ATAI - Atai Life Sciences: RL-007 Targeting Schizophrenia Subpopulation With No FDA Approved Therapies

2023-09-01 19:02:09 ET

Summary

• Atai Life Sciences is advancing RL-007 for the treatment of cognitive impairment associated with schizophrenia, with top-line results expected in the 2nd half of 2024.
• The company is also working on advancing COMP360 for treatment-resistant depression, with results expected in Summer 2024.
• Atai Life Sciences has a strong financial position with $227.5 million in cash and funding to support its operations into the 1st half of 2026.
• The global schizophrenia drug market is expected to reach $9.8 billion by 2030.

Atai Life Sciences ( ATAI ) has been making great progress in advancing several drugs from its pipeline on multiple fronts. In particular, it is advancing a clinical candidate known as RL-007 for the treatment of patients with cognitive impairment associated with schizophrenia, in an ongoing phase 2b study. Top-line results from this study are expected to be released in the 2nd half of 2024. Another product it is working on advancing is COMP360, which is being advanced in a phase 3 program for treatment-resistant depression [TRD]. This is an indication of a huge unmet medical need and positive data produced here would also be a huge deal for patients and for the company. Results from one of the two studies of COMP360 targeting TRD, known as COMP005, are expected to be released in Summer of 2024. Besides these two clinical programs having data readouts, there are several other products in the pipeline with expected catalysts before the end of 2023 as well.

Potential Advancement Of RL-007 For Unmet Medical Need

The reason why I wanted to bring up Atai Life Sciences is because of the massive potential that exists with this biotech, with respect to the advancement of RL-007 for the treatment of cognitive impairment associated with schizophrenia [CIAS]. That's because it is a huge market opportunity, especially when you look at the addressable market size. The global schizophrenia drug market is expected to reach $9.8 billion by 2030 . However, it is important to keep in mind that this company is specifically going after such patients with cognitive impairment. This still won't be a bad target market to go after even if only accounting for this portion. Why is that? That's because it is said that about 75% of schizophrenia patients are affected by cognitive impairment . Thus, even if only looking at this specific subpopulation, it would still entail a large market opportunity for Atai Life Sciences to go after. There is one other positive aspect to consider as well, which is that there are no FDA approved drugs for CIAS. Thus, if this biotech is ultimately successful in getting RL-007 to market, then it will have this market all to itself. This program is coming along well thus far, because a phase 2b proof-of-concpet study using RL-007 for the treatment of patients with cognitive impairment associated with schizophrenia, was initiated back in December of 2022. It is expected that about 234 patients will be randomized to receive either one of two doses of RL-007 or placebo. The primary endpoint is going to be the MATRICS Consensus Cognitive Battery [MCCB]. This is an endpoint used to evaluate cognition in patients with schizophrenia and several other related disorders. In a prior proof-of-concept phase 2a study, using RL-007 for CIAS, it was noted that pro-cognitive effects were observed . Thus, with this particular data, along with data from other prior early-stage studies, it was able to get to this point of running the ongoing phase 2b proof-of-concept study. It is expected that results from this particular study will be released in the 2nd half of 2024.

Financials

According to the 10-Q SEC Filing , Atai Life Sciences had cash, cash equivalents and short-term investments of $227.5 million as of June 30, 2023. This a decent amount of cash, but of course not enough to fund its entire pipeline. However, it already has a strong financial position because it has already established a $175 million term loan facility with Hercules Capital . Whereby Atai, has the option of drawing additional tranches of the loan. However, one key thing to note is that $115 million of this loan only becomes available if specific conditions are met and can be drawn upon through March 31, 2025. Based on the cash on hand, plus the term loan funding, it believes that it has enough to fund its operations into the 1st half of 2026.

Risks To Business

There are several risks that investors should be aware of before investing in Atai Life Sciences. The first risk to consider would be with respect to the release of results from the ongoing phase 2b proof-of-concept study, which is using RL-007 for the treatment of patients with cognitive impairment associated with schizophrenia. Results from this study are expected to be released in 2024 and there is no guarantee that the primary endpoint of this study will be met. A second risk to consider would be with respect to a more advanced program in the pipeline, which is the use of COMP360 being developed for the treatment of patients with treatment-resistant depression. Results from this study are expected in the Summer of 2024 and there is no guarantee that positive results will be achieved. The third and final risk to consider would be the other study readouts that are expected before the end of 2023. Such other data readouts expected are VLS-01 in patients with Treatment-resistant Depression Q3 of 2023 and EMP-01 in healthy adult participants to explore it as a potential treatment for post-traumatic stress disorder [PTSD] expected Q4 of 2023. While both of these programs are promising, there is no assurance that results to be released from either or both of these studies will end up being positive.

Conclusion

Atai Life Sciences has made great progress in advancing several candidates in possibly being able to help unmet medical needs for mental health. One of the big programs in its pipeline would be the use of RL-007 for the treatment of patients with cognitive impairment associated with schizophrenia. I believe that should it be successful with clinical testing, plus eventually receive regulatory approval for this drug, then it would be a highly ideal situation. For starters, the global schizophrenia market is expected to reach $9.8 billion by 2030 and RL-007 could possibly help treat about 75% of this specific subpopulation. Secondly, there are no FDA approved drugs for CIAS. Lastly, there are plenty of other catalysts to look forward to with this biotech before the end of 2023, as I noted above. This biotech has a large pipeline with several drugs targeting various mental health indications.

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