe, personally speaks to the breadth of innovation that we – that is happening in Atai. Looking at the last quarter, we’ve made meaningful progress, in my view, across our entire pipeline. We have delivered results that have met the highest standards that we set ourselves for our own programs. And looking ahead, we cannot wait to share the eagerly anticipated top line results of Phase 2 – of the Phase 2a in R-ketamine, of course. And we anticipate that for around the end of this year. This specific dataset can be potentially, as Andrew and also Srini mentioned, be a significant event for Atai as we’re targeting an at-home therapy for treatment-resistant depression. So we’ve had a strong balance sheet and runway into 2025. We are, in our perspective, very well positioned to achieve additional milestones beyond R-ketamine, across all of our other programs. And that makes us very excited, and we anticipate a lot more to come over the next quarters and years. So with that, let me thank you for listening in today, everyone, and have a great week.