Is ATAI a Viable Investment?

We recently purchased shares of ATAI stock and moved the market. ATAI is a pharmaceutical company with several potential medicines under investigation. They have FDA approval to do clinical trials on a ketamine compound for depression. Like most small startup pharmaceutical operations, ATAI is not making any drugs that they are currently selling. Thus they have a stock that trades in the $1 range. So, is ATAI a viable investment? It has to do with what you think about the psychedelic medicine niche.

What Are Psychedelic Medicines?

For many people the mention of psychedelics brings images of rock concerts with folks taking LSD and hallucinating. Because of the negative view that psychedelics achieved in the 1960s they were made Schedule I drugs along with drugs like heroin and cocaine. Research into the medicinal aspects of these medicines was stopped and did not resume until this century. It turns out that psychedelics can be very helpful in treating conditions like major depression, post-traumatic stress disorder, and substance abuse disorders. As a rule they are used to make the brain more receptive to psychotherapy. Unlike standard antidepressants which are used in a similar fashion, these medicines only need to be taken once or twice and often provide symptom relief that lasts for years. One of these medicines, MDMA, is likely to be approved by the FDA in 2024 for use in treating PTSD. Psilocybin for treatment of depression is likely about a year behind. Ketamine is already in use for depression and is a drug under investigation by ATAI.

What Is the Investment Potential of Psychedelics?

For a pharmaceutical to be a money maker it has to have a large market and not a lot of competition. The competition part is taken care of by the fact that the Food and Drug Administration makes companies take their potential therapies through stages of testing. First they have to demonstrate safety in the doses to be used. This is done with animals and then with humans. Then they need to demonstrate effectiveness for their intended purposes. Last of all they need to be shown to be significantly more effective than a placebo in treating their target conditions.

Potential Size of Psychedelic Market

The potential market for psychedelics is huge. Roughly 4% of people are depressed with women more likely to suffer than men. 5% percent of adults and nearly 6% of the elderly suffer from depression. 9% of people suffer from post-traumatic stress disorder during their lifetime. The incidence of substance abuse disorders is greater than depression and PTSD combined. People often have more than one of these problems, all of which are risk factors for suicide. The point is that these are all conditions that appear to respond well when psychedelic medicines are used as adjunctive treatment along with psychotherapy thus providing a huge potential market for psychedelics.

How Has ATAI Stock Been Doing and What Is Its Potential?

ATAI hit the market at $19.45 in June of 2021. It was down to $5 by the start of 2022 and then crept down to the $2 and then $1 ranges. There is a lot of excitement about the potential for a company with several potential blockbuster medicines in the pipeline. However, it can take as long as ten to fifteen years to go through all three phases of FDA trials. Both psilocybin and MDMA are moving faster because they have achieved special status. However, no matter the status of the drug with the FDA it is to be proven to be safe, effective, and more effective than placebo in humans before it is allowed to be used in a normal clinical setting.

The point is that it may take more years before ATAI’s stable of psychedelic medicines come on the market. The company needs to stay in business long enough to be there when the FDA grants approval. That having been said, the investment potential for a patient investor who pays attention to the psychedelic market is very large. Because the market looks ahead for investing opportunities, when one of ATAI’s drugs passes a stage in FDA testing and appears to be closer to being a money maker, the company’s stock will go up. Thus, traders will not need to wait for ATAI to have a full product line being sold in order for the stock to be a profitable investment.

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