Despite the failure of its Recognify-partnered inidascamine, Jefferies analysts do not expect a definitively negative stock impact on atai, given the company’s promising psychedelic pipeline.
Recognify Life Sciences’ GABA-B modulator inidascamine has failed a Phase IIb study in schizophrenia. The drug was unable to significantly improve neurocognitive function in adults, further underscoring the difficulty of developing effective therapies for neuropsychiatric conditions.
Recognify is partnered with atai Life Sciences, which in early 2021 acquired a majority stake in the biotech to participate in the development of inidascamine. But despite its investment in the schizophrenia drug, inidascamine’s mid-stage failure, announced Friday, does not pose a serious threat to atai’s business, analysts at Jefferies wrote in an investor note after the news.
“We are unsurprised by [inidascamine’s] Phase IIb failure,” the analysts wrote, adding that they had “low expectations” of the asset, underscored by the “difficulty of succeeding in this hard-to-treat CNS/neuro indication.” Given this broader backdrop, Jefferies anticipates that the inidascamine failure will have “minimal stock impact” on atai.
Instead, the analysts said that atai’s story remains “compelling,” especially given its psychedelic nasal spray BPL-003 being developed for treatment-resistant depression. A mid-stage readout earlier this month showed that the investigational nasal spray significantly eased symptom burden in patients, with treatment benefits arising as early as one day after dosing. BPL-003 is being developed by Beckley Psytech, with which atai announced a merger in June.
As for Recognify, the company reported in its readout that inidascamine failed to significantly improve scores on a neurocognitive composite battery at week 6. Still, the South San Francisco–based company detected “modest but consistent numerical improvement” across various neurocognitive domains, including processing speed, symbol coding and verbal learning. Recognify also pointed to “directionally positive” effects of inidascamine on real-world functional cognition.
Given the underwhelming mid-stage performance of inidascamine, atai will allocate its resources “on our wholly owned pipeline of transformative psychedelic product candidates focused on affective disorders,” CEO Srinivas Rao said in a prepared statement on Friday. This move, according to Jefferies analysts, will make atai a “pure-play psychedelic” company.
The analysts also said that atai’s “macro backdrop” appears to be improving, with health authorities “recently voicing support.” Both Health Secretary Robert F. Kennedy Jr. and FDA Commissioner Marty Makary have signaled their openness to psychedelic therapies, especially for neuropsychiatric indications.
Recognify’s mid-stage stumble in schizophrenia deals another blow to the neuropsychiatric space. Last month, for instance, Alto Neuroscience hit a Phase II stumble in major depressive disorder, with its oral drug candidate ALTO-203 failing to boost mood in adult patients. Meanwhile, earlier this month, Otsuka and Lundbeck failed to win the support of an FDA advisory panel for their atypical antipsychotic Rexulti for PTSD.
