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Targacept drug for depression lauded
Breakthrough puts company in a strong position, analysts say
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Published: October 17, 2009
Compelling. Best-case scenario. Stunning. Treatment of choice.
Those were just some of the terms that analysts used yesterday in reaction to what they considered Targacept Inc.'s breakthrough for treatment of depression.
It's a breakthrough that could be worth in the neighborhood of $150 million in new financing from a big pharmaceutical partner, analysts said.
Targacept develops drugs based on its understanding of nicotinic receptors to treat diseases of the central nervous system.
It has 115 employees at Piedmont Triad Research Park, making it one of the largest life-sciences employers in the Triad.
Targacept reported Thursday that the drug compound, TC-5214, did three times better on a prominent rating scale for depression than a drug already in the marketplace, Abilify.
The test measures a drug's performance compared with a placebo while taking the antidepressant Celexa.
Abilify and TC-5214 target major, or chronic, depressive disorder as an add-on option.
"We view these results as a best-case scenario, with the drug's efficacy far exceeding our already high expectations," said Bret Holley, an analyst with Oppenheimer & Co.
"We believe TC-5214's efficacy on all major depressive-disorder endpoints increases the probability of Phase 3 success and gives the drug clear potential to become the treatment of choice in major depressive-disorder augmentation," Holley said.
He was so impressed with Targacept's results that he raised his 12-month share-price forecast for the second time in less than two months from $26 to $34.
Investors sent the share price to a record high of $24.50 during trading yesterday before settling for a 16 percent increase, or $3.20, at $23.29.
The share price has skyrocketed from $2.44 on July 8 -- when Targacept released preliminary results on TC-5214.
The company also blew past the milestone of $500 million in market capitalization, finishing yesterday at $583.9 million.
Don deBethizy, the president and chief executive of Targacept, could not be reached for comment yesterday.
"We believe that a well-tolerated add-on treatment with strong antidepressant effects would represent a major breakthrough," deBethizy said Thursday.
"It's turned out to be a much bigger product because of the tolerability and safety of the product."
DeBethizy has said that the company's goal is to have a partner by June 30 to move TC-5214 into a Phase 3 trial.
He also stressed that Targacept wants to remain independent and based here.
Partnerships with Astra Zeneca PLC and Glaxo SmithKline have served as Targacept's financial lifeline. Neither is involved in the development of TC-5214. Targacept's four-year, $300 million partnership with AstraZeneca will expire in December.
Alan Carr, an analyst with Needham & Co., said that Targacept will have plenty of financing partners to consider.
Carr raised his 12-month forecast to $26 and changed his rating to "buy" from "hold."
"Targacept will be dealing from a position of strength in many ways," he said.
Those include already raising at least $46.2 million in a public stock offering last week, the promise of other drug compounds -- most notably AZD-3480 for adult attention deficit/hyperactivity disorder -- and the potential for other uses of TC-5214.
rcraver@wsjournal.com | 727-7376
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