Atai Goes Public With Promising New Mental-Health Treatments Based On Psychedelics

Germany-based Atai Life Sciences (NASDAQ: ATAI), a biotech backed by Peter Thiel, a founder of PayPal, made its public debut Friday. 

Shares were priced at $15, the high end of the projected range, with 15 million shares changing hands. All the newly public shares were offered by the company, rather than other individual or institutional owners. 

The company now has a market capitalization of $3.1 billion, placing it in mid-cap territory. 

The stock climbed as high as $22.91 in the session, closing at $19.45. Trading above the IPO price is a good indication of demand for a new issue. 

Atai focuses on the use of psychedelics to treat mental health conditions. It’s considered a clinical-stage biotech. The company does not yet have regulators’ OK to move forward with treatments. 

According to a company press release, “Atai was founded in 2018 as a response to the significant unmet need and lack of innovation in the mental health treatment landscape, as well as the emergence of therapies that previously may have been overlooked or underused, including psychedelic compounds and digital therapeutics. Atai is headquartered in Berlin, with offices in New York and London.”

Currently, the treatments and molecules the company is developing are in Phase II clinical trials. 

Atai’s public debut follows that of two other biotechs specializing in psychedelics. New York-based Mind Medicine NASDAQ: MNMD, which went public in April, and U.K.-based Compass Pathways NASDAQ: CMPS, which made its debut in September. 

Atia owns about a quarter of outstanding shares of Compass Pathways. 

All these young companies are developing treatments using LSD and MDMA derivatives, in addition to the psychedelic mushroom compound, psilocybin, to treat mental illnesses such as anxiety, schizophrenia, depression and other conditions. These new meds also have promise for treating addiction. 

Atai has 10 therapeutic treatments in the pipeline.

Compass Pathways, the first of the three psychedelic-focused companies to go public, is focused on development for untreatable depression using psilocybin mushrooms. 

It’s become well known that the pandemic accelerated mental health problems around the world. While the pharmaceutical industry has been developing antidepressants and other medications for decades, many patients find the existing meds don’t work. 

That’s where the promise of mushrooms and the other psychedelics comes into play. 

Compass’ treatments are currently in Phase II trials, with results expected to be released later this year. 

As with cannabis, medicinal use of psychedelics has been hamstrung by governmental restrictions. However, major universities, such as the University of California, Yale and Johns Hopkins are conducting research into the role of psychedelics in psychological treatment. 

For example, studies have shown that MDMA, more commonly known as ecstasy or Molly, has potential for treating post-traumatic stress disorder. 

Although the industry shows a great deal of potential, these stocks harken back to the early days of publicly traded cannabis companies. These are small companies, with little trading history, scant analyst coverage and little institutional investment.

For example, at Compass Pathways, insiders own 31% of shares, with mutual funds holding just 13%. The number of funds owning shares held steady at 29 for the quarters ending in December in March. That’s not so surprising, given that the stock has a market cap of just $1.43 billion and is so new to the public markets.

Compass is not yet a buyable stock, as it’s still finding its way as a newly public company. After its IPO, the stock rallied to a high of $61.69 on December 14, then pulled into a new correction. It hit resistance at $58.62 in February, and has been etching a base since then. 

Until there’s a definitive uptrend, the stock remains one to watch, not buy. 

As for Mind Medicine, it’s forming its first post-IPO base and also merits watching. None of the three newly public psychedelic companies are expected to show any earnings in the foreseeable future, so all of these would be speculative buys at this time.