Psychedelic IPOs build momentum as Atai Life Sciences goes public


Making its Wall Street debut, Peter Thiel-backed Atai Life Sciences has become the third biotech company focused on psychedelic treatment for mental health disorders to list on a major US stock exchange.

Coming on the heels of debuts by MindMed and Compass Pathways, the Atai deal underscores continuing investor interest and growing acceptance of what until recently was seen as a fringe area of medicine.

On Thursday evening, Berlin-based Atai priced its shares at the top of the target range at $15, raising $225 million. Based on the number of shares outstanding, the deal values the company at about $2.3 billion. Private investors valued Atai at $2 billion in a deal in March.

Psychedelic drugs that are being developed for clinical use include those on the federal list of illegal substances such as LSD, psilocybin—the active ingredient in magic mushrooms—and MDMA, also known by its recreational name ecstasy or Molly.

Clinical research suggests that psychedelics could be effective in treating conditions including cluster migraines, severe post-traumatic stress disorder, depression and end-of-life anxiety.

Investors are hopeful that FDA approval of these compounds could revolutionize mental health treatments, leading to the creation of a large industry consisting of not only drug discovery companies but also treatment clinics and ancillary software platforms.

“Psychedelics for mental health could be what anesthetics were to surgery 100 years ago,” said Eric Scott, who until recently was a principal with Founders Fund and is currently a senior adviser at 8VC. Founders Fund backed Compass Pathways.

Some investors believe that these compounds can eventually help treat other medical conditions, including strokes. 

But first, in addition to regulatory hurdles, psychedelic companies have to hone in on a business model that is not a big time commitment for physicians and ensure that health plans would cover the cost of the treatment.

Read full article here on Pitchbook.