Planning for the long term, mental health-focused biotech Atai Life Sciences took a hard look at its sizable portfolio — and decided to cut parts of it.
The decision to stop funding certain discovery programs and efforts, described as “company-wide cost optimization,” should lead to “significant cost savings,” noted CEO Florian Brand. At the same time, it is pulling in $175 million via a term loan facility from Hercules Capital, a move that is expected to extend the cash trail through 2025.
“This additional lead gives us the ability to do many reads of proof-of-concept data without additional dilutive funding,” he said.
Atai ended the second quarter with $312 million in cash and cash equivalents. But just like the rest of the industry, it is experiencing a biotech winter that has depressed its stock, which currently sits at $4.62.
The biotech, which is backed by billionaire Peter Thiel, was founded in 2018 to take a platform approach to developing drugs for mental health disorders such as depression and schizophrenia, supporting a variety of approaches – including, but not limited to, psychedelics – through acquisition, incubation and partnerships.
As atai explains in its Q2 update, it has begun the pipeline review with the goal of reducing operating expenses and finding the most valuable programs to prioritize.
Executives have now decided to end funding, beyond existing bonds, for the Rexixia subsidiary programs as well as Neuronasal and DemeRx NB, with which atai had partnerships. The three companies have each been linked to a drug candidate, including RLS-01 for treatment-resistant depression, NN-101 for mild traumatic brain injury and DMX-1001 for opioid use disorder.
That leaves eight programs in the streamlined pipeline that are expected to generate reads over the next two years, said CSO and co-founder Srinivas Rao, “beginning with the read of PCN-101 phase 2a in drug-resistant depression. treatment (TRD) by the end of the year.”
As part of atai’s deal with Hercules, it draws $15 million at loan closing and has the option to draw an additional $20 million by March. The rest becomes available in installments until 2025, with a variable interest rate.
Financial oversight will now be provided by Stephen Bardin, who succeeds Greg Weaver as Chief Financial Officer.