Atai Life Sciences Is Going Public, Stock Looks Like a Good Buy

The IPO calendar for this week looks pretty crowded and several companies are going public. Atai Life Sciences is backed by billionaire Peter Theil, who co-founded PayPal and Palantir. Atai Life Sciences has also filed for an IPO. What’s the forecast for Atai Life Sciences stock and should you buy the IPO?

Atai Life Sciences is a Berlin-based biotech startup. The company is working to treat mental disorders using psychedelic treatments. MindMed (MMED) is another company working on similar products.

Atai Lifesciences has filed for the IPO and is expected to list on June 18. The company plans to offer 14.3 million shares and has set the pricing range at $13–$15. Berenberg, Credit Suisse, Cowen, and Citigroup are the lead underwriters for the issue.

Generally, biotech startup companies are pre-revenue stage and don’t generate revenues and post losses. However, Atai Life Sciences reported a license revenue of $19.8 million in the first quarter of 2021 and posted an operating income of $4 million. The company anticipates that it “will continue to incur significant losses for the foreseeable future.” Also, despite the revenues for the first quarter of 2021, it still is a pre-revenue company.

Before the IPO, the company had cash and cash equivalents of $245 million, which it expects to rise to $425 million assuming the IPO is priced at $14 per share.

At the upper end of the IPO, Atai Life Sciences would be valued at around $2.3 billion. The valuation is in line with its most recent private market transaction. The company was valued at $2 billion at a private funding round in March. Incidentally, some of the other companies like Snowflake and Affirm went public at a massive premium to their private market valuation.

Atai Life Sciences would trade under the ticker symbol “ATAI” after the listing. Christian Angermayer, a co-founder of Atai Life Sciences, has been a long-time advocate of mental health benefits. Some of the company’s product candidates use controlled substances.

Since Atai Life Sciences is only going public, we don’t have any forecast for the stock. Also, being a clinical-stage company, we don’t have earnings-based metrics to value the stock. That said, the company has kept the valuation near the private market valuation which makes it attractive. Also, the backing from Theil adds value to the company.

From a market perspective, the market for mental health is growing very fast and an increasing number of people are realizing the importance of addressing mental disorders. According to IBIS World, the market size for mental health and substance abuse centers in the U.S. is $19.2 billion in 2021.

As part of the risks, Atai Life Sciences said, “In connection with the preparation of our consolidated financial statements for the years ended December 31, 2019, and 2020, we identified material weaknesses in our internal control over financial reporting.”

Like all clinical-stage companies, Atai Life Sciences is a risky and speculative bet. However, with a reasonable valuation and strong market potential, the IPO looks like a good buy.

You can buy Atai Life Sciences through any of the brokers. Robinhood allows users to place the order for some IPOs before the listing. However, these are limit orders and they get executed when the stock starts trading.