atai Life Sciences: Psychedelics’s Dutch Disease?

atai just published its 2021 financial report.  In its press release, the Company was effusive over its R&D progress, “philanthropic arm” and innovative “patient support technologies and precision mental health approaches.”

To fund the above initiatives, the Company claims to have ended 2021 with $362M in the bank. 

Something in this report, however, doesn’t sit well with me.  Considering their myriad of activities and my knowledge of strategic planning and program implementation, I can’t help but wonder whether they are in the throes of the psychedelics version of the Dutch Disease.  Simply put, the Dutch Disease was a real-life 1970s financial hangover that came about when Netherland’s economy suddenly became flush with oil money. 

Does atai have too much of a good thing i.e capital?  Maybe.

For one thing, atai hasn’t chosen a single strategic lane or two; they are spanning a superhighway, including off ramps.  atai’s research effort includes “13 discovery and drug development programs and four enabling technologies.”  They have made an investment in Compass Pathways plus are executing a variety of other high profile business initiatives.  A lack of focus combined with misallocated capital and operational complexity can be deadly for early-stage firms.  

Secondly, one can’t help but notice the eery similarities between today’s well-funded psychedelics firms and the overly ambitious capital spending of publicly-traded Canadian LPs during the hype-driven 2018-19 period. We know how the latter played out. Boom can quickly turn into bust when expensive bets don’t pay off and retail investors become fickle.

I don’t claim to know what’s happening under atai’s hood. Other psychedelics companies like Compass, Beckley Psytech and MindMed have raised hundreds of millions of dollars and face similar challenges and risks. What I do know is how the average start up thinks and acts. Once you raise a lot of money (especially in a high potential, virgin market) there is an impetus to spend big and not in a particularly efficient manner. From a social psychology perspective, one is ‘in for a penny, in for a pound’ Put another way, which executive team or Board wants to admit to the public markets that their Company raised too much money or that their growth strategy ought to be scaled back?

I want atai to succeed for their own good, for the sake of their prospective patients and the for nascent psychedelics industry.  Perhaps they - and others - are biting off more than they can chew.

PS:  atai’s stock price has fallen -8% since the 2021 results were reported.

#psychedelics #atai #strategy @atailifesciences #compasspathways