atai Life Sciences (NASDAQ:ATAI, ETR:9VC) continues to receive bullish support from analysts despite the broader psychedelic sector experiencing a "technical setback" this week.
On June 4, Lykos Therapeutics brought its application for MDMA-assisted therapy for post-traumatic stress disorder before the Food and Drug Administration (FDA) Advisory Committee (AdCom). The committee voted against approving the therapy, stating that there was not enough data to demonstrate its effectiveness and raised methodological concerns.
Analysts at Jefferies believe there is minimal read-across from the AdCom vote to atai, but noted a rise in uncertainty about the general approvability of psychedelics.
“That said, we know the FDA has been quite supportive of psychedelics over the years, so we are curious how the agency will decide on the upcoming August 11th Prescription Drug User Fee Act (PDUFA),” they wrote.
They added that there are “subtle nuances” to consider as the issues raised by the panel appear mostly idiosyncratic to the sponsor and seem fully addressable by industry players.
“There are differences between Lykos’ trial and other psychedelic programs in terms of trial design and study rigor/execution,” they wrote.
“Many of Lykos’ issues seem unique to the program, which was sufficient to dissuade the committee’s confidence in MDMA’s efficacy/safety profile despite two Phase 3 results.”
They highlighted that atai’s affiliated COMP360 program, being developed by Compass Pathways (NASDAQ:CMPS) in which atai holds an approximately 22% stake, has been designed in a way to address all of Lykos’ issues.
For example, on expectation bias, patient screening is more restrictive as COMP360 excludes patients with prior psilocybin use. This compares to about 40% of subjects who had previously used MDMA in Lykos’ trial, potentially skewing the study outcomes, the analysts pointed out.
“atai has been very thoughtful in advancing its pipeline of psychedelics and non-psychedelics for $1 billion-plus in central nervous systems indications,” they wrote.
The analysts added that they were looking forward to the results from a Phase 2b trial of BPL-003 (intranasal 5-MeO-DMT) in treatment-resistant depression in the second half of 2024 from Beckley Psytech, in which atai owns a 35.5% stake.
“We think a breakthrough award is possible post-Phase 2b BPL-003 data,” they wrote.
The analysts have a ‘Buy’ rating and a $6 price target on atai, representing upside of 305% at the time of writing.