By Trisha Roy

(Reuters) – Intra-Cellular Therapies Inc said on Monday its lead drug to treat schizophrenia in adults has received approval from the U.S. Food and Drug Administration, sending its shares soaring 85%.

The company said it will price the drug, Caplyta, closer to its launch.

Caplyta, which has been approved as a once-daily dose of 42 mg, has shown to regulate three neurotransmitter systems — serotonin, dopamine and glutamate — linked to severe mental illnesses.

Intra-Cellular plans to launch the drug later in the first quarter of 2020 and is in talks with health insurers on the its potential coverage. The company will market Caplyta on its own worldwide, it said.

The approval comes with FDA’s harshest warning that the drug is not for the treatment of patients with dementia-related psychosis.

Schizophrenia is a chronic mental disorder that causes distortion in thoughts, hallucinations and feelings of fright and paranoia, affecting about 2.4 million adults in the United States.

An approval will de-risk the market inefficiency driven by investors’ concerns regarding the pace at which Caplyta will be adopted post launch as a differentiated neuropsychiatric product in early 2020, Cantor Fitzgerald analyst Charles Duncan said, ahead of the FDA decision.

“We anticipate first couple of quarters to be driven by pharmacy stockpiling with sales revenue reflecting in the third quarter of 2020,” added Fitzgerald.

Existing anti-psychotic drugs in the market include Rexulti from Danish drugmaker H. Lundbeck A/S and Japan’s Otsuka Pharmaceutical Co Ltd, Allergan Plc’s Vraylar and Johnson & Johnson’s Invega.

In trials, Caplyta did not cause akathisia, a feeling of jitteriness among patients, which is extraordinarily uncomfortable and makes people “jump out of their skin”, the company said.

The drug is also being developed by Intra-Cellular for other indications including bipolar depression, depressive disorders and agitation in patients with Alzheimer’s disease.

Shares of the company were trading at $23 before the bell and were set to open at more than one and a half year high.

(Reporting by Trisha Roy in Bengaluru; Editing by Maju Samuel and Vinay Dwivedi)