Multinational Pharma Giants Pour Over $20 Billion into Schizophrenia Therapeutics – Is This the Next Hot Investment Frontier?

Source丨Original Work by Healthnews21

Author/Ji Yuanyuan

Currently, significant changes have occurred in the internal and external development environment of the global biopharmaceutical industry. The time required to discover new targets is becoming longer, R&D costs are increasing, and the market is becoming more competitive. This also requires pharmaceutical companies to enhance their ability to identify promising areas in order to uncover new drivers for market growth.

Recently, a group of multinational pharmaceutical companies have set their sights on the schizophrenia track. First, AbbVie announced that it would acquire Cerevel Therapeutics and its robust neuroscience pipeline for $45 per share in cash. The pipeline consists of multiple clinical-stage and preclinical candidates with potential in various diseases such as schizophrenia, Parkinson's disease (PD), and mood disorders.The total equity value of this transaction is approximately $8.7 billion.AbbVie stated that it expects to complete the acquisition in 2024.

Shortly thereafter, Bristol-Myers Squibb (hereinafter referred to as "BMS") and Karuna Therapeutics announced that they had reached a definitive acquisition agreement.Bristol-Myers Squibb Agrees to Acquire Karuna Therapeutics for Approximately $14 BillionBMS to Acquire Karuna’s Potential “First-in-Class” Therapy KarXT for Treating Adult Schizophrenia; NDA Accepted by U.S. FDA. If approved by the FDA, KarXT will become the first new mechanism drug for treating schizophrenia in decades.

Whether it is AbbVie or Bristol-Myers Squibb, acquisitions are new breakthroughs sought to address market competition pressures. Take AbbVie as an example: its currently best-selling drug Humira is facing competition from generic drugs, and while the oral JAK1 inhibitor upadacitinib has a very broad range of indications, it also faces many competitors, including Pfizer. This acquisition supplements AbbVie's neuroscience portfolio, adding a series of potentially first-class assets that could become new market growth points.

Schizophrenia is a common severe mental illness with an etiology that has not been fully elucidated, often accompanied by disorders in perception, thinking, emotion, and behavior. Among these, perceptual and thought disorders are the core symptoms of the disease, such as common manifestations like auditory hallucinations and paranoid delusions, which is why it is sometimes referred to as "Thought and Perception Dysregulation Syndrome" in some regions. However, there is generally no disturbance of consciousness, and intelligence remains intact. Schizophrenia is not rare, typically first manifesting during adolescence or early adulthood, with roughly equal prevalence in males and females. The course of the disease tends to be prolonged, progressing slowly; some individuals may transition into a chronic state, while others can maintain a state of full or near-full recovery.

Huachuang Securities analysis pointed out that schizophrenia is a persistent and disabling mental illness that affects a person's thinking, feelings, and behavior. In the United States, there are approximately 1.6 million patients currently receiving treatment for schizophrenia, most of whom do not respond to currently available therapies or experience intolerable side effects. Schizophrenia is also one of the major public health challenges faced in China. According to a cross-sectional epidemiological study in The Lancet Psychiatry, based on the prevalence rate of mental disorders in China,As of 2022, there are approximately 6.88 million schizophrenia patients in China, but less than half of them receive treatment.

Antipsychotics, also known as major tranquilizers or neuroleptics, do not affect the patient's intelligence and consciousness at a certain therapeutic dose but can effectively control psychomotor excitement, hallucinations, delusions, hostility, thought disorders, and abnormal behaviors among other psychiatric symptoms. With an increasing number of schizophrenia patients receiving standardized diagnosis and treatment, the market size for antipsychotic drugs in China is expected to grow rapidly. According to the "In-depth Research on the Current Status and Development Prospects of China's Schizophrenia Drug Industry (2022-2029)," the market size increased from 6.41 billion yuan in 2016 to 7.27 billion yuan in 2020 and is projected to reach 9.98 billion yuan by 2025, with a CAGR of 6.5% from 2020 to 2025.

Public information shows that schizophrenia requires lifelong treatment, and there are three types of treatments: chemotherapy, psychotherapy, and electroconvulsive therapy, with medication being the primary treatment method. Based on chemical structure, antipsychotic drugs are classified into phenothiazines, thioxanthenes, butyrophenones, benzamides, diphenyl diazepines, benzisoxazoles, and others.

Currently, antipsychotic drugs mainly function by inhibiting D2 dopamine receptors and 5HT-52A serotonin receptors, and are used to treat a wide range of mental illnesses, including schizophrenia and bipolar disorder, among others. There is a lack of new mechanism-based therapeutic drugs. Muscarinic receptor agonists were discovered in the 1990s; the activation of muscarinic receptors in the central nervous system, particularly M1/M4 receptors, has been associated with the reduction of psychotic symptoms and improvement in cognitive abilities. However, the development of therapies targeting muscarinic receptors has been limited by adverse effects, primarily due to the activation of muscarinic receptors in the peripheral system.

A pharmaceuticals industry analyst at a brokerage firm told the 21st Century Business Herald,One important reason for the limited effectiveness, significant side effects, and poor patient compliance of current antipsychotic drugs lies in the still-limited understanding of the disease's etiology. The ambiguity in etiological research makes the development of targeted drugs even more challenging.

"Generally speaking, if a drug has very good clinical efficacy, such as a certain highly effective drug, then the requirements or tolerance for its safety will be relatively lower. Chemotherapy drugs basically fall into this category. How to gain recognition and acceptance from doctors and patients in clinical practice, how to balance safety and efficacy, and how to develop new varieties that are currently unavailable on the market are all questions and goals pursued by pharmaceutical company researchers," the aforementioned securities analyst said. Since most of the antipsychotic drugs currently approved for marketing globally are D2 receptor antagonists, their efficacy in treating negative symptoms and cognitive impairment is limited. At present, at least one-third of schizophrenia patients do not respond to existing treatment drugs, indicating significant unmet clinical needs, which also implies a relatively broad market space.

As marketed products transition from the basic treatment market to the specialized treatment market, competition in key therapeutic areas is intensifying, and subsequent products are capturing less market share within two years. At the same time, amid an external environment of industry transformation and heightened competition, the pharmaceutical industry’s adjustments have entered a deep-water phase. Currently, pharmaceutical companies will inevitably face the growing pains of this adjustment period, but their innovation and R&D capabilities will continue to accelerate, becoming a crucial factor for sustained growth.

According to IQVIA, the global market is expected to return to the pre-pandemic projected growth rate by 2024, and the cumulative net value of the global pharmaceutical market will increase by approximately $500 billion by 2027. The global pharmaceutical market (calculated at list or ex-factory prices) is projected to have an annual compound growth rate of 3%-6%, reaching a market size of about $1.9 trillion by 2027. However, performance varies across different regions, with total growth over five years ranging from less than 10% to more than 50%.

However, in the next five years, growth in high-income countries will be primarily driven by newly launched products and other patented products, especially specialty drugs, which will offset the impact of reduced drug spending due to biosimilars and small-molecule generics. By 2027, the U.S. market is expected to remain the largest pharmaceutical market, but its net-price market size will be almost the same as it is now, with greater uncertainty brought about by the implementation of the Inflation Reduction Act.

This also means that,In the next five years, the global pharmaceutical market will continue to face challenges, and companies will also need to continuously summarize experiences from market challenges and explore new market growth points.In response to this situation, how to respond becomes critical. In this regard, the aforementioned analyst pointed out that, on the one hand, speed is key. Accelerating clinical development to be the first to enter the market; on the other hand, speeding up commercialization to establish a market presence before competitors arrive.

So, in the current market environment, how can companies accurately screen projects? A senior executive of a multinational pharmaceutical company told the 21st Century Business Herald that there must be a set of standards for internally screening pipeline projects, specifically including four levels:

First, deepen cooperation with companies that share common values, prioritizing decision-making based on the order of "Patient, Trust, Reputation, Business" (Patient, Trust, Reputation, Business), to promote truly innovative drugs reaching more patients, especially those with significant unmet clinical needs.

Secondly, focus on drug research and development in core therapeutic areas, including immunology, oncology, gastroenterology, neuroscience, and rare diseases, while keeping an eye on cutting-edge technologies of the times. Actively and extensively layout in big data and digital innovation, aligning with globally prioritized disease areas for strategic development in line with key focus areas.

Thirdly, the Chinese market has become one of the globally important strategic markets for multinational pharmaceutical companies. Therefore, in their global external cooperation, multinational pharmaceutical companies also pay special attention to fostering collaboration in key markets, including the United States, Japan, China, Europe, and other countries and regions.

Fourth, it is necessary to complement each other with partners and jointly leverage respective strengths. Multinational pharmaceutical companies need to collaborate with more Chinese domestic start-ups to drive innovation, addressing unmet clinical needs of more patients through such innovation.

"We believe that strategy is the core factor determining the success or failure of pharmaceutical companies, and judgments must be based on a company's own situation and a deep understanding of niche markets; secondly, the development strategies suitable for each company vary greatly, and they cannot be formulated overnight. Instead, they often involve long-term planning." The aforementioned pharmaceutical executive believes that it is now difficult for both Chinese and foreign pharmaceutical companies to rely solely on blockbuster drugs or long patent protection periods to enjoy benefits effortlessly, as the entire industry's iterative nature has significantly accelerated in recent years. It is possible that even before a drug’s patent expires, a more effective competing product may have already emerged.Whether it is market changes or policy pressures, pharmaceutical companies have no choice but to heavily invest in and focus on research and development.As for whether the antipsychotic drug market can truly move beyond its "golden" era, it still needs to be validated by the market.