Shares Of Atai Life Go Up 40% On First Day On Stock Market

Shares of Atai Life Sciences soared on Friday, being their first day of trading on Wall Street.

The newly listed Nasdaq stock jumped to 40% upon opening, before pulling back.

The German biotech’s IPO was priced at $15 per share, on Thursday night -the high end of the expected range. The shared closed on Friday at $19.45.

Atai, which aims to make psychedelic drugs to treat mental health disorders, raised $225 million and currently is valued at $2.3 billion.

It is the third psychedelic biotech to go public in the U.S., following in the footsteps of MindMed, which went public on the Nasdaq in April, and Compass Pathways, which listed in September. As of Thursday, Compass Pathways was up 26% since its listing, and MindMed, which just announced its CEO’s resignation, was down about 19%.

Each of the biotechs is formulating therapies using the psychedelic mushroom compound psilocybin, LSD, and MDMA derivatives to treat addiction and mental illnesses ranging from depression, anxiety, schizophrenia, and traumatic brain injury. Only three years after its founding, Atai Life Sciences already has 10 therapeutic programs in the works, each at various stages of clinical trials.

The company's founder and chairman, Christian Angermayer, announced on Friday, “The world we’re building is a bad place for our brain, so mental health issues will go up. But I do think we have some real shots in our portfolio to end the mental health crisis.”

Interest in psychedelic treatments has grown alongside rising interest in these therapies from the medical community.

Johns Hopkins University, Yale University, the University of California, Berkeley, and the Icahn School of Medicine are among the institutions studying psychedelics and psychology. Recent Studies establishing MDMA’s promise in treating post-traumatic stress disorder and the efficacy of psilocybin, a hallucinogenic chemical found in psychedelic mushrooms, in treating drug-resistant depression have only heightened interest in the space.

Angermayer was an early investor in Compass Pathways, and his own company Atai serves as a holding company for various psychedelic start-ups pursuing alternative treatments for mental illness. He told CNBC on Friday that new-age biotechs are building on centuries of practice in shamanistic cultures and religions.

There are currently federal restrictions for psychedelic mushrooms, MDMA — commonly known as molly or ecstasy — and LSD around the world. However, Oregon last year became the first U.S. state to legalize psychedelics for therapeutic use. Residents in Washington, D.C., also recently voted in support of decriminalizing the use of psychedelics for medicinal purposes.

Angermayer is betting that federal approval of these drugs for therapeutic use could make a huge difference for those suffering from mental illness. “They are very, very powerful medications, but they have to be taken under supervision. ... You will be tripping while you are sitting with your therapist.”

Atai Life Sciences is backed by the billionaire investor Peter Thiel, as well as Mike Novogratz’s Galaxy Investments and Angermayer’s own Apeiron Investment Group, among others. 

Thiel made an $11.9 million investment in Atai in November, via Thiel Capital, his venture firm.

“Atai’s great virtue is to take mental illness as seriously as we should have been taking all illness all along,” said Thiel, who is co-founder of Palantir and PayPal. “The company’s most valuable asset is its sense of urgency.”

According to venture capital reports, VC deals in psychedelics have risen substantially in the last three years. In 2018 and 2019, less than $100 million of venture capital was invested in psychedelic start-ups, however, 2020 saw $346 million. By April 2021, VCs invested $329 million in the industry.

Palo Santo said it had taken a notable stake in Atai’s IPO. “There is an urgent need to address our broken mental healthcare system,” Daniel Goldberg, co-founder of Palo Santo, said in a statement. “We believe psychedelics will expand treatment options and transform the outdated system.”

Atai submitted an S-1 filing to the Securities and Exchange Commission in April that showed that the company raised an aggregate of $362.3 million from private investors at that point.

The company, which describes itself as a drug development platform, was set up to acquire, incubate and develop psychedelics and other drugs that can be used to treat mental health conditions like depression, anxiety, and addiction, etc.

With a workforce of about fifty, in offices spread across Berlin, New York, and San Diego, Atai is currently in partnership with 14 companies with a focus on drug development and other related technologies.

In exchange for a majority stake in the drugs and technologies they develop, Atai helps the scientists raise money, work with regulators and conduct clinical trials. None of Atai’s drugs have been approved by regulators to date.

As of Monday, the company's stock (ATAI : NASDAQ) is trading at $19.89.