Neuro Drug Stocks Rise Following Intra-CellularTherapies' Drug Approval

One indisputable trend about the modern world is that people are living longer. In 1950, the average lifespan for an American was 68 years old. Today, it's 78. One result of a longer life is that people are succumbing to different types of neurological diseases.

So far, effective treatments have been rare. With a few exceptions, neurological drug stocks haven't really been great investments. Yet, it seems this may be changing given the FDA's approval of Intra-Cellular Therapies' (Nasdaq: ITCI) schizophrenia drug Caplyta which is scheduled to launch in the first quarter of 2020. The drug is intended to offset adverse side effects of older psychotic drugs whose side effects include impaired movement and weight gain. It is also under trials as a treatment for bipolar disorder.

Treatments and drug development for schizophrenia have been sparse despite it affecting nearly 1% of the population. Increasing approvals and gains in share prices may attract investor capital which can increase the odds of future breakthroughs. Capylta's fate was uncertain as its Phase 3 trial was a success, but it failed another part of its study. The FDA's approval signals that it's taking a more generous approach to this underserved area.

Its stock rallied more than 200%, and others in the sector followed suit. Intra-Cellular's approval will only strengthen the nascent trend of an increasing amount of investment into the development of neurological drugs. For most of the past decade, drug development companies have focused on oncology and rare diseases, where there was a greater chance of approval, success, and understanding of mechanisms and pathways.

However, 2019 has seen Johnson & Johnson's (NYSE: JNJ) ketamine-derived treatment for depression which is the first new major drug for depression in three decades gaining approval as well as Sage Therapeutics' (Nasdaq: SAGE) postpartum depression drug getting approved.

Other pharmaceutical stocks with exposure to neuro treatments include Biogen Idec (Nasdaq: BIIB), Karuna Therapeutics (Nasdaq: KRTX), Acadia Pharmaceuticals (Nasdaq: ACAD), and Sage Therapeutics. All of these stocks are in the midst of solid uptrends and are near recent highs. 2019 has been a spectacular year for stocks with the S&P 500 up nearly 30%. Biotech stocks have done even better with the biotech ETF (NYSE: XBI) up 35%.

And within this group, the neuro stocks are outperforming with some spectacular gains like Karuna Therapeutics being up 600% since its IPO in July; Acadia Pharmaceuticals is up 150% year to date; Intra-Cellular is up 200%. Stocks like Biogen Idec and Sage are down significantly which indicates that risk remains and investors should spread their bets.