Analyzing the ATAI Life Sciences IPO
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Greg Kubin: [00:00:00] Welcome to Business Trip, a podcast about psychedelic entrepreneurship. Psychedelic medicine is transforming mental, physical, and spiritual health and entrepreneurship will be key to expanding access. Business Trip explores the business models and origin stories of the most interesting companies in psychedelics. I'm Greg Kubin. In today's episode,
[00:00:31] we're doing things a bit differently. It's actually hosted by my Business Trip, Co-creator Matias Serebrinsky, and it features a panel of experts to discuss, ATAI life sciences and break down their S-1, which is a disclosure they filed in anticipation of their upcoming IPO. Matias, can you set the stage?
[00:00:51] Matias Serebrinsky: [00:00:51] Thanks Greg. I'm usually working behind the scenes and letting Greg take all the limelight, but that is about to change. Jokes aside, I am super excited to step in as a host, and, let our panel of guests go deep into ATAI life sciences. ATAI's, a psychedelic company with the highest number of drug development programs.
[00:01:13] They create companies from scratch, incubate and acquire majority stakes in drug development companies. Their programs include drugs, such as ibogaine, ketamine, kratom and MDMA derivatives. Their last financing round valued them at $2 billion and it is expected that once they go public, it will become the largest psychedelic company in capitalization.
[00:01:37] Quick disclosure. The investments syndicate that Greg and I lead is an investor in ATAI. In this episode, we analyze ATAI's S-1 with a panel of experts. An S-1 is a long registration form required by the securities and exchange commission before a company goes public. The S-1  provides information on the uses and sources of capital proceeds, business model,
[00:02:00] competition and risks that a company's facing and will face in the future. You could say we're doing this episode because I, didn't really want to read the S-1, so I asked some experts to break it down for us. I'll be analyzing the S-1 with Michael Haichin, a doctor of pharmacy and co-founder of the psychedelic pharmacist association, which is a nonprofit
[00:02:21] focused on advancing psychedelics as medicines. Let's just say Michael knows a thing or two about drugs. 
[00:02:28] Michael Haichin: [00:02:28] They made the decision to go with esketamine as opposed to arketamine based on some preclinical evidence. But now it's appearing that arketamine might actually be a superior molecule. 
[00:02:38] Matias Serebrinsky: [00:02:38] The second panelist is Graham Pechenik.
[00:02:41] He's the founder of Calyx law a firm providing legal guidance to businesses in the cannabis and psychedelics spaces. Graham is a patent attorney with degrees in biochemistry and cognitive neuroscience. He will help us dive into the legal, nuts and bolts of the psychedelic medicine industry. 
[00:02:58] Graham Pechenik: [00:02:58] The deuterated compound is still potentially capable of receiving successfully patent protection.
[00:03:04] And 
[00:03:04] Matias Serebrinsky: [00:03:04] finally, Josh Hardman is the guy with a British accent and the business know-how. He's a creator and editor of Psilocybin Alpha, a website providing analysis of the psychedelic medicine sector. Josh is also senior associate at Noetic Fund a psychedelic medicine VC.
[00:03:22] Josh Hardman: [00:03:22] As time goes on and these drugs move through the respective phases,
[00:03:25] that will be more of a focus, not just on marketing, but also on cost effectiveness. 
[00:03:30] Matias Serebrinsky: [00:03:30] Oh, and that's a reminder, the content on this episode and all other episodes is for informational purposes only. And it does not constitute financial or investing advice. Let's get to the panel. I start off chatting with Josh of psilocybin alpha for a few minutes, about atai and the space.
[00:03:49] And now to the episode,
[00:03:58] Josh, Graham, Michael, welcome to Business Trip. Super excited to have you here. We are going to break down atai's S-1 and, use this as an 
[00:04:09] excuse to just cover one of the most significant companies in psychedelic medicine. 
[00:04:14] Why don't we start by chatting about why they focused on mental health and what they talk about in the S-1?
[00:04:21] Josh Hardman: [00:04:21] Yeah, so I think the focus on mental health, is not necessarily specific to atai. We see a lot in the entire psychedelic medicine sector. Besides being one of the biggest global burdens in terms of diseases, it's also very close to most people's heart's. So I think everyone on the atai team has made public statements about having some personal connection to people with mental health disorders, by the person who within their family or their network.
[00:04:42] Also in terms of an addressable market, these are huge indications. So anxiety, PTSD, depression, these are enormous, uh, burdens on, on the global economy, both redirect treatment costs, also loss of productivity. So companies like atai, are looking at this, not only from the, the ability to impact the world in a positive light, but you know, they're also thinking in terms of these markets and that's evidenced as well through the focus on opioid use disorder, which again, you know, has strong connections to mental health, but it's a distinct market in itself.
[00:05:10] So I think, you know, the ability to tackle these huge markets, like in the field of oncology who see similarly large markets, I think that really drives a focus on mental health. There. Yeah. 
[00:05:19] Matias Serebrinsky: [00:05:19] And I guess one question that I get asked so many times is the why now, why start atai now and not 10 years ago, 20 
[00:05:27] years ago?
[00:05:28] Josh Hardman: [00:05:28] I think in terms of why now that there's been a total stagnation and research into mental health in terms of more mechanistic models. So we saw the SSRI and the eighties and nineties. And since then, since the SSRI antidepressants. We haven't seen any real innovation. There hasn't been a breakthrough product or drug that really treats mental health diseases in such a broad way.
[00:05:47] The SSRIs were applied. So I think, you know, there's an enormous appetite on behalf of insurance companies and national health care systems, both regulators. And I think that explains why we've seen these breakthrough therapy designation for psychedelics, which was unthinkable, you know, for the last 50 years under the war on drugs.
[00:06:02] But now there's just such an enormous need, an appetite that we're seeing. You know, very disruptive new types of drugs and medicine being explored. 
[00:06:09] Matias Serebrinsky: [00:06:09] One of the interesting things about atai is the fast timeline since when it was started till now. So basically 
[00:06:17] it seems to be it's, um, foundation until their IPO and everything that happened in between.
[00:06:22] Josh. Can you talk a little bit more about that? 
[00:06:26] Josh Hardman: [00:06:26] Yeah. So I think that's kind of Testament to how the funders and the backers of atai are really fundraising machines and themselves, you know, beyond an interest in the field, they all come from serious investment backgrounds. So it's backed by Peter Thiel, Mike Novogratz and Christian Angermayer, all three of which come together in terms of the involvement in crypto, weed stocks, space exploration, longevity, so kind of wacky sectors, but the three of them kind of came together originally to invest in COMPASS pathways.
[00:06:53] So atai was kind of, the Genesis of atai was really to invest in COMPASS. The story is that Mike Novogratz spoke to Christian Angermayer, told him you've got to meet George and Ekaterina, the founders of COMPASS pathways. You know, these two wacky Brits who are looking to commercialize psilocybin for treatment resistant depression.
[00:07:08] And within 15 minutes of speaking to them, the story goes, Christian Angermayer decided that he wanted to invest. He then pulled together, Mike and Peter Thiel, to, to invest in COMPASS. And that's where the seed round started. So that's kind of how atai started, right. It was an investment vehicle. Today,
[00:07:22] it's more of an operating company, but that, that kind of ability to raise capital from a seed round of 3.6 million in 2018 through to the series D of 157 million, just a couple of months ago. So we've seen between those different series of fundraising, approximately 294 days between each round. And that's versus, you know, a standard cadence of series of fundraising of 700 days.
[00:07:44] And it's only accelerating lately. So I think atai, one of the key abilities is to raise funds and they have the backing of these hugely wealthy individuals who are willing to bet on risky industries. That's obviously a benefit. Other people might look at it and say, you know, these folks are just looking to invest in Vanguard and exciting sectors and maybe they'll hop off onto the next sector.
[00:08:02] So, you know, that's, that's either a pro or a con whichever way you look at it. Yeah, 
[00:08:06] Matias Serebrinsky: [00:08:06] one thing that caught my attention about the S-1 is that there are only three entities that have over 5% of equity in the company. And one of them is Christian's family office , Apeiron, and the other one is Galaxy Financial, which is Mike Novogratz family office as well.
[00:08:23] So that early involvement, that Mike Novogratz had actually paid off in today's equity in the company. Another interesting question that we got asked many times is why, at least on NASDAQ, you have most
[00:08:38] companies in psychedelic medicine that are listing in a couple of Canadian stock 
[00:08:42] exchanges, 
[00:08:43] but they chose to list on NASDAQ.
[00:08:46] Josh Hardman: [00:08:46] The people are choosing not to list on the NASDAQ. I think, you know, most of these companies, especially in North America and Canada would love to be on the NASDAQ. I see press releases every other week. It seems of small cap, public companies in the psychedelic space. Claiming that they've initiated the process of up listing on the NASDAQ.
[00:09:02] Sadly, it's not that simple. You already have to have a certain scale. You have to have a certain operating history to be able to be eligible, to even list on the NASDAQ. So we saw the main made-up listing, obviously that took a while, but ultimately that one of the biggest companies in the space. So the eligible for that, the COMPASS pathways listing was similar, right?
[00:09:18] They, they had already raised a set amount of capital. The share price was, you know, it wasn't a penny stock. It was above a certain price requirement. So I think, you know, that listing on the NASDAQ is just testament to their scale. Their being around longer, you know, they were formed in 2018, which is longer than a lot of the other companies in the space.
[00:09:32] And really the reason we see so many companies listing in Canada on exchanges like the CSE and the TSXV is, is just the legacy of the cannabis industry. There's a lot of shell companies leftover for mining exploration in Canada, very easy to have a reverse takeover transaction with. And that's ultimately why we see so many of them in Canada.
[00:09:49] So it's a very cheap and easy way to go public via an RTI or reverse takeover. So I think this is just kind of signaling the development and the maturity of the space that we're now going to have three companies publicly listed on the NASDAQ, which is a senior exchange. You know, one of the most prestigious in the world, 
[00:10:03] Matias Serebrinsky: [00:10:03] So let's chat a little bit about atai's business model.
[00:10:06] One 
[00:10:06] of the first things that are mentioned in the S-1 is that they 
[00:10:10] consider themselves a platform company and that's, 
[00:10:13] that's quite unique, right? It's not your typical
[00:10:15] psychedelic medicine company in a way. Let's break down a little bit. What that means. What does it mean that atai's a platform 
[00:10:22] company? 
[00:10:22] Josh Hardman: [00:10:22] So unlike other companies in this space, atai provides kind of a platform.
[00:10:26] It's a decentralized model. So they provide shared services at the atai level. So things like project management, financial support and advice. And then the underlying companies, the kind of programs themselves, they do the actual drug development and discovery and development. And even beyond that, atai itself acquires and operates enabling technologies.
[00:10:44] So these could be things from digital therapeutics, like AI based drug discovery, right through to intelligence, which is a company that looks at drug delivery mechanisms like oral films. So atai's going to aggregating these services at the atai level and each of the underlying programs is operated as a company in itself.
[00:10:59] So it's a really unique model compared to other biotech companies. There are some competitors in biotech, but certainly not really in the psychedelic space, just yet. 
[00:11:07] Matias Serebrinsky: [00:11:07] Michael, 
[00:11:08] any examples of companies outside psychedelics that are taking 
[00:11:12] this approach? 
[00:11:13] Michael Haichin: [00:11:13] Yeah. So to Josh's point, what a Ty's doing is a fairly unique business model, but there are some examples outside of the psychedelic sector.
[00:11:22] So two that come to mind are bridge bio, which is a platform with various gene therapies and cancer drugs. And the other one, which is perhaps a more appropriate comparison is PureTech health. So they specialize in psychiatry and immunology and they do have some overlap with atai. One of PureHealth Tech's ventures is
[00:11:41] related to schizophrenia and atai similarly has a drug that's targeting an aspect of schizophrenia. And even more comparable is PureTech Health's investment in digital therapeutics. So they actually have an equity stake in Akili's Therapeutics, which was the company that developed the first ever video game approved by the FDA as a treatment of ADHD.
[00:12:01] Some listeners might be familiar with Akili because it was developed by Adam Gazzaley, out of a UCSF in Neuroscape where Robin Carhart-Harris is now, formed a new research center for psychedelics. So that's probably the closest comparison to atai's platform, but again, it is a fairly unique model. 
[00:12:17] Matias Serebrinsky: [00:12:17] Yes.
[00:12:18] And that model has proven to be quite 
[00:12:21] successful for bridge bio as an example. Right? I think their market cap is 
[00:12:25] north of several billion dollars right now. Josh one 
[00:12:28] interesting 
[00:12:29] thing that atai mentioned in there S-1 is their investment criteria. I'm curious if you want to chat about that. 
[00:12:35] Josh Hardman: [00:12:35] I 
[00:12:35] think a really interesting thing when you look at the S-1 is a key part of their investment criteria when looking at new opportunities and new in-process R and D to acquire,
[00:12:45] is that they like it when there's preexisting human trial evidence of efficacy and not just trial, it can be anecdotal. So for example, if we look at DemeRx, they're looking at, ibogaine and noribogaine, and they're looking to get a 506B fast-track designation from the FDA because of the wealth of evidence already exists of ibogaine and its efficacy and substance use disorders.
[00:13:05] GABA therapeutics is perhaps the most striking here. They're looking to commercialize a deuterated version of etifoxine. Which is an anxiolytic and an anticonvulsant and anxiety medication that's actually already sold and used in about 40 countries. And they're looking to use it for a generalized anxiety disorder indication.
[00:13:22] So they're not only looking to repurpose the drug, they're actually looking to deuterate it and then use it for the same indication. And again, EmpathBio, which is another one of atai's underlying programs is looking to look at empathogenic compounds. So derivatives of empathogens like MDMA and that's relying on MAPS' phase three data in the S-1.
[00:13:40] That's what cited to identify the underlying efficacy, the evidence of the underlying efficacy of MDMA like molecules. So all of these programs, I've just mentioned, and, and most of the other programs, if you actually look at them, they're relying on quite a lot of third party data and pre-existing evidence, which is really interesting when you think about the broader space, because
[00:13:56] there seems to be kind of a rush amongst other companies in this space to identify white space. So areas that haven't been developed, molecules that haven't been looked at and indications that are going, unnoticed. So this kind of really flies in the face of the prevailing attitude, whereas atai is looking at stuff that's already been explored.
[00:14:12] So I think it brings up interesting debates going on in this space as well, as well as being an interesting business model. 
[00:14:18] Matias Serebrinsky: [00:14:18] And I guess that also presents 
[00:14:20] a few 
[00:14:21] trade-offs from IP perspective. Graham, do you want to share your thoughts around the kind of like the risks 
[00:14:27] and rewards of atai's 
[00:14:28] approach?
[00:14:29] Graham Pechenik: [00:14:29] Yeah. Thanks for that question. Even before starting, I can just circle back to one of the things that Michael said, which was the great expense of running clinical trials on these products. And one of the benefits of course, of taking, or trying to take something to market that's already been proven out.
[00:14:43] I'm like etifoxine is they've, de-risked a lot of that early clinical work, similar to the way just bringing psychedelic compounds to market themselves has a lot of benefits in terms of reduced costs, because we know based on hundreds or thousands of years of potentially use of some of these compounds, that they are safe and, you know, fairly well tolerated in most humans. From an IP perspective, actually I think etifoxine and the other deuterated compound mitragynine that
[00:15:11] atai is working with are really good examples of a strategy that actually many companies are taking to be able to take that de-risking of a clinical program, but yet still be able to get patent protection for a compound. So for each of these, of course, we know that they're not patentable in and of themselves because they've already been used.
[00:15:30] However, the deuteration itself creates a new chemical entity. That can actually be patented and receive a very strong patent protection of a composition of matter patents. So we'll probably talk more when we get to some of atai's, other programs about how some of these patents are discovering methods of use, and that are going to be a little bit weaker because they're covering something more specific, but with a composition of matter, patent covers all use of something.
[00:15:53] So deuteration maybe just to back up a step. Replacing a hydrogen on a compound with a heavier isotope. It's just a hydrogen with another neutron. It does have some changes in the pharmaco kinetics. It generally increases a half-life often it results in less toxic metabolites, but the FDA has actually approved another deuterated compound back in 2017.
[00:16:14] And there was still some sort of open questions about whether the FDA would approve a product like that and would give it data exclusivity, and actually the FDA agreed that that compound presented a new active moiety, which was the requirement for a new chemical entity, which meant that it got five years of data exclusivity.
[00:16:31] So it's, it's really, it's the same compound as already was marketed for many years, but by being deuterated it presented a new chemical entity and that's also something that's true now at the patent office. So this actually is a fairly common strategy for pharmaceutical companies. The patent applications that atai had
[00:16:51] I think there could have been some greater controversy whether or not they would be strong and whether they would be approved for some of the pending ones. Interestingly, actually the day we're recording today. Small pharma, which has a deuterated DMT compound just received in the UK a notice of allowance, basically a recognition from the patent examiner that they're going to grant the patent application.
[00:17:13] So this is something that indicates that a deuterated compound is still potentially capable of receiving successfully patent protections. 
[00:17:22] Matias Serebrinsky: [00:17:22] What is the difference between composition of matter and data exclusivity and, why would a company prefer to go with composition of matter? 
[00:17:31] Graham Pechenik: [00:17:31] Sure. Well, the biggest difference really is the length of time that one gets exclusivity.
[00:17:37] So for data exclusivity, that length of time is only going to be five years from approval. And it's a little bit longer in some other countries. So five years in the US, in the EU, and most likely in the UK, it will be it's eight and two and one. So it's going to be up to 11 years. It's a little bit longer, but still patent protection is most often going to last beyond that.
[00:17:56] So a patent lasts 20 years from when it's first filed the non-provisional and there's a possibility of getting an extension for the time that you lose while you're in the regulatory approval process up to five years, as long as that five years, doesn't bring your overall patent term beyond 14 years after approval.
[00:18:15] So generally you can get up to around 14 years or longer for patent protection. So obviously you have more time on the market and for anything that's a blockbuster drug that's making a billion dollars a year. Just a day or a week on the market is going to be an enormous amount of money. So that's the biggest one, but the other one would be.
[00:18:32] Just the protection that you get, of course, is a protection that extends to any use of, or any thing that could fall under the claim of the patent. Whereas data exclusivity would just prohibit somebody from using your data. To file for, you know, similar  new drug application at the FDA, but they could still use what's covered by your claim.
[00:18:52] And in some other way, they just can't rely on the data that you have at the FDA. So it potentially covers, you know, a lot more activity that you can prevent somebody from doing. The difference between a composition of matter claim. And the other types of claims one can receive are pretty significant depending on what the claim language like ultimately is when you compare, but a competition of matter claim,
[00:19:14] I mean, it covers any use of a compound. Anytime that compound, you know, would exist somewhere. If a person has a compound, that's going to be infringing. So, you know, it could really can be any use of it or, or any possession of it. Even, you know, manufacturing where it's, you know, a by-product or the ultimate product could infringe that claim. With a method of use claim
[00:19:31] it's going to be really limited to just the use of that. And if it's treatment of a specific indication, separate indication may not. And you know, generally wouldn't infringe that particular use. 
[00:19:42] Matias Serebrinsky: [00:19:42] So why don't we start discussing atai's, 10 development program and six enabling technologies. 
[00:19:50] Josh Hardman: [00:19:50] Yeah. So when we look at these programs, it's quite striking that around half of them.
[00:19:54] So I think around five out of the 10 underlying molecules that are being explored, the drugs are, they're not actually psychedelic in nature. So while in the psychedelic space, we bundled things like ketamine, which is more of a dissociative and MDMA, which is an empathogen into psychedelics. Even taking that into account, only half of these programs are psychedelic in nature.
[00:20:12] So I think, you know, it's just worthwhile pointing that out because I think a lot of people think of atai as you know, a pure play psychedelics company. So perception neuroscience is looking at arketamine for treatment resistant depression. It's not the only program in atai that's looking at this indication, there's actually a few, but this one is perhaps the farthest along.
[00:20:29] So I think Michael, you could give an overview of arketamine. 
[00:20:32] Michael Haichin: [00:20:32] Sure thing. So just to take a step back, arketamine is one of two isomers of ketamine, which is the more well known anesthetic that has been recently used as an antidepressant. And so ketamine, you can think of it, of a mixture of arketamine and esketamine where the comparison would be to your right hand and to your left hand.
[00:20:51] And that they're super imposable on each other. But they're not mirror images. So they actually have different characteristics where they interact with slightly different pharmacology, esketamine, also known as Spravato is a marketed intra-nasal spray by Janssen, which is a family company of Johnson and Johnson.
[00:21:10] And that was  approved for. Treatment resistant depression about two years ago now. They made the decision to go with esketamine as opposed to arketamin based on some preclinical evidence. But now it's appearing that arketamine might actually be a superior molecule. In part, because of its improved safety profile, ketamine is known for causing dissociative effects and those appear to occur consistently with esketamine as well.
[00:21:34] But there's some good evidence that indicates arketamine will be safer in that it has less dissociation. As far as where they are in development perception just recently completed their phase one trial of arketamine and are presumably in the planning stages of a phase two trial. 
[00:21:49] Matias Serebrinsky: [00:21:49] And it's interesting that perception was originally founded by the co-founder of Gilgamesh.
[00:21:55] And what that means is that perception was basically one of the first successful exits that a psychedelic medicine company had in the 
[00:22:02] space. 
[00:22:04] Graham Pechenik: [00:22:04] I think another interesting thing to add here is that this is a real success too, for atai's ability to spot a good opportunity to bring something in by licensing.
[00:22:14] And we can talk about some of their other in-licensing programs and then also turn it around and license it back out at quite a profit. The arketamine program was first really Kenji Hashimoto, a professor and researcher at Chiba University had published and filed applications covering arketamine,
[00:22:33] and arketamine for a variety of uses. That program and Chiba University's owned patents and patent applications are licensed by perception for very low amounts, actually. So they disclose in their S-1. It was an upfront license fee of just, $55,000, $40,000 in annual license fees, milestone payments of just 1.2 million with low to mid single digits tier royalties.
[00:22:59] And they stated in their S-1 that they've paid in total so far, $200,000. Otsuka in licensing from atai Perceptions program, which covers arketamine  specifically for treatment prevention, diagnosis of depression in MDD and TRD. And it appears only in Japan, had an upright upfront payment of $20 million with $49 million in milestone payments, including commercial milestones, up to 66 million and royalties from the low to high teens on feature sales.
[00:23:28] So clearly the program that they brought in for quite a low amount of money, they've turned around, probably a couple of other applications. I know some time has passed and obviously Jonathan Sporn's hand and other's hand, you know, the, the work in the meanwhile and then license it out successfully looking at it financially to you know a big pharmaceutical company.
[00:23:44] So this is a. Interesting example of that strategy, that licensing strategy at 
[00:23:49] work. 
[00:23:50] Matias Serebrinsky: [00:23:50] So next company is DemeRx and we featured Deborah Mash. Uh, DemeRx's  CEO in the last Business Trip episode. So we're 
[00:23:58] not going to 
[00:23:59] cover that one in detail, but I think Graham, you have a couple of interesting thoughts around their IP strategy.
[00:24:07] Graham Pechenik: [00:24:07] Yeah. And I won't rehash what Debra Mash said. She had a lot of great points. So I would strongly recommend any listeners to go back and listen to that. I listened to her last night and was very entertained by some of that backstory. One of the things I thought was notable just for DemeRx is having, you know, reviewed patents in this area, seeing the number of patents that were listed in atai's S-1, made me realize that , I think this is going to carry over to some of the other programs I have too, but the only patents that need to be listed
[00:24:32] in the S-1 are certain specific ones that are, that are laid out in the regulations that the SEC has, but there are only a certain number of material ones to particular aspects of the business. So for instance, with DemeRx what soliciting S-1 is an issue patent and several pending ones in the U S and several other international pending ones.
[00:24:50] But DemeRx has quite a number of other granted patents and pending applications on ibogaine for indications, other than opiod use disorder, which are the indications for the patents they list. They have everything from, ibogaine for pain, depression, PTSD, anxiety, impulse control, alcohol dependence, nicotine addiction, other substance use disorders, food, cravings, violence, and anger.
[00:25:10] So quite a number of other ones that aren't listed in the S-1. Also Deborah Mash. She's an inventor on quite a number of that covered noribogaine. And those aren't listed in atai's S-1 either. So I think it's important that people are looking at the S-1 for like a, you know, a list of patents atai might have
[00:25:28] just to recognize that these are the patents that are related to the specific clinical programs, but they aren't the full list of all applications and maybe owned or in licensed or otherwise be related to justatai. But beyond that, I mean, I think those are the sort of main issues that I kinda thought were relevant around DemeRx.
[00:25:47] The only other one that, you know, maybe would note would be, there's an interesting angle with some of their patents aren't listed, which is the fact that they carved out particular patient populations from treatment. So for instance, a patent that covers depression, carves out patient populations for patients who are addicted to cocaine or opiates as a patent lawyer.
[00:26:08] Uh, that's something that jumps out because there's this patent doctrine around inherent anticipation and what's called sort of like a person received ibogaine and that person's depression was relieved. Even if that wasn't the reason that person received ibogaine that could uh, anticipate in cause and a claim onibogaine to no longer be novel if it's filed later.
[00:26:30] So I think this is a reflection of the fact that the prior art in the area around ibogaine was really specific to treating substance use disorders. So in filing these other applications, On things like depression or, or violence and anger, for instance, they've carved out the sort of the reasons that a person would have taken.
[00:26:47] ibogaine in the past, or at least at that, that treatment would have been recorded or published in the prior art. One other aspect of the backstory that's interesting to note is some of Howard Lotsof's work and some of his use of ibogaine. And he had a foundation that he started that came to the attention of Stanley Glick
[00:27:05] at Albany medical center who recognized the potential for using ibogaine to treat substance use disorders, but also recognize the fact that ibogaine  use itself caused a number of problems in certain patients, it could cause cardiac arrhythmias that were potentially fatal. So Stanley Glick teamed up with the medicinal chemists, Martin Kuhn at the university of Vermont, and they created and tested about 60 compounds looking for an ibogaine, derivative or analog that would have the same benefits, treating a substance use disorder
[00:27:39] without the side effects and specifically without the side effect of cardiac toxicity and also potentially without the hallucinogenic side effects. And they found a number of them. One of them was 18 MC. 18 MC some people may have heard of, because that's the lead compound that MindMed has in clinical trials now for treatment of substance use disorder.
[00:28:02] And MindMed has some applications that they've licensed or I suppose to purchase from Steve Glick. And those acquired patents are expiring in the next a year and a half or so. It's also interesting to note that some of  patents on ibogaine also cover, ibogaine derivatives. Many of them explicitly also cover 18 MC.
[00:28:22] So it's interesting to see that you know, that the patent office often grants things that are arguably overlapping rights. And that's something I think we may see more of as we see more patents published in these areas and you know, those will have to be fought out or, you know, whether they're flat out in litigation or they're flat out just in corporate boardrooms and companies have to license their patents to each other.
[00:28:45] Matias Serebrinsky: [00:28:45] Okay, so let's move on to the next company, Viridia Life 
[00:28:47] Greg Kubin: [00:28:47] Sciences, 
[00:28:48] Matias Serebrinsky: [00:28:48] which also seems to have quite some competition. 
[00:28:51] Josh Hardman: [00:28:51] Sometimes with this program. Viridia, aren't the only company looking to develop DMT for a depression indication. So they're looking at treatment resistant depression, but small pharma, which London-based small pharma, which recently listed on the TSXV with the ticket symbol.
[00:29:04] DMT is kind of becoming a heavy hitter in the commercialization of DMT for depression. They're looking at DMT for major depressive disorder. MindMed is also in a more secretive way. Looking at DMT. Algernon is looking at DMT in the use of the treatment of stroke, both acute and in terms of recovery from strokes. Entheon and Solara are both also looking at DMT.
[00:29:24] So DMT is one of these molecules. A bit like 5-MeO-DMT that suddenly seen a groundswell of interest from companies in this space. 
[00:29:31] Michael Haichin: [00:29:31] I guess I would just add that the reason DMT and 5-MeO-DMT are getting so much attention is because of their short acting nature and the larger concerns about the cost effectiveness of psychedelic assisted therapy and the requirements to therapists and quite a lot of resources utilized.
[00:29:48] So with a shorter acting compound, like DMT, 5-MeO-DMT, where the whole drug session itself is under an hour. Um, those are some advantages that companies are clearly looking towards, but are also somewhat unfounded in the clinical 
[00:30:02] literature. 
[00:30:03] Matias Serebrinsky: [00:30:03] Okay, let's discuss next company, Revixia Life Sciences.
[00:30:06] Michael. When I was reading about Revixia.  They have this drug salvinorin a, can you speak a little bit about what 
[00:30:14] what's salvinorin 
[00:30:16] Michael Haichin: [00:30:16] So, Salvinorin A, is the main psychoactive ingredient in the salvia divinorum plant. Which was historically used by being ingested orally by the Mazatecs of Mexico for religious purposes.
[00:30:27] And also has a history of use as a recreational drug. Although in that case, it typically inhaled either smoked or vaporized. And it's what some might consider an atypical psychedelic. The technical classification is dissociative hallucinogen. So it has some similar properties to ketamine, but not altogether.
[00:30:45] It is extremely short acting in the range of 15 minutes and then causes perceptual changes and has other psychedelic qualities. But the overall experience is quite dysphoric or unpleasant. From a pharmacology standpoint, it's different than other psychedelics by mainly acting it's at the Kappa opioid receptor, which is in itself
[00:31:03] a separate receptor from where conventional opioids that most people are familiar with act. And so it has some interesting effects in that it helps reduce opioid dependency or at least anecdotally that seems to be the case and have some pain management qualities. And there is some evidence that it has antidepressant effects, which is spurring the interest of Revixia since they seem to be targeting treatment resistant depression.
[00:31:27] And just to add one last point, there is recent research out of Johns Hopkins that salvinorin a, has very similar effects on human brain functioning that are strikingly similar actually to those of other psychedelics. So it may not be all that different, but the main differentiator is the fact that the experience is so short and considered fairly unpleasant.
[00:31:49] Matias Serebrinsky: [00:31:49] So one of the things that you mentioned is that it is atypical psychedelic. And so the 
[00:31:56] typical psychedelics are mostly 
[00:31:58] Greg Kubin: [00:31:58] tryptamines, um,Phenethylamines, um, belongs to a different family. 
[00:32:03] Michael Haichin: [00:32:03] Yeah, 
[00:32:03] exactly. So the chemical structure itself is quite different from the psychedelic classes that you named and both of those work by primarily activating the serotonin 2A receptor.
[00:32:15] And so Salvinorin A does not seem to be mediating its effects through that. Although the overall research on its pharmacology is still somewhat 
[00:32:23] Josh Hardman: [00:32:23] unclear. 
[00:32:24] Matias Serebrinsky: [00:32:24] Okay. The last 
[00:32:24] psychedelic program that atai has is EmpathBio. Michael, can you speak about that program? 
[00:32:30] Michael Haichin: [00:32:30] So, yeah, EmpathBio is an interesting venture on their part, but one interesting fact about them is the recent partnership with Bionomics another pharmaceutical company and their lead candidate BNC210, which there isn't much publicly available information about them, but they were granted a specific designation called fast track designation by the FDA for the treatment of PTSD.
[00:32:53] And so th the intention of that partnership is to combine EmpathBio's MDMA derivative with the BNC210 molecule to try and treat PTSD without the requirements of psychotherapy that are a part of MAPS' MDMA assisted psychotherapy model. And so that's a point of differentiation where not only are they using a different
[00:33:16] MDMA like molecule, but are also trying to deliver it without the resource intensive nature of psychotherapy. 
[00:33:23] Matias Serebrinsky: [00:33:23] Okay. So let's discuss a few of their non psychedelic programs. Let's start with Kures. 
[00:33:29] Michael Haichin: [00:33:29] So Kures is exploring a deuterated mitragynine molecule for the treatment of opioid use disorder. Graham alluded earlier to the deuterated status of the molecule, but mitragynine is one of two active molecules from kratom or kratom some people pronounce it differently.
[00:33:48] It's the Mitragyna speciosa plant that's native to Southeast Asia and Thailand and its effects have been shown to be similar to opioids, but also with some stimulant effects, depending on the dosage. The pharmacology is not well understood, and it may have its own dependency issues, but, uh, it's been traditionally useful for pain management and opioid withdrawal and human research is not currently allowed with the actual kratom plant in the U S based on certain new FDA restrictions, but through Kures and the use of the isolated, active ingredient mitragynine, they're able to
[00:34:23] study it in humans. 
[00:34:25] Josh Hardman: [00:34:25] And also what's interesting about Kures is the two founders of Kures and the founder of Perception Neuroscience, Jonathan Sporn and now at Gilgamesh, which just recently closed their $27 million series a. So there's an interesting that both exits the founding teams are now at Gilgamesh.
[00:34:40] Matias Serebrinsky: [00:34:40] It is a 
[00:34:41] very, very small psychedelic medicine world. 
[00:34:45] Graham Pechenik: [00:34:45] Maybe one other kind of interesting point of trivia is that Kratom and the active compounds in it were the DA, issued a intent to schedule them. And then after I think tens of thousands of people sort of wrote in, they decided to withdraw their intent.
[00:35:02] I believe it's the only time that's ever ever happened. That's something that's trend to be put on, Schedule 1 and then removed based on really the desires of people who are primarily, it seems from what I understand a letter writing campaign, using kratom solves to manage their pain and want to have access to are the natural compounds.
[00:35:19] And there have been some attempts over the years to try to bring something to three clinical trials. But for now, these people do have access except for in six states. Although of course it's fairly easy to order anything off the web to have access to the kratom plant. 
[00:35:34] Matias Serebrinsky: [00:35:34] I guess another example would be dialex, right?
[00:35:36] Where it comes from CBD, which is also available and can be commercialized freely. 
[00:35:42] Graham Pechenik: [00:35:42] Yeah, that's a great example. And I mean, I think part of the reason of bringing something through clinical trials of course, is you can have your insurance cover it. Epidiolex the list price, I think is 1200 something dollars per a hundred milliliter bottle.
[00:35:55] Of course, $1,200 is a lot more than you would pay to buy CBD at your dispensary. I mean, the CBD that you buy through GW pharma is can it be GMP CBD, and you can be sure that you are getting the exact dosage amount that you think you're getting, unlike probably most of what you would find at a dispensary or ordering online, but certainly that the price difference is there.
[00:36:17] So, you know, there's obviously a benefit to getting something FDA approved so you can potentially get it covered by insurance, but that's itself, uh, certainly a whole another process and there's no 
[00:36:27] guarantee. 
[00:36:29] Matias Serebrinsky: [00:36:29] Okay. So let's discuss the last company in the 
[00:36:32] non psychedelic programs, Recognify Life Sciences.
[00:36:36] Michael Haichin: [00:36:36] So, I guess one thing that's interesting about Recognify Life Sciences main program for drug and development is that it's targeting a cognitive impairment in schizophrenia, which is a huge area of unmet need. So to take a step back, schizophrenia is divided into three main classes of symptoms. Positive symptoms,
[00:36:53] so what you might associate like auditory hallucinations, or delusions of grandeur, there are negative symptoms, which are. Uh, reductions in emotional expression or loss of interest. And then the last category is the cognitive symptoms. So memory and thinking and conventional anti-psychotics are only good at addressing those positive symptoms.
[00:37:10] So there's a huge need for drugs that address both negative and or cognitive symptoms. And in that sense, this venture is interesting because there's really nothing there available for patients with schizophrenia, for their cognitive symptoms. 
[00:37:22] Graham Pechenik: [00:37:22] Perhaps, it's interesting to note that this program and 10 issued patents that cover it were licensed in from Alor Dan for an upfront payment of half, a million dollars and a mid single digit royalty.
[00:37:34] If they ever make sales revenues on it,
[00:37:40] Matias Serebrinsky: [00:37:40] The program we didn't discuss is COMPASS Pathways and that's because atai actually doesn't consider COMPASS as one of their 10 development programs. They consider COMPASS as a , strategic investment. As I reminder, COMPASS in phase 
[00:37:55] two clinical trials for a program studying 
[00:37:58] psilocybin therapy for treatment resistant depression.
[00:38:06] So atai invested in COMPASS in August 2018. Today they have 21.6% ownership in COMPASS, which 
[00:38:15] is around 330 million dollars at COMPASS', current market cap. So, you know, if even without 
[00:38:23] their own programs on what they are currently developing. They have this ownership in a public company that's already worth around $330 
[00:38:31] million.
[00:38:32] Why don't we discuss a little bit the enabling technologies. And I found this 
[00:38:37] fascinating since it's quite unique also, and it's different than how most psychedelic medicine companies are going to market. So why is this important for atai? Why are they acquiring and developing, enabling technologies? 
[00:38:51] Josh Hardman: [00:38:51] So I think we're seeing a lot of companies in this space now looking to bring digital therapeutics into play, looking at new drug delivery mechanisms.
[00:39:00] And what atai has done in here is instead of entering into a feasibility agreement with a company like IntelGenx, who creates oral films and other delivery mechanisms. So instead of just entering into agreement with them, like a company like Cybin did, they've actually taken, uh, an equity position in the company, uh, to have control over it.
[00:39:15] So what that does is they can use it as a service for the other companies and things like Entheogenics bio sciences, which is one of these enabling technologies. This is AI based drug discovery, augmentation. So using AI to accelerate the ability to identify candidates that would be worth taking into clinical and human clinical trials.
[00:39:34] So, you know, technologies like this, other companies are relying on third parties, contract research organizations, and deals where as atai's really trying to bring that in house. One point that is interesting on this topic is this calendar year thus far, atai has spent $1.4 million, according to the S-1 on acquisitions or strategic investments
[00:39:50] in four of these enabling technologies. That's obviously a really small amount of money compared to the projects that they're investing in. So the either says a lot about, atai's ability to negotiate these milestone based payments, where they invest a very small amount upfront and then invest the rest through commitments through when milestones are met, you know, or, you know, someone who's being more pessimistic could suggest that, you know, there's very little to these companies that are early stage and they're acquiring the team members more than the projects themselves.
[00:40:16] Matias Serebrinsky: [00:40:16] I guess that 
[00:40:17] when we talk about 
[00:40:18] enabling technologies, that means a few things. Josh, you mentioned AI 
[00:40:23] enabled drug discovery platforms, but also that means digital therapeutics. That means different types of drug delivery 
[00:40:32] technologies, and also ways to segment or stratified patients. 
[00:40:37] So 
[00:40:38] Michael Haichin: [00:40:38] as if clinical trials with psychedelics is not complicated enough by a variety of factors with atai's interest in enabling technologies or digital therapeutics to pair with some of their drug candidates.
[00:40:51] There's an added level of complexity as far as the regulatory burden. So drugs and devices typically have distinct regulatory pathways. And the combination of the two is a relatively new phenomenon that most regulatory bodies are still trying to figure out how they would handle. 
[00:41:08] Matias Serebrinsky: [00:41:08] All right. So pretty much half of the S-1 is actually dedicated to listing risks that atai will face,
[00:41:16] after they go public. So why don't we talk about 
[00:41:20] some of the most interesting or 
[00:41:23] noteworthy risks that they mentioned on one of them is that the skills that it 
[00:41:29] takes 
[00:41:29] to be a drug discovery and drug development program are very different than the skills that it 
[00:41:35] takes to commercialize a drug. 
[00:41:38] Josh Hardman: [00:41:38] But I think, you know, there's a broader kind of consideration there.
[00:41:40] About the cost efficacy of these drugs. And, you know, that's something that MAPS as it's moved towards later stages and completed its first of two phase three trials has had to start considering. So MAPS published, I think late last year, cost effectiveness study on MDMA assisted psychotherapy for PTSD, which showed I think $103,000 of savings per person over over a 20 to 30 year period.
[00:42:01] So I think, at the moment, there's just such a focus on regulatory approvals. Um, as time goes on and these drugs move through that, the respective phases, there will be more of a focus, not just on marketing, but also on cost effectiveness of the therapy. And, you know, that's why we're starting to see some, some companies, as, as Michael mentioned, looking at5-MeO-DMT and DMT itself because of the shorter duration of action and the companies are taking perhaps arguably more
[00:42:26] dystopian angles and are looking to kind of remove the, the human aspect. So removing the therapist from the situation, you know, whether you put the therapist on a screen in the case of tele medicine, or whether you create a kind of AI human to do that therapy itself. So there's many ways that companies are looking at cost cutting, but overall, the main focus in my opinion is really going to shift from approvals to cost effectiveness and convincing regulators and insurance companies of that cost effectiveness.
[00:42:52] It also, you know, that differs. Based on in North America, we see insurance companies having to be convinced of the cost effectiveness. In the UK, the buyer is about higher. We have a state health care provider and ultimately it's funded by the government at the time. So they're often thinking on shorter timeframes in terms of cost-effectiveness.
[00:43:08] So. Things like Spravato Johnson and Johnson's esketamine product for depression wasn't approved for use, or it wasn't recommended for use in the UK because it was deemed to be too expensive based on the cost benefit analysis. So I think, you know, these considerations are going to become a lot more prevalent and atai outlines them in their S-1, but I think, yeah.
[00:43:26] What's so useful to investors, uh, in the S-1 is looking at the risks that atai outlines and identifying which ones that you need to atai and, which ones are relevant for the entire sector . 
[00:43:36] Michael Haichin: [00:43:36] To Josh's most recent point about differentiating what's unique to atai and what isn't.  One that isn't and speaks to the lack of innovation in mental health drugs in general is how difficult it is to find a drug that shows some efficacy in pre-clinical or animal models.
[00:43:52] Where there's always a risk that, that doesn't translate to humans. And then the subsequent need to show that the therapy is safe and finally, the biggest hurdle being showing that it's effective. And so as you move through the clinical trial process, an increasing number of molecules fail that next step.
[00:44:08] And so it's appropriate that they highlight how big, a risk that is with all their ventures, just because of how difficult it is to develop a central nervous system acting drug 
[00:44:18] Matias Serebrinsky: [00:44:18] Graham. They also mentioned a few IP 
[00:44:21] risks. Can you talk a little bit about what caught your 
[00:44:25] attention 
[00:44:26] Graham Pechenik: [00:44:26] Yeah, I'm happy to go through those? I mean, I will note maybe at the outset that the risk section, part of the reason it's so big is because the S-1 can create liability for a company if there are any material emissions.
[00:44:37] So especially when it comes to risk, there is a lot of boilerplate in there, and that's really true with the IP section, but broadly, I mean, the types of risks that anyone in this space faces are really two. One is not being able to get patent protection on your own products, which means competitors can develop and commercialize competing products without you having any means of preventing them through the exclusivity of a patent
[00:45:00] right. And then the other is your own products could potentially infringe the patent of another. So it just generally. At least a third of all applications don't end up being granted for one reason or another. They have to maintain these patents after they've been granted. And then of course, you know, there's a risk just enforcing a patent.
[00:45:16] It's difficult, it's expensive for things that are in licensed. Sometimes it's difficult to even have the right to be able to enforce that patent again somewhere else. And the sort of other bucket of just having potentially a product that can infringe the claim of another, you know, there's, as they point out patents, aren't published for 18 months.
[00:45:32] So there's a lot of unknowns out there about whether or not somebody has something that covers the product that you're working on. And one of the things they know it is litigation just itself can be a weapon. So they say that many companies in biotech and pharmaceutical industries have used. I see litigation as a means to gain an advantage.
[00:45:47] So just the threat of litigation itself and the uncertainty of litigation itself is often used for competitive purposes. It enables a competitor who sues you to ask for production of all your documents. They can obtain like trade secret documents and a lot of things that you wouldn't otherwise want to reveal.
[00:46:01] Find out information about your projects that are more secret compounds. You're working on. 
[00:46:05] Matias Serebrinsky: [00:46:05] Graham. Do 
[00:46:06] you think it's likely that patent litigation will happen in psychedelic medicine? 
[00:46:11] Graham Pechenik: [00:46:11] I mean, if it goes the way of other industries, it's much more likely that it will happen than it won't yeah, that's what happened in the early days of biotech.
[00:46:18] That's what's always happened in pharmaceuticals and most merging industries there's a period of time where there's a lot of competing patent litigations against each other. I mean, both because, you know, they can be used to really prevent a competitor from launching a product or competing directly with you, but also because they can be used as a way of getting documents from a competitor, getting witnesses from a competitor to, you know, take depositions of and get information from.
[00:46:46] Michael Haichin: [00:46:46] So one last risk. I wanted to mention in regards to the combination of a drug and a medical device, that atai seems to be interested in is that with the inclusion of companion, diagnostic tests or some form of digital therapeutic, there is the requirement that they obtained coverage and reimbursement for that additional device on top of the drug itself.
[00:47:09] And that paradigm may add some additional risk when it comes to obtaining reimbursement, which ultimately dictates the success of a drug or a therapy. 
[00:47:18] Josh Hardman: [00:47:18] So one other risk that isn't really covered by the kind of standard format of the  is this fact that there's a lot of overlap within their platform. So for example, they have three drug candidates that are targeting opioid use disorder.
[00:47:29] They have, ibogaine, noribogaine and , deuterated mitragynine they also have three candidates looking at treatment resistant depression. So DMT, arketamine and Salvinorin A. And in addition to that, they also have the 21.6% equity stake in COMPASS, which is looking at psilocybin for treatment resistant depression. So there's quite a lot of concentration there with have six of their drug candidates looking at two indications.
[00:47:52] So when we think about, you know, I mean, some people could say that's good because it gives them a few shots on goal or those indications. But when people are thinking about the total addressable market, You have to remember that is unlikely that all six of these candidates would end up being, you know, the dominant drug for , any one of those two indications.
[00:48:07] So I just wanted to kind of recapitulate that point, but this is an incredibly competitive landscape and these are incredibly competitive ailments that many people are trying to treat, which is good for society that we finally have a huge amount of investment in these compounds. 
[00:48:21] Matias Serebrinsky: [00:48:21] All right. Well, 
[00:48:22] that's a wrap.
[00:48:23] Thank you so much, Josh, 
[00:48:25] Greg Kubin: [00:48:25] Michael, Graham, for your time and sharing your knowledge about atai.
[00:48:33] Matias Serebrinsky: [00:48:33] Atai is a fascinating company. They are developing therapies with a diverse assortment of psychedelic compounds. They are doing it with laser sharp execution and have been able to raise a ton of capital in a short period of time. Let's remember they were one of the first for-profit companies to bet on psychedelic medicine and they played a big role in attracting attention and resources to the space.
[00:48:57] With all this potential, it's still early days. Their programs are still in clinical trials and potentially, will it be approved in the next few years
[00:49:07]This is Business Trip, a podcast about psychedelic entrepreneurship. If you liked this episode, you can help us by subscribing to the podcast and leaving a review.
[00:49:17] You can tweet at us or find us on the gram at businesstripfm. And if you're building a company in psychedelics, definitely reach out. My email is matias@businesstrip.fm. I'm your host Matias Serebrinsky. Business Trip is created  by me and Greg Kubin. Producer and editor is Jonathan Davis. Sound design and engineering came from Zack Frank.
[00:49:40] Our theme music is by Dorian Love and additional music credits are in the show notes. This is Business Trip. Thanks for tripping with us and we'll see you next time.
[00:49:54] Greg Kubin: [00:49:54] Should I host this episode? No, you host. No, you hosts. No, you host you. No, you host, you host, you host you host. No, you host.