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Results disappoint Targacept
It does not plan to continue testing drug to treat schizophrenia
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Published: December 9, 2008
Targacept Inc. reported yesterday that it has had a second disappointing clinical result within four months regarding its most promising drug to date.
Targacept, based in Piedmont Triad Research Park, was spun off from R.J. Reynolds Tobacco Co. in 2000. It is developing drugs based on nicotine to treat diseases of the central nervous system.
The company said that a Phase 2B clinical trial of its TC-1734 drug did not show a statistically significant benefit in 445 subjects with cognitive dysfunction in schizophrenia.
As a result, Targacept and AstraZeneca PLC said in a joint statement that they do not expect to proceed with a Phase 3 study. The companies released the results after the stock market closed yesterday.
"While this trial outcome did not meet our objectives, we continue to pursue medicines that target neuronal nicotinic receptors with Targacept to treat cognitive disorders," said Bob Holland, the head of the neuroscience therapy area for AstraZeneca.
Don deBethizy, the chief executive and president of Targacept, said that although he was disappointed in the outcome, it does provide "clarity" in terms of how the company should use its resources.
"We both remain interested in developing products for cognitive dysfunction in schizophrenia," he said. "There are about 7.9 million schizophrenic patients worldwide, with most being cognitively impaired."
The AstraZeneca partnership is pivotal for Targacept. A four-year, $300 million licensing agreement has served as Targacept's main financing pipeline since December 2005. AstraZeneca is paying for the development and marketing of Targacept's drug in return for a share of the potential profits.
Targacept also has an agreement with GlaxoSmithKline, signed in July 2007, to develop drugs for treating five central-nervous-system disorders. It has received about $41.5 million from GlaxoSmithKline. Targacept is conducting a Phase 1 clinical trial to test a drug for neuropathic pain.
DeBethizy said that Targacept is proceeding with developing drugs for pain, smoking cessation, obesity, addiction and Parkinson's disease through Phase 2 clinical trials. GlaxoSmithKline would then have the option to license those drugs, and would be responsible for further development.
"We continue to have several shots on goal with our research and a diverse pipeline," he said. "We have retained the rights to our product candidates for depression and anxiety disorders, and expect to have top-line results by mid-2009. There has been considerable interest shown in those candidates."
In a separate statement, Targacept said it expects to end 2008 with "cash, cash equivalents and short-term investments" of at least $86 million, up about $4 million from earlier projections. Half of the increase comes from a $2 million milestone payment by AstraZeneca toward the initial trial of the TC-6683 compound that was produced through a collaborative research effort.
Targacept said it expects to meet its operating requirements through at least June 30, 2011 -- nine months longer than previously projected -- with current resources. Targacept expects to achieve that goal partially through making adjustments to its 2009 operating plan.
"Seventy percent of unprofitable biotechnology companies have less than 24 months of cash, so we feel fortunate to be well capitalized," deBethizy said.
Investors have sent Targacept's share price down as they have awaited AstraZeneca's final decision on TC-1734 for mild-to-moderate Alzheimer's disease. The share price has gone from a 52-week high of $10.11 on Aug. 15 to a low of $1.40 on Nov. 25.
The share price surged 47 percent in trading yesterday, up $1.26 to close at $3.75. However, in limited after-hours trading, the stock surrendered all but 5 cents of the gain.
Kimberly Lee, an analyst with Pacific Growth Equities, said that the decision to not proceed with the TC-1734 clinical trial with cognitive dysfunction in schizophrenia may affect Targacept in the short term. She has the company with a "buy" rating despite the decline in its share price.
"We believe the company's approach to therapeutics via neuronal nicotinic-receptor modulation creates an appealing opportunity that may very well differentiate and separate Targacept from the pack in billion-dollar commercial markets," Lee said.
■ Richard Craver can be reached at 727-7376 or at rcraver@wsjournal.com.
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