Do Karuna, Cerevel Deals Signal Renewed Neuropsychiatric Interest From Big Pharma?

In recent years, large pharmaceutical companies have shifted their focus from neuropsychiatric research and development (R&D) to other areas like neurodegenerative diseases, such as Alzheimer’s and amyotrophic lateral sclerosis (ALS). This trend is largely due to the changing landscape of the pharmaceutical industry and evolving business priorities.

During the 1980s and 1990s, major pharmaceutical companies developed blockbuster drugs for depression and antipsychotics, including Prozac, Zoloft, Risperdal, and Abilify. Graig Suvannavejh, a senior biopharmaceutical and biotechnology equity research analyst at Mizuho Americas, explained that large pharma companies were attracted to these diseases because of the high number of patients requiring treatment. At that time, pharmaceutical sales forces were promoting a wide array of primary care products.

However, in the late 2000s and 2010s, many of these lucrative drugs went off-patent and became available as generics. This period also saw the rise of oncology and monoclonal antibodies, which led many big pharmaceutical companies to divert their resources away from psychiatry and towards these new areas of interest. This shift persists to some extent today. For instance, a representative from Eli Lilly, a prominent player in Alzheimer’s treatment, stated that the company currently does not have any psychiatric clinical programs and does not prioritize this area in its R&D efforts.

As a result, the responsibility for developing neuropsychiatric drugs has largely fallen to smaller biotech firms. Companies like Sage Therapeutics and Intra-Cellular Therapies have made strides in this field; Sage Therapeutics received approval for Zurzuvae to treat postpartum depression in August 2023, while Intra-Cellular Therapies achieved a Phase III success for a major depressive disorder treatment.

Amit Etkin, founder and CEO of Alto Neuroscience, emphasized the importance of big pharma's involvement in neuropsychiatric R&D, citing the massive unmet need for new treatments. However, several factors contribute to the reluctance of large pharmaceutical companies to invest in this area. For example, Suvannavejh pointed out that most neuropsychiatric drugs are small molecules, which are easier to replicate as generics compared to large molecules. The Inflation Reduction Act of 2022 further complicates matters by allowing price negotiations for small molecule drugs four years earlier than for biologics, making the financial prospects less attractive for big pharma.

The neuropsychiatric field also poses high risks due to the low success rates of clinical trials and the complexity of the brain. The "placebo effect" and diverse underlying causes of psychiatric disorders make it challenging to develop effective treatments. Daniel Karlin, chief medical officer at MindMed, noted that the heterogeneous nature of depression complicates drug development, as a single treatment may not be effective across different biological profiles.

Despite these challenges, some big pharmaceutical companies continue to explore the neuropsychiatric space. Bristol Myers Squibb and AbbVie have acquired smaller firms with promising neuropsychiatric pipelines, such as Karuna Therapeutics and Cerevel Therapeutics. Additionally, Johnson & Johnson’s Janssen, Merck, and Lundbeck are conducting advanced-stage clinical trials for various psychiatric conditions.

Etkin believes that increased collaboration between large pharmaceutical companies and biotech firms could accelerate innovation in neuropsychiatric R&D. He suggests that such partnerships could take various forms beyond traditional mergers and acquisitions, fostering a more integrated approach to drug development.

In conclusion, while big pharma has largely shifted its focus away from neuropsychiatric R&D, the involvement of smaller biotech firms and potential collaborations offer hope for future advancements in this crucial field. The need for innovative treatments remains significant, and bridging the gap between large pharmaceutical companies and biotech firms could be key to addressing this challenge.