Shares of Targacept Inc. fell 17 percent on Monday after the company said its neuronal nicotinic receptor (NNR) modulator TC-2696 failed to outperform placebo in a Phase II trial for pain relief after third molar extraction surgery.

Yet analyst Gregory Wade of Pacific Growth Equities LLC said he doesn't think the failure is an indictment of Targacept's NNR platform. "It's one study in one indication," he told BioWorld Today, adding that acute treatment of post-operative pain is "very challenging."

Even so, investors pushed Targacept's shares (NASDAQ:TRGT) down to a new 52-week low of $6.80 in early trading. The stock later recovered some ground to close at $8.01, a loss of $1.59 for the day.

Targacept's NNR platform, dubbed Pentad, emerged from the company's study of nicotine during its time spent as a subsidiary of the R. J. Reynolds Tobacco Co. Pentad has since generated a pipeline of small molecules that modulate various subtypes of the neuronal nicotinic receptor.

TC-2696, a small-molecule modulator of the alpha4beta2 NNR, was Targacept's most advanced product candidate for pain. Behind it in preclinical development was TC-6499, an alpha4beta2 NNR modulator for neuropathic pain. Both compounds were included in Targacept's $1.5 billion deal with GlaxoSmithKline plc, signed earlier this year.

The GSK deal resulted in a $35 million up-front payment to Targacept and the potential for $1.5 billion in milestones tied to the development of NNR modulators for pain, smoking cessation, obesity, addiction and Parkinson's disease. The terms of the deal called for Targacept to advance each drug through proof of concept, at which point GSK could pick up further development and commercialization. Targacept would receive royalties on any resulting commercial products as well as an option to co-promote TC-2696 and TC-6499. (See BioWorld Today, July 30, 2007.)

TC-2696 was the only clinical compound included in the GSK deal. Phase I studies had demonstrated a nonstatistically significant trend toward the drug over placebo in pain relief tests. But in the randomized, placebo-controlled, 181-patient Phase II trial, TC-2696 did not result in superior pain relief compared to placebo.

Targacept did not return calls seeking comment but said in a press release that while the results of the trial suggest TC-2696 is not a viable therapeutic candidate for acute postoperative pain, the company is continuing to analyze the data and work with GSK to determine the next steps.

Meanwhile, Targacept is making progress with other NNR modulators. The company is working with partner AstraZeneca plc to conduct Phase IIb trials in Alzheimer's disease and cognitive deficits in schizophrenia (CDS) with TC-1734/AZD3480, which also modulates alpha4beta2 NNR.

The two parties signed a potential $300 million deal for the drug in 2005, and in 2006 AstraZeneca completed initial studies and elected to advance into the Phase IIb program. (See BioWorld Today, Dec. 29, 2005, and Dec. 28, 2006.)

As part of the 2005 deal, AstraZeneca also provided funding for Targacept to discover additional NNR modulators for cognitive disorders. Last month, the big pharma paid $2 million to secure an option to license TC-5619, a Phase I alpha7 NNR modulator for cognitive disorders and schizophrenia. Targacept is continuing to develop the drug through Phase II, at which point, AstraZeneca can license it for $40 million up front, $226 million in milestones and royalties.

Winston-Salem, N.C.-based Targacept also is conducting Phase I trials with alpha4beta2 NNR modulator TC-2216 for depression and anxiety and plans to start a Phase I trial next year with depression drug TC-5214.

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