By David Wainer

Modern society's relationship with mental health has evolved in recent decades. Once taboo, conditions such as depression and bipolar disorder are now openly discussed by high-profile figures like Simone Biles and Mariah Carey. Governments and employers worldwide have expanded access to care.

Yet pharmaceutical innovation hasn't kept pace. Since the blockbuster success of drugs such as Prozac and Zoloft in the 1990s and early 2000s, many of the industry's largest companies have scaled back their investments in the field.

This isn't for lack of patient demand. More than one in five Americans lives with a mental illness, and existing treatments often have significant side effects and limited effectiveness.

Now, signs of a cautious revival are emerging. In late 2023, Bristol Myers Squibb acquired Karuna Therapeutics for $14 billion, betting on a promising new schizophrenia treatment. And in January, Johnson & Johnson agreed to acquire Intra-Cellular Therapies for $15 billion, adding a pill that treats bipolar depression and schizophrenia to its portfolio.

The recent deals might signal a comeback for the field, though they remain modest compared with pharma's investments in oncology, autoimmune diseases or even the broader neurological field for conditions such as Alzheimer's.

A hurdle for the industry is the lack of clear biological targets. Unlike diseases such as cancer, which allow scientists to biopsy tumors and pinpoint specific genetic mutations, psychiatric illnesses arise from a complex interplay of many genes, each with small effects, across millions of interacting brain cells, explains Steven Hyman, a professor at Harvard University. This makes drug development especially challenging. Clinical trials are further complicated by their reliance on subjective patient reports, rather than objective biomarkers like those found in blood tests.

Just last week, J&J -- one of the few large drugmakers still deeply invested in neuropsychiatry -- scrapped a potential treatment for major depressive disorder after it failed to show efficacy. AbbVie's recent acquisition of Cerevel Therapeutics for $8.7 billion hit a setback last year when its experimental schizophrenia drug missed an important study goal.

Yet for those willing to endure the risks, the rewards -- both financial and clinical -- can be significant. J&J's ketamine-derived antidepressant, Spravato, is now one of the company's fastest-growing blockbusters, generating $1 billion in sales last year. "Investing in this space is not for the faint of heart," says John Reed, J&J's head of innovative medicine, research and development. "The brain is the last frontier."

Drugs such as Eli Lilly's Prozac generated billions of dollars but were developed without a deep understanding of the underlying genetic mechanisms of mental health. Many of the treatments we use today are refinements of therapies discovered serendipitously more than 70 years ago. For example, all commonly used antipsychotics for schizophrenia are, broadly speaking, descendants of Thorazine, Hyman says. Thorazine, which works by blocking dopamine receptors, was discovered by accident in the 1950s when a French surgeon found that the drug, used at first as a preoperative sedative, could also reduce psychotic symptoms.

While our understanding of the brain -- with its billions of neurons and intricate neurotransmitter networks -- remains limited, that hasn't stopped companies from testing new pathways, analyzing patient responses and refining approaches.

Take the psychedelics industry: There are now dozens of startups conducting studies of drugs such as LSD, MDMA and psilocybin. Scientists don't fully understand yet exactly how psychedelics help patients, but it is clear that many report benefits for a variety of conditions such as post-traumatic stress disorder, anxiety and depression. While these therapies haven't yet gained Big Pharma's backing, some biotech companies, including Compass Pathways and Cybin, are moving the ball forward. "It'll be a big moment when a pharma company decides to invest in this space," says Paul Matteis, a biotech analyst at Stifel.

Indeed, as large companies pulled back, small biotech firms have driven innovation. While big acquisitions basically dried up during the past decade, venture capital investment in psychiatry-focused biotechs averaged $550 million between 2014 and 2024, according to DealForma data. One recipient was Karuna Therapeutics, which pursued an idea Big Pharma had abandoned. Karuna hypothesized that combining xanomeline -- an old Eli Lilly drug -- with another compound to mitigate its gastrointestinal side effects could create a new approach to treating schizophrenia. The result was Cobenfy, the first in a class of new treatments that help stabilize patient symptoms without the uncomfortable side effects of existing antipsychotics.

Steve Paul, a former Eli Lilly executive and ex-CEO of Karuna, says Cobenfy's success in targeting a new pathway of muscarinic receptors in the brain is paving the way for others -- such as Neurocrine Biosciences and MapLight Therapeutics -- to explore ways of tinkering with that approach. New discoveries can be helpful not only in schizophrenia but also to Alzheimer's patients who experience psychotic symptoms such as hallucination and delusions.

Successful investor "exits" such as Bristol Myers's acquisition of Karuna can help draw capital to more upstarts in the space. Paul and Daphne Zohar, both of whom played leading roles at Karuna, now head Seaport Therapeutics, a company focused on depression and anxiety.

"We are starting to make inroads," says Robert Plenge, chief research officer at Bristol Myers. "And while this may not be as mature as other areas, that progress forms a seed, which will allow many more things to grow."

In the long term, advances in genetics, neuroimaging, and cell biology will gradually reshape the understanding of psychiatric disorders, and our ability to treat them. It is early days for pharma's return to psychiatry, but the path forward is promising.

Write to David Wainer at david.wainer@wsj.com

(END) Dow Jones Newswires

March 14, 2025 05:30 ET (09:30 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.