World Mental Health Day is observed every year on Oct 10 -- this year, the theme is “psychological first aid”, which covers both psychological and social support. According to information provided by the National Alliance on Mental Illness, about one in five adults in the U.S. or 43.8 million people experience mental illness in a given year and approximately 1 in 25 adults in the U.S. or 10 million people experience a serious mental illness in a given year that substantially interferes with or limits one or more major life activities.

Given these statistics, it is not surprising that several pharma and biotech companies are involved in developing and selling drugs that target mental health disorders which include a wide range of conditions like attention deficit hyperactivity disorder (ADHD), anxiety disorders, bipolar disorder, depression, eating disorders and schizophrenia among others.

The market potential for drugs targeting mental health disorders is huge. In fact, due to the social stigma and ignorance associated with such conditions, a large part of the market remains untapped as people don’t seek treatment or are unaware of their symptoms.

5 Stocks to Consider

Ahead of World Mental Health Day, let us look at some of the companies which are actively pursuing the development of treatments for various types of mental illnesses.

To guide investors to the right picks, we highlight 5 stocks that carry a favorable Zacks Rank - Zacks Rank #1 (Strong Buy) or #2 (Buy) or #3 (Hold). 

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First on our list is Zacks Rank #1 stock GW Pharmaceuticals plc (GWPH - Free Report) which is working on the development of plant-derived cannabinoid therapeutics. The company’s proprietary cannabinoid product platform targets a broad range of disease areas including schizophrenia which affects about 1.1% of the adult population in the U.S., as per the National Institute of Mental Health. While GW Pharma has been more in the news for its progress with the development of Epidiolex (childhood onset epilepsy), the company has an experimental schizophrenia treatment in its pipeline - GWP42003. GW Pharma has completed a mid-stage study on the candidate which demonstrated positive proof-of-concept. The candidate showed notable anti-psychotic effects as well as demonstrated the ability to reduce the characteristic movement disorders induced by currently available anti-psychotic agents. Shares of this UK-based stock, which has been witnessing positive estimate revisions, are up 94.4% year-to-date (YTD).

GW PHARMA-ADR Price and Consensus

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GW PHARMA-ADR Price and Consensus | GW PHARMA-ADR Quote

Shire plc (SHPG - Free Report) is well-known for its ADHD offerings including Vyvanse, Adderall XR and Intuniv even though some of these products are facing generic competition. The company’s neuroscience division delivered sales of $2.5 billion in 2015 and continues to perform well driven by its strong presence in the ADHD market. Shire is working on developing new treatment options for the growing adult ADHD market. The company expects to re-submit its regulatory filing for SHP465 in the U.S. and is hoping to gain approval in the second quarter of 2017 followed by product launch in the second half of 2017. The company believes that SHP465 has the potential to address a segment of the adult ADHD market that still has unmet needs for non-residual control. Shire’s share of the U.S. ADHD prescription market in Dec 2015 was 16.7% (compared to 16.2% in Dec 2014).

Shire also has a presence in the binge eating disorder (BED) market with Vyvanse being approved for the treatment of moderate to severe BED in adults. According to information provided by Shire, BED is the most common eating disorder in the U.S., affecting about 2.8 million adults. Shire, a Zacks Rank #3 stock, has a strong earnings track record with the company beating expectations in each of the last four quarters with an average surprise of 8.41%.

SHIRE PLC-ADR Price and Consensus

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SHIRE PLC-ADR Price and Consensus | SHIRE PLC-ADR Quote

Healthcare giant, Johnson & Johnson (JNJ - Free Report) also has a strong presence in the neuroscience segment, which is one of its core therapeutic areas. In addition to Concerta for ADHD, the company has products like Risperdal Consta (schizophrenia and bipolar I disorder) and Invega Sustenna/Trinza (schizophrenia) in its portfolio.

Meanwhile, one of the most promising candidates in J&J’s pipeline is esketamine, an investigational antidepressant medication with blockbuster potential. Esketamine recently got breakthrough therapy designation from the FDA for major depressive disorder with imminent risk for suicide. According to the National Institute of Mental Health, in 2015 about 16.1 million adults in the U.S. had at least one major depressive episode in the past year. FDA approval would make esketamine one of the first new approaches to treat major depressive disorder in the last 50 years. Esketamine has breakthrough therapy designation for treatment-resistant depression as well.

J&J, a Zacks Rank #3 stock, has a good earnings track record having surpassed expectations in each of the last four quarters. The company’s shares are up 18.2% YTD.

JOHNSON & JOHNS Price and Consensus

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JOHNSON & JOHNS Price and Consensus | JOHNSON & JOHNS Quote

Specialty pharma company, Supernus Pharmaceuticals, Inc. (SUPN - Free Report), is developing several candidates in psychiatry to address large unmet medical needs and market opportunities. SPN-810 is currently in a couple of late-stage studies for impulsive aggression in ADHD patients in the 6-12 years age group. If all goes well, the company expects to launch the product in 2019. SPN-810 has the potential to be developed for other indications like autism and bipolar disorder.

Supernus has another experimental ADHD treatment in its portfolio, SPN-812, for the 6-12 years age group. Data from an ongoing phase IIb study are expected by early 2017. According to research and consulting firm GlobalData, the ADHD market across the U.S., France, Germany, Italy, Spain, the UK, and Japan, is set to grow at a CAGR of 8.5% from approximately $6.1 billion in 2014 to $13.9 billion by 2024. Growth will be driven by the launch of new products with convenient oral formulations or less frequent dosing, growing awareness and higher treatment rates.

Supernus, a Zacks Rank #2 stock has an impressive earnings track record with an average surprise of 117.95% over the last four quarters.

SUPERNUS PHARMA Price and Consensus

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SUPERNUS PHARMA Price and Consensus | SUPERNUS PHARMA Quote

Allergan plc (AGN - Free Report) , a Zacks Rank #3 stock, also looks well-positioned in the mental health disorder market. The company has quite a few products in its portfolio targeting this market including Vraylar (schizophrenia and bipolar I disorder), Viibryd (major depressive disorder) and Saphris (bipolar I disorder). Moreover, the company is evaluating flagship product Botox for major depressive disorder and intends to move rapastinel into phase III development for adjunctive major depressive disorder this year. Rapastinel was given breakthrough therapy designation earlier this year for this indication.

ALLERGAN PLC Price and Consensus

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ALLERGAN PLC Price and Consensus | ALLERGAN PLC Quote