Targacept Inc. is looking to take its drug development work to the public markets.

The Winston-Salem, N.C.-based company filed for a proposed initial public offering worth an estimated $86.25 million. Targacept, which will sell all the shares, applied for listing on the Nasdaq exchange under the ticker symbol "TRGT." It has yet to specify the number of shares it plans to offer or the price per share.

Should the company price, it plans to use proceeds for clinical trials, preclinical testing and other research and development activities, for manufacturing and for general and administrative expenses.

Targacept is developing a new class of drugs to treat diseases and disorders of the nervous system by targeting neuronal nicotinic acetylcholine receptors, or NNRs. Originally incorporated as a wholly owned subsidiary of R.J. Reynolds Tobacco Co., it became an independent company in August 2000.

Since then, the company has raised more than $90 million through two rounds of venture financing. Its Series B round, worth a total of $60 million, was raised in two tranches completed a few months apart. Upon closing the last financing just more than a year ago, Targacept said it hoped its next investments would come from the public sector. (See BioWorld Today, Dec. 6, 2002, and March 20, 2003.)

Armed with one marketed product, Inversine (mecamylamine HCl), and four product candidates in clinical development, the 72-employee company believes it is well positioned for its IPO.

Its pipeline includes TC-1734 in Phase II trials for cognitive impairment in elderly persons, TC-5231 in Phase II studies for attention deficit hyperactivity disorder, TC-2403 in a Phase II trial for ulcerative colitis and TC-2696 in Phase I for pain.

The ulcerative colitis product, TC-2403, is partnered with Dr. Falk Pharma GmbH, of Freiburg, Germany. Other partnered programs, for Alzheimer's disease and other central nervous system diseases, are paired with Aventis Pharma SA, of Strasbourg, France.

Inversine was acquired from Layton Bioscience Inc., of Sunnyvale, Calif., and is sold for hypertension. It was first developed by Merck & Co. Inc., of Whitehouse Station, N.J.

Targacept's preclinical programs include research on Alzheimer's disease, schizophrenia, depression and anxiety, smoking cessation and obesity.

Its primary stockholders include New Enterprise Associates, of Baltimore, which controls 17.8 percent of the company; EuclidSR Partners LP, of New York, which has a 13.8 percent stake; Nomura International plc, of London, with 11.8 percent; Oxford Bioscience Partners, of Boston, with 8.9 percent; R.J. Reynolds Tobacco Holdings Inc., of Winston-Salem, with 8.7 percent; Burrill & Co. LLC, of San Francisco, with 5.7 percent; and Advent Private Equity Fund II, of London, with 5.6 percent.

The offering's managing underwriter is New York-based Morgan Stanley & Co. Inc., acting as book-running manager. Co-managers include Deutsche Bank Securities Inc., of New York; CIBC World Markets, also of New York; and Pacific Growth Equities LLC, of San Francisco.