The psychedelic drug boom may be taking off, but one company in the space is trimming its workforce. Atai Life Sciences (NASDAQ: ATAI) just announced it has laid off roughly 30% of its staff. Shares are rising today, but it’s been a very difficult year for this penny stock. After declining more than 62% over the past six months, ATAI stock needs a positive catalyst to turn things around. This is likely part of the reason behind the Atai layoffs, which follow the company’s promise to implement a “company-wide cost optimization” initiative, a measure that hasn’t yet yielded the intended results.
Let’s examine the company’s recent announcement and see what investors should be expecting as Atai prepares to hopefully turn a new corner.
Atai Layoffs: A Closer Look
Part of ATAI stock’s negative performance can be attributed to some poor clinical trial results. The company began the year by announcing disappointing news regarding a Phase 2 trial for PCN-101 (R-ketamine) as a means of addressing treatment-resistant depression. Shares have been trending downward since.
The company needs to give investors cause for optimism and it seems intent on making key changes. CEO Florian Brand recently addressed the Atai layoffs, providing insight into the motives behind them. In his words:
“As part of our efforts to further focus our capital allocation towards generating meaningful clinical readouts in the near-term and to optimize our operational efficiency, we reduced our team by approximately 30%. I am grateful for the dedication of the team members impacted by this decision and their contributions towards our mission.”
Endpoints News reports that the Atai layoffs will primarily impact workers in non-clinical development roles, such as administrative positions. While reinvesting capital in further research and development may boost shares in the short term, the company will need to demonstrate some actual results if it wants investors to stand by it. Layoffs alone won’t solve that problem. As InvestorPlace contributor Muslim Farooque reported, ATAI stock could have significant upside potential, but only if it can improve on the drug that flopped in clinical trials.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.