For decades, schizophrenics were stuck with drugs that could be worse than the disease.

Drugs like Haldol and Thorazine, introduced during Eisenhower's presidency, left many schizophrenics in a slightly surreal state. But they were effective enough that despite severe and unpleasant side effects, researchers didn't seek alternatives. ''Scientifically, we really had 30 to 40 years of a dead zone,'' said Bruce Given, a vice president at Johnson & Johnson's (JNJ) Janssen Pharmaceutica.

In the last handful of years, however, knowledge of the brain exploded and the limitations of the older drugs became clear. As a result, researchers all over the world have been able to develop a raft of new antipsychotic drugs.

The new drugs don't cure schizophrenia, a psychosis characterized by delusions, hallucinations and a sense of isolation. But they seem to work as well as the older drugs, except with fewer side effects. As several of these edge closer to approval, sufferers of schizophrenia, manic-depression, psychotic depression and dementia are poised to have more new treatment choices than most have had in their lifetimes.

''This is really a terrifically exciting time,'' said Carol Tamminga, a professor of psychiatry at the University of Maryland. ''Researchers are waking up to the illness.'' It's not only researchers, psychiatrists and patients voicing enthusiasm. Investors also seek to share in the rewards of the drugs. The antipsychotic market is about to balloon, financial analysts predicted. Steve Scala, of Cowen & Co., expects the $1 billion market today to more than double to about $2.3 billion in three to four years, and some analysts put the number much higher. The most widely anticipated new antipsychotic, especially on Wall Street, is Eli Lilly & Co.'s (LLY) olanzapine, branded Zyprexa. Investors expect it to rapidly become the drug of choice when it wins approval, reducing Lilly's dependence on Prozac sales and spurring its earnings growth to among the best in the industry. Abbott Laboratories' (ABT) sertindole, or Serlect, was recommended for approval by a Food and Drug Administration panel in July. Zeneca Group PLC (ZEN) and Pfizer Inc. (PFE) also have upcoming drugs.

Standing in the way of Zyprexa's becoming the drug of choice is Johnson & Johnson's already-approved drug risperidone, or Risperdal. Some clinical psychiatrists believe that Zyprexa - though good - isn't that significant of an advance over J&J's drug. A less-than-spectacular rollout could harm Lilly's shares. ''It doesn't seem to me that you see a big difference in overall efficacy'' between Risperdal and Zyprexa, said Dr. Robert Conley, director of treatment research at the University of Maryland and a colleague of Tamminga's, who has research experience with the newer agents. Lilly will tout Zyprexa's clean safety profile. But Conley said the apparently benign side-effect profiles of the two are simply ''different, not better'' for either drug. (MORE) DOW JONES NEWS 09-13-96 12:06 PM