For years, investor skepticism toward central nervous system (CNS) therapeutics was earned. The sector had a well-documented track record of late-stage failures, opaque endpoints, and regulatory uncertainty that made capital allocation feel more like guesswork than strategy. Many institutional investors simply stopped engaging. The conventional wisdom held that CNS was too hard, too slow, and too binary.
That narrative is now being dismantled, not by sentiment, but by data and regulatory action. And for IR leaders at CNS-focused companies, the window to capitalize on this shift is open now.
We’ve included our team’s observations on the current, and favorable, evolving regulatory environment below.
A Cluster of Regulatory Wins That Cannot Be Ignored
The pace of FDA engagement with CNS assets in the first five months of 2026 has been notable — and it extends well beyond any single approval and regulatory designation.
On April 30, 2026, Axsome Therapeutics (NASDAQ: AXSM) received FDA approval of AUVELITY® (dextromethorphan HBr/bupropion HCl) as the first non-antipsychotic treatment for agitation associated with Alzheimer’s disease, a condition affecting up to 76% of the more than 7 million Americans living with the disease. Developed with Breakthrough Therapy Designation (BTD) and reviewed under Priority Review, the approval was the second time AUVELITY has earned both designations, following its earlier MDD indication. CEO Herriot Tabuteau described it as validation of Axsome’s broader CNS franchise-building strategy. The market agreed: shares surged more than 13% in the days following, with multiple sell-side firms raising price targets — Deutsche Bank to $281, TD Cowen and Needham each to $255.
That approval didn’t arrive in a vacuum. Scan the regulatory landscape over the preceding four months and a pattern emerges:
- January 2026: Alkermes received Breakthrough Therapy Designation for alixorexton, an oral selective OX2R agonist for narcolepsy type 1, based on Vibrance-1 Phase 2 data (n=92). The designation landed in the middle of a broader strategic validation of the orexin pathway: on March 31, Eli Lilly announced a definitive agreement to acquire Centessa Pharmaceuticals (NASDAQ: CNTA) — advancing its own OX2R agonist cleminorexton — for up to $7.8 billion, a ~40% premium to VWAP. Alkermes subsequently presented positive Vibrance-2 Phase 2 data in narcolepsy type 2 at SLEEP 2026 (June 4) and received Orphan Drug Designations from FDA and the European Commission for idiopathic hypersomnia and narcolepsy, respectively (June 15).
- February 2026: Reunion Neuroscience received BTD for luvesilocin (a next-generation psilocybin-inspired compound) for postpartum depression, following Phase 2 RECONNECT data demonstrating statistically significant improvements on the MADRS scale as early as Day 1 — with 70% of patients in remission at Day 28.
- February 2026: Vanda Pharmaceuticals Inc. (Nasdaq: VNDA) announced FDA approval of BYSANTI™ (milsaperidone), a first line therapy for the acute treatment of manic or mixed episodes associated with bipolar I disorder and for the treatment of schizophrenia in adults. BYSANTI™ is a new chemical entity (NCE) in the class of atypical antipsychotics having demonstrated bioequivalence to iloperidone across the therapeutic dosing spectrum enabling it to leverage well-established efficacy and safety derived from a rich clinical development program and more than 100,000 patient-years of real-world experience with Fanapt® (iloperidone).
- March 2026: Denali Therapeutics (NASDAQ: DNLI) received FDA action on its BLA for AVLAYAH (aka tividenofusp alfa) — a milestone the market viewed as strategically significant less for its commercial size than for what it validates: Denali’s proprietary blood-brain barrier transport platform, which underpins multiple higher-risk neurodegeneration programs across its pipeline.
- April 1, 2026: FORE Biotherapeutics received BTD for plixorafenib in BRAF V600E-mutated brain and spinal cord tumors, after the drug showed a 67% response rate in a clinical trial — a signal that FDA’s willingness to engage in CNS oncology is expanding alongside neurodegeneration and psychiatry.
- April 14, 2026: Praxis Precision Medicines (NASDAQ: PRAX) received FDA acceptance of its NDA for ulixacaltamide HCl for essential tremor, with a PDUFA date of January 29, 2027. Notably, this is the company’s second NDA in active review simultaneously, as its relutrigine application for SCN2A/8A developmental epileptic encephalopathies carries a PDUFA of September 27, 2026, also under Priority Review, with BTD.
- April 24, 2026: Compass Pathways (NASDAQ: CMPS) announced the FDA granted Compass NDA rolling review request and selected COMP360, Compass’ proprietary formulation of synthetic psilocybin, within the Commissioner’s National Priority Voucher (CNPV) program for treatment-resistant depression (TRD).
The density of this regulatory activity, across psychiatry, rare pediatric epilepsy, neurodegeneration, sleep disorders, and CNS oncology, reflects an FDA that is actively engaging with CNS unmet need, not just processing applications. That distinction is important for strategizing how IR leaders frame the regulatory environment in investor communications.
BTD as a Capital Markets Instrument
Breakthrough Therapy Designation was designed to accelerate development and deepen FDA engagement for drugs addressing serious conditions where early evidence is compelling. What it has increasingly become, in practice, is one of the most powerful signals a CNS company can bring to an investor conversation.
For CNS specifically, where investors have historically struggled to underwrite development timelines and endpoint credibility, BTD addresses two of the most persistent objections simultaneously: it signals that FDA has reviewed early evidence and found it sufficiently differentiated, and it compresses the perceived timeline to regulatory decision.
The companies generating the strongest investor engagement in CNS right now (Axsome, Compass, Praxis, Reunion Neuroscience) are not doing so primarily because of market size narratives or platform stories. They are doing so because they have real clinical data that earned notable FDA designations, and their IR programs communicate those facts with clarity and discipline.
IR teams at CNS companies with BTD-eligible assets, or those currently holding the designation, should be treating it as a core pillar of investor messaging, not a footnote in the regulatory timeline section of a corporate deck. Practically, that means:
- Leading with the designation in investor presentations and conference materials, framing it as evidence of FDA’s substantive engagement, not merely as a procedural benefit.
- Explaining the mechanism of BTD in plain language for generalist institutional investors who may not be familiar with its specific implications, particularly the enhanced FDA interaction, eligibility for rolling review, and priority review access it enables.
- Connecting BTD status to development timeline assumptions in a rigorous, defensible way. Investors have seen designation language used loosely; those who earn credibility are the ones who can articulate exactly what the designation means for their specific asset’s development trajectory.
- Using BTD as a natural anchor for catalyst communication helping investors understand which milestones carry the most weight and when they are expected.
The RAPID Pathway: A Structural Tailwind for Neuro Devices and Diagnostics
The conversation about FDA’s evolving posture in CNS cannot be limited to drug approvals. On April 23, 2026, exactly one week before the Axsome AUVELITY approval, the FDA and CMS jointly announced the Regulatory Alignment for Predictable and Immediate Device (RAPID) coverage pathway.
RAPID is designed to compress the gap between FDA market authorization and Medicare national coverage from a year or more to as little as two months for certain Class II and Class III Breakthrough Devices. For context: the previous TCET pathway had processed roughly five devices per year. CMS has indicated RAPID is designed to accommodate approximately 40 to 60 eligible devices annually — a scale that signals genuine structural intent, not a pilot.
The implications extend directly to CNS-adjacent medtech and diagnostics companies. Neuro-focused device developers, whether in neurostimulation, brain-computer interfaces, AI-enabled neurological diagnostics, or blood-based biomarker tests, now have a clearer line of sight from Breakthrough Device designation through FDA clearance to Medicare reimbursement. That clarity is precisely what institutional investors have demanded from this category for years.
Roche’s Elecsys NfL blood-based test for neuroinflammation in relapsing-remitting MS, which received CE mark approval in April 2026, is an instructive parallel: a diagnostics asset for CNS indications navigating both regulatory and reimbursement systems simultaneously. For U.S.-based device and diagnostics companies in the neuro space, RAPID represents a structural improvement to the reimbursement story they are trying to tell investors.
IR teams at medtech and diagnostics companies with Breakthrough Device designations in neurological indications should be proactively discussing RAPID in investor materials, while being careful to characterize it accurately as a proposed pathway still pending a 60-day public comment period. The narrative opportunity is real; the implementation details are still being finalized.
The Nuance Investors Require: What the Tolebrutinib CRL Teaches
No assessment of FDA’s CNS posture would be complete or credible without acknowledging the Sanofi tolebrutinib complete response letter issued in December 2025.
Tolebrutinib, Sanofi’s oral BTK inhibitor for non-relapsing secondary progressive MS, had been awarded Breakthrough Therapy Designation. It generated compelling Phase 3 HERCULES data, showing a 31% reduction in six-month confirmed disability progression versus placebo. And then the FDA rejected it, citing severe drug-induced liver injury risk that the agency found could not be adequately managed by Sanofi’s proposed risk evaluation and mitigation strategy.
The CRL is not a counter-narrative to the broader CNS tailwind thesis. It is, however, a calibration. FDA’s increased engagement with CNS unmet need does not translate to reduced rigor on safety. The bar for benefit-risk is as high as ever, and CNS issuers who communicate regulatory optimism without acknowledging safety scrutiny will lose credibility with the sophisticated investors they most want to attract.
The constructive IR lesson from tolebrutinib is about risk communication as much as catalyst framing. Companies with safety signals in their development programs should be proactively and transparently discussing risk mitigation strategies with investors, not in a defensive posture, but as evidence of management rigor and regulatory preparedness.
What Management Teams Should Do Now
The regulatory environment in CNS is the most constructive it has been in more than a decade. The question for management teams and their IR advisors is not whether the tailwind is real (it demonstrably is), but whether their communications are positioned to capture the investor interest it is generating.
Four immediate priorities:
1. Audit your designation status and communicate it proactively. If your company holds BTD, Fast Track, or Priority Review, those designations should be woven into every investor touchpoint, not reserved for press releases. If your asset is BTD-eligible and you have not engaged with FDA on designation, that conversation should be on your near-term agenda.
2. Build a catalyst-to-timeline narrative that is precise and defensible. The investors re-engaging with CNS after years of avoidance are not doing so on faith. They want to see rigorous sequencing of milestones, clear endpoint rationale, and honest runway analysis. Vague language around “expected regulatory interactions” will not close the gap.
3. Contextualize your asset within the broader CNS renaissance, but with specificity. The rising tide of regulatory wins across neurodegeneration, psychiatry, epilepsy, and CNS oncology is a legitimizing backdrop, but it only helps your story if you can articulate clearly what makes your asset differentiated within it. “CNS is having a moment” is not an equity story. “Here is why our mechanism, our endpoint, and our FDA engagement distinguish us from the programs that preceded us” is.
4. For device and diagnostics companies: get ahead of the RAPID narrative now. The pathway is not final, but the directional signal is clear. Investors in medtech and diagnostics CNS assets will be asking about reimbursement pathways with increasing frequency. Having a prepared, nuanced answer (one that references RAPID without overpromising on implementation) is a meaningful IR differentiator.
The Bottom Line
The FDA’s recent engagement with CNS assets reflects a structural shift, not a cyclical uptick. Breakthrough Therapy Designations are clustering. Priority Reviews are being granted. A joint FDA-CMS coverage pathway for breakthrough neuro devices is taking shape. These are not coincidental data points. They represent an agency that has absorbed the lessons of past CNS engagement and is bringing more sophisticated tools to bear on an area of enormous unmet need.
The companies best positioned to convert this regulatory tailwind into durable investor support are those whose IR programs are built on the same foundation as their clinical programs: rigorously-generated and impactful data, clear communication, and disciplined credibility. The window is open, the future lies ahead. The question is whether management teams are ready to walk through it.
Gilmartin Group is a strategic advisory and investor relations firm focused exclusively on healthcare. We work with companies in biotech, medtech, tools & diagnostics and HCIT to build institutional investor relationships and communicate complex clinical and regulatory narratives with precision and credibility. To learn more about how we partner with clients, reach out at [email protected].