Clinical-stage biopharmaceutical company Atai Life Sciences (Nasdaq: ATAI) provided investors an outlook on its operational runway as it begins to double down on trimming costs.
Most of the savings will come from a labor cuts in nonclinical development as well as general and administration, the company said.
“As part of our efforts to further focus our capital allocation towards generating meaningful clinical readouts in the near-term and to optimize our operational efficiency, we reduced our team by approximately 30%,” CEO and co-founder Florian Brand said in a Monday statement.
“The dosing of the first patient in the phase 2b study of RL-007 in CIAS earlier this quarter exemplifies the execution capabilities of our team as we advance our programs into later-stage clinical studies,” he added.
Despite Brand’s optimism, the promise behind the drug remains to be seen. The company’s shares slumped by more than 40% last month on news that the phase 2a clinical trial results for its ketamine therapy (PCN-101) to treat depression failed to meet its primary endpoint.
During a November investors’ call, Jefferies Group analyst Andrew Tsai asked whether or not BioGen’s drug to treat cognitive impairment associated with schizophrenia (CIAS) failing in studies earlier this year shakes the company’s confidence in embarking on a mid-stage trial for its RL-007 drug looking at the mental disorder.
Atai’s co-founder and chief scientific officer, Srinivas Rao, replied that the “challenging indication” is also part of its appeal.
“Obviously there’s a huge medical need here,” Rao said at the time, noting the societal and personal costs of struggling with the mental health disorder. “In terms of biomarker data, I don’t recall seeing anything published on that, personally. So, it will be interesting to get a better read sense of that or even get a more granular read on the results that they have.”
Brand concluded the call as Tsai attempted to follow up.
The news could come as a cautionary tale for the nascent psychedelics industry, which has struggled finding pathways toward commercial viability.
Still, Atai had a decent 2022 amid sizable losses and negative cash flows, and has fared better than most despite accumulating a deficit since 2018 of nearly $500 million by the end of 2022.
The downsizing has extended the company’s operational cash runway, which its expects to maintain into the first half of 2026.
Atai spent $19.4 million on general and administrative expenses, according to its most recent earnings report.