The Food and Drug Administration on Thursday approved Bristol Myers Squibb's highly anticipated schizophrenia drug Cobenfy, the first novel type of treatment for the debilitating, chronic mental disorder in more than seven decades. 

Schizophrenia affects how a person thinks, feels and behaves, and can cause paranoia, delusions, hallucinations, and changes in emotions, movements and behavior. Those symptoms can disrupt a patient's everyday life, making it difficult to go to school or work, socialize and complete other daily activities. Most people are diagnosed in their late teens to early 30s.

Bristol Myers Squibb expects the twice-daily pill, which will be sold under the brand name Cobenfy, to be available in late October, executives told CNBC. The drug is a badly needed new option for the nearly 3 million adults in the U.S. living with schizophrenia, some medical experts say.

Only 1.6 million of those patients are treated for the condition, and 75% of them stop taking existing medications in the first 18 months because they struggle to find treatments that are effective or easy for them to tolerate, according to the drugmaker. 

Cobenfy could also be a huge long-term sales opportunity for Bristol Myers Squibb, which faces pressure to offset the potential loss of revenue from top-selling treatments that will see their patents expire. The drug comes from the company's whopping $14 billion acquisition of biotech company Karuna Therapeutics at the end of last year. 

In a July research note, Guggenheim analysts said they view Cobenfy as a "longer-term multi-billion dollar opportunity" for the company. But they said the drug will likely have a slow launch, so it may not meaningfully contribute to Bristol Myers Squibb's top line in 2024 and 2025. 

"I think there's potentially a really transformational moment in how we treat and talk about schizophrenia. And what you have is, unfortunately, an often disadvantaged population that doesn't get the attention they deserve from a research and health-care perspective," Andrew Miller, founder and former president of research and development of Karuna Therapeutics and now an advisor to Bristol Myers Squibb, told CNBC.

"I think the most important moment is going to be five or 10 years from now, when we look back and say we've actually made a difference," he continued. "We've helped people, we've improved outcomes, we've provided caregivers and physicians with another tool that they can use."

Cobenfy will cost $1,850 for a month's supply or $22,500 annually before insurance and other rebates, Bristol Myers Squibb executives said.

They said that pricing is in line with existing branded oral schizophrenia treatments and that they expect most patients, particularly those enrolled in Medicare and Medicaid plans, to have minimal out-of-pocket costs for the drug. Around 80% of patients living with the condition are covered by government insurance, according to Bristol Myers Squibb.

The company intends to launch a program aimed at helping patients afford Cobenfy, executives added. 

It's still unclear how much that program will increase access for people without insurance.

Cobenfy will have to compete with some existing schizophrenia drugs – called antipsychotic treatments – with lower list prices, particularly generic copycats of branded treatments. For example, patients without insurance can get the generic version of an antipsychotic treatment called Abilify for as little as $16 for 30 once-daily tablets with free coupons from GoodRx.

Existing schizophrenia drugs work by directly blocking the dopamine receptors in the brain to generally improve symptoms in patients. 

But they come with a long list of serious potential side effects that can cause patients to stop treatment, including weight gain, excessive fatigue and involuntary, uncontrollable movements. Roughly a third of people with schizophrenia are also resistant to conventional antipsychotic treatments, according to WebMD.

Cobenfy is the first treatment approved from a new class of drugs that do not directly block dopamine to improve symptoms of schizophrenia, Dr. Samit Hirawat, Bristol Myers Squibb's chief medical officer, told CNBC. 

He said one part of Cobenfy is a drug called xanomeline, which activates certain so-called muscarinic receptors in the brain to decrease dopamine activity without causing the side effects associated with antipsychotics. The second part of Cobenfy is called trospium, which reduces the gastrointestinal side effects linked to xanomeline, such as nausea, vomiting, diarrhea and constipation. 

"The majority of these patients have already cycled through one or two of these products," Adam Lenkowsky, Bristol Myers Squibb's chief commercialization officer, told CNBC. "So the enthusiasm that we're hearing from physicians is the opportunity to have a patient go onto treatment without seeing the side effects but also getting unprecedented like efficacy." 

Lenkowsky said the company expects Cobenfy to eventually become the standard treatment for schizophrenia as physicians learn more about the drug and get more comfortable with prescribing it to patients. 

But the price could limit use of the drug to patients who have already tried and failed with other existing treatments, said Nina Vadiei, clinical associate professor of pharmacotherapy and translational sciences at the University of Texas at Austin College of Pharmacy.

"If it were up to me, I wouldn't necessarily say we have to try X number of antipsychotics first. But I know from experience in a hospital setting that that is probably what's going to have to happen because of cost, mainly," said Vadiei, a clinical psychiatric pharmacist who sees patients with schizophrenia at San Antonio State Hospital."

The approval was based on data from three clinical trials comparing Cobenfy to a placebo, as well as two longer-term studies that examined how safe and tolerable the drug is for up to one year. Cobenfy met the main goal of the three trials, significantly decreasing symptoms of schizophrenia compared with a placebo, according to Bristol Myers Squibb. 

In the studies, Cobenfy mostly led to mild to moderate side effects, which were mainly gastrointestinal and dissipated over time, Miller said.

Bristol Myers Squibb said Thursday's approval for schizophrenia may only be the beginning for Cobenfy.

For example, the company has ongoing late-stage clinical trials examining Cobenfy's potential in treating Alzheimer's disease patients with psychosis. Bristol Myers Squibb said it expects to release data from those studies in 2026. 

The company also plans to study Cobenfy's potential to treat bipolar mania and irritability associated with autism. 

"When we think about Cobenfy, we think about it as multiple indications packed in one product … because we are really developing the drug not only for schizophrenia but six other indications," Hirawat said, referring to other potential uses for the drug. 

— CNBC's Angelica Peebles contributed to this report.