Hi everyone, I’m Greg Weaver, CFO of atai Life Sciences. And I’m pleased to welcome you to our First Quarter 2022 Earnings Management Interview. I’m joined today by my colleagues, CEO, Florian Brand; and CSO, Srini Rao. We thought we would do things a bit differently this time by hosting a conversation with two of our analysts, Charles Duncan from Cantor and Ritu Baral from Cowen. We’re super excited to have them here with us today. Over the next 30 minutes, Ritu and Charles will be asking us a series of questions on our Q1 activities and the progress made in our pipeline developments. As a reminder, our discussion today may include forward-looking statements about atai’s future results and performance, which are subject to risks and uncertainties that may cause actual results to differ. Atai does not undertake any obligation to update such statements, which speak only as of today. Before moving to the interview, I’d like to briefly comment on our first quarter cash and operating expenses as reported in today’s Q1 earnings release. Our first quarter use of cash, total operating expenses, R&D, and G&A expenses were generally in line with expectations. The total use of cash was $27 million for the quarter, and we ended Q1 with $335 million in cash. We reiterate our guidance with a runway into 2024. I’d like to emphasize the strength of that cash position with liquidity on hand to reach multiple key clinical milestones over the next two years, along with our continued disciplined management of our cash resources. With that, I’ll hand the call over to Charles to kick off the conversation. Charles?

Yes. And also thanks from my side, first of all, for joining this new approach or this new format that we are hosting Charles and Ritu. To answer your question, Charles, yes, we are facing turbulent times. If we look at the XBI biotech index, we basically are where we were five years ago or below that in May 2017, despite all the value that has been generated over those five years across therapeutic areas and companies. Many of those companies are now trading below cash or at cash. Broadly, I think it’s fair to say that it’s a great opportunity for investors to invest in biotech. As a result of the current prices that we are seeing and this undervalued sector. If you look at neuropsychiatry, the therapeutic area that we are active in and atai in particular, I believe there’s an even greater opportunity for investors. Number one, as you know, there are approximately 1 billion people globally suffering from mental health disorders, and COVID is making this number likely to grow even further sadly. At the same time, we’ve seen very little innovation in the neuropsych space over the last decades. The unmet need has unfortunately not been met with much progress in terms of approved drugs. In the neuropsychiatry space, only 17 drugs have been approved since 2015 compared to around 108 drugs in oncology. We started atai with a very unique model to de-risk on an asset level, as well as a diverse pipeline with multiple shots on goal. With our cash position of $335 million, we are in a fortunate and strong position to execute on this pipeline rigorously. Regarding PD opportunities, yes, we will remain active in screening the market for potential new opportunities in the BDI space.

Very good, bad news, good news. So Ritu, any thoughts?

Florian, thanks for including me as well in this new format. On that, regarding your 81% cash position and given the unique strategy that atai has, which involves digital technologies as complements to drug therapy, how much flexibility does that initiative have? Could you deemphasize it and extend the runway a little further, while offsetting that by considering digital therapeutics as an emerging aspect of psychiatric care?

Yes. Our approach to effectively treating mental health disorders and achieving sustained, clinically meaningful behavioral changes in mental health patients involves having novel differentiated pharmacological agents, which open a therapeutic window through neuroplasticity and behavioral plasticity. We combine them with digital therapeutics that allow for sustained effects in a durable way. This is essential, especially with psychedelic-assisted therapies, to bring them through the clinical trials. We are very disciplined in our cash management, continuously reviewing our portfolio, especially as new data comes out, updating our assumptions about the likelihood of success, and making capital allocation decisions accordingly. Our cash position of $335 million is sufficient to hit all the R&D catalysts we have communicated, including the digital therapeutics we're developing.

Great.

One thing I can add is that, as both of you know, the risk associated with drugs tends to be higher, particularly early on. So I would say the risk associated with digital therapeutics is actually much lower. We are using established psychotherapeutic approaches that have been widely used and adapted to this new format, but we know they are beneficial. Overall, the risk associated with those is significantly less than the risk associated with the drugs themselves. But of course, we have multiple shots on goal regarding the drugs.

Good point. Let’s dive into some of the questions on the pipeline now. Perhaps we could start with Perception PCN-101. That trial is ongoing, but as you look at the landscape, what do you think are the biggest mistakes in the commercial profile and launch prep for SPRAVATO? That product has vastly underperformed and missed expectations with really modest commercial uptake. What are the lessons learned for you guys as you think about the PCN-101 opportunity?

Sure. Let me provide a high-level perspective, and then I’ll hand it over to Srini. It’s important to emphasize that we are differentiated from esketamine. Our target product profile, and also commercial profile that you mentioned, is different from SPRAVATO. While many of our therapies are thought to be administered in clinics, for instance, our DMT program, there are over a thousand licensed clinics in the U.S. that can administer SPRAVATO. This is great news for patients and builds a basis for our rollout. In this case, it’s advantageous not to be the first mover, but to learn from the first mover and use what has been established to our advantage. Those are high-level perspectives. Srini, would you like to comment further?

No, I think you’ve captured all the main points regarding commercial considerations. As Florian mentioned, the duration of efficacy has always been front and center. We can utilize the existing infrastructure, so why build when you can leverage what's already there? That’s what we aim to do with several of our programs.

Ultimately, one of the key takeaways is to be proactive and engage early with stakeholders, including payers, physicians, and patient groups, to raise awareness and educate the landscape. This is a paradigm shift in psychiatry with SPRAVATO, and it's important to emphasize that we can build not only on the clinic infrastructure but also on the capacity that was developed in the past.

Got it. As you consider the PCN-101 clinical program transitioning into Phase 2 and then Phase 3, especially your ideal Phase 3 trial design, populations, and endpoints, how do you compare that to the SPRAVATO Phase 3 program?

Currently, we are still in the midst of Phase 2. The Phase 3 program will be informed by the results of this trial, particularly with regards to redosing and other considerations. There are various unique trial designs that Janssen had in their Phase 3 program, and we are developing the compound for at-home use, allowing us to model based on other recently approved compounds for at-home use.

Great. I’ll turn it back to Charles.

Thanks, Ritu. I want to stick with the theme of innovation for treatment-resistant depression patients and the program you've discussed. However, I also want to consider your recent investment in COMPASS and the plans forward with COMP360 following its end of Phase 2 meeting with the agency. What are your key takeaways from the data you analyzed from their rigorously conducted Phase 2b, and what would you like to see in their Phase 3 concerning probability of success for that program?

We have discussed the results of the COMPASS program in previous calls. The rapidity of onset was one of the most robust demonstrations, and the durability of effect was a key takeaway. The premise of this compound class is that a single administration of the drug provides long-term efficacy, typically without side effects during the intervening period. These results were replicated, demonstrating the long duration of efficacy and good safety. These factors excited us to increase our stake in COMPASS. In terms of what we would like to see moving forward, we look for the clearance and advancement of their Phase 3 program. I imagine we will learn a lot from the Perception study, just as they have learned from the Phase 2b.

Got it. Very helpful. Srini, anything to add before we move on?

No, I think this aligns with our approach to using digital therapeutics and biomarkers to improve flexibility in assessing the optimal time for redosing. This is tailored to our heterogeneous patient population and is key for developing our compounds.

A very interesting differentiating paradigm for depression patients. I want to quickly address the recent progress with Recognify and its candidate RL-007, evaluated for cognitive impairment associated with schizophrenia. As you know, a decrease of one to two standard deviations in cognitive function compares to the general population is observed. Screening one core pharmacological treatment class for schizophrenia, the anti-psychedelics, unfortunately exacerbates the targeted dysfunction for this patient population. Atai is investing in Recognify with RL-007 as a cholinergic, glutamatergic, and GABA-B receptor modulator. Why do you believe this will work? How might modulating the activity of these receptors translate into clinical benefits for these patients?

Cognition is complicated, as multiple neurotransmitter systems are involved. Various systems, including glutamate and cholinergic, have been investigated, often focusing on a single receptor system. Our belief is that modulating multiple systems gently makes a difference, as cognitive impairments are heterogeneous among patients. This drug aims for a broader effect.

Good. In terms of stewardship of capital, what key data from your previous work and studies on RL-007 would give you confidence to move forward into a Phase 2 clinical proof of concept study with this candidate? In particular, what does the quantitative EEG data suggest regarding potential activity that may translate into therapeutic benefit?

We're very encouraged by the consistent pro-cognitive effect observed first in healthy volunteers and then in our Phase 2 biomarker study conducted several months ago, showing clinically meaningful pro-cognitive effects and supportive qEEG data reassuring us to advance this into a full clinical proof of concept study.

We observed a consistent inverted U-shaped curve for quantitative EEG and cognition, evidencing an important internal correlation in those data, which gives us confidence for moving forward.

Let’s shift focus to your GABAergic program, GRX-917, targeting anxiety disorders. Can you discuss the differential mechanism of this drug around GABA compared to other treatments like benzodiazepines and the numerous positive allosteric modulators in the clinic for MDD?

This is a unique drug. Benzodiazepines are direct GABA agonists, activating the channel and suppressing neuronal activity for anxiolysis. Positive allosteric modulators improve selectivity, but they still require the endogenous ligand. This compound, etifoxine, increases the production of neurosteroids like allopregnanolone, providing a better safety profile compared to traditional methods.

Based on the preclinical data and your observations, how do your expectations regarding sedation and somnolence compare to benzodiazepines versus the positive allosteric modulators?

This drug has a long history since its introduction in 1979. Clinical experience shows minimal sedation, unlike benzodiazepines. From our Phase 1 trial of GRX-917, we did not observe significant sedation, so we anticipate similar findings moving forward.

I’ll turn it back to Charles for the next program.

Before we wrap up, I wanted to ask about the importance of patient experiences concerning treatment-resistant depression and your VLS-01 program, particularly the buccal transmucosal film containing DMT. How is Atai considering short versus long-acting psychedelics, and how might that impact therapeutic benefits relative to the emerging treatment landscape with COMPASS and others?

There are important scientific and commercial considerations to factor in. On the commercial side, our DMT programs are being designed to fit into pragmatic treatment situations, accelerating commercialization. We aim for an optimal duration of effect around 45 minutes to an hour for psychedelics. Data from COMPASS showcases rapid onset and promising durability compared to traditional treatments. We want to balance efficacy and treatment windows. Srini, would you want to add to that?

We always anticipate a need for some redosing, and shorter psychedelic effects are part of that design. Understanding the correlation between psychedelic experience and efficacy is crucial as we progress with our Phase 2a programs for both VLS-01 and Revixia.

Based on all the data so far, our second-generation compounds appear to offer a reasonable starting point. For our third-generation compounds, we are also investigating whether it's possible to decouple the psychedelic experience from the neuroplastic effects.

Thank you for the insights.

I must apologize on a housekeeping perspective as 30 minutes have passed quickly. I’ll wrap it up here. Thank you, Ritu and Charles, for your great questions. It’s been a valuable conversation. I wish to leave investors with some key takeaways: these turbulent financial markets present challenges, but our company is well positioned. We have the resources to weather this storm and a strong treasury to fund our programs and reach the milestones discussed today. We’re focused in our clinical development sweet spot, aimed at patients in need, and very optimistic about the future both short-term and long-term. Thank you, and we look forward to speaking again next quarter. Have a great day.