Atai raises $43m to repurpose illicit drugs as medicines

Atai Life sciences has closed a $43 million second-round financing that will help it advance new medicines for mental illnesses derived from compounds in illicit drugs.

The German-headquartered biotech says it will use the proceeds to advance its pipeline of drugs for depression and other psychiatric disorders, as well as in-license additional compounds and to grow its drug development platform.

Co-founded by German entrepreneur and investor Christian Angermayer, Atai says it is supporting the revival of “formerly stigmatised” compounds with evidence of activity in humans, such as psilocybin and ketamine, in the treatment of mental health conditions.

The $43 million Series B comes after the company raised $25 million in a first round last October and just under $13 million in seed financing.

At the moment, Atai’s activities in this area are focused around three companies. Earlier this year it acquired a majority stake in New York-based Perception Neurosciences, which is developing a single-isomer derivative of ketamine – called arketamine (PCN 101) – for neuropsychiatric diseases.

It also has an investment position in Compass Pathways, which is focused on testing psilocybin, an active compound in Psilocybe species of magic mushrooms that has picked up a breakthrough designation from the FDA for treatment-resistant depression and is heading for large-scale clinical trials.

Rounding out the trio is Innoplexus, a big data and artificial intelligence specialist that is providing the technology that underpins Atai’s in-house drug discovery and development operations.

There’s a very recent precedent for developing new psychiatric drugs based on drugs that are more commonly associated with abuse. Johnson & Johnson’s pharma unit Janssen has just won FDA approval for a nasal spray formulation of another ketamine derivative – Spravato (esketamine) – as an add-on to oral antidepressants for treatment-resistant depression.

Ketamine was originally developed in the 1960s as an anaesthetic but more recently has become better known as a party drug – sometimes referred to as ‘Special K’ or ‘Vitamin K’ – that has become associated with the clubbing and raving scenes. It has also developed a sinister reputation as a date rape drug.

The derivatives are designed to limit the potential for abuse but retain the fast-acting antidepressant activity of the parent drug. Treatment-resistant depression is an obvious first target as it affects approximately 100 million people around the world and puts people at much higher risk of self-harm and suicide.

The FDA’s approval of Spravato is an encouragement to investors, who can see there is a tried and tested route to market for medicines derived from recreational drugs.

“Mental illnesses such as depression are debilitating for so many people.” said Florian Brand, Atai’s CEO and co-founder. “The companies on our platform are developing extremely promising candidates to treat mental health disorders and bring a much-needed paradigm shift.”

The Series B round was led by Michael Auerbach’s New York-based Subversive Capital. It was subscribed by both new and existing investors, including Apeiron Investment Group, Bail Capital, and Efrem Kamen, founder of Pura Vida Investments.