There’s been quite a lot of chatter concerning the mental health crisis for the reason that Covid-19 pandemic. Overall, 12 mental health disorders affect 970 million people world wide — or one in eight people, in accordance with the Institute for Health Metrics and Evaluation’s Global Burden of Disease. That may mean anything from anxiety and depression to bipolar disorder and schizophrenia. Covid has exacerbated the crisis, with 28% more people reporting anxiety and depressive disorders in consequence of the pandemic in 2020 versus 2019, the organization found . Now firms are stepping up to fulfill those needs — from innovation in drug therapies to providing services. “Covid really put a highlight on quite a lot of things, including technology and health care, and really specifically, mental health issues,” said Peter Micca, a partner and national health tech leader at consulting firm Deloitte. “Many of the investment within the early parts of Covid were around access and awareness, and advantages and programs,” he added. “There’s at all times been organizations focused on neuroscience issues, however the connection is even stronger now than I believe anyone could imagine.” ‘Exciting’ developments Already, big pharma — which has been largely absent in neuropsychiatry innovations — is getting on board. On Dec. 6, AbbVie said it could acquire Cerevel Therapeutics for about $8.7 billion . Cerevel’s antipsychotic drug Emraclidine is currently in a phase two study for schizophrenia and a phase one study in elderly volunteers for Alzheimer’s disease psychosis. CERE 6M mountain Cerevel’s 6-month performance Cerevel’s stock has moved nearly 20% higher for the reason that deal announcement, while AbbVie has gained 23%. Then, on Dec. 22, Bristol-Myers Squibb announced a $14 billion deal to accumulate Karuna Therapeutics . The latter’s antipsychotic, KarXT, is predicted to launch in late 2024 to treat schizophrenia, in accordance with the discharge announcing the agreement. Shares of Karuna have since soared nearly 48%, while Bristol Myers Squibb’s stock is down about 3%. Each drugs goal muscarinic receptors, which influence key neurotransmitters within the brain. Marc Goodman, senior research analyst at Leerink Partners, called the brand new class of medication, “essentially the most exciting thing occurring within the schizophrenia world straight away.” “Now now we have a drug that has a greater side effect profile and equal efficacy on the positive symptoms” in comparison with the opposite medications approved to treat the disease, he said. KRTX 6M mountain Karuna Therapeutics shares over the past six months. Attention to a long-time crisis The mental health crisis is nothing latest. Nonetheless, there has also been a growing awareness and acceptance of mental health illnesses over the past decade, said Canaccord Genuity analyst Richard Close. “There’s been recognition that mental health has a big impact on an individual’s overall health,” he said. A couple of in five American adults live with a mental illness, in accordance with the Centers for Disease Control and Prevention. About one in 25 have a serious mental illness, like bipolar disorder, major depression or schizophrenia, per the organization. That increased recognition will be seen, for instance, within the donations pouring into the National Alliance on Mental Illness. In 2022, MacKenzie Scott donated $30 million to the grassroots organization, the biggest it has ever received. “That is the mental health moment,” said Dr. Ken Duckworth, NAMI’s chief medical officer and creator of “You Are Not Alone: The NAMI Guide to Mental Health.” At the identical time, pharmaceutical firms want to pioneer latest treatments for neuropsychiatric illnesses. Last 12 months, Deloitte analyzed the market size of pharmacological interventions for 16 brain disorders, for each neurological or neuropsychiatric conditions. The latter generated $99 billion in 2022 and is predicted to succeed in $121.7 billion in 2026, the consulting firm found. “AI and AI technologies and capabilities will speed up the R & D process, will speed up and make the clinical trials process more focused, and in theory, enable certain drugs to get to market quicker, faster, cheaper,” Deloitte’s Micca said. Existing pharmaceutical firms are also specializing in certain therapeutic classes, “in order that they’ll go deep, not wide,” he added. As well as, Deloitte expects an expansion in non-drug treatments, similar to behavioral therapy services. Some $444.7 billion in revenue was generated in 2022 and the firm is projecting it should rise to $515 billion in 2026, with an aggregate compound annual growth rate of three.7%. Investing in biopharma Deloitte sees an enormous demand for innovation in neuropsychiatry. With big pharma largely out of the image over the past several years, there’s a big market opportunity for biopharmaceutical firms — and maybe, eventually, more acquisitions by large firms, Wall Street analysts said. “There may be a transparent unmet need,” said William Blair analyst Myles Minter. As an illustration, only about 50% of those affected by major depressive disorder are treated and of those, about three-quarters will relapse and must be treated again, he said. What firms are in search of now are novel therapies for depression which can be different from the present standard of care and those who can treat symptoms quicker. Among the many names Minter rates outperform are Axsome Therapeutics and Neumora Therapeutics . Neumora is developing an opioid receptor antagonist, Navacaprant, which is now in phase three trial to treat depression and phase two trial to great bipolar depression. The corporate also has trials underway for medications to treat schizophrenia and agitation in Alzheimer’s Disease. Meanwhile, Axsome’s fast-acting antidepressant Auvelity got here available on the market in late 2022. The drug can be in a phase three trial to treat Alzheimer’s Disease agitation and the outcomes should come out within the second quarter, said Leerink’s Goodman. He has an outperform rating and $100 price goal on the stock, which suggests almost 8% upside from Friday’s close. “We’re highly anticipating that data,” he said. “They have been pretty positive. So if this one’s positive, they’ll file and get that approved for a latest indication, and that could be a big, exciting latest deal.” UBS can be bullish on Axsome, initiating coverage of the stock earlier this month with a buy rating and $111 price goal. “We consider Auvelity could change into a number one brand in depression, generating $1bn in sales by 2030,” analyst Ashwani Verma wrote in a Feb. 6 note. Positive phase three data in Alzheimer’s agitation and narcolepsy could also drive the stock higher, Verma said. “AXSM stock is benefitting from renewed investor interest in CNS [central nervous system] therapy area, following [the] strategic exit of Karuna/ Cerevel; we consider this can be a sticky trend that gives [a] favorable backdrop for the stock,” Verma said. The one Goodman has his eye on straight away is Intra-Cellular Therapies . The corporate is seeking to expand is Caplyta drug, which treats schizophrenia and bipolar depression, into major depressive disorder, also often called clinical depression. Goodman is optimistic concerning the efficacy of Caplyta to treat depression. Two of the three ongoing studies are expected to report data in the primary and second quarter, he said. In late January, he boosted his price goal to $82 from $70, implying 8% upside from Friday’s close. Meanwhile, Relmada Therapeutics remains to be working on its major depressive order drug, REL-1017, also often called esmethadone. The NMDA receptor channel blocker failed its first two phase three trials since it didn’t show statistically significant improvement in depression symptoms in comparison with the placebo. The outcomes from its latest study needs to be released sometime in the following six months, Goodman said. “I’m really a believer that this drug can work,” he said. There are also names which can be a play on epilepsy but also they are looking into using the drugs to assist with depression, Goodman said. Xenon Pharmaceuticals has phase three trials underway for XEN1101, a Kv7 potassium channel opener, for epilepsy. Nonetheless, it is usually studying the drug for major depressive disorder. The corporate accomplished phase two for depression and said it saw promising topline results. It expects to begin phase three this 12 months. BioHaven has a Kv7 drug it’s working on for epilepsy as well, and has also began studying it for major depressive disorder. Relating to schizophrenia, Karuna and Cerevel aren’t the one ones developing drugs that focus on muscarinic receptors. Neumora has one in a phase one trial. Neurocrine Biosciences, which Goodman rates outperform, has a drug in a phase two trial. “If big pharma is acquiring two other muscarinics, anybody who’s a muscarinic is clearly going to learn from that,” Goodman said. Neurocrine Biosciences shares have added almost 12% since AbbVie said it could acquire Cerevel on Dec. 6 and Goodman thinks it has more room to run. His price goal of $160 suggests about 21% upside from Friday’s close. Neurocrine Biosciences also has a drug, Ingrezza, that treats tardive dyskinesia, which is a movement disorder normally attributable to long-term use of antipsychotic drugs. Meanwhile, Acadia Pharmaceuticals also has a schizophrenia drug and a drug for Parkinson’s disease psychosis within the pipeline , but straight away investors are focused on whether it gets the first-ever drug approval for Rett syndrome, a rare genetic neurological disorder, Goodman said. Finding value Meanwhile, valuations are largely compelling for small- and medium-cap biopharma stocks, said David Song, an investment partner and head of life sciences at Tema ETFs. His firm recently launched the actively managed Tema Neuroscience and Mental Health ETF (MNTL) , which invests in firms involved in combating neurological diseases and psychiatric disorders. “The core of what we put money into is small-, mid-cap biotech firms,” he said. “They’ve just come out of a extremely difficult bear market.” “Investors get compensated for attempting to, in my opinion, put money into breakthrough therapies and pay reasonable valuations for that,” he added. Included within the funds holdings are Neurocrine Biosciences, Intra-Cellular Therapies, Acadia Pharmaceuticals and Axsome Therapeutics. It also has assets within the services and technology side, including Acadia Healthcare , which makes a speciality of behavioral health treatment facilities, and a small holding in online therapy company Talkspace . One name it doesn’t hold is Teladoc , which has a direct-to-consumer mental-health business with BetterHelp. The stock surged in the course of the pandemic as Americans flocked to virtual health services, but fell flat because the economy reopened. Shares are down 93% from their all-time high of $294.54 hit on Feb. 8, 2021. The common analyst rating is a hold, in accordance with FactSet. Nonetheless, Canaccord’s Close rates the stock a buy due to the corporate’s success on driving profitablity and money flow, he wrote in a note Thursday. BetterHelp is now approaching $1 billion in revenue this 12 months, he told CNBC. His $34 price goal suggests nearly 62% upside from Friday’s close. Venturing into psychedelics Johnson & Johnson stands out as one big pharma name that has said it’s committing research and development into neuroscience. It has turned to psychedelics to treat depression. The corporate’s nasal spray, Spravato, is esketamine, which is created from ketamine. The drug launched in 2019 and got off to a slow start, but that has modified. Spravato brought in $689 million in global sales in 2023, an 84% increase from the 12 months prior, Johnson & Johnson reported in January. “Spravato has had a extremely good run over the past 12 months or two, and is starting to alter people’s attitudes,” said Goodman, who doesn’t cover the stock. “Quite a lot of investors within the investor community are like, ‘okay, possibly the psychedelics are potential moneymakers.'” The large debate now is whether or not the psychedelics that require controlled supervision will be successful or will those that do not require statement be higher, he said. Patients who take Spravato must be monitored by a health-care provider for no less than two hours after taking the drug. More M & A ahead? With big pharma stepping up with two planned acquisitions this 12 months, many on Wall Street consider more will follow eventually. “There’s going to be more M & A because there was such an extended time period where people weren’t investing in neuroscience,” said Leerink’s Goodman. Blair’s Minter also sees more deals ahead as big pharma tries to achieve exposure to neuropsychiatry through these firms developing the products. “If you happen to can construct out the sales force, you will have pathways to billion-dollar-plus products,” he said. Particularly, he thinks Axsome Therapeutics, Neumora and Intra-Cellular Therapies are all attractive as potential acquisitions. “You’re seeing quite a lot of these products construct out as pipelines,” he said. “What really matters to [big pharma] is: What am I buying 10 years down the track and is that this going to be a blockbuster for us?” Deloitte also sees latest business models emerging where firms form an alliance to work together on a drug, moderately than merge firms. “M & A sometimes doesn’t occur as quickly as people would love,” Micca said. “Sometimes taking a therapeutic class or drug to market requires a unique type of strategic alliances.” — CNBC’s Michael Bloom contributed reporting.