In its first financing since going public in April 2006, Targacept Inc. is raising $26.9 million through the sale of 3.8 million common shares priced at $7.07 each, the company's closing price on Wednesday.
The proceeds from the offering will provide Targacept with "enough fuel in the tank to get to mid-2010," President and CEO J. Donald deBethizy told BioWorld Today. Combined with a healthy existing cash balance and anticipated milestone payments from partnerships, Targacept should have sufficient funding to last until its small-molecule neuronal nicotinic receptor (NNR) modulators start hitting the market, deBethizy added.
As of Sept. 30, Targacept had $90.4 million in cash, equivalents and marketable securities. The company burned $11.5 million on operating expenses during the third quarter, but its expenses partially were offset by a steady stream of milestone payments from partners AstraZeneca plc and GlaxoSmithKline plc.
Targacept's potential $300 million deal with London-based AstraZeneca for TC-1734/AZD3480 already has resulted in a $10 million up-front payment, followed by a $20 million milestone payment when the drug advanced into Phase II trials. AstraZeneca currently is conducting Phase IIb trials with AZD3480 in Alzheimer's disease and cognitive deficits in schizophrenia, with data from both trials expected by the end of this year. (See BioWorld Today, Dec. 29, 2005, and Dec. 28, 2006.)
Targacept will get additional milestones upon successful completion of the Phase IIb trials and initiation of Phase III trials, deBethizy said.
Last month, AstraZeneca paid Targacept $2 million to secure an option to license TC-5619, a NNR modulator for cognitive disorders and schizophrenia that Targacept is moving through Phase I. By the end of the year, deBethizy said, the company expects to complete the Phase I trial and start Phase II. If the Phase II data - expected in the fourth quarter of 2009 - look good, AstraZeneca could end up licensing the drug for $40 million up front and up to $226 million in milestones and royalties.
And then there's the deal with London-based GSK, a $1.5 billion whopper signed last year. Targacept got $35 million up front, and just last month earned a $6 million milestone payment for initiating a Phase I trial with neuropathic pain drug TC-6499. More milestones are expected by the end of this year when the drug finishes Phase I, and in the first half of 2010 upon successful completion of proof-of-concept trials. (See BioWorld Today, July 30, 2007.)
The GSK deal also covers preclinical NNR programs for smoking cessation, obesity, addiction and Parkinson's disease, each of which could bring Targacept $16 million in pre-proof-of-concept milestones. DeBethizy said he expects to begin hitting some of those milestones this year.
Yet the original lead candidate in the GSK deal - a pain drug dubbed TC-2696 - won't be bringing in any money in the near term. The drug failed to provide superior pain relief to placebo in a randomized, 181-patient Phase II trial in pain relief after third-molar extraction surgery. (See BioWorld Today, Dec. 4, 2007.)
DeBethizy said TC-2696 still has promise in neuropathic and inflammatory pain, but GSK elected to focus instead on TC-6499, returning TC-2696 rights to Targacept. For now, bandwidth issues are keeping the product on hold, but deBethizy said the company is "exploring partnering options."
On its own, Targacept is conducting a Phase I trial with TC-2216 for depression and anxiety and plans to start a Phase I trial this quarter with depression drug TC-5214. The company has more than 50 NNR modulators in its research program and plans to file one investigational new drug application per year, deBethizy said.
For the public offering, Deutsche Bank Securities Inc. is the sole book-running manager. Co-managers include Lazard Capital Markets LLC, Oppenheimer & Co. Inc. and Pacific Growth Equities LLC. Targacept will offer an additional 570,000 shares to the underwriters to cover any overallotments. The deal, which draws from a $75 million shelf registration statement filed last year, is expected to close Jan 23.
Shares of Winston-Salem, N.C.-based Targacept (NASDAQ:TRGT) fell 2 cents to close at $7.08 Thursday.
In other financing news:
• Peptimmune Inc., of Cambridge, Mass., raised $8.2 million in the first close of its Series D financing. Investors included New Enterprise Associates, MPM Capital, Hunt Ventures LP, Boston Medical Investors, Silicon Valley Bank Capital and others. Proceeds will support clinical trials with multiple sclerosis drug PI-2301, a second-generation peptide copolymer similar to Teva Pharmaceuticals Inc.'s marketed MS drug Copaxone (glatiramer acetate). PI-2301 is being studied in an ongoing single-ascending dose trial, and Peptimmune plans to begin a multiple-ascending dose trial later this year, with results from both trials expected by the end of the year. The second close of the Series D is expected in the second quarter.
• Senexis Ltd., of Cambridge, UK, raised £2.9 million (US$5.7 million) from the Wellcome Trust. The money will be used to continue optimization and preclinical development of Senexis' small-molecule inhibitors of amyloid-induced toxicity and neuroinflammation for the treatment of Alzheimer's disease.
• Theravance Inc., of South San Francisco, priced its previously announced public offering of $150 million worth of unsecured, 3 percent, convertible subordinated notes due 2015. The notes are convertible into common shares at a rate of 38.6548 shares per $1,000 principal amount of notes, or about $25.87 per share. Joint book-running managers Merrill Lynch & Co. and Goldman, Sachs & Co. will have the option to purchase an additional $22.5 million aggregate principal amount of notes to cover overallotments. Proceeds will be used for general corporate purposes. Shares of Theravance (NASDAQ:THRX) rose $1.42, or 7 percent, to close at $21.32 Wednesday.