National Editor

Still smokin' while others struggle in the financially hard-pressed sector, Targacept Inc. raised $14 million, bringing to $60 million the amount raised in its second round for work with nicotinic receptor drugs in central nervous system disorders.

Privately held Targacept, spun out from R.J. Reynolds Tobacco Co. in August 2000, completed late last year the first closing in the current financing round, raising $46 million. (See BioWorld Today, Dec. 6, 2002.)

"We were looking for somebody like Oxford [Bioscience Partners] to come in so we held it open," said Donald deBethizy, president and CEO of Winston-Salem, N.C.-based Targacept, which gained a whopping $30.4 million first round of venture capital when it spun out from the tobacco giant that currently owns "less than 10 percent" of the company, deBethizy said.

Investors taking part in the second closing in Targacept's second round include Oxford, of Westport, Conn.; Jafco Co. Ltd., of Palo Alto, Calif.; Cogene Biotech Ventures, of Houston; Bison Capital, of Venice, Fla.; and Rock Castle Ventures, of San Diego.

"We're done," deBethizy said.

As part of the deal, Alan Walton, senior general partner and chairman of Oxford Bioscience Corp., was elected to Targacept's board. Walton has led Oxford's investments in genomics and biotechnology.

Soon to be in Phase IIb trials is Inversine (mecamylamine HCl), Targacept's nicotinic antagonist acquired last year from Layton Bioscience Inc., of Sunnyvale, Calif. The drug, developed by Whitehouse Station, N.J.-based Merck & Co. Inc. for hypertension, is known to modulate nicotinic acetylcholine receptors and has been used off-label for neuropsychiatric indications such as Tourette's syndrome, autism and bipolar disorder.

Targacept is developing it for ADHD and will file an investigational new drug application in June, deBethizy said.

"We've reformulated it," he said, adding that "the drug already has been in children, and there's 50 years' worth of safety data on it."

The Phase IIb trial with Inversine will put it almost alongside Targecept's most-advanced candidate, TC2403-12, a nicotinic agonist entering Phase II for ulcerative colitis, deBethizy said. That drug is the subject of a strategic alliance with Dr. Falk Pharma GmbH, of Freiburg, Germany, and has previously been tested by the Mayo Clinic.

"It's a nice, broad-spectrum nicotinic with low side effects" as designed by Targacept, which reported Phase I data in October, deBethizy told BioWorld Today. Previous side effects with a patch administration at Mayo included problems with nausea, heart rate and blood pressure.

"The patients didn't want to stay on treatments," he said, so Mayo switched to an enema. "But it just wasn't adequate," he said. "Our enema is going into Phase II, with an oral, delayed-release close behind in preclinical."

The enema approach is "like a topical administration in the colon, and there's a reasonable-sized market for the enema, but it's mostly for acute treatment," he added.

Another clinical compound, TC-1734, is being studied in Phase I trials for memory in cognition or neurodegenerative diseases.

"It's making excellent progress," deBethizy said, with a Phase II trial expected to begin next year.

Targacept also has a deal with Strasbourg, France-based Aventis Pharma SA to develop compounds to treat Alzheimer's disease - a "longer, more expensive program" than the firm could handle on its own, he said.

Current cash provides the company with a "long enough runway that we believe we can weather the contraction that's going on right now," deBethizy said, noting the business plan presented to investors estimates money to operate for "a little over three years. We can go into 2006. We're hoping the next time [we seek financing], it's in the public markets."