What happened

Cerevel Therapeutics (NASDAQ:CERE) closed Monday at $21.39, after starting the year at $15.55, a rise of more than 29% for the first half of 2021. Most of that climb came late last month after the company released positive phase 1B results regarding the use of its CVL-231 antipsychotic drug for schizophrenia patients.

According to Cerevel, CVL-231 was well-tolerated, with few side effects, in adult patients with schizophrenia. When taken once daily, the patients saw clinically meaningful antipsychotic activity compared to a placebo. The therapy works by reducing the release of dopamine in patients by manipulating M4 receptors in the brain.

The news regarding CVL-231 came on the heels of positive news regarding CVL-871, a therapy being developed for the treatment of dementia-related apathy. The Food and Drug Administration (FDA) gave the drug Fast Track designation in June, increasing the likelihood the FDA will expedite its review of the drug because it treats a serious medical condition and could meet a need that is unfilled.

Distorted view of a person having mental difficulties.

Image source: Getty Images.

So what

Schizophrenia, a serious medical condition characterized by incoherent and illogical thoughts, as well as hallucinations, is a very difficult disease to tackle. Though the incidence rate is low, affecting between 0.25% to 0.65% of the population, according to the National Institute for Mental Health, a study in the Lancet said the disease is one of the top 15 leading causes of disability worldwide. Another study in the Journal of Pharmacy and Therapeutics placed the incidence of schizophrenia patients not taking their medication ranging between 37% to 74%, due in part to the side effects from various medications.

If Cerevel's treatment is as well-received in later studies, that would be a major breakthrough, making the disease more treatable. The compound annual growth rate for schizophrenia medication is expected to be 4.3% and reach $9.48 billion by 2026, according to a Fortune Business Insights report. 

Now what

The company has no revenue yet. CVL-231 and CVL-871 aren't the only drugs in the company's pipeline, so there's plenty of reason for optimism for Cerevel, though as with any clinical-stage biotech company, there are more risks than guarantees.

As of March 31, the company had $343.3 million in cash. That's enough, considering its research and development and administrative costs, to last 10 years.  In the meantime, investors will be watching the next trials for the company's schizophrenia drug closely. 

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