UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
n
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
Commission File Number:
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(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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Accelerated filer |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 1, 2023, the registrant had
ATAI Life Sciences N.V.
FORM 10-Q
Table of Contents
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Page |
1 |
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PART I. FINANCIAL INFORMATION |
3 |
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Item 1. |
3 |
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Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022 |
3 |
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Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022 |
4 |
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5 |
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6 |
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Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022 |
7 |
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8 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
35 |
Item 3. |
49 |
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Item 4. |
50 |
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PART II. OTHER INFORMATION |
51 |
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Item 1. |
51 |
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Item 1A. |
51 |
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Item 2. |
51 |
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Item 3. |
51 |
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Item 4. |
51 |
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Item 5. |
51 |
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Item 6. |
53 |
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54 |
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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 (the “Quarterly Report) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). AAll statements contained in this Quarterly Report other than statements of historical fact should be considered forward-looking statements, including without limitation statements regarding our future operating results and financial position; the success, cost, and timing of development of our product candidates, including the progress of preclinical studies and clinical trials and related milestones; the commercialization of our current product candidates and any other product candidates we may identify and pursue, if approved, including our ability to successfully build a specialty sales force and commercial infrastructure to market our current product candidates and any other product candidates we may identify and pursue; the timing of and our ability to obtain and maintain regulatory approvals; our business strategy and plans, including the benefits of our corporate restructuring; potential acquisitions, partnerships and other strategic arrangements; the sufficiency of our cash and cash equivalents and short-term investments to fund our operations; available funding under the Hercules Capital, Inc. loan facility; and the plans and objectives of management for future operations and capital expenditures. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “potentially,” “preliminary,” “likely,” and similar expressions are intended to identify forward-looking statements.
We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are neither promises nor guarantees, and are subject to a number of important factors that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by the forward-looking statements, including without limitation: we are a clinical-stage biopharmaceutical company and have incurred significant losses since our inception, and we expect to incur losses for the foreseeable future and may never be profitable; if we are unable to obtain funding when needed and on acceptable terms, we could be forced to delay, limit or discontinue our product development efforts; our limited operating history may make it difficult to evaluate the success of our business and to assess our future viability; we rely on third parties to assist in conducting our clinical trials and some aspects of our research and preclinical testing, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, research, or testing; we currently rely on qualified therapists working at third-party clinical trial sites to administer certain of our product candidates in our clinical trials and we expect this to continue upon approval, if any, of our current or future product candidates, and if third-party sites fail to recruit and retain a sufficient number of therapists or effectively manage their therapists, our business, financial condition and results of operations would be materially harmed; our product candidates are in preclinical or clinical development, which is a lengthy and expensive process with uncertain outcomes, and we cannot give any assurance that any of our product candidates will receive regulatory approval, which is necessary before they can be commercialized; research and development of drugs targeting the central nervous system, or CNS, is particularly difficult, and it can be difficult to predict and understand why a drug has a positive effect on some patients but not others; the production and sale of our product candidates may be considered illegal or may otherwise be restricted due to the use of controlled substances, which may also have consequences for the legality of investments from foreign jurisdictions; we face significant competition in an environment of rapid technological and scientific change, and there is a possibility that our competitors may achieve regulatory approval before we do or develop therapies that are safer, more advanced or more effective than ours, which may negatively impact our ability to successfully market or commercialize any product candidates we may develop and ultimately harm our financial condition; if we are unable to obtain and maintain sufficient intellectual property protection for our existing product candidates or any other product candidates that we may identify, or if the scope of the intellectual property protection we currently have or obtain in the future is not sufficiently broad, our competitors could develop and commercialize product candidates similar or identical to ours, and our ability to successfully commercialize our existing product candidates and any other product candidates that we may pursue may be impaired; third parties may claim that we are infringing, misappropriating or otherwise violating their intellectual property rights, the outcome of which would be uncertain and may prevent or delay our development and commercialization efforts; our future success depends on our ability to retain key employees, directors, consultants and advisors and to attract, retain and motivate qualified personnel; as a result of covenants to our loan agreement with Hercules Capital, Inc., our operating activities may be restricted and we may be required to repay the outstanding indebtedness in the event of a breach by us, or an event of default thereunder, which could have a materially adverse effect on our business; if we fail to maintain an effective system of disclosure controls and internal control over financial reporting our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired; our business is subject to economic, political, regulatory and other risks associated with international operations; a pandemic, epidemic, or outbreak of an infectious disease, such as the COVID-19 pandemic, may materially and adversely affect our business, including our preclinical studies, clinical trials, third parties on whom we rely, our supply chain, our ability to raise capital, our ability to conduct regular business and our financial results, and other risks, uncertainties, and assumptions described under “Risk Factors” in Item 1A of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II and elsewhere in our Form 10-K for the year ended December 31, 2022 (the "Form 10-K") as further updated in this Quarterly Report, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of this Quarterly Report, and elsewhere in our filings with the Securities and Exchange Commission (“SEC”).
1
Any forward-looking statements made herein speak only as of the date of this Quarterly Report, and you should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or achievements reflected in the forward-looking statements will be achieved or will occur. Except as required by applicable law, we undertake no obligation to update any of these forward-looking statements for any reason after the date of this Quarterly Report or to conform these statements to actual results or revised expectations.
GENERAL
Unless the context otherwise requires, all references in this Quarterly Report to “we,” “us,” “our,” “atai” or the “Company” refer to ATAI Life Sciences N.V. and its consolidated subsidiaries. References to "Quarterly Report" herein refer to this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 and references to “Form 10-K” and “Annual Report” herein refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
All reports we file with the SEC are available for download free of charge via the Electronic Data Gathering Analysis and Retrieval (EDGAR) System on the SEC’s website at www.sec.gov. We also make electronic copies of our reports available for download, free of charge, through our investor relations website at ir.atai.life as soon as reasonably practicable after filing such material with the SEC.
We may announce material business and financial information to our investors using our investor relations website at ir.atai.life. We therefore encourage investors and others interested in atai to review the information that we make available on our website, in addition to following our filings with the SEC, webcasts, press releases and conference calls. Information contained on our website is not incorporated into, and does not form a part of this Quarterly Report.
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ATAI LIFE SCIENCES N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share amounts)
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March 31, |
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December 31, |
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2023 |
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2022 |
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(unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Securities carried at fair value |
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Prepaid expenses and other current assets |
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Short term notes receivable - related parties, net |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use asset, net |
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Other investments |
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Long term notes receivable - related parties, net |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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Accrued liabilities |
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Current portion of lease liability |
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Other current liabilities |
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Total current liabilities |
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Non-current portion of contingent consideration liability - related parties |
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Non-current portion of lease liability |
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Convertible promissory notes - related parties, net of discounts and deferred issuance costs |
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Long-term debt, net |
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Other liabilities |
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Total liabilities |
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$ |
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$ |
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(Note 16) |
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Stockholders’ equity: |
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Common stock, € |
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Additional paid-in capital |
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Share subscription receivable |
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( |
) |
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Accumulated other comprehensive loss |
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( |
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( |
) |
Accumulated deficit |
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( |
) |
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( |
) |
Total stockholders’ equity attributable to ATAI Life Sciences N.V. stockholders |
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Noncontrolling interests |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.
3
ATAI LIFE SCIENCES N.V.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share amounts)
(unaudited)
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Three Months Ended March 31, |
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2023 |
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2022 |
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License revenue |
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$ |
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$ |
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Operating expenses: |
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Research and development |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
) |
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( |
) |
Other income (expense), net: |
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Interest income |
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Interest expense |
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( |
) |
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Change in fair value of contingent consideration liability - related parties |
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Change in fair value of securities carried at fair value |
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( |
) |
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Foreign exchange gain (loss), net |
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( |
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Other income |
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Total other income (expense), net |
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Loss before income taxes |
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( |
) |
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( |
) |
Provision for income taxes |
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( |
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( |
) |
Losses from investments in equity method investees, net of tax |
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( |
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( |
) |
Net loss |
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( |
) |
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( |
) |
Net loss attributable to noncontrolling interests |
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( |
) |
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( |
) |
Net loss attributable to ATAI Life Sciences N.V. stockholders |
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$ |
( |
) |
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$ |
( |
) |
Net loss per share attributable to ATAI Life Sciences N.V. stockholders — basic and diluted |
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$ |
( |
) |
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$ |
( |
) |
Weighted average common shares outstanding attributable to ATAI Life Sciences N.V. stockholders — basic and diluted |
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See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.
4
ATAI LIFE SCIENCES N.V.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Amounts in thousands)
(unaudited)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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Other comprehensive income (loss): |
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Foreign currency translation adjustments, net of tax |
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( |
) |
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Comprehensive loss: |
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$ |
( |
) |
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$ |
( |
) |
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Comprehensive loss attributable to noncontrolling interests |
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( |
) |
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( |
) |
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Foreign currency translation adjustments, net of tax attributable to noncontrolling interests |
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( |
) |
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Comprehensive loss attributable to noncontrolling interests |
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( |
) |
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( |
) |
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Comprehensive loss attributable to ATAI Life Sciences |
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$ |
( |
) |
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$ |
( |
) |
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See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.
5
ATAI LIFE SCIENCES N.V.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands, except share and per share amounts)
(unaudited)
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Total |
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Accumulated |
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Stockholders’ |
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Additional |
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Share |
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Other |
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Equity Attributable to |
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Total |
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Common Stock |
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Paid-In |
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Subscriptions |
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Comprehensive |
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Accumulated |
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ATAI Life Sciences N.V. |
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Noncontrolling |
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Stockholders’ |
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Shares |
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Amount |
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Capital |
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Receivable |
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Loss |
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Deficit |
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Stockholders |
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Interests |
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Equity |
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Balances at December 31, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
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$ |
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||||||
Issuance of shares upon exercise of stock options |
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— |
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Settlement of issuance of shares upon |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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||||||||
Adjustment to accumulated deficit |
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— |
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— |
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— |
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— |
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|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
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|
( |
) |
Foreign currency translation adjustment, |
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— |
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||||||||
Net loss |
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|
— |
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|
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|
|
— |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|||
Balances at March 31, 2023 |
|
|
|
|
$ |
|
|
$ |
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|
$ |
— |
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|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
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$ |
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$ |
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||||||
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Total |
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|||||||||
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Accumulated |
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Stockholders’ |
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|||||||||
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Additional |
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Share |
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Other |
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Equity Attributable to |
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Total |
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|||||||||
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Common Stock |
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Paid-In |
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Subscriptions |
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Comprehensive |
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Accumulated |
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ATAI Life Sciences N.V. |
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Noncontrolling |
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Stockholders’ |
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||||||||||||
|
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Shares |
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Amount |
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Capital |
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Receivable |
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Loss |
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Deficit |
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Stockholders |
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Interests |
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Equity |
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|||||||||
Balances at December 31, 2021 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Issuance of shares upon exercise of stock options |
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— |
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||||||||
Stock-based compensation expense |
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— |
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||||||||
Foreign currency translation adjustment, |
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— |
|
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|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|||
Net loss |
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|
— |
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|
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|
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|
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— |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|||
Balances at March 31, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.
6
ATAI LIFE SCIENCES N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(unaudited)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Cash flows from operating activities |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization expense |
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Change in right-of-use asset |
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Amortization of debt discount |
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Change in fair value of contingent consideration liability—related parties |
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Change in fair value of securities carried at fair value |
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Losses from investments in equity method investees |
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Stock-based compensation expense |
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Unrealized foreign exchange (gains) losses |
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Other |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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Accounts payable |
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Accrued liabilities |
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Net cash used in operating activities |
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Cash flows from investing activities |
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Purchases of property and equipment |
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Capitalized internal-use software development costs |
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Cash paid for securities carried at fair value |
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Proceeds from sale and maturities of securities carried at fair value |
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Loans to related parties |
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Net cash provided by investing activities |
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Cash flows from financing activities |
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Proceeds from issuance of shares upon exercise of stock options |
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Net cash provided by financing activities |
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Effect of foreign exchange rate changes on cash |
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Net increase (decrease) in cash and cash equivalents |
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Cash and cash equivalents – beginning of the period |
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Cash and cash equivalents – end of the period |
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$ |
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$ |
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Supplemental disclosures: |
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Cash paid for interest |
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$ |
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$ |
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Supplemental disclosures of non cash investing and financing information: |
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Right of use asset obtained in exchange for operating lease liabilities |
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$ |
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$ |
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See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.
7
1. Organization and Description of Business
ATAI Life Sciences N.V. (“atai”) is the parent company of ATAI Life Sciences AG and, along with its subsidiaries, is a clinical-stage biopharmaceutical company aiming to transform the treatment of mental health disorders. atai was founded in 2018 as a response to the significant unmet need and lack of innovation in the mental health treatment landscape. atai is dedicated to acquiring, incubating and efficiently developing innovative therapeutics to treat depression, anxiety, addiction, and other mental health disorders.
Since inception, atai has either created wholly owned subsidiaries or has made investments in certain controlled entities, including variable interest entities (“VIEs”) for which atai is the primary beneficiary under the VIE model (collectively, the “Company”). atai is headquartered in Berlin, Germany.
The Company has determined that it has one operating and reporting segment.
Corporate Reorganization and Initial Public Offering
atai was incorporated pursuant to the laws of the Netherlands as a Dutch private company with limited liability on September 10, 2020 for the purposes of becoming a holding company for ATAI Life Sciences AG and consummating the corporate reorganization described below. atai did not conduct any operations prior to the corporate reorganization other than activities incidental to its formation. ATAI Life Sciences AG was formed as a separate company on February 7, 2018.
In contemplation of the consummation of atai’s initial public offering (“IPO”) of common shares, atai undertook a corporate reorganization (the “Corporate Reorganization”). The Corporate Reorganization consisted of several steps as described below:
The Corporate Reorganization, as described above, is considered a continuation of ATAI Life Sciences AG resulting in no change in the carrying values of assets or liabilities.
In June 2021, atai closed the IPO of its common shares on the Nasdaq Stock Market ("Nasdaq"). As part of the IPO, the Company issued and sold
Impact of COVID-19 Pandemic
The COVID-19 pandemic has continued to present global public health and economic challenges during the three months ended March 31, 2023. Although some research and development timelines have been impacted by delays related to the COVID-19 pandemic, the Company has not experienced material financial impacts on its business and operations as a result. The Company continues to monitor the impact of the COVID-19 pandemic on its employees and business and has undertaken business continuity measures to mitigate potential disruption to its operations.
8
The future impact of COVID-19 on the Company’s business and operations, including its research and development programs and related clinical trials, will largely depend on future developments, which are highly uncertain, such as the duration of the pandemic, the spread of the disease and variants thereof, the availability and effectiveness of vaccines and related roll-out efforts, breakthrough infections among the vaccinated, vaccine hesitancy, the implementation of vaccine mandates, travel restrictions, social distancing and related government actions around the world, business closures or business disruptions and the ultimate impact of COVID-19 on financial markets and the global economy.
Liquidity and Going Concern
The Company has incurred significant losses and negative cash flows from operations since its inception. As of March 31, 2023, the Company had cash and cash equivalents of $
The Company currently expects that its existing cash and cash equivalents and short-term securities as of March 31, 2023 will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months from the date the condensed consolidated financial statements are issued.
2. Basis of Presentation, Consolidation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and follow the requirements of the United States Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, these unaudited condensed consolidated financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements as certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 24, 2023.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the Company’s financial position, its results of operations and comprehensive loss, and its cash flows for the periods presented. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other future annual or interim period.
Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative U.S. GAAP included in the Accounting Standards Codification (“ASC”), and Accounting Standards Update (“ASU”) issued by the Financial Accounting Standards Board (“FASB”).
Consolidation
The Company's condensed consolidated financial statements include the accounts of atai and its subsidiaries. All intercompany balances and transactions have been eliminated in the consolidation.
The Company's policy is to consolidate all entities that it controls by ownership of a majority of the outstanding voting stock. In addition, entities that meet the definition of a variable interest entity (“VIE”) for which atai is the primary beneficiary are consolidated. The primary beneficiary is the party who has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity. For consolidated entities that are less than wholly-owned, the third-party’s holding of equity interest is presented as Noncontrolling interests in the Company's condensed consolidated balance sheets and condensed consolidated statements of stockholders' equity. The portion of net earnings attributable to the noncontrolling interests is presented as Net loss attributable to noncontrolling interests in the Company's condensed consolidated statements of operations.
In situations in which atai has significant influence, but not control, of an entity that does not qualify as a VIE, the Company applies the cost and equity method of accounting, with its portion of net losses recorded in Losses from investments in equity method investees, net of tax in the Company's condensed consolidated statements of operations.
Significant Accounting Policies
9
During the three months ended March 31, 2023, there were no significant changes to the Company’s significant accounting policies as described in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2022 except as described below.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates and assumptions made in the accompanying condensed consolidated financial statements include, but are not limited to the fair value of the Company’s investment in Intelgenx Technologies Corp. (“IntelGenx”), securities carried at fair value, contingent consideration liability—related parties, in-process research and development assets (“IPRD”) and noncontrolling interests recognized in acquisitions, the valuation of share-based awards, and accruals for research and development costs.
The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable. Actual results may differ from those estimates or assumptions.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. As of March 31, 2023 and December 31, 2022, cash and cash equivalents consisted of cash on deposit and cash held in high-yield savings accounts and money market funds, and at times in excess of federally insured limits.
Investment Securities Portfolio
The following table sets forth the fair value of atai's available-for-sale securities portfolio at the dates indicated:
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Fair Value |
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March 31, 2023 |
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December 31, 2022 |
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Money Market Funds |
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$ |
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$ |
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Commercial Paper |
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Corporate Notes/Bonds |
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U.S. Government Agencies |
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$ |
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$ |
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In January 2022, the Company invested in a certain investment portfolio, which is comprised of Money Market Funds, U.S. Treasury securities, Commercial Paper, Corporate Notes/Bonds, and U.S. government agencies securities. The Company classified securities in the investment portfolio as available-for-sale securities. Furthermore, the Company elected the fair value option for the available-for-sale securities in the investment portfolio (see Note 7). The decision to elect the fair value option, which is irrevocable once elected, is determined on an instrument-by-instrument basis and applied to an entire instrument. The net gains or losses, if any, on an investment for which the fair value option has been elected are recognized as a change in fair value of securities carried at fair value on the Condensed Consolidated Statements of Operations and the amortized cost of investments approximates their fair value. The Company's securities in the investment portfolio will mature within two years.
Fair Value Measurements
Assets and liabilities recorded at fair value on a recurring basis in the condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:
Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
10
The Company’s contingent consideration liability—related parties, IntelGenx Initial Warrants and IntelGenx Additional Units Warrant are carried at fair value, determined according to Level 3 inputs in the fair value hierarchy described above (See Note 7). The IntelGenx common stock and securities carried at fair value are determined according to Level 2 inputs in the fair value hierarchy above. The carrying amount reflected in the accompanying condensed consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable and accrued liabilities approximate their fair values, due to their short-term nature.
The carrying amounts of the Company’s remaining outstanding convertible promissory notes—related parties (“2018 Convertible Notes”) do not approximate fair value because the fair value is driven by the underlying value of the Company’s common shares into which the notes are to be converted. As of March 31, 2023, the carrying amount and fair value amount of the 2018 Convertible Notes was $
Fair Value Option
As permitted under Accounting Standards Codification 825, Financial Instruments, or ASC 825, the Company has elected the fair value option to account for its investment in common shares of IntelGenx, which otherwise would be subject to ASC 323. In accordance with ASC 825, the Company records this investment at fair value under Other investments held at fair value in the Company's condensed consolidated balance sheets and changes in fair value are recognized as a component of other income (expense), net in the condensed consolidated statements of operations. The carrying value of the investment remained at
Furthermore, as noted above the Company also elected the fair value option for its investment securities portfolio.
Emerging Growth Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
As described in “Recently Adopted Accounting Pronouncements” below, the Company early adopted certain accounting standards, as the JOBS Act does not preclude an emerging growth company from adopting a new or revised accounting standard earlier than the time that such standard applies to private companies. The Company expects to use the extended transition period for any other new or revised accounting standards during the period in which it remains an emerging growth company.
Recently Adopted Accounting Pronouncements
ASU 2016-02 Leases (Topic 842)
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is a comprehensive new lease standard that amends various aspects of existing accounting guidance for leases. The core principle of Topic 842 requires lessees to recognize on the condensed consolidated balance sheets a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance and operating leases with lease terms greater than twelve months. The lease liability is measured at the present value of the unpaid lease payments and the right-of-use asset is derived from the calculation of the lease liability. Topic 842 also requires lessees to disclose key information about leasing arrangements. For public entities, ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. As a result of the Company having elected the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act, ASU 2016-02 is effective for the Company beginning after December 15, 2021.
The Company adopted the new standard on January 1, 2022 using the modified transition approach as of the effective date.
The Company elected the “package of three practical expedients,” which permitted it to not reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. As a result, the Company has continued to account for existing leases - i.e. leases for which the commencement date is before January 1, 2022 - in accordance with Topic 840 throughout the entire lease term, including periods after the effective date, with the exception that the Company applied the new balance sheet recognition guidance for operating leases and applied Topic 842 for remeasurements and modifications after the Transition Date. The Company also elected the hindsight expedient in determining the lease term and assessing impairment of right-of-use assets when transitioning to ASC 842. As a result, the Company evaluated the lease term for its existing leases as of the transition date, January 1, 2022.
11
The most significant impact of the initial adoption of Topic 842 on the Company’s condensed consolidated financial statements was the recognition of a $
In May 2022, the Company entered into a five year lease arrangement that commenced in January 2023 related to our principal executive office located at Wallstraße 16, 10179, Berlin, Germany. This lease will require lease payments over the term of approximately $
ASU 2016-13 Financial Instruments - Credit Losses
In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses. This guidance requires immediate recognition of management’s estimates of current expected credit losses. Under the prior model, losses were recognized only when losses were deemed probable. The new model is applicable to most financial assets and certain other instruments that are not measured at fair value through net income.
The Company utilizes an undiscounted probability-of-default (“PD”) and loss-given-default (“LGD”) method for estimating credit losses on its assets pool, which is comprised of loans to other companies. Under the PD and LGD method, the expected credit loss percentage (or “loss rate”) is calculated as the probability of default (i.e., the probability the asset will default within the given time frame) multiplied by the loss given default (i.e., the percentage of the asset not expected to be collected because of default). To implement the PD and LGD method, the Company utilizes readily observable market information from term-matched public debt to derive market implied current expected credit losses (“MICECL”) grouped by Standard & Poor’s (“S&P”) credit rating scale. The MICECL framework considers risk characteristics of assets pool based on publicly available or estimated S&P credit ratings to calculate an appropriate credit loss reserve for the pool or group of assets.
ASU 2016-13 requires a cumulative effect adjustment to the statement of financial position as of the beginning of the first reporting period in which it is effective. On January 1, 2023, the Company adopted this guidance and applied a modified-retrospective transition approach through a cumulative-effect adjustment to retained earnings upon adoption. At transition, the new accounting guidance’s adoption resulted in an increase to accumulated deficit of $
Reclassifications
Certain reclassifications were made to prior period amounts in the condensed consolidated financial statements and accompanying notes to conform with current year presentation due to the increase in the balances of the Company's operating right-of-use asset and related lease liability during the period.
3. Dispositions
2022 Dispositions
Neuronasal, Inc.
In October 2020 and March 2021, the Company invested in Neuronasal, Inc. ("Neuronasal") common stock for a cash contribution of $
In November 2022, the Company finalized and entered into a Redemption, Termination and Release Agreement ("Termination Agreement") with Neuronasal through which atai disposed of its equity interests and residual SPA funding obligations. Pursuant to the Neuronasal Termination Agreement, the Company transferred all of its approximately
12
As a result of the disposition, the Company ceased having controlling financial interest in Neuronasal and the Company deconsolidated Neuronasal in November 2022 because it determined that it no longer was the primary beneficiary of Neuronsasal as it no longer had the power to direct the significant activities of Neuronasal. Upon the effective termination date, the Company derecognized all of Neuronasal's assets and liabilities from the Company's balance sheet, and recognized a gain of $
The Company concluded that the decision to deconsolidate Neuronasal, which was based on clinical data that did not meet expectations, did not represent a significant strategic shift. Therefore, the Company did not present the results of Neuronasal prior to deconsolidation as discontinued operations in its consolidated statements of operations for the year ended December 31, 2022.
4. Variable Interest Entities
Consolidated VIEs
At each reporting period, the Company reassesses whether it remains the primary beneficiary for Variable Interest Entities (“VIEs”) consolidated under the VIE model.
The entities consolidated by the Company are comprised of wholly and partially owned entities for which the Company is the primary beneficiary under the VIE model as the Company has (i) the power to direct the activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses that could potentially be significant to the VIE, or the right to receive benefits from the VIE that could potentially be significant to the VIE. The results of operations of the consolidated entities are included within the Company’s condensed consolidated financial statements from the date of acquisition to March 31, 2023.
As of March 31, 2023 and December 31, 2022, the Company has accounted for the following consolidated investments as VIEs, excluding the wholly owned subsidiaries:
Consolidated Entities |
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Relationship as of |
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Relationship as of |
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Date |
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Ownership % |
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Ownership % |
Perception Neuroscience Holdings, Inc. |
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Kures, Inc. |
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EntheogeniX Biosciences, Inc. |
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DemeRx IB, Inc. |
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Recognify Life Sciences, Inc. |
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PsyProtix, Inc. |
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Psyber, Inc. |
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InnarisBio, Inc. |
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TryptageniX Inc. |
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As of March 31, 2023 and December 31, 2022, the assets of the consolidated VIEs can only be used to settle the obligations of the respective VIEs. The liabilities of the consolidated VIEs are obligations of the respective VIEs and their creditors have no recourse to the general credit or assets of atai.
EntheogeniX Biosciences, Inc.
In November 2019, the Company entered into a series of agreements with Cyclica Inc. ("Cyclica") to form EntheogeniX Biosciences, Inc. ("EntheogeniX"), a company dedicated to developing the next generation of innovative mental health drugs employing an AI-enabled computational biophysics platform designed to optimize and accelerate drug discovery. Based on the Company's assessment of the transaction at the time of acquisition, the Company concluded that EntheogeniX was not a business and accounted for the Company's investment as an initial consolidation of a VIE that is not a business under ASC 810.
13
In February 2022 and September 2022, pursuant to the business plan as contemplated in the Stockholders Agreement and Subscription for Shares pursuant to the Contribution and Subscription Agreement, atai purchased additional shares of Class A common stock for an aggregate purchase price of $
In March 2023, pursuant to the business plan as contemplated in the Stockholders Agreement and Subscription for Shares pursuant to the Contribution and Subscription Agreement, atai purchased additional shares of Class A common stock for an aggregate purchase price of $
As of March 31, 2023 and December 31, 2022, the Company owned
The purchase of additional Class A common stock was deemed to be a reconsideration event. The Company determined that EntheogeniX is still considered a VIE subsequent to the additional Class A common stock purchase as EntheogeniX does not have sufficient equity at risk to carry out its principal activities without additional subordinated financial support.
The following table presents the assets and liabilities (excluding intercompany balances that were eliminated in consolidation) for all VIEs as of March 31, 2023 (in thousands):
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Perception |
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Kures |
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EntheogeniX |
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DemeRx IB |
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Recognify |
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PsyProtix |
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Psyber |
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InnarisBio |
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TryptageniX |
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Assets: |
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Current assets: |
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Cash |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Accounts receivable |
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Prepaid expenses and other current assets |
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Total current assets |
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Long term notes receivable |
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Other assets |
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Total assets |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Liabilities: |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Accrued liabilities |
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|
|||||||||
Other current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
The following table presents the assets and liabilities (excluding intercompany balances that were eliminated in consolidation) for all consolidated VIEs as of December 31, 2022 (in thousands):
|
|
Perception |
|
|
Kures |
|
|
EntheogeniX |
|
|
DemeRx IB |
|
|
Recognify |
|
|
PsyProtix |
|
|
Psyber |
|
|
InnarisBio |
|
|
TryptageniX |
|
|||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Cash |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Accounts receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Prepaid expenses and other current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Long term notes receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Other assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Accounts payable |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Accrued liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Other current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
14
Noncontrolling Interests
The Company recognizes noncontrolling interests related to its consolidated VIEs and provides a rollforward of the noncontrolling interests balance, as follows (in thousands):
|
|
Perception |
|
|
Kures |
|
|
Recognify |
|
|
Total |
|
||||
Balance as of December 31, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Net loss attributable to noncontrolling |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss attributable to noncontrolling |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Comprehensive loss attributable to noncontrolling |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance as of March 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Perception |
|
|
Kures |
|
|
Recognify |
|
|
Total |
|
||||
Balance as of December 31, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Net loss attributable to noncontrolling |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Comprehensive loss attributable to noncontrolling |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Balance as of March 31, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Non-consolidated VIEs
The Company evaluated the nature of its investments in Innoplexus AG (“Innoplexus”), DemeRx NB, Inc. (“DemeRx NB”) and IntelGenx and determined that the investments are VIEs as of the date of the Company’s initial investment through March 31, 2023. The Company is not the primary beneficiary of Innoplexus, DemeRx NB or IntelGenx as it did not have the power to direct the activities that most significantly impact the investments’ economic performance and therefore concluded that it did not have a controlling financial interest in each of Innoplexus, DemeRx NB or IntelGenx that would require consolidation as of March 31, 2023 and December 31, 2022.
The Company will reevaluate if the investments meet the definition of a VIE upon the occurrence of specific reconsideration events. The Company accounted for these investments under either the equity method, fair value option, or the measurement alternative included within ASC 321 (See Note 5). As of March 31, 2023, the Company’s maximum exposure for its non-consolidated VIEs was $
5. Equity Method Investments and Other Investments
Equity Method Investments
As of March 31, 2023 and December 31, 2022, the Company accounted for the following investments in the investee’s common stock under the equity method (amounts in thousands):
|
|
|
|
As of March 31, 2023 |
|
|
As of December 31, 2022 |
|
||||||||
|
|
Date First |
|
Common Stock |
|
|
Carrying |
|
|
Common Stock |
|
|
Carrying |
|
||
Investee |
|
Acquired |
|
Ownership % |
|
|
Value |
|
|
Ownership % |
|
|
Value |
|
||
Innoplexus A.G. |
|
|
|
|
$ |
— |
|
|
|
|
$ |
|
||||
COMPASS Pathways plc |
|
|
|
|
|
— |
|
|
|
|
|
|
||||
GABA Therapeutics, Inc |
|
|
(1) |
|
|
— |
|
|
(1) |
|
|
|
||||
Total |
|
|
|
|
|
|
$ |
— |
|
|
|
|
|
$ |
|
|
COMPASS Pathways plc
COMPASS Pathways plc ("COMPASS") is a mental health care company dedicated to pioneering the development of a new model of psilocybin therapy with its product COMP360. The Company first acquired investments in COMPASS in December 2018.
15
Equity Investment
Through a series of open market transactions between November 23, 2021 and December 7, 2021, the Company purchased an additional
Upon the completion of the COMPASS IPO and through March 31, 2023, the Company is deemed to continue to have significant influence over COMPASS primarily through its ownership interest in COMPASS’ equity. Following the COMPASS 2022 annual shareholder meeting, the Company no longer has representation on the COMPASS board of directors. However, the Company maintains significant influence through its ownership interest. Accordingly, the Company’s investment in COMPASS’ ADS was accounted for in accordance with the equity method through March 31, 2023.
The carrying value of the Company's investment in COMPASS was reduced to
Other Investments
The Company has accounted for its other investments that do not have a readily determinable fair value under the measurement alternative.
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
GABA Therapeutics, Inc. |
|
$ |
|
|
$ |
|
||
DemeRx NB, Inc. |
|
|
|
|
|
|
||
Juvenescence Limited |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
The Company’s investments in the preferred stock of Innoplexus, GABA, and DemeRx NB are not considered as in-substance common stock due to the existence of substantial liquidation preferences and therefore did not have subordination characteristics that were substantially similar to the common stock. Although the Company’s investment in Juvenescence Limited (“Juvenescence”) is in common stock, it is not able to exercise significant influence over the operating and financial decisions of Juvenescence. The Company concluded that its ownership interests in the above Other Investments do not have a readily determinable fair value and are accounted for under the measurement alternative. Under the measurement alternative, the Company measured its other investments at cost, less any impairment, plus or minus, if any, observable price changes in orderly transactions for an identical or similar investment of the same issuer.
During the three months ended March 31, 2023 and 2022 there were no observable changes in price recorded related to the Company’s Other Investments.
During the three months ended March 31, 2023 and 2022, the Company evaluated all of its other investments to determine if certain events or changes in circumstance during these time periods in 2023 and 2022 had a significant adverse effect on the fair value of any of its investments in non-consolidated entities. Based on this analysis, the Company did not note any impairment indicators associated with the Company’s Other Investments.
Innoplexus AG
Innoplexus is a technology company that provides “Data as a Service” and “Continuous Analytics as a Service” solutions that aims to help healthcare organizations leverage their technologies and expedite the drug development process across all stages—preclinical, clinical, regulatory and commercial. The Company first acquired investments in Innoplexus in August 2018.
16
As of December 31, 2020, the Company owned
In February 2021, the Company entered into a Share Purchase and Assignment Agreement (the “Innoplexus SPA”) to sell its shares of common and preferred stock held in Innoplexus to a current investor of Innoplexus (the “Purchaser”) in exchange for an initial purchase price of approximately $
Pursuant to the Innoplexus SPA, the Purchaser is required to hold a minimum number of shares equivalent to the number of shares purchased from the Company through
In addition, the Innoplexus SPA also provides the right for the Company to receive additional consideration with a maximum payment outcome of $
The carrying value of the Company’s investment in Innoplexus was
GABA Therapeutics, Inc.
GABA is a California based biotechnology company focused on developing GRX-917 for anxiety, depression and a broad range of neurological disorders. The Company is deemed to have significant influence over GABA through its total ownership interest in GABA’s equity, including the Company’s investment in GABA’s preferred stock, and the Company’s noncontrolling representation on GABA’s board of directors.
Common Stock Investment
The Company’s investment in GABA’s common stock was accounted for in accordance with the equity method.
In November 2020 the Company exercised its option to purchase additional shares of common stock of GABA at a price of approximately $
The carrying value of the investment in GABA common stock was reduced to
Preferred Stock Investment
The Company’s investment in GABA’s preferred stock did not meet the criteria for in-substance common stock. As such, the investment in GABA’s preferred stock is accounted for under the measurement alternative.
In August 2019, GABA and the Company entered into the Preferred Stock Purchase Agreement (the “GABA PSPA”), whereby GABA issued shares of its Series A preferred stock to the Company at a price of approximately $
Pursuant to the GABA PSPA, the Company was obligated to purchase additional shares of Series A preferred stock for up to $
17
cost of $
In May 2021, GABA and the Company entered into an Amendment to Preferred Stock Purchase Agreement (the Amended GABA PSPA”) under which the GABA PSPA was amended and shares of its Series A preferred stock were issued to the Company at a price of approximately $
In accordance with the Amended GABA PSPA, the Company also has the option but not the obligation to purchase the aforementioned additional shares of Series A preferred stock at any time prior to the achievement of any milestone at the same price per share as its initial investment.
GABA’s net losses attributable to the Company were determined based on the Company’s ownership percentage of preferred stock in GABA and recorded to the Company’s investments in GABA preferred stock. During the three months ended March 31, 2023 and 2022, the Company recognized its proportionate share of GABA’s net loss of $
DemeRx NB
In December 2019, the Company jointly formed DemeRx NB with DemeRx. DemeRx and DemeRx NB entered into a Contribution Agreement whereby DemeRx assigned all of its rights, title, and interests in and to all of its assets relating to DMX-1002, Noribogaine, in exchange for shares of common stock of DemeRx NB. DemeRx NB will use the contributed intellectual property to develop Noribogaine. Noribogaine is an active metabolite of ibogaine designed to have a longer plasma half-life and potentially reduced hallucinogenic effects compared to ibogaine.
In connection with the Contribution Agreement, the parties entered into a Series A Preferred Stock Purchase Agreement (the “DemeRx NB PSPA”) pursuant to which the Company purchased shares of Series A preferred stock of DemeRx NB at a purchase price of $
Pursuant to the DemeRx NB PSPA, the Company also has the option but not the obligation to purchase additional shares of DemeRX NB's Series A preferred stock at a purchase price of up to an aggregate of $
Other Investments Held at Fair Value
IntelGenx Technologies Corp.
IntelGenx is a novel drug delivery company focused on the development and manufacturing of novel oral thin film products for the pharmaceutical market. In March 2021, IntelGenx and the Company entered into the Strategic Development Agreement and Purchaser Rights Agreement (“PPA”). In May 2021, IntelGenx and the Company executed a Securities Purchase Agreement (the “IntelGenx SPA”) after obtaining IntelGenx shareholder approval, whereby IntelGenx issued shares of its common stock and warrants to the Company at a price of approximately $
18
common stock and (ii) one half of one warrant (the “Additional Warrants”). The price for the Additional Unit Warrants will be (i) until the date which is
Pursuant to the Strategic Development Agreement, the Company engages IntelGenx to conduct research and development projects (“Development Project”) using IntelGenx’s proprietary oral thin film technology. Under the terms of the Strategic Development Agreement, the Company can select four (4) program products. As of the effective date of the Strategic Development Agreement, the Company nominated two (2) program products - DMT and Salvinorin A.
The Company has significant influence over IntelGenx through ownership interest in IntelGenx’s equity and the Company’s noncontrolling representation on IntelGenx’s board of directors. The Company qualified for and elected to account for its investment in the IntelGenx common stock under the fair value option. The Company believes that the fair value option better reflects the underlying economics of the IntelGenx common stock investment. The Initial Warrants and Additional Units Warrant, (collectively the “Warrants”) are accounted for at fair value under ASC 321 and recorded in Other investments held at fair value on the condensed consolidated balance sheets. The Company applied a calibrated model and determined that the initial aggregate fair value is equal to the transaction price and recorded the common shares at $
Summarized Financial Information
The following is a summary of financial data for investments accounted for under the equity method of accounting (in thousands):
Balance Sheets
|
|
March 31, 2023 |
|
|||||
|
|
COMPASS |
|
|
GABA |
|
||
Current assets |
|
$ |
|
|
$ |
|
||
Non-current assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Current liabilities |
|
$ |
|
|
$ |
|
||
Non-current liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
$ |
|
|
$ |
|
||
19
|
|
December 31, 2022 |
|
|||||
|
|
COMPASS |
|
|
GABA |
|
||
Current assets |
|
$ |
|
|
$ |
|
||
Non-current assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Current liabilities |
|
$ |
|
|
$ |
|
||
Non-current liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
$ |
|
|
$ |
|
||
Statements of operations
|
|
Three Months Ended March 31, 2023 |
|
|||||
|
|
COMPASS |
|
|
GABA |
|
||
Revenue |
|
$ |
|
|
$ |
|
||
Loss from continuing operations |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
|
|
Three Months Ended March 31, 2022 |
|
|||||
|
|
COMPASS |
|
|
GABA |
|
||
Revenue |
|
$ |
|
|
$ |
|
||
Loss from continuing operations |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
6. Notes Receivable
Short Term Notes Receivable – Related Party, net
Loan to IntelGenx Corp.
In March 2021, the Company and IntelGenx entered into a loan agreement under which the Company provided a loan to IntelGenx for an aggregate principal amount of $
Pursuant to the terms of the Term Loans, upon the occurrence of an event of default, the Company may accelerate the Term Loans and declare the principal and any accrued and unpaid interests of the Term Loans to be immediately due and payable. In addition, IntelGenx may prepay the Term Loans in whole or in part at any time without premium or penalty. Any prepayment of the principal shall be accompanied by a payment of interest accrued to date thereon. The Company concluded that these embedded features do not meet the criteria to be bifurcated and separately accounted for as derivatives.
As of March 31, 2023, the Term Loans are recorded in Short term notes receivables – related parties, net on the Company's condensed consolidated balance sheets, which includes the principal balance of the Term Loans, accrued interest and allowance for credit losses. On January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments — Credit Losses and applied a modified-retrospective transition approach through a cumulative-effect adjustment to retained earnings of $
20
Long Term Notes Receivable – Related Party, net
Investment in DemeRx Promissory Note—Related Party
In January 2020, DemeRx IB loaned to DemeRx Inc. $
The Company recorded the DemeRx Note at cost which included the principal balance of the DemeRx Note and accrued interest in Long term notes receivables - related parties, net on its condensed consolidated balance sheets. On January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments — Credit Losses and applied a modified-retrospective transition approach through a cumulative-effect adjustment to retained earnings of $
For the three months ended March 31, 2023 and 2022, the Company did not recognize any interest income associated with the DemeRx Note. As of March 31, 2023, and December 31, 2022, respectively, the DemeRx Note had an outstanding balance of $
7. Fair Value Measurement
The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation (in thousands):
|
|
Fair Value Measurements |
|
|||||||||||||
|
|
As of March 31, 2023 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash & Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Investment in securities at fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial Paper |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate Notes/Bonds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Government Agencies |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other investment at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent consideration liability - related parties |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Fair Value Measurements |
|
|||||||||||||
|
|
As of December 31, 2022 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash & Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Investment in securities at fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial Paper |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate Notes/Bonds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Government Agencies |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other investment at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent consideration liability - related parties |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Investment Securities Portfolio - Fair Value Option
The Company elected the fair value option for the securities in the investment portfolio. The fair value is based on quoted market prices, when available. When a quoted market price is not readily available, the Company uses the market price from its last sale of similar assets.
21
The cash and cash equivalents held by the Company are categorized as Level 1 investments as quoted market prices are readily available for these investments. All other investments in the investment portfolio are categorized as Level 2 investments as inputs utilized to fair value these securities are either directly or indirectly observable, such as the market price from the last sale of similar assets.
The Company purchases investment grade marketable debt securities which are rated by nationally recognized statistical credit rating organizations in accordance with its investment policy. This policy is designed to minimize the Company's exposure to credit losses and to ensure that the adequate liquidity is maintained at all times to meet anticipated cash flow needs.
The unrealized gains and losses on the available-for-sale securities, represented by change in the fair value of the investment portfolio, is reported in other income (expense), net in the condensed consolidated statements of operations. Since the investment in the available-for-sale securities are already measured at fair value, no separate credit losses would be recorded in the condensed consolidated financial statements.
Contingent Consideration Liability—Related Parties—Perception, InnarisBio, and TryptageniX
The contingent consideration liability—related parties in the table above relates to milestone and royalty payments in connection with the acquisition of Perception Neuroscience Holdings, Inc. (“Perception”), InnarisBio and TryptageniX. The fair value of the contingent consideration liability—related parties was determined based on significant inputs not observable in the market, which represent Level 3 measurements within the fair value hierarchy. The fair value of the contingent milestone and royalty liabilities was estimated based on the discounted cash flow valuation technique. The technique considered the following unobservable inputs:
The fair value of the contingent milestone and royalty liabilities for InnarisBio was estimated to be $
The fair value of the Perception contingent milestone and royalty liabilities could change in future periods depending on prospects for the outcome of R-Ketamine milestone meetings with the FDA or other regulatory authorities, and whether the Company realizes a significant increase or decrease in sales upon commercialization. The most significant assumptions in the discounted cash flow valuation technique that impacts the fair value of the milestone contingent consideration are the projected milestone timing and the probability of the milestone being met. Further, significant assumptions in the discounted cash flow that impacts the fair value of the royalty contingent consideration are the projected revenue over ten years, the timing of royalties on commercial revenue, and the probability of success rate for a commercial R-Ketamine product. The valuations as of March 31, 2023 and December 31, 2022, respectively, used inputs that were unobservable inputs with the most significant being the discount rates for royalties on projected commercial revenue and clinical milestones and probability of success estimates over the following ten years, which represent Level 3 measurements within the fair value hierarchy.
The fair value of the contingent milestone and royalty liabilities for Perception was estimated to be $
The fair value of the Perception contingent consideration liability - related parties was calculated using the following significant unobservable inputs:
|
|
|
|
March 31, 2023 |
|
December 31, 2022 |
|
|
|
|
|
|
|
Valuation Technique |
|
Significant Unobservable Inputs |
|
Input Range |
|
Input Range |
Discounted cash flow |
|
Milestone contingent consideration: |
|
|
|
|
|
|
Discount rate |
|
|
||
|
|
Probability of the milestone |
|
|
||
Discounted cash flow |
|
Royalty contingent consideration: |
|
|
|
|
|
|
Discount rate for royalties |
|
|
||
|
|
Discount rate for royalties on milestones |
|
|
||
|
|
Probability of success rate |
|
|
The fair value of the contingent liability for TryptageniX was estimated to be $
22
the contingent liability for TryptageniX was determined based on significant unobservable inputs, including the discount rate, estimated probabilities of success, and timing of achieving certain clinical milestones. The fair value of the royalties liability was determined to be de minimis as the products are in the early stages of development. The Company will continue to assess the appropriateness of the fair value of the contingent liability as the products continue through development.
IntelGenx Common Stock, Initial Warrants and Additional Unit Warrants
The Company’s investment in IntelGenx consists of Common Stock, Initial Warrants and Additional Unit Warrants (the Initial Warrants and the Additional Unit Warrants are collectively referred to as the “Warrants”). The Company determined that the Warrants do not meet the definition of a derivative instrument under ASC 815. The Company has classified the Common Stock as Level 2 assets and the Warrants as Level 3 assets in the fair value hierarchy. The Company determined that the initial aggregate fair value was equal to the transaction price and recorded the Common Stock at $
The fair value of Common Stock is estimated by applying a discount for lack of marketability (“DLOM”) of
The Initial Warrant asset was recorded at fair value utilizing the Black-Scholes option pricing model. The Black Scholes option pricing model is based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrant, risk-free interest rates, expected dividends, and expected volatility of the price of the underlying common stock. The expected volatility is based on a peer group volatility which is a Level 3 input within the fair value hierarchy. The fair value of the Initial Warrants, which is included in Other investments held at fair value in the condensed consolidated balance sheets, was zero as of March 31, 2023 and December 31, 2022.
The following table summarizes significant unobservable inputs that are included in the valuation of the Initial Warrants as of March 31, 2023 and as of December 31, 2022:
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
Value of Underlying |
|
$ |
|
|
$ |
|
||
Expected Volatility |
|
|
% |
|
|
% |
||
The fair value of the Additional Unit Warrants is estimated using a Binomial Lattice in a risk-neutral framework (a special case of the Income Approach). Specifically, the future stock price of the IntelGenx is modeled assuming a Geometric Brownian Motion in a risk-neutral framework. For each modeled future price, the Additional Unit Warrants are calculated based on the contractual terms (incorporating any optimal early exercise), and then discounted at the term-matched risk-free rate. Finally, the value of the Additional Unit Warrants is calculated as the probability-weighted present value over all future modeled payoffs. The fair value of the Additional Unit Warrants, which is included in Other investments held at fair value in the condensed consolidated balance sheets, was zero as of March 31, 2023 and December 31, 2022.
The following table summarizes significant unobservable inputs that are included in the valuation of the Additional Units Warrant as of March 31, 2023 and as of December 31, 2022:
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
Value of Underlying |
|
$ |
|
|
$ |
|
||
Expected Volatility |
|
|
% |
|
|
% |
||
23
The following table provides a roll forward of the aggregate fair values of the Company’s financial instruments described above, for which fair value is determined using Level 3 inputs (in thousands):
|
|
Contingent |
|
|
Balance as of December 31, 2022 |
|
$ |
|
|
Initial fair value of instrument |
|
|
|
|
Change in fair value |
|
|
( |
) |
Extinguishment of liability |
|
|
|
|
Balance as of March 31, 2023 |
|
$ |
|
|
|
|
Contingent |
|
|
Balance as of December 31, 2021 |
|
$ |
|
|
Initial fair value of instrument |
|
|
|
|
Change in fair value |
|
|
|
|
Extinguishment of liability |
|
|
( |
) |
Balance as of March 31, 2022 |
|
$ |
|
|
8. Prepaid Expenses and Other Current Assets
Prepaid expenses consist of the following (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
Prepaid insurance |
|
$ |
|
|
$ |
|
||
Prepaid research and development related expenses |
|
|
|
|
|
|
||
Tax receivables |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
9. Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
Accrued accounting, legal, and other professional fees |
|
$ |
|
|
$ |
|
||
Accrued external research and development expenses |
|
|
|
|
|
|
||
Accrued restructuring costs |
|
|
|
|
|
|
||
Accrued payroll |
|
|
|
|
|
|
||
Taxes payable |
|
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
10. Leases
In February 2016, the FASC issued ASU 2016-02, "Leases" Topic 842, which amends the guidance in former ASC Topic 840, Leases.
Operating lease Right-of-Use ("ROU") assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The operating lease ROU asset also includes lease payments made, lease incentives, and initial direct costs incurred, if any.
The discount rate implicit within the Company's leases is generally not determinable and therefore the Company determines the discount rate based on its incremental borrowing rate, which is based on the information available at commencement date. As of March 31, 2023, the operating lease liabilities reflect a weighted-average discount rate of
Operating Leases
24
The Company leases certain office space under long-term operating leases that expire at various dates through 2028. The Company generally has options to renew lease terms on its facilities, which may be exercised at the Company's sole discretion. The Company evaluates renewal and termination options at the lease commencement date to determine if it is reasonably certain to exercise the option and has concluded on all operating leases that is it not reasonably certain that any options will be exercised. The weighted-average remaining lease term for the Company's operating leases as of March 31, 2023 was
ROU assets and lease liabilities related to the Company's operating leases are as follows (in thousands):
|
Balance Sheet Classification |
March 31, 2023 |
|
|
December 31, 2022 |
|
||
Right-of-use assets |
Operating lease right-of-use asset, net |
$ |
|
|
$ |
|
||
Current lease liabilities |
Current portion of lease liability |
|
|
|
|
|
||
Non-current lease liabilities |
Non-current portion of lease liability |
|
|
|
|
|
||
Expenses related to leases is recorded on a straight-line basis over the lease term.
Lease Cost Components |
|
Statement of Operations Classification |
Three months ended |
|
|
Three months ended |
|
||
Operating lease cost |
|
Operating expenses: General and administrative |
$ |
|
|
$ |
|
||
Short-term lease cost |
|
Operating expenses: General and administrative |
|
|
|
|
|
||
Total lease cost |
|
|
$ |
|
|
$ |
|
||
Future minimum commitments under all non-cancelable operating leases are as follows (in thousands):
Year Ended |
|
|
|
|
2023 (excluding three months ended March 31, 2023) |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Total lease payments |
|
|
|
|
Less: Imputed interest |
|
|
( |
) |
Present value of lease liabilities |
|
$ |
|
|
Supplemental cash flow information related to the Company's operating leases for the three months ended March 31, 2023 and 2022 are as follows (in thousands):
|
|
|
|
|
|
||
|
Three months ended March 31, 2023 |
|
|
Three months ended March 31, 2022 |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
||
Operating cash flows from operating leases |
$ |
|
|
$ |
|
||
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
|
|
|
|
||
11. Debt
Convertible Promissory Notes
2018 Convertible Promissory Notes—Related Parties
Convertible promissory notes—related parties, net of discounts and deferred issuance costs, consisted of the following (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
Convertible notes issued in October 2020 |
|
$ |
|
|
$ |
|
||
Total |
|
$ |
|
|
$ |
|
||
In November 2018, the Company executed a terms and conditions agreement (the “Convertible Note Agreement”) under which it was authorized to issue up to €
25
promissory notes in the aggregate principal amount of €
The 2018 Convertible Notes are non-interest-bearing, unsecured and are due and payable on September 30, 2025, unless previously redeemed, converted, purchased or cancelled. Each 2018 Convertible Note has a notional value of €
In connection with the Convertible Note Agreement, the Company issued convertible notes in aggregate principal amounts of €
Conversion of 2018 Convertible Promissory Notes - Related Parties
Upon the Company's 2021 corporate reorganization, atai became the sole shareholder of ATAI Life Sciences AG. In connection with the corporate reorganization, all former shareholders of ATAI Life Sciences AG contributed their shares of ATAI Life Sciences AG to atai and received sixteen shares in atai for every one share of ATAI Life Sciences AG. In 2021 and 2022, several noteholders elected to convert their convertible promissory notes into shares of atai. These investors paid €
The Company accounted for the conversion of the 2018 Convertible Notes as a conversion such that carrying values of these notes were derecognized with an offset to common stock at par of ATAI Life Sciences AG and the excess of the carrying values of these notes over the common stock at par of ATAI Life Sciences AG was recorded as additional paid-in capital. Concurrently, with the conversion of the 2018 Convertible Notes into ATAI Life Sciences AG shares, the shares of ATAI Life Sciences AG that were issued to the noteholders were exchanged for shares of atai through a transfer and sale arrangement. As ATAI Life Sciences AG continued to remain a wholly owned subsidiary of atai, the transaction was accounted for as an equity transaction that resulted in no gain or loss recognition.
Term Loan
Hercules Loan and Security Agreement
In August 2022, the Company and certain subsidiaries, as guarantors, and Hercules Capital, Inc. entered into a Loan and Security Agreement (as amended by the Hercules Term Loan Amendment), the “Hercules Loan Agreement”). The Hercules Loan Agreement provides for term loans in an aggregate principal amount of up to $
The 2022 Term Loan Facility will mature on
26
(30) months following the Closing Date, which period may be extended to (i) thirty-six months if certain additional performance milestones have been achieved; and (ii) forty-two months if certain additional performance milestones have been achieved. At the end of the interest only period, the Company is required to begin repayment of the outstanding principal of the 2022 Term Loan Facility in equal monthly installments.
The Hercules Loan Agreement contains customary closing and commitment fees, prepayment fees and provisions, events of default and representations, warranties and affirmative and negative covenants, including a financial covenant requiring the Company to maintain certain levels of cash in accounts subject to a control agreement in favor of the Agent (the “Qualified Cash”) at all times commencing from the Closing Date, which includes a cap on the amount of cash that can be held by, among others, certain of our foreign subsidiaries in Australia and the United Kingdom.
In addition, the Company is required to make a final payment fee (the “End of Term Charge”) upon the earlier of (i) the Maturity Date, (ii) the date that the Company prepays, in full or in part, the principal balance of the 2022 Term Loan Facility, or (iii) the date that the outstanding balance of the 2022 Term Loan Facility becomes due and payable. The End of Term Charge is
The Company may, at its option, prepay the term loans in full or in part, subject to a prepayment penalty equal to (i)
The Company incurred financing expenses related to the Hercules Loan Agreement, which are recorded as an offset to long-term debt on the Company's condensed consolidated balance sheets. These deferred financing costs are being amortized over the term of the debt using the effective interest method, and are included in other income (expense), net in the Company’s condensed consolidated statements of operations. During the three months ended March 31, 2023, interest expense included $
Outstanding debt obligations are as follows (in thousands):
|
|
|
|
|
|
|
||
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
Principal amount |
|
$ |
|
|
$ |
|
||
End of the term charge |
|
|
|
|
|
|
||
Less: unamortized issuance discount |
|
|
( |
) |
|
|
( |
) |
Less: unamortized issuance costs |
|
|
( |
) |
|
|
( |
) |
Less: unamortized end of term charge |
|
|
( |
) |
|
|
( |
) |
Net carrying amount |
|
|
|
|
|
|
||
Less: current maturities |
|
|
|
|
|
|
||
Long-term debt, net of current maturities and unamortized debt discount and issuance costs |
|
$ |
|
|
$ |
|
||
The fair value of the outstanding debt obligations under the 2022 Term Loan Facility was $
12. Common Stock
In June 2021, atai closed the IPO of its common shares on Nasdaq. As part of the IPO, the Company issued and sold
27
All common shareholders have identical rights. Each common share entitles the holder to one vote on all matters submitted to the shareholders for a vote.
All holders of common shares are entitled to receive dividends, as may be declared by the Company’s board of supervisory directors. Upon liquidation, common shareholders will receive distribution on a pro rata basis. As of March 31, 2023 and December 31, 2022, no cash dividends have been declared or paid.
13. Stock-Based Compensation
atai Equity Incentive Plans
The Company has options and restricted stock units ("RSUs") outstanding under various equity incentive plans, including the 2020 Incentive Plan, 2021 Incentive Plan, and HSOP Plan, which are further described in Note 12 of the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC on March 24, 2023.
As of March 31, 2023, there were
Shares that are expired, terminated, surrendered, or canceled without having been fully exercised will be available for future awards. As of March 31, 2023,
As of March 31, 2023,
Stock Option activity under 2020 Incentive Plan and 2021 Incentive Plan
The stock options outstanding noted below consist primarily of both service and performance-based options to purchase common stock. These stock options have a five-year or ten-year contractual term. These awards are subject to the risk of forfeiture until vested by virtue of continued employment or service to the Company.
The following is a summary of stock option activity from December 31, 2022 to March 31, 2023:
|
|
Number of |
|
|
Weighted- |
|
|
Weighted- |
|
|
Aggregate |
|
||||
Outstanding as of December 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
(1) |
|
|
|
|
— |
|
|
|
— |
|
||
Exercised |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
Cancelled or forfeited |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
Outstanding as of March 31, 2023 |
|
|
|
(2) |
$ |
|
|
|
|
|
$ |
|
||||
Options exercisable as of March 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The weighted-average grant-date fair value of options granted during the three months ended March 31, 2023 was $
The Company estimates the fair value of each stock option using the Black-Scholes option-pricing model on the date of grant. During the three months ended March 31, 2023 and 2022, the assumptions used in the Black-Scholes option pricing model were as follows:
28
|
|
March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Weighted average expected term in years |
|
|
|
|
|
|
||
Weighted average expected stock price volatility |
|
|
|
|
||||
Risk-free interest rate |
|
|
|
|
||||
Expected dividend yield |
|
|
|
|
||||
For the three months ended March 31, 2023 and 2022, the Company recorded stock-based compensation expense of $
As of March 31, 2023, total unrecognized compensation cost related to the unvested stock options was $
Stock Option activity under HSOP Plan
The HSOP Options outstanding noted below consist of service and performance-based options to request the distribution of HSOP Shares. These HSOP Options have a fifteen-year contractual term. These HSOP Options vest over a three to four-year service period. These awards are subject to the risk of forfeiture until vested by virtue of continued employment or service to the Company.
The following is a summary of stock option activity from December 31, 2022 to March 31, 2023:
|
|
Number of |
|
|
Weighted- |
|
|
Weighted- |
|
|
Aggregate |
|
||||
Outstanding as of December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
$ |
— |
|
|||
Granted |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Exercised |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Cancelled or forfeited |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Outstanding as of March 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
— |
|
|||
Options exercisable as of March 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
For the three months ended March 31, 2023 and 2022, the Company recorded stock-based compensation expense of $
As of March 31, 2023, total unrecognized compensation cost related to the unvested stock-based awards was $
Restricted Stock Unit activity under the 2021 Incentive Plan
The restricted stock units noted below consist of service-based awards vesting over a two-year period, subject to the risk of forfeiture until vested by virtue of continued employment or service to the Company. The Company reflects restricted stock units as issued and outstanding common stock when vested and the shares have been delivered to the individual.
The following is a summary of restricted stock unit activity from December 31, 2022 to March 31, 2023:
|
|
Restricted Stock Units |
|
|
Weighted Average Grant Date Fair Value |
|
||
Unvested at January 1, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
|
|
|
|
||
Forfeited |
|
|
|
|
|
|
||
Unvested at March 31, 2023 |
|
|
|
|
$ |
|
||
For the three months ended March 31, 2023 and 2022, the Company recorded stock-based compensation expense of $
The total fair value of restricted stock units vested during the three months ended March 31, 2023 was $
29
Subsidiary Equity Incentive Plans
Certain controlled subsidiaries of the Company adopted their own equity incentive plans (each, an “EIP”). Each EIP is generally structured so that the applicable subsidiary, and its affiliates’ employees, directors, officers and consultants are eligible to receive non-qualified and incentive stock options and restricted stock unit awards under their respective EIP. Standard option grants have time-based vesting requirements, generally vesting over a period of four years with a contractual term of ten years. Such time-based stock options use the Black-Scholes option pricing model to determine grant date fair value. Certain awards issued to employees partially vest on date of grant, then over a three-year service period and upon the satisfaction of specified performance-based vesting conditions, which are not considered probable of achievement as of March 31, 2023.
For the three months ended March 31, 2023 and 2022, the Company recorded share-based compensation expense of $
Stock-Based Compensation
Stock-based compensation expense is allocated to either research and development or general and administrative expense on the condensed consolidated statements of operations based on the cost center to which the option holder belongs.
The following table summarizes the total stock-based compensation expense by function for the three months ended March 31, 2023, which includes expense related to stock options and restricted stock unit awards (in thousands):
|
|
Three Months Ended March 31, 2023 |
|
|||||||||||||
|
|
Atai 2020 and 2021 Incentive Plans |
|
|
Atai 2020 |
|
|
Other Subsidiary |
|
|
Total |
|
||||
Research and development |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total share based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table summarizes the total stock-based compensation expense by function for the three months ended March 31, 2022, which includes expense related to stock options and restricted stock unit awards (in thousands):
|
|
Three Months Ended March 31, 2022 |
|
|||||||||||||
|
|
Atai 2020 and 2021 Incentive Plans |
|
|
Atai 2020 |
|
|
Other Subsidiary |
|
|
Total |
|
||||
Research and development |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total share based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
14. Income Taxes
The Company records its quarterly income tax expense by utilizing an estimated annual effective tax rate applied to its period to date earnings as adjusted for any discrete items arising during the quarter. The tax effect for discrete items are recorded in the period in which they occur. The Company recorded $
30
15. Net Income (Loss) Per Share
Basic and diluted net loss per share attributable to atai stockholders were calculated as follows (in thousands, except share and per share data):
|
|
Three Months Ended March 31, |
|
|
|||||
|
|
2023 |
|
|
2022 |
|
|
||
Numerator: |
|
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
Net loss attributable to noncontrolling interests |
|
|
( |
) |
|
|
( |
) |
|
Net loss attributable to ATAI Life Sciences |
|
$ |
( |
) |
|
$ |
( |
) |
|
Denominator: |
|
|
|
|
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HSOP Shares issued to the Partnership and allocated to the HSOP Participants are not considered outstanding for accounting purposes and not included in the calculation of basic weighted average common shares outstanding in the table above because the HSOP Participants have a forfeitable right to distributions until the HSOP Options vest and are exercised, at which time the right becomes nonforfeitable.
The following also represents the maximum amount of outstanding shares of potentially dilutive securities that were excluded from the computation of diluted net income (loss) per share attributable to common shareholders for the periods presented because including them would have been antidilutive:
Potentially dilutive securities to the Company’s common shares:
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The outstanding 2018 Convertible Notes are issuable upon the exercise of conversion rights of convertible note holders for
16. Commitments and Contingencies
Research and Development Agreements
The Company may enter into contracts in the ordinary course of business with clinical research organizations for clinical trials, with contract manufacturing organizations for clinical supplies and with other vendors for preclinical studies, supplies and other services and products for operating purposes.
Indemnification
In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to vendors, lessors, business partners, board members, officers and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by the Company, negligence or willful misconduct of the Company, violations of law by the Company, or intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with directors and certain officers and employees that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon the Company to provide indemnification under such agreements, and thus, there are no claims that the Company is aware of that could have a material effect on the Company’s condensed consolidated financial statements.
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The Company also maintains director and officer insurance, which may cover certain liabilities arising from its obligation to indemnify the Company’s directors. To date, the Company has not incurred any material costs and has not accrued any liabilities in the condensed consolidated financial statements as a result of these provisions.
Contingencies
From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. The Company is unable to predict the outcome of these matters or the ultimate legal and financial liability, and at this time cannot reasonably estimate the possible loss or range of loss and accordingly has not accrued a related liability. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, the Company does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. The Company currently believes that the outcome of these legal proceedings, either individually or in the aggregate, will not have a material effect on its consolidated financial position, results of operations or cash flows.
17. License Agreements
Otsuka License and Collaboration Agreement
In March 2021, Perception entered into a license and collaboration agreement (the “Otsuka Agreement”) with Otsuka under which Perception granted exclusive rights to Otsuka to develop and commercialize products containing arketamine, known as PCN-101 in Japan for the treatment of any depression, including treatment-resistant depression, or major depressive disorder or any of their related symptoms or conditions at its own cost and expense. Perception retained all rights to PCN-101 outside of Japan.
With the execution of the Otsuka Agreement, Perception received an upfront, non-refundable payment of $
For the three months ended March 31, 2023, and 2022 there were no milestones achieved under the Otsuka Agreement and the Company recognized an immaterial amount of revenue related to certain research and development services. As of March 31, 2023 the remaining balance of deferred revenue related to the Otsuka Agreement was immaterial.
National University Corporation Chiba University License Agreement
In August 2017, Perception entered into a license agreement (the “CHIBA License”), with the National University Corporation Chiba University (“CHIBA”), relating to Perception’s drug discovery and development initiatives. Under the CHIBA License, Perception has been granted a worldwide exclusive license under certain patents and know-how of CHIBA to research, develop, manufacture, use and commercialize therapeutic products.
During the three months ended March 31, 2023 and 2022, respectively, the Company made
Allergan License Agreement
In February 2020, Recognify entered into an amended and restated license agreement (the “Allergan License Agreement”), with Allergan Sales, LLC (“Allergan”), under which Allergan granted Recognify an exclusive (non-exclusive as to know-how), sublicensable and worldwide license under certain patent rights and know-how controlled by Allergan to develop, manufacture and commercialize certain products for use in all fields including the treatment of certain diseases and conditions of the central nervous system.
During the three months ended March 31, 2023 and 2022, respectively, Recognify made
Columbia Stock Purchase and License Agreement
In June 2020, Kures entered into a license agreement with Trustees of Columbia University (“Columbia”), pursuant to which, Kures obtained an exclusive license under certain patents and technical information to discover, develop, manufacture, use and commercialize such patents or other products in all uses and applications (“Columbia IP”). In addition, in consideration for the rights to the Columbia IP, Kures entered into a Stock Purchase Agreement (the “SPA”) with Columbia in contemplation of the license agreement. Pursuant to the SPA, Kures issued to Columbia certain shares of the Kures’ capital stock, representing
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a per share price equal to the then fair market value of each such share, which price shall be deemed to have been paid in partial consideration for the execution, delivery and performance by Columbia of the License Agreement, such that the common stock held by Columbia shall equal to
During the three months ended March 31, 2023 and 2022, respectively, Kures made
Accelerate License Agreement
In April 2021, Psyber entered into a license arrangement with Accelerate Technologies Pte. Ltd. (“Accelerate”), whereby Accelerate grants Psyber non-exclusive rights to license and use the technology to commercialize of Psyber’s BCI-enabled companion digital therapeutics in United States of America, Singapore, Member Countries of the European Union, Canada, Australia and New Zealand as a potential treatment for mental health and behavior change, such as substance use disorders including opioid use disorder, mood and anxiety disorders including post-traumatic stress disorder, and treatment-resistant depression.
During the three months ended March 31, 2023 and 2022, respectively, Psyber made
Dalriada License Agreement
In December 2021, Invyxis, Inc. ("Invyxis"), a wholly owned subsidiary of the Company, entered into an exclusive services and license agreement (the "Invyxis ESLA") with Dalriada Drug Discovery Inc. ("Dalriada"). Under the Invyxis ESLA, Dalriada is to exclusively collaborate with Invyxis to develop products, services and processes with the specific purpose of generating products consisting of new chemical entities. Invyxis will pay Dalriada up to $
In January 2022, in accordance with the Invyxis ESLA, Invyxis paid an upfront deposit of $
18. Related Party Transactions
atai Formation
In connection with the formation of atai in 2018, the Company entered into a series of transactions with its shareholders, Apeiron, Galaxy Group Investments LLC. (“Galaxy”) and HCS Beteiligungsgesellschaft mbH (“HCS”) whereby these shareholders contributed their investments in COMPASS, Innoplexus and Juvenescence to the Company in exchange for the Company's common stock of equivalent value. Apeiron is the family office of the Company’s co-founder who owns
Directed Share Program
In connection with ATAI’s initial public offering, the underwriters reserved
Consulting Agreement with Mr. Angermayer
In January 2021, the Company entered into a consulting agreement, (the “Consulting Agreement”), with Mr. Angermayer, one of the Company’s co-founders and supervisory director. Apeiron is the family office and merchant banking business of Mr. Angermayer. Pursuant to the Consulting Agreement, Mr. Angermayer agreed to render services to the Company on business and financing strategies in exchange for
As a result of the Consulting Agreement, for the three months ended March 31, 2023 and 2022, the Company recorded $
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For the three months ended March 31, 2023 and 2022, the Company recorded $
19. Defined Contribution Plan
The Company has a defined contribution retirement savings plan under Section 401(k) of the Internal Revenue Code. This plan allows eligible employees to defer a portion of their annual compensation. Employees may make contributions by having the Company withhold a percentage of their salary up to the Internal Revenue Service annual limit. The Company recognized $
20.
In February 2023, the Company restructured its workforce and eliminated approximately
Restructuring expense related to the workforce reduction was incurred primarily during the three months ended March 31, 2023, resulting in $
As of March 31, 2023, net restructuring liabilities totaled approximately $
A reconciliation of the restructuring charges and related payments for the three months ended March 31, 2023 is as follows:
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21. Subsequent Events
None.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes thereto included in this Quarterly Report and our audited consolidated financial statements and related notes thereto for the year ended December 31, 2022, included in our Form 10-K filed with the SEC on March 24, 2023. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled "Risk Factors" in our Annual Report on Form 10-K dated and filed with the SEC on March 24, 2023, and may be updated from time to time in our other filings with the SEC.
All references to years, unless otherwise noted, refer to our fiscal years, which end on December 31. Unless the context otherwise requires, all references in this subsection to “we,” “us,” “our,” “atai” or the “Company” refer to atai and its consolidated subsidiaries.
Business Overview
We are a clinical-stage biopharmaceutical company aiming to transform the treatment of mental health disorders. We were founded in 2018 in response to the significant unmet need and lack of innovation in the mental health treatment landscape, as well as the emergence of therapies that previously may have been overlooked or underused.
We have a bold and ambitious vision: to heal mental health disorders so that everyone, everywhere can live a more fulfilled life.
Mental health disorders such as depression, substance use disorder, or SUD, and anxiety, which are among our initial focus indications, are highly prevalent and estimated to affect more than one billion people globally. In addition, the total costs of mental health disorders are significant and expected to increase substantially. Between 2009 and 2019, spending on mental health care in the United States increased by more than 50%, reaching $225 billion, and a Lancet Commission report estimates the global economic cost will reach $16 trillion by 2030. While current treatments, such as selective serotonin reuptake inhibitors, or SSRIs, and serotonin-norepinephrine reuptake inhibitors, or SNRIs, are well established and effective for certain patients, a significant percentage of patients either respond inadequately or relapse, translating to a significant unmet patient need.
Since our inception in 2018, we have focused substantially all of our efforts and financial resources on acquiring and developing product and technology rights, establishing our platform, building our intellectual property portfolio and conducting research and development activities for our product candidates within our atai companies that we consolidate based on our controlling financial interest of such entities. We operate a decentralized model to enable scalable drug or technological development at our atai companies. Our atai companies drive the development of our programs and enabling technologies for which we have either acquired a controlling or significant interest in or created de novo. We believe that this model provides our development teams the support and incentives to rapidly advance their therapeutic candidates or technologies in a cost-efficient manner. We look to optimize deployment of our capital in order to maximize value for our stakeholders.
We provide our development teams with access to shared services including scientific, intellectual property, clinical, and regulatory support, as well as project management, research and development, market strategy, and development and corporate finance. Our global team of subject matter professionals provides deep domain expertise in areas such as mental health drug development and life sciences intellectual property. Development teams have access to relevant expertise specific to each stage of their development. We believe our knowledge and specialization in psychedelics and mental health continuously enhance the quality of the services we provide through the sharing of learnings and experiences across the teams.
In June 2021, we completed our initial public offering ("IPO") on the Nasdaq Global Market, in which we issued and sold 17,250,000 common shares at a public offering price of $15.00 per share, including 2,250,000 common shares sold pursuant to the underwriters’ exercise of their option to purchase additional common shares, for aggregate net proceeds of $231.6 million, after deducting underwriting discounts and commissions of $18.1 million and offering costs of $9.0 million.
We have incurred significant operating losses since our inception. Our net loss attributable to ATAI Life Sciences N.V. stockholders was $33.1 million and $36.9 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023 and December 31, 2022, our accumulated deficit was $543.8 million and $510.2 million, respectively. Our ability to generate product revenue sufficient to achieve profitability will depend substantially on the successful development and eventual commercialization of product candidates at our atai companies that we consolidate based on our controlling financial interest of such entities as determined under the variable interest entity model ("VIE model") or voting interest entity model ("VOE model"). We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.
Our historical losses resulted principally from costs incurred in connection with research and development activities, as well as general and administrative costs associated with our operations. In the future, we intend to continue to conduct research and development, preclinical
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testing, clinical trials, regulatory compliance, market access, commercialization and business development activities that, together with anticipated general and administrative expenses, will result in incurring further significant losses for at least the next several years. Our operating losses stem primarily from the development of our mental health research programs. Furthermore, we expect to incur additional costs associated with operating as a public company, including audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums, and investor relations costs. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, strategic collaborations and alliances or licensing arrangements. Our inability to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. There can be no assurances, however, that our current operating plan will be achieved or that additional funding will be available on terms acceptable to us, or at all.
As of March 31, 2023, we had cash and cash equivalents of $185.9 million and short-term securities of $64.0 million. We believe that our existing cash and cash equivalents and short-term securities will be sufficient for us to fund our operating expenses and capital expenditure requirements for at least the next 12 months following the filing of this Quarterly Report. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “Liquidity and Capital Resources—Liquidity Risk” below.
We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations to date primarily with proceeds from the sale of our common shares, issuances of convertible notes and a term loan.
Our Model and Strategy
We have a team of experienced drug discoverers, developers and innovators working towards our goal to heal mental health disorders. We operate a decentralized model to enable scalable drug or technological development at our atai companies. Our atai companies drive development of programs that we have either acquired a controlling or significant interest in or created de novo. We believe that this model provides our development teams the support and incentives to rapidly advance their programs in a cost-efficient manner. To continue to grow our business and to aid in the development of our various programs, we intend to continue to incubate, acquire and invest in companies that share our goal of advancing transformative treatments for patients that suffer from mental health disorders.
This model enables a modular approach to capturing value as we advance therapies through commercialization. While our primary goal is to pursue commercialization of products independently, we also intend to continue opportunistically establishing collaborations and/or divest atai companies entirely based on several factors, including, without limitation, the strategic rationale and financial return potential. The model is designed to maximize the value of each drug that we successfully develop and generate returns for shareholders through these value-capturing strategies.
Impactful Capital Allocation and Strategic Value Capture
Consistent with our strategy, we provide the necessary funding and operational support to our programs to maximize their probability of success in clinical development and commercialization. We also regularly review the status of our programs to assess whether there are alternative forms of ownership, partnership or other forms of collaboration that would optimize our economic interests and the success of our programs. To that end, we are focusing on clinical phase programs and business development that we expect to generate meaningful data in the near term, and therefore prioritizing programs and opportunities that we believe have the highest return potential and value.
In addition, in February 2023 we conducted a reduction in force of approximately 30% of our global workforce in February 2023 in order to more effectively allocate our research and development and other resources supporting the revised business and program priorities and to reduce operational costs. Refer to Note 20 for further information.
Our Key Clinical Programs
Our pipeline currently consists of therapeutic candidates across multiple neuropsychiatric indications. The table below summarizes the status of our product candidate portfolio as of the date of the filing date of this Quarterly Report.
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Note: DMT = N,N-dimethyltryptamine; MDMA = 3,4-Methylenedioxymethamphetamine
Clinical Pipeline Recent Advancements
The following details recent advancements regarding clinical programs, as applicable:
RL-007 (Pro-Cognitive Neuromodulator for Cognitive Impairment Associated with Schizophrenia - Recognify Life Sciences)
GRX-917 (Deuterated Etifoxine for Anxiety Disorders - GABA Therapeutics)
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VLS-01 (N,N-Dimethyltryptamine; (“DMT”) for TRD - Viridia Life Sciences)
PCN-101 (R-Ketamine – Perception Neurosciences)
Financial Overview
Since our inception in 2018, we have focused substantially all of our efforts and financial resources on acquiring and developing product and technology rights, establishing our platform, building our intellectual property portfolio and conducting research and development activities for our product candidates within our atai companies that we consolidate based on our controlling financial interest of such entities. We operate a decentralized model to enable scalable drug or technological development at our atai companies. Our atai companies drive development of our programs and enabling technologies that we have either acquired a controlling or significant interest in or created de novo. We believe that this model provides our development teams the support and incentives to rapidly advance their therapeutic candidates or technologies in a cost-efficient manner. We look to optimize deployment of our capital in order to maximize value for our stakeholders.
Wholly owned subsidiaries and VIEs with greater than 50% ownership and deemed control are consolidated in our financial statements, and our net income (loss) is reduced for the non-controlling interest of the VIE’s share, resulting in net income (loss) attributable to atai stockholders.
Investments, where we have ownership in the underlying company’s equity greater than 20% and less than 50%, or where we have significant influence, are recorded under the cost and equity method. We then record losses from investments in equity method investees, net of tax, for our proportionate share of the underlying company’s net results until the investment balance is adjusted to zero. If we make subsequent additional investments in that same company, we may record additional gains(losses) based on changes to our investment basis and also may record additional income(loss) in equity method investments.
We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations to date primarily with proceeds from the sale of our common shares and from issuances of convertible notes and term loans.
Factors and Trends Affecting our Results of Operations
We believe that the most significant factors affecting our results of operations include:
Research and Development Expenses
Our ability to successfully develop innovative product candidates through our programs will be the primary factor affecting our future growth. Our approach to the discovery and development of our product candidates is still being demonstrated. As such, we do not know whether we will be able to successfully develop any of our product candidates. Developing novel product candidates requires a significant investment of resources over a prolonged period of time, and a core part of our strategy is to continue making sustained investments in this area. We have chosen to leverage our platform to initially focus on advancing our product candidates in the area of mental health.
All of our product candidates are still in development stages, and we have incurred and will continue to incur significant research and development costs for preclinical studies and clinical trials. We expect that our research and development expenses will constitute the most
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substantial part of our expenses in future periods in line with the advancement and expansion of the development of our product candidates.
Acquisitions/Investments
To continue to grow our business and to aid in the development of our various product candidates, we are continually acquiring and investing in companies that share our common goal towards advancing transformative treatments, including psychedelic compounds and digital therapeutics, for patients that suffer from mental health disorders.
Acquisition of In-Process Research and Development Expenses
In an asset acquisition, including the initial consolidation of a VIE that is not a business, acquired in-process research and development, or IPR&D, with no alternative future use is charged to the condensed consolidated statements of operations as a component of operating expenses at the acquisition date.
Stock-Based Compensation
In August 2020, we adopted the 2020 Equity Incentive Plan (the “2020 Incentive Plan”) and the Hurdle Share Option Plan (the “HSOP Plan”), which allowed us to grant stock-based awards to executive officers, directors, employees and consultants. Prior to our IPO, we issued stock options that vest over a two to four-year service period, only if and when a “Liquidity Event” (as defined in the plans) occurs, with accelerated vesting if a Liquidity Event occurred by specified dates. Upon the closing of our IPO, the stock-based award vesting contingent upon a Liquidity Event was no longer deferred.
Effective April 23, 2021, we adopted and our shareholders approved the 2021 Incentive Award Plan (the “2021 Incentive Plan”). The 2021 Incentive Plan enables us to grant incentive stock options or nonqualified stock options, restricted stock awards and other stock-based awards to our executive officers, directors and other employees and consultants. Any shares subject to outstanding options originally granted under the 2020 Incentive Plan that terminate, expire or lapse for any reason without the delivery of shares to the holder thereof shall become available for issuance pursuant to the 2021 Incentive Plan. For the three months ended March 31, 2023 and 2022, we incurred $8.7 million and $10.2 million of stock-based compensation expense, respectively.
COVID-19 Business Update
The COVID-19 pandemic has continued to present global public health and economic challenges. Although some research and development timelines have been impacted by delays related to the COVID-19 pandemic, we have not experienced material financial impacts on our business and operations as a result. The full extent to which the COVID-19 pandemic will continue to directly or indirectly impact our results of operations and financial condition, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat it, the success or failure of ongoing vaccination programs worldwide, the emergence and spread of additional variants of COVID-19, as well as the overall impact on local, regional, national and international markets and the global economy. We continue to monitor the impact of the COVID-19 pandemic on our employees and business, including working remotely on a part or full time basis, and have, and will continue to, undertake business continuity measures to mitigate potential disruption to our operations and safety of our employees. For a discussion of the risks related to COVID-19 and impact to our business and operations, including our research and development programs and related clinical trials, refer to the section titled “Risk Factors” in Part I, Item 1A of the Form 10-K.
Basis of Presentation and Consolidation
Since our inception, we have created wholly owned subsidiaries or made investments in certain controlled entities, including partially-owned subsidiaries for which we have majority voting interest under the VOE model or for which we are the primary beneficiary under the VIE model, which we refer to collectively as our consolidated entities. Ownership interests in consolidated entities that are held by entities other than us are reported as noncontrolling interests in our condensed consolidated balance sheets and condensed consolidated statements of stockholders' equity. The portion of net earnings attributable to the noncontrolling interests is presented as Net loss attributable to noncontrolling interests in our condensed consolidated statements of operations.
Ownership interests in entities over which we have significant influence, but not a controlling financial interest, are accounted for as cost and equity method investments with our portion of net losses recorded in Losses from investments in equity method investees, net of tax in our condensed consolidated statements of operations.
Components of Our Results of Operations
Revenue
In March 2021, Perception Neuroscience, Inc. (“Perception”) entered into a license and collaboration agreement (the "Otsuka Agreement"), with Otsuka Pharmaceutical Co., LTD (“Otsuka”), under which we granted exclusive rights to Otsuka to develop and commercialize certain products containing arketamine, known as PCN-101, in Japan for the treatment of depression and other select indications.
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Perception received an upfront, non-refundable payment of $20.0 million in June 2021 and we are also eligible to receive up to $35.0 million if certain development and regulatory milestones are achieved and up to $66.0 million in commercial milestones upon the achievement of certain commercial sales thresholds. Perception is eligible to receive tiered, royalties ranging from low-teens to high-teens on net sales of licensed products subject to reduction in certain circumstances.
For the three months ended March 31, 2023, and 2022 there were no milestones achieved under the Otsuka Agreement and we recognized an immaterial amount of revenue related to certain research and development services. As of March 31, 2023 the remaining balance of deferred revenue related to the Otsuka Agreement was immaterial.
For the foreseeable future, we may generate revenue from reimbursements of services under the Otsuka Agreement, as well as milestone payments under our current and/or future collaboration agreements. We do not expect to generate any revenue from the sale of products unless and until such time that our product candidates have advanced through clinical development and regulatory approval, if ever. We expect that any revenue we generate, if at all, will fluctuate from year-to-year as a result of the timing and amount of payments relating to such services and milestones and the extent to which any of our products are approved and successfully commercialized. Our ability to generate future revenues will also depend on our ability to complete preclinical and clinical development of product candidates or obtain regulatory approval for them.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our product candidates, which include:
Research and development costs, including costs reimbursed under the Otsuka Agreement, are expensed as incurred, with reimbursements of such amounts being recognized as revenue. We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received.
Our direct research and development expenses are tracked on a program-by-program basis for our product candidates and consist primarily of external costs, such as fees paid to outside consultants, CROs, contract manufacturing organizations (“CMOs”) and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. Our direct research and development expenses by program also include fees incurred under third-party license agreements.
We do not allocate internal research and development expenses consisting of employee and contractor-related costs, to specific product candidate programs because these costs are deployed across multiple product candidate programs under research and development and, as such, are separately classified.
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase for the foreseeable future in connection with our planned preclinical and clinical development activities in the near term and in the future.
The successful development of our product candidates is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the remainder of the development of these product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from our product candidates. This is due to the numerous risks and uncertainties associated with developing products, including the uncertainty of whether (i) any clinical trials will
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be conducted or progress as planned or completed on schedule, if at all, (ii) we obtain regulatory approval for our product candidates and (iii) we successfully commercialize product candidates.
Acquisition of In-Process Research and Development Expenses
Acquisition of IPR&D expenses consist of acquired in-process research and development with no future alternative use based on the probability of clinical success.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate and business development and administrative functions, professional fees for legal, patent, accounting, auditing, tax and consulting services, travel expenses and facility-related expenses, advertising, and information technology-related expenses.
Subsequent to our 2023 reduction in work force, we expect that our general and administrative expenses will not materially increase in the near future. We could add more general and administrative head count in the future to support the potential commercialization of our product candidates.
Other Income (Expense), Net
Interest Income
Interest income consists of interest earned on cash balances held in interest-bearing accounts and interest earned on notes receivable. We expect that our interest income will fluctuate based on the timing and ability to raise additional funds as well as the amount of expenditures for our research and development of our product candidates and ongoing business operations.
Interest Expense
Interest expense consists primarily of interest expense incurred in connection with our term loan under the Loan Agreement entered into in August 2022. Upon closing of the Loan Agreement, Hercules Capital, Inc. issued a term loan advance in the amount of $15.0 million. See “—Liquidity and Capital Resources—Indebtedness” below for further discussion of the 2022 Term Loan Facility.
Change in Fair Value of Contingent Consideration Liability—Related Parties
Changes in fair value of contingent consideration liability—related parties, consists of subsequent remeasurement of our contingent consideration liability—related parties with Perception, TryptageniX and InnarisBio for which we record at fair value. See “—Liquidity and Capital Resources—Indebtedness” below for further discussion of our contingent consideration liability—related parties.
Change in Fair Value of Securities carried at Fair Value
Changes in fair value of securities consists of changes in fair value of available for sale securities. We first purchased securities in January 2022.
Foreign exchange gain (loss), net
Foreign exchange gain (loss), net consists of the impact of changes in foreign currency exchange rates on our foreign exchange denominated assets and liabilities, relative to the U.S. dollar. The impact of foreign currency exchange rates on our results of operations fluctuates period over period based on our foreign currency exposures resulting from changes in applicable exchange rates associated with our foreign denominated assets and liabilities.
Other Income
Other income consists principally of the impact of our adoption of ASU 2016-13, Financial Instruments — Credit Losses and service revenue generated for general and administrative services performed by atai on behalf of our platform companies. See Note 2 of our condensed consolidated financial statements for additional discussion regarding our adoption of ASU 2016-13.
Provision For Income Taxes
For our consolidated entities, deferred income taxes are provided for the effects of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for income tax purposes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
41
We regularly assess the need to record a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Accordingly, we maintain a full valuation allowance against net deferred tax assets for all entities as of March 31, 2023. In assessing the realizability on deferred tax assets, we consider whether it is more-likely-than-not that some or all of deferred tax assets will not be realized. The future realization of deferred tax assets is subject to the existence of sufficient taxable income of the appropriate character (e.g., ordinary income or capital gain) as provided under the carryforward provisions of local tax law. We consider the scheduled reversal of deferred tax liabilities (including the effect in available carryback and carryforward periods), future projected taxable income, including the character and jurisdiction of such income, and tax-planning strategies in making this assessment.
Unrecognized tax benefits arise when the estimated benefit recorded in the financial statements differs from the amounts taken or expected to be taken in a tax return because of the considerations described above. As of March 31, 2023 and December 31, 2022, we had no unrecognized tax benefits.
Losses from Investments in Equity Method Investees, Net of Tax
Losses from investments in equity method investees, net of tax consists of our share of equity method investees losses on the basis of our equity ownership percentage, IPR&D charges resulting from basis differences and impairment related to our equity method investments.
Net Loss Attributable to Noncontrolling Interests
Net loss attributable to noncontrolling interests in our condensed consolidated statements of operations is a result of our investments in certain of our consolidated VIEs and consists of the portion of the net loss of these consolidated entities that is not allocated to us. Net losses in consolidated VIEs are attributed to noncontrolling interests considering the liquidation preferences of the different classes of equity held by the shareholders in the VIE and their respective interests in the net assets of the consolidated VIE in the event of liquidation, and their pro rata ownership. Changes in the amount of net loss attributable to noncontrolling interests are directly impacted by changes in the net loss of our VIEs and our ownership percentage changes.
Results of Operations
Comparison of the Three Months Ended March 31, 2023 and 2022 (unaudited)
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(in thousands, except percentages) |
|
|||||||||||||
License revenue |
|
$ |
37 |
|
|
$ |
— |
|
|
$ |
37 |
|
|
|
100.0 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
19,281 |
|
|
|
15,460 |
|
|
|
3,821 |
|
|
|
24.7 |
% |
General and administrative |
|
|
13,970 |
|
|
|
17,982 |
|
|
|
(4,012 |
) |
|
|
-22.3 |
% |
Total operating expenses |
|
|
33,251 |
|
|
|
33,442 |
|
|
|
(191 |
) |
|
|
-0.6 |
% |
Loss from operations |
|
|
(33,214 |
) |
|
|
(33,442 |
) |
|
|
228 |
|
|
|
-0.7 |
% |
Other income (expense), net: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
275 |
|
|
|
98 |
|
|
|
177 |
|
|
|
180.6 |
% |
Interest expense |
|
|
(622 |
) |
|
|
— |
|
|
|
(622 |
) |
|
|
-100.0 |
% |
Change in fair value of contingent consideration liability - |
|
|
35 |
|
|
|
— |
|
|
|
35 |
|
|
|
100.0 |
% |
Change in fair value of securities carried at fair value |
|
|
964 |
|
|
|
(740 |
) |
|
|
1,704 |
|
|
|
-230.3 |
% |
Foreign exchange gain, net |
|
|
(837 |
) |
|
|
2,163 |
|
|
|
(3,000 |
) |
|
|
-138.7 |
% |
Other income |
|
|
243 |
|
|
|
— |
|
|
|
243 |
|
|
|
100.0 |
% |
Total other income (expense), net |
|
|
58 |
|
|
|
1,521 |
|
|
|
(1,463 |
) |
|
|
-96.2 |
% |
Loss before income taxes |
|
|
(33,156 |
) |
|
|
(31,921 |
) |
|
|
(1,235 |
) |
|
|
3.9 |
% |
Provision for income taxes |
|
|
(165 |
) |
|
|
(41 |
) |
|
|
(124 |
) |
|
|
302.4 |
% |
Losses from investments in equity method investees, net of tax |
|
|
(1,033 |
) |
|
|
(5,596 |
) |
|
|
4,563 |
|
|
|
-81.5 |
% |
Net loss |
|
$ |
(34,354 |
) |
|
$ |
(37,558 |
) |
|
$ |
3,204 |
|
|
|
-8.5 |
% |
Net loss attributable to noncontrolling interests |
|
|
(1,219 |
) |
|
|
(689 |
) |
|
|
(530 |
) |
|
|
76.9 |
% |
Net loss attributable to ATAI Life Sciences N.V. stockholders |
|
$ |
(33,135 |
) |
|
$ |
(36,869 |
) |
|
$ |
3,734 |
|
|
|
-10.1 |
% |
License Revenue
We recognized an immaterial amount of license revenue for the three months ended March 31, 2023 and 2022. The remaining deferred revenue balance related to the Otsuka Agreement is not material as of March 31, 2023.
42
Research and Development Expenses
The table and discussion below present research and development expenses for the three months ended March 31, 2023 and 2022:
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(in thousands, except percentages) |
|
|||||||||||||
Direct research and development expenses by program: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Our Key Clinical Programs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
RL-007 (Recognify) |
|
$ |
1,729 |
|
|
$ |
397 |
|
|
$ |
1,332 |
|
|
|
335.3 |
% |
VLS-01 (Viridia) |
|
|
3,068 |
|
|
|
1,795 |
|
|
|
1,273 |
|
|
|
70.9 |
% |
DMX-1002 (DemeRx IB) |
|
|
476 |
|
|
|
568 |
|
|
|
(92 |
) |
|
|
-16.3 |
% |
EMP-01 (EmpathBio) |
|
|
635 |
|
|
|
1,364 |
|
|
|
(729 |
) |
|
|
-53.4 |
% |
Our Other Clinical Programs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
PCN-101 (Perception) |
|
|
3,043 |
|
|
|
2,193 |
|
|
|
850 |
|
|
|
38.7 |
% |
KUR-101 (Kures) |
|
|
137 |
|
|
|
796 |
|
|
|
(659 |
) |
|
|
-82.8 |
% |
RLS-01 (Revixia) |
|
|
44 |
|
|
|
394 |
|
|
|
(350 |
) |
|
|
-88.8 |
% |
Enabling Technologies and Drug Discovery Platforms |
|
|
1,990 |
|
|
|
1,343 |
|
|
|
647 |
|
|
|
48.2 |
% |
Unallocated research and development expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Personnel expenses |
|
|
7,691 |
|
|
|
6,331 |
|
|
|
1,360 |
|
|
|
21.5 |
% |
Professional and consulting services |
|
|
301 |
|
|
|
227 |
|
|
|
74 |
|
|
|
32.7 |
% |
Other |
|
|
167 |
|
|
|
52 |
|
|
|
115 |
|
|
|
223.7 |
% |
Total research and development expenses |
|
$ |
19,281 |
|
|
$ |
15,460 |
|
|
$ |
3,821 |
|
|
|
24.7 |
% |
Research and development expenses were $19.3 million for the three months ended March 31, 2023, compared to $15.5 million for the three months ended March 31, 2022. The increase of $3.8 million was primarily attributable to a $2.3 million increase of direct costs at the platform companies as discussed below, a $1.4 million net increase in personnel costs, which included a $0.3 million decrease in stock-based compensation and a $0.1 million increase in professional and consulting services fees.
Our Key Clinical Programs:
RL-007 (Recognify Life Sciences)
The $1.3 million increase in direct costs for the RL-007 program was primarily due to an increase of $1.3 million of clinical development costs related to the on-going Phase 2b proof-of-concept clinical trial for RL-007 in CIAS.
Viridia Life Sciences: VLS-01 (N,N-Dimethyltryptamine; DMT) for Treatment Resistant Depression (TRD)
The $1.3 million increase in direct costs for VLS-01 was primarily due to an increase of $1.1 million of clinical development costs and $1.0 million of preclinical development costs, partially offset by a decrease of $0.8 million of manufacturing costs relating to the initiation of our Phase 1 open-label, single ascending dose, two-part trial of VLS-01.
DemeRx IB: DMX-1002 (ibogaine) for OUD
The $0.1 million decrease in direct costs for the DMX-1002 program was primarily due to a decrease of $0.1 million of manufacturing and personnel related costs.
EmpathBio: EMP-01 (MDMA derivative) for PTSD
The $0.7 million decrease in direct costs for EMP-01 was primarily due to a decrease of $0.6 million preclinical activities as well as a $0.4 million decrease of manufacturing costs, offset by a $0.3 million increase in clinical development costs relating to the initiation our Phase 1 single ascending dose trial to assess the safety and tolerability of orally administered EMP-01.
Our Other Clinical Programs
Perception Neuroscience: PCN-101(R-Ketamine) for TRD
The $0.9 million increase in direct costs for PCN-101 was primarily due to an increase of $0.7 million of preclinical costs and $0.3 million of personnel related costs, offset by a decrease of $0.1 million of manufacturing costs related to the conduct of our PCN-101 studies.
43
Kures: KUR-101(deuterated mitragynine) for OUD
The $0.7 million decrease in direct costs for KUR-101 was primarily due to a $0.6 million decrease of preclinical costs and a $0.1 million decrease in clinical development costs.
Revixia Life Sciences: RLS-01 for TRD
The $0.4 million decrease in direct costs for RLS-01 was primarily due to a $0.3 million decrease of manufacturing costs and $0.1 million decrease of preclinical development costs.
Enabling Technologies and Drug Discovery Platforms
The $0.7 million increase in our enabling technologies and drug discovery platforms primarily relates to increased direct costs of $0.3 million in our EntheogeniX program, $0.3 million in our InnarisBio program, $0.2 million in our Invyxis program, and $0.2 million in our TryptageniX program. We also incurred immaterial costs in association with IntroSpect, Psyber, Psyprotix, and Neuronasal.
General and Administrative Expenses
General and administrative expense was $14.0 million for the three months ended March 31, 2023 compared to $18.0 million for the three months ended March 31, 2022. The decrease of $4.0 million was largely attributable to a decrease of $2.0 million in VAT and other non-income taxes, $1.3 million decrease in stock-based compensation, $0.8 million decrease in accounting and legal fees, $0.8 million decrease in personnel related costs, $0.6 million decrease in D&O and other insurance costs, offset by $1.4 million of restructuring costs related to the reduction in force in February 2023.
Interest Income
Interest income for the three months ended March 31, 2023 and 2022 primarily consisted of interest earned on our cash balances and notes receivable during these periods. We recognized interest income of $0.3 million and $0.1 million for the three months ended March 31, 2023 and 2022.
Interest Expense
Interest expense was $0.6 million for the three months ended March 31, 2023, which consists primarily of interest expense incurred in connection with our term loan under the Loan Agreement entered into in August 2022. We recognized an immaterial amount of interest expense during the three months ended March 31, 2022.
Change in Fair Value of Contingent Consideration Liability—Related Parties
The milestone and royalty payments in relation to the acquisition of Perception, InnarisBio and TryptageniX were recorded at the acquisition date or at the exercise date related to the call option, and is subsequently remeasured to fair value. For the three months ended March 31, 2023 and 2022 we recognized an immaterial change in fair value, due to updates to certain assumptions used to calculate the Perception contingent consideration liability, such as the probability of success and discount rates.
Change in Fair Value of Securities carried at Fair Value
Changes in fair value of securities consists of changes in fair value of available for sale securities. We purchased the securities in January 2022. During the three months ended March 31, 2023 and 2022 we recognized a gain of $1.0 million and a loss of $0.7 million, respectively, relating to the change in fair value of securities.
Foreign Exchange Gain (Loss), net
We recorded a loss of $0.8 million related to foreign currency exchange rates for the three months ended March 31, 2023 and a gain of $2.2 million related to foreign currency exchange rate for the three months ended March 31, 2022. This was due to the impact of fluctuations in the foreign currency exchange rate between the Euro and the U.S. dollar on our foreign denominated balances.
Other Income
We recognized other income of $0.2 million for the three months ended March 31, 2023 and 2022, which consists principally of a $0.1 million gain recorded as a result of the Company's remeasurement of our expected credit loss allowance as of March 31, 2023 and $0.1 million of service revenue generated for general and administrative services performed by the atai on behalf of our platform companies. See Note 2 for additional discussion regarding our adoption of ASU 2016-13, Financial Instruments — Credit Losses.
44
Provision For Income Taxes
We incurred current income tax expense of $0.2 million for the three months ended March 31, 2023 compared to $0.1 million for the three months ended March 31, 2022. Our current income tax expense relates to book profits and thus taxable profits generated in our United States, Australian, and United Kingdom based subsidiaries.
Losses from Investments in Equity Method Investees
Losses from investment in equity method investees for the three months ended March 31, 2023 and 2022 was $1.0 million and $5.6 million, respectively. Loss from investment in equity method investees represents our share of equity method investee losses on the basis of our equity ownership percentages or based on our proportionate share of the respective class of securities in our other investments in the event that the carrying amount of our equity method investments was zero.
Liquidity and Capital Resources
Sources of Liquidity
Initial Public Offering
In June 2021, we completed our IPO and issued and sold 17,250,000 of our common shares at a price to the public of $15.00 per share, which included the exercise in full by the underwriters of their option to purchase 2,250,000 additional common shares. We received aggregate net proceeds of $231.6 million, after underwriting discounts and commissions of $18.1 million and offering costs of $9.0 million. As of March 31, 2023, we had cash and cash equivalents of $185.9 million and short-term securities of $64.0 million.
Convertible Promissory Notes
In November 2018, we issued an aggregate principal amount of $0.2 million of convertible notes, or the 2018 Convertible Notes. The 2018 Convertible Notes are non-interest-bearing and have a maturity date of September 30, 2025, unless previously redeemed, converted, purchased or cancelled. In October 2020, we issued an additional aggregate principal amount of $1.0 million of the 2018 Convertible Notes. Each note has a face value of €1 and is convertible into one ordinary share of ATAI Life Sciences AG upon the payment of €17.00. In 2021, several noteholders elected to convert their 2018 Convertible Notes into shares of ATAI Life Sciences N.V. These investors paid €17.00 per share for an aggregate amount of €5.8 million ($6.9 million) in order to convert their 2018 Convertible Notes into common shares of ATAI Life Sciences AG, which was in accordance with the original terms of the 2018 Convertible Note Agreements. In May and July 2022, certain noteholders elected to convert some of their 2018 Convertible Notes into shares of ATAI Life Sciences N.V. The investors paid €17.00 per share for an aggregate amount of €4.6 million ($4.6 million) in order to convert their 2018 Convertible Notes into common shares of ATAI Life Sciences AG. Concurrently with the conversion of the 2018 Convertible Notes into common shares of ATAI Life Sciences AG, the shares of ATAI Life Sciences AG that were issued to the noteholders were exchanged for shares of ATAI Life Sciences N.V. through a transfer and sale arrangement such that ATAI Life Sciences AG continued to remain a wholly owned subsidiary of ATAI Life Sciences N.V and the transaction was accounted for as an equity transaction that resulted in no gain or loss recognition. The aggregate principal amount of 2018 Convertible Notes outstanding as of March 31, 2023 was $0.4 million.
Investments
While a significant potential source of liquidity resides in our investment in COMPASS ordinary shares, we do not expect that our investment in COMPASS will be a material source of liquidity in the near term. Based on quoted market prices, the market value of our ownership in COMPASS was $94.9 million as of March 31, 2023. As of March 31, 2023, the carrying value of our investment in COMPASS was $0 under the equity method. Through a series of open market transactions between November 23, 2021 and December 7, 2021 we purchased additional equity investments in COMPASS common stock. As of March 31, 2023, our voting interest in COMPASS was 22.4%.
Hercules Term Loan
In August 2022, we entered into a Loan and Security Agreement, with Hercules Capital, Inc. See “ – Liquidity Risks – Indebtedness– Hercules Term Loan” for additional information.
Liquidity Risks
As of March 31, 2023, we had cash and cash equivalents of $185.9 million and short-term securities of $64.0 million. We believe that our cash and cash equivalents will be sufficient to fund our projected operating expenses and capital expenditures through at least the next 12 months from the date of this Quarterly Report.
We expect to continue to incur substantial additional expenditures in the near term to support our ongoing activities. Additionally, we have incurred and expect to continue to incur additional costs as a result of operating as a public company. We expect to continue to incur net losses for the foreseeable future. Our ability to fund our product development and clinical operations as well as commercialization of our product candidates, will depend on the amount and timing of cash received from planned financings.
45
Our future capital requirements will depend on many factors, including:
A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Further, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans. If we are unable to obtain this funding when needed on acceptable terms or at all, we could be forced to delay, limit or terminate our product development efforts.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity financings, debt financings, collaborations with other companies and other strategic transactions. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Further, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development activities. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated product development programs.
Cash Flows
The following table summarizes our cash flows for the three months ended March 31, 2023 and 2022:
|
|
March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(in thousands) |
|
|||||
Net cash used in operating activities |
|
$ |
(21,111 |
) |
|
$ |
(23,986 |
) |
Net cash provided by investing activities |
|
|
16,018 |
|
|
|
(214,736 |
) |
Net cash provided by financing activities |
|
|
206 |
|
|
|
132 |
|
Effect of foreign exchange rate changes on cash |
|
|
159 |
|
|
|
299 |
|
Net increase (decrease) in cash |
|
$ |
(4,728 |
) |
|
$ |
(238,291 |
) |
Net Cash Used in Operating Activities
Net cash used in operating activities was $21.1 million for the three months ended March 31, 2023, which consisted of a net loss of $34.4 million, adjusted by non-cash charges of $9.6 million and net cash inflows from the change in operating assets and liabilities of $3.7 million. The non-cash charges primarily consisted of $8.7 million of stock-based compensation, $1.0 million of losses from our equity
46
method investments, $0.8 million of unrealized foreign exchange losses, $0.1 million change in right-of-use asset and $0.1 million amortization of debt discount, partially offset by a $1.0 million gain relating to the change in the fair value of our short-term securities during the period. The net cash inflows from the change in operating assets and liabilities were primarily due to a decrease of $4.9 million in prepaid expenses and other current assets and a $2.5 million increase in accounts payable, partially offset by a $3.7 million decrease in accrued liabilities.
Net cash used in operating activities was $24.0 million for the three months ended March 31, 2022, which consisted of a net loss of $37.6 million, adjusted by non-cash charges of $15.0 million and net cash outflows from the change in operating assets and liabilities of $1.5 million. The non-cash charges primarily consisted of $10.2 million of stock-based compensation, $5.6 million of losses from our equity method investments and a $0.7 million loss relating to the change in the fair value of our short-term debt securities during the period, partially offset by $1.5 million of unrealized foreign exchange gains. The net cash outflows from the change in operating assets and liabilities were primarily due to a $1.3 million increase in prepaid expenses and other current assets and a $1.9 million decrease in accounts payable, partially offset by a $1.7 million increase in accrued liabilities.
Net Cash Provided by Investing Activities
Net cash provided by investing activities was $16.0 million for the three months ended March 31, 2023, primarily driven by $19.5 million of proceeds from the sale and maturities of securities carried at fair value, partially offset by $3.0 million of loans remitted to related parties, $0.3 million of purchases of property and equipment and $0.2 million of capitalized internal-use software development costs.
Net cash used in investing activities was $214.7 million for the three months ended March 31, 2022, primarily driven by $211.7 million of cash paid for debt securities carried at fair value and $3.0 million of loans remitted to related parties.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $0.2 million for the three months ended March 31, 2023, due to $0.2 million of proceeds from stock option exercises.
Net cash provided by financing activities was $0.1 million for the three months ended March 31, 2022, due to $0.1 million of proceeds from stock option exercises.
Indebtedness
Convertible Notes
In November 2018, we issued an aggregate principal amount of $0.2 million of 2018 Convertible Notes. In October 2020, we issued an additional principal amount of $1.0 million of 2018 Convertible Notes. The 2018 Convertible Notes are non-interest-bearing and have a maturity date of September 30, 2025, unless previously redeemed, converted, purchased or cancelled. Each note has a face value of €1 and is convertible into one common share of ATAI Life Sciences AG upon the payment of €17.00. Conversion rights may be exercised by a noteholder at any time prior to maturity, except during certain periods subsequent to the consummation of the IPO.
In 2021 and 2022, several noteholders elected to convert their 2018 Convertible Notes into common shares of ATAI Life Sciences N.V. These investors paid €17.00 per share for the aggregate amount of €5.8 million or $6.9 million and €4.6 million ($4.6 million), respectively, in order to convert their 2018 Convertible Notes into common shares of ATAI Life Sciences AG, which was in accordance with the original terms of the 2018 Convertible Note Agreements. Concurrent with the conversion of the 2018 Convertible Notes into common shares of ATAI Life Sciences AG, the common shares of ATAI Life Sciences AG that were issued to the noteholders were exchanged for 5,478,176 shares of ATAI Life Sciences N.V. through a transfer and sale arrangement such that ATAI Life Sciences AG continued to remain a wholly owned subsidiary of ATAI Life Sciences N.V and the transaction was accounted for as an equity transaction that resulted in no gain or loss recognition.
As of March 31, 2023 an aggregate principal amount of $0.4 million remained outstanding under the 2018 Convertible Notes.
47
Hercules Term Loan
On August 9, 2022 (the “Closing Date”), we, ATAI Life Sciences AG (“ATAI AG” and together with the Company, the “Borrowers”) and certain of our subsidiary guarantors (collectively, the “Subsidiary Guarantors”) entered into a Loan and Security Agreement (the “Loan Agreement”) with Hercules Capital, Inc. (“Hercules”), in its capacity as administrative agent and collateral agent (the “Agent”) and as a lender, and certain other financial institutions that from time to time become parties to the Loan Agreement as lenders (collectively, the “Lenders”). The Loan Agreement provides for term loans in an aggregate principal amount of up to $175.0 million under multiple tranches (the “2022 Term Loan Facility”), available as follows: (i) a term loan advance in the amount of $15.0 million on the Closing Date (the “Tranche 1A Advance”); (ii) at any time after the Closing Date but on or prior to May 1, 2023 or a date otherwise agreed to by the parties (the “Tranche 1B Expiration Date”), term loan advances in an aggregate principal amount of up to $20.0 million (the “Tranche 1B Advances”); (iii) at any time beginning upon the earlier of (A) the Tranche 1B Expiration Date and (B) the date on which all amounts available to be drawn under the Tranche 1B Advances have been drawn and on or prior to December 15, 2023 (the “Tranche 1C Expiration Date”), term loan advances in an aggregate principal amount of up to $25.0 million (the “Tranche 1C Advances” and together with the Tranche 1A Advance and the Tranche 1B Advances, the “Tranche 1 Advances”); (iv) subject to us achieving certain performance milestones and, beginning upon the earlier of (A) the date on which all amounts available to be drawn under the Tranche 1C Advances have been drawn and (B) the Tranche 1C Expiration Date, on or prior to June 30, 2024, term loan advances in an aggregate principal amount of $15.0 million (the “Tranche 2 Advances”); and (v) subject to approval by the Lenders’ respective investment committees in its discretion, on or prior to March 31, 2025, term loan advances in an aggregate principal amount of up to $100.0 million (the “Tranche 3 Advances”). With the exception of the first $15.0 million tranche available on the Closing Date, each of the tranches may be drawn down in $5.0 million increments at our election, subject to applicable conditions to draw. We have agreed to use the proceeds of the 2022 Term Loan Facility for working capital and general business purposes.
We are permitted to engage in certain specified transactions (subject to mandatory prepayment in certain instances as well as certain limitations, including the pledge of equity interests of certain subsidiaries and VIEs), including but not limited to, (i) entering into non-exclusive and certain specified exclusive licensing arrangements with respect to intellectual property without the consent of the Lenders; and (ii) entering into certain permitted acquisitions.
The 2022 Term Loan Facility will mature on August 1, 2026 (the “Maturity Date”), which may be extended until February 1, 2027 if we achieve certain performance milestones, raise at least $175.0 million of unrestricted new net cash proceeds from certain permitted sources after the Closing Date and prior to June 30, 2024, and satisfy certain other specified conditions. The outstanding principal balance of the 2022 Term Loan Facility bears interest at a floating interest rate per annum equal to the greater of either (i) the prime rate as reported in the Wall Street Journal plus 4.55% and (ii) 8.55%. Accrued interest is payable monthly following the funding of each term loan advance. We may make payments of interest only, without any loan amortization payments, for a period of thirty (30) months following the Closing Date, which period may be extended to (i) thirty-six months if certain additional performance milestones have been achieved; and (ii) forty-two months if certain additional performance milestones have been achieved. At the end of the interest only period, we are required to begin repayment of the outstanding principal of the 2022 Term Loan Facility in equal monthly installments.
As collateral for the obligations under the 2022 Term Loan Facility, we have granted to the Agent for the benefit of the Lenders a senior security interest in substantially all of our, ATAI AG and each Subsidiary Guarantor’s property (including a pledge of equity interests of certain subsidiaries and VIEs), exclusive of intellectual property, with certain limited exceptions set forth in the Loan Agreement.
The Loan Agreement contains customary closing and commitment fees, prepayment fees and provisions, events of default and representations, warranties and affirmative and negative covenants, including a financial covenant requiring us to maintain certain levels of cash in accounts subject to a control agreement in favor of the Agent (the “Qualified Cash”) at all times commencing from the Closing Date, which includes a cap on the amount of cash that can be held by, among others, certain of our foreign subsidiaries in Australia and the United Kingdom. In addition, the financial covenant under the Loan Agreement requires that beginning on the later of (i) July 1, 2023 and (ii) the date on which the aggregate outstanding amount borrowed under the 2022 Term Loan Facility is equal to or greater than $40.0 million, we shall maintain Qualified Cash in an amount no less than the sum of (1) 33% of the outstanding amount under the 2022 Term Loan Facility, and (2) the amount of the Borrowers’ and Subsidiary Guarantors’ accounts payable that have not been paid within 180 days from the invoice date of the relevant account payable, subject to certain exceptions; provided, that the financial covenant shall not apply on any day that our market capitalization is at least $600.0 million measured on a consecutive 10-business day period immediately prior to such date of measurement and tested on a daily basis. Upon the occurrence of an event of default, including a material adverse effect, subject to certain exceptions, on our and ATAI AG’s, taken together, business, operations, properties, assets or financial condition, and subject to any specified cure periods, all amounts owed by us may be declared immediately due and payable by the Lenders. As of the Closing Date, we were in compliance with all applicable covenants under the Loan Agreement.
In addition, we are required to make a final payment fee (the “End of Term Charge”) upon the earlier of (i) the Maturity Date, (ii) the date that we prepay, in full or in part, the principal balance of the 2022 Term Loan Facility, or (iii) the date that the outstanding balance of the 2022 Term Loan Facility becomes due and payable. The End of Term Charge is 6.95% of the aggregate original principal amount of the term loans so repaid or prepaid under the Loan Agreement.
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We may, at our option, prepay the term loans in full or in part, subject to a prepayment penalty equal to (i) 2.00% of the principal amount prepaid if the prepayment occurs on or prior to the first anniversary of the Closing Date, (ii) 1.0% of the principal amount prepaid if the prepayment occurs after the first anniversary and on or prior to the second anniversary of the Closing Date, and (iii) 0.5% of the principal amount prepaid if the prepayment occurs after the second anniversary and prior to the Maturity Date.
Material Cash Requirements from Known Contractual and Other Obligations and Commitments
Our commitments and obligations were reported in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 24, 2023. During the three months ended March 31, 2023, there have been no material changes from the contractual commitments and obligations previously disclosed in our Form 10-K, with the exception of the five year lease that commenced in February 2023 that is further described in Note 15 of the notes to our unaudited condensed consolidated financial statements appearing under Part 1, Item 1.
Recently Adopted Accounting Pronouncements
See Note 2, “Summary of Significant Accounting Policies—Recently Adopted Accounting Pronouncements” to our unaudited condensed consolidated financial statements appearing under Part 1, Item 1 for more information.
Critical Accounting Policies and Estimates
We believe that the assumptions and estimates associated with licenses of intellectual property, research and development expenses, acquisitions and share-based compensation have the greatest potential impact on our condensed consolidated financial statements. Therefore, we consider these to be our critical accounting estimates. Our critical accounting policies are detailed in our Form 10-K.
JOBS Act
We are an emerging growth company, as defined in the JOBS Act. We intend to rely on certain of the exemptions and reduced reporting requirements provided by the JOBS Act. We have elected to use the extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
As described in Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report, we have early adopted certain accounting standards, as the JOBS Act does not preclude an emerging growth company from adopting a new or revised accounting standard earlier than the time that such standard applies to private companies. We expect to use the extended transition period for any other new or revised accounting standards during the period in which we remain an emerging growth company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates. In addition, our portfolio of notes receivables is exposed to credit risk in the form of non-payment or non-performance. In mitigating our credit risk, we consider multiple factors, including the duration and terms of the note and the nature of and our relationship with the counterparty.
Interest Rate Sensitivity
Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. As of March 31, 2023 we had cash and cash equivalents of $185.9 million and short-term securities of $64.0 million. We generally hold our cash in interest-bearing demand deposit accounts and short-term securities. Due to the nature of our cash and investment portfolio, a hypothetical 100 basis point change in interest rates would not have a material effect on the fair value of our cash. Our cash is held for working capital purposes. The Company purchases investment grade marketable debt securities which are rated by nationally recognized statistical credit rating organizations in accordance with its investment policy. This policy is designed to minimize the Company's exposure to credit losses and to ensure that the adequate liquidity is maintained at all times to meet anticipated cash flow needs.
As of March 31, 2023, we had $0.4 million in convertible promissory notes – related parties, net, which was comprised of non-interest-bearing borrowings under the 2018 Convertible Notes. Based on the principal amounts of the convertible promissory notes and the interest rate assigned to the convertible promissory notes, a hypothetical 10% change in interest rates would not have a material impact on our convertible promissory notes, financial position or results of operations.
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As of March 31, 2023, the carrying amount of our short and long-term notes receivables was an aggregate amount of $10.0 million. Based on the principal amounts of the notes receivable and the interest rates assigned to each note receivable as per their respective contracts, a hypothetical 10% change in the interest rates would not have a material impact on our notes receivables, financial position or results of operations.
Foreign Currency Exchange Risk
Our reporting and functional currency is the U.S. dollar, and the functional currency of our foreign subsidiaries is generally the respective local currency. The assets and liabilities of each of our foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at each balance sheet date. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are recorded as a separate component on the Condensed Consolidated Statements of Comprehensive Loss. Equity transactions are translated using historical exchange rates. Expenses are translated using the average exchange rate during the previous month. Gains or losses due to transactions in foreign currencies are included in interest and other income (expense), net in our Condensed Consolidated Statements of Operations.
The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. We have experienced and will continue to experience fluctuations in foreign exchange gains and losses related to changes in foreign currency exchange rates. In the event our foreign currency denominated assets, liabilities, revenue, or expenses increase, our results of operations may be more greatly affected by fluctuations in the exchange rates of the currencies in which we do business, resulting in unrealized foreign exchange gains or losses. We have not engaged in the hedging of foreign currency transactions to date, although we may choose to do so in the future.
A hypothetical 10% change in the relative value of the U.S. dollar to other currencies during any of the periods presented would not have had a material effect on our condensed consolidated financial statements, but could result in significant unrealized foreign exchange gains or losses for any given period.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2023, the end of the period covered by this Quarterly Report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2023 at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II- OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we have been and may again become involved in legal proceedings arising in the ordinary course of our business. Although the results of litigation and claims cannot be predicted with certainty, we do not believe we are party to any claim or litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse impact on our financial position, results of operations or cash flows. Regardless of the outcome, litigation can have an adverse effect on us because of defense and settlement costs, diversion of management resources and other factors.
Item lA. Risk Factors.
Investing in our common shares involves a high degree of risk. In addition to the other information set forth in this Quarterly Report and in other documents that we file with the SEC, you should carefully consider the factors described in the section titled "Risk Factors" in our Form 10-K. There have been no material changes to the risk factors described in Part I, Item 1A of our Form 10-K. If any of the risk factors described in the Form 10-K actually materializes, our business, financial condition and results of operations could be materially adversely affected. In such an event, the market price of our common shares could decline and you may lose all or part of your investment. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
During the three months ended March 31, 2023, we did not sell any securities that were not registered under the Securities Act.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
On May 10, 2023, our board of directors designated Anne Johnson, Chief Accounting Officer, as our principal accounting officer effective immediately. Ms. Johnson will continue to report to Stephen Bardin, our Chief Financial Officer (who remains the Company’s principal financial officer and is no longer designated as principal accounting officer).
Anne Johnson, age 54, joined atai in January 2021 as VP, Global Controller and most recently became the Chief Accounting Officer. From December 2018 to December 2020, Ms. Johnson served as Controller of Aruvant Sciences, Inc. Prior to that, Ms. Johnson served as Project Lead/Consultant at Resource Global Professionals from January 2017 to December 2018. From September 2014 to June 2016, Ms. Johnson served as Executive Director and Corporate Controller of Chimerix, Inc. Ms. Johnson received her Bachelor of Science in Accounting from the University of North Carolina Wilmington, and is a Certified Public Accountant and Chartered Global Management Accountant.
On May 10, 2023, atai Life Sciences US, Inc., a subsidiary of the Company (“atai US”), entered into an employment agreement with Ms. Johnson (the “Employment Agreement”). Pursuant to the Employment Agreement, Ms. Johnson is entitled to an initial base salary of $360,000. Ms. Johnson is also eligible to receive an annual discretionary bonus award targeted at 40% of her then-current base salary. The Employment Agreement further provides that if atai US terminates Ms. Johnson’s employment without “cause” or she resigns for “good reason” (as these terms are defined in the Employment Agreement), subject to her timely executing a release of claims and her continued compliance with certain restrictive covenants, she is entitled to receive (i) base salary continuation for a period of nine months; (ii) payment for any earned but unpaid annual bonus for the year prior to the year of termination; and (iii) reimbursement for continued health coverage pursuant to COBRA for up to nine months following termination. If such a termination of employment occurs on or within 12 months following a “change in control” (as defined in the Employment Agreement), then, in lieu of the severance payments and benefits described above, subject to her timely executing a release of claims and her continued compliance with certain restrictive covenants, Ms. Johnson is entitled to receive (i) a lump-sum payment equal to one times the sum of her annual base salary and her target annual bonus for
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the year of termination; (ii) reimbursement for continued health coverage pursuant to COBRA for up to 12 months following termination; and (iii) accelerated vesting of all unvested equity or equity-based awards that vest solely based on the passage of time, with any such awards that vest based on the attainment of performance-vesting conditions being governed by the terms of the applicable award agreement, and the time period that Ms. Johnson may have to exercise any stock options may be extended for up to 12 months.
Ms. Johnson has agreed to refrain from competing with us while employed and following her termination of employment for any reason for a period of one year (or two years if Ms. Johnson breaches her fiduciary duties or misappropriates our property or proprietary information). Ms. Johnson has also agreed to refrain from soliciting employees or consultants of atai US to terminate their relationship with atai US and from inducing clients, licensors, licensees or customers to terminate, breach or materially change their relationship with atai US, in each case, while employed and following her termination of employment for any reason for a period of two years.
There are no arrangements or understandings between Ms. Johnson and any other person pursuant to which Ms. Johnson was designated as principal accounting officer. Ms. Johnson has no family relationships subject to disclosure under Item 401(d) of Regulation S-K or any direct or indirect material in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
The foregoing information is included for the purpose of providing the disclosures required under “Item 5.02 - Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers – paragraphs (b) and (c)” of Form 8-K.
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Item 6. Exhibits.
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Incorporated by Reference |
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Exhibit Number |
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Description |
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Form |
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File No. |
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Exhibit |
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Filing |
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Filed/Furnished |
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3.1 |
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Articles of Association of ATAI Life Sciences N.V. (translated into English), currently in effect |
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S-3 |
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333-265970 |
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3.1 |
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7/01/2022 |
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3.2 |
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S-1/A |
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333- 255383 |
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3.2 |
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6/11/2021 |
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3.3 |
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S-1/A |
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333- 255383 |
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3.3 |
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6/11/2021 |
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31.1 |
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Certification of Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a) |
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* |
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31.2 |
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Certification of Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a) |
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* |
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32.1 |
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Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 |
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** |
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32.2 |
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Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 |
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** |
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101.INS |
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Inline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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* |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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* |
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104 |
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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* |
* Filed herewith.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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ATAI LIFE SCIENCES N.V. |
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Date: May 11, 2023 |
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By: |
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/s/ Florian Brand |
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Florian Brand |
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Chief Executive Officer and Managing Director (Principal Executive Officer) |
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Date: May 11, 2023 |
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By: |
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/s/ Stephen Bardin |
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Stephen Bardin |
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Chief Financial Officer and Managing Director (Principal Financial Officer) |
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Exhibit 31.1
CERTIFICATION
I, Florian Brand, certify that:
Date: May 11, 2023 |
By: |
/s/ Florian Brand |
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Florian Brand Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
I, Stephen Bardin, certify that:
Date: May 11, 2023 |
By: |
/s/ Stephen Bardin |
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Stephen Bardin |
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Chief Financial Officer |
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(Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of ATAI Life Sciences N.V. (the “Company”) for the period ended March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
Date: May 11, 2023 |
By: |
/s/ Florian Brand |
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Florian Brand |
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Chief Executive Officer |
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(Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of ATAI Life Sciences N.V. (the “Company”) for the period ended March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
Date: May 11, 2023 |
By: |
/s/ Stephen Bardin |
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Stephen Bardin |
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Chief Financial Officer |
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(Principal Financial Officer) |