Higher research and development costs for Targacept Inc. led to a loss for the third consecutive quarter.
The company said Tuesday that it had a loss of $9.8 million in the fourth quarter compared with a loss of $9 million in the third quarter and a loss of $2.1 million a year ago.
Targacept, an anchor tenant in Piedmont Triad Research Park with 150 employees, develops drugs based on its understanding of nicotinic receptors to treat diseases of the central nervous system.
Targacept reported $26 million in research and development costs during the quarter, compared with $22.5 million a year ago. The increase was expected by analysts considering that much of it was related to the cost of developing its most promising drug compound, TC-5214.
Targacept's operating revenues fell 19 percent to $18.9 million. The company had a decrease in amounts turned into revenue from payments previously received from AstraZeneca PLC and GlaxoSmithKline. It relies on collaboration and milestone payments to bolster revenue.
The company, as expected, did not provide new information on TC-5214 and the compound's clinical trial initiative.
In December, the company said TC-5214 failed for the second time to achieve a meaningful difference when compared with a placebo in a Phase 3 clinical trial. The trials are aimed at determining whether the compound could be an add-on treatment to existing antidepressants for major depressive disorder.
The results of two more tests on TC-5214 are expected to be released between March and May, according to Alan Carr, an analyst with Needham & Co.
Analysts said Targacept has little, if any, margin for more failed tests with TC-5214, given that the Food and Drug Administration has indicated two positive trial results likely would be necessary to gain its approval. Targacept expects to file an application with the FDA for the add-on use in the second half of this year. The company's research pipeline includes Phase 2b clinical trials involving schizophrenia, attention deficit/hyperactivity disorder with a focus on inattention, asthma, type 2 diabetes and Alzheimer's disease.
Carr said in January that AstraZeneca's decision to pursue AZD1446 for Alzheimer's is encouraging "since it appears to be making funding decisions on a compound-by-compound basis."
"It is a vote of confidence in the breadth and depth of Targacept's research pipeline. With most of its research still in the early stages, it's not clear which could be the next leap forward for Targacept."
For the full year, Targacept's operating revenues rose 14 percent to $97.7 million. The 2011 revenues were bolstered by the need to recognize deferred revenues associated with the mutual ending of its partnership with GlaxoSmithKline in May.
Targacept projects its operating revenues would range between $50 million and $60 million during fiscal year 2012 — not including potential milestone payments. It projects expenses to range between $75 million to $85 million compared with $107 million in 2011.
The company repeated expectations that its current cash resources will be enough to finance its operating requirements through at least the end of 2014.
Targacept's share price is down 78 percent from a record high of $30.42 on March 3, and down 64 percent since its first failed clinical trial with TC-5214 was announced Nov. 8. The share price fell 36 cents, or by 5 percent, to close at $6.84 on Tuesday.
Targacept earnings
Highlights of the fourth-quarter report for Targacept Inc.:
Net income: Loss of $9.8 million, compared with a loss of $2.1 million a year ago.
Diluted earnings per share: Loss of 29 cents, compared with a loss of 8 cents a year ago.
Average earnings forecast: Loss of 28 cents a share by analysts surveyed by Zacks Investment Research.
Share price: Down 36 cents to close at $6.84. Targacept released its earnings report after the market closed Tuesday.
Targacept Inc.
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