Atai Beckley NV (ATAI) 2022 Q1 法說會逐字稿

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'd do things a bit differently this time by hosting a conversation with 2 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, with a 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 the 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 2 years and with our continued disciplined management of our cash resources.

With that, I'll hand the call over to Charles to kick off the conversation. Charles?

So Hi Greg. Hi, everyone. Thank you, Florian, and team for the opportunity to co-host this Q&A with Ritu. And congratulations on the recent progress.

Just starting with the prospective builder perhaps for Florian. Florian, just thinking about atai's strategy for navigating the turbulent biotech equity markets have been a challenge this year. And I guess I'm wondering if you see this as an opportunity to acquire new assets or perhaps to frankly increase your ownership of companies that you've already invested in, like COMPASS Pathways? Or are the prices -- with the prices so low? Or is this a headwind which forces you to be more careful about your cash runway?

Yes. And also thanks from my side, first of all, for joining this new approach or this new format that we were 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're basically where we were 5 years ago or below where we were 5 years ago, in May 2017, despite all the value that has been generated over those 5 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 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 there's an even greater opportunity for investors, and let me explain to you why.

Number one, and as you know, we've discussed in the past before the pandemic there were already approximately 1 billion people globally suffering from mental health disorders and COVID, as we've been learning through recent studies that are coming out, 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 neuropsychiatric space, only 17 drugs have been approved since 2015 compared to around about [108] drugs in oncology. And we basically started atai with a very unique model to derisking on an asset level as well as a very diverse pipeline with multiple shots on goal.

And as Greg mentioned, we have cash position 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 [BD] opportunities. Yes, those valuations are -- we are very much aware of that development. And our business model has always been to also acquire new very complementary assets to our pipeline, and we will remain active screening the market. And yes, having a very close look, continued close look at potential new opportunities in the BD 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 18-month or so 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, digital services in neuropsych is sort of an emerging field an 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 patients is: On the one side, having novel differentiated pharmacological agents becoming approved. That open basically a therapeutic window if [you're the] neuroplastic and behavioral plasticity strong effects on that side and then combining them to your point, with digital therapeutics that allow for a very sustained Or sustaining that effect in a very durable way.

So it's an integral part of how we think about 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 comes out, and we are also updating of course, our own assumptions in terms of likelihood of success and most effective capital allocation.

And that's basically part of the model that we are continuously [facing basis] 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.

One thing. 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 -- are relatively high, particularly early on. So I would say that the risk associated with the digital therapeutics is actually much less right? So we're using a tried-and-treat technologies in a sense, right? These are therapeutic approaches, psychotherapeutic approaches that have been widely used are 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 the perception in PCN-101. That trial is ongoing. But as you look at the lessons in the landscape, what do you think were 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 101 opportunity?

Sure. Let me give a high-level perspective and then hand it over to 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, S-ketamine -- with R-ketamine that we're developing for at-home use. Then 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. It tells 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 1,000 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're actually designing the duration of effect to neatly slot into the therapeutic -- 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 (technical difficulty) 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.

No, I think you've hit all the main points as regards to 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 usurp 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.

Normally, I think one of the key takeaways is to be very proactive and early on engaged 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 -- as was the 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 101 clinical program into Phase II, into Phase III, especially your ideal Phase III trial design populations, endpoints as you think about potentially multiple Phase IIIs. How would you compare and contrast that to what was done in the SPRAVATO Phase III program?

Well, as you know, right now, we're still in the midst of Phase IIA. So obviously, the Phase III program is going to be informed by the results of our trial, particularly as regards to (inaudible) things of that nature. In general, there are -- I mean there's a lot of unique trial designs that Johnson had in their Phase III program. But the shorter trials and the longer ones as well transforms I through III. 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 if you think about whether it's the [Sage] program, et cetera, I mean for the most part, some of the key trials are longer duration, looking at primary endpoints like the MADRS at 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 be 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 in 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 II meeting with the agency. I wanted to ask you what your key takeaways were from the data that you saw from there pretty rigorously conducted Phase IIb as well as really asking what would you like to see in terms of next steps when they talk about their Phase III in terms of being able to gauge probability of success for that -- 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 effects is really quite key for me. The whole premise with this compound or this class of compounds is a single administration of drug to give long-term efficacy.

And of course, in the absence, essentially of side effect 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 about placebo is 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 to move forward with our Phase III program. I mean the details of that are TBD. I imagine just like we're going to learn a lot from the perception study, they have clearly learned a lot from this Phase IIb and I'm sure they'll take those forward.

A couple of things that we've learned for our programs obviously relate to repeat dosing, right? 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 on to what they are -- the details of their plans.

Yes. Got it. That'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 redose someone. So that is not that static, but it really given our very heterogeneous patient papulation, that we're developing our compounds for really takes this into account. And that is kind of one of the key areas that we're still 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 differentiated paradigm for depression patients. Let me move on, though 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 1 to 2 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 antipsychotics. And unfortunately, they add to the targeted dysfunction for this unfortunate 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.

Yes, that's a good question. So cognition is complicated, right? So there's certainly many neurotransmitter systems that are involved. So people have investigated different neurotransmitter systems, right? So they've basically taken all of these, the glutamate cholinergic et cetera, and played with molecules. And of course, some of the ones that are in development now do focus on a single receptor system. -- again, that'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, right? Again, it's heterogeneous, perhaps not as heterogeneous as a mood disorder, but there's a lot of heterogeneity, certainly, vis-a-vis 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 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 II 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.

Yes. 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 II biomarker study that we reported out several months ago. And that in combination with supportive [QEG] data was then basically for us, really reassuring to drive this forward based on the most relevant doses, 20 and 40-milligram to move this into a full clinical proof-of-concept study.

And yes, we (technical difficulty) Srini to further comment maybe more on the QEG technical details that we saw and why also he is very excited about the compound.

Yes. I mean I think in terms of big picture, what we saw was consistency, right? So we anticipated inverted U-shape 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 bit. There was this nice pattern that was internally consistent. And that gives us a lot of faith in these data to move forward.

Yes, I'm okay with inverted U shape dose response, it is complex But that's the opportunity. Ritu?

That's exactly right.

So let's move to your GABAergic program, 917, your GABAergic mechanism candidate for anxiety disorders. Can you just 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.

Yes, absolutely. So this is a pretty unique drug. The benzodiazepines are direct agonist at GABA, right? So they activate that channel. They basically suppress the activity of neurons, and that's how they're giving you anxiolysis. It's a pretty blunt instrument, right? There's GABA receptors all over your brain. The [positive] allosteric modulators definitely improve on selectivity, right? So any -- because they do require the endogenous ligand, the presence of that to really have an action at all. This compound etifoxine and by extension, 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 in allopregnanolone, you basically get an anesthetic, right? I mean that's the downside to 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 is only going to crank out so much allopregnanolone no matter how hard you crank on the [TSBO] protein.

Based on the preclinical data and the comparative 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.

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, 1979. So lots of experience, clinical experience of this, sedation is not really particularly prominent. And it's certainly nothing like any other compound like a benzo or the adverse event table that we've seen with, for example, (inaudible) .

Yes. So those -- we've seen those AE tables have been made public. 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 and 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 I trial with 917 is that we got -- we probably won't see much in the way of sedation. There's certainly nothing different pharmacologically mechanistically between those 2 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 are a very interesting scientific considerations as well as commercial considerations to factor in here. And that we addressed some of them in this call already. On the commercial side, again, we are designing our programs in DMT. Viridia is basically part of those to fit into this (inaudible) paradigm out of pragmatism and we believe this is a good way, a good way to accelerate commercialization with those therapies. So that's on the commercial side, while we optimize the duration of effect for around about like a 45 minute, an hour-ish window in terms of psychedelic duration.

And on the scientific side, I think our 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 is the data of (inaudible) 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. The more gentle PK is probably a good start point. So we don't think like a 10-hour LSD or 4 to 6 hour that we see with COMPASS is ultimately needed, but also 15 minutes, might not give the ideal therapeutic effect. And so this is the high-level assessment. I don't know, Srini, if you want -- 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 attacks. So I don't know to Florian's point how much psychedelic effect 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 IIa program with both VLS-01 as well as the (inaudible) asset.

And based on all the data, I think, for the second-generation compound, that's -- in our perspective, 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're looking at with EntheogeniX, for instance, one of our drug discovery engines.

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've really enjoyed the 30 minutes together. I might leave investors with just a couple of 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 I've seen this before.

This company is -- 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 market, 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.