Targacept

(from NI July/August 2010)

We have heard more than one small company CEO say "We want to be the next Targacept." And who can blame them? The AstraZeneca-led Phase III program for TC-5214 as an adjunctive antidepressant should begin soon, and will produce data in 2012. With several major pharmas withdrawing from psychiatry R&D (ironically, including AstraZeneca), this program's profile and potential value have increased greatly. Targacept's lead nicotinic alpha7 modulator, TC-5619, is now in Phase II testing for both schizophreniform cognition and ADHD, and is being prepared for an Alzheimer's trial, to begin early in 2011. Even Targacept competitors see TC-5619 as a strong alpha7 entrant, and AZ expanded their option on the compound, paying $11 million now--in exchange for paying $10 million less if the option is exercised.
The only downside for Targacept is the possibility that GSK will back out of their partnership, although neither smoking cessation nor obesity has been specifically eliminated from their menu of interests, unlike pain and depression. With the AZ partnership going strong, this is not of critical import for Targacept's prospects.

(from NI January 2010)

No CNS company had a better, more substantive 2009 than did Targacept. The first major event was the positive outcome in ADHD for AZD3480, which led to AstraZeneca's decision to take that program ahead, rescuing AZD3480 from the ambiguity of their failed schizophrenia and unsatisfying Alzheimer's trials. But this was dwarfed by the surprisingly robust success Targacept revealed in its Phase II data for TC-5214, discussed earlier in this issue. The trial was a neatly executed validation of the nicotinic approach to SSRI augmentation for patients who are not responsive to the SSRI as monotherapy. This became a highly sought after asset for partnering, and AstraZeneca's ongoing relationship undoubtedly played a significant role in the consummation of a deal for TC-5214 in treatment-resistant depression. $200 million is being paid up front, although Targacept must cover 20% of the clinical development costs, which will take a notable chunk of the upfront money.
Targacept also started a Phase II in schizophreniform cognition with TC-5619, and if POC is obtained, AZ almost certainly would exercise their option, with a $40 million milestone attached thereto. That is a decision AZ will likely have to make during 1Q:11. The GSK partnership is advancing in smoking cessation and/or obesity, with a lead likely to enter the clinic early in 2010. Targacept has a very healthy cash position, but we would be surprised if they stray outside their nicotinic area of expertise at this point.

(from NI January 2009)

AstraZeneca produced 'ambiguous' results in its AD study for AZD3480, which AstraZeneca is still evaluating months later, since some effects were seen on secondary measures. The lack of efficacy for AZD3480 was not ambiguous in schizophrenia, AZ immediately responded to those top-line results with a decision to not move ahead in schizophrenia with that compound. AZD3480's future depends on its performance in an ADHD Phase II trial expected to report midyear. AZ was to make a decision by the beginning of 2009, but now will wait for the ADHD data. Targacept did receive a $2 million milestone when AZ selected AZD-1446 to go into the clinic by year-end. That is another alpha4beta2 receptor subtype modulator, and it is apparently being viewed as a candidate for Alzheimer's and ADHD, not schizophrenia. Reading between those lines, the alpha4beta2 subtype appears to being losing its appeal as a schizophrenia target, while it is still being developed for ADHD and possibly Alzheimer's, by both Abbott and Pfizer, in addition to the AZ program. Nicotinic alpha7 may be--without benefit of much public data--now considered a better schizophrenia cognition target. AZ has the option on Targacept's TC-5619 once POC is obtained (Targacept has completed Phase I dosing, but was cagey about Phase II timing), and (perhaps this is why) AZ also has its own inhouse alpha7 drug, AZ-0328.

Targacept ended the year with around $86 million in the bank, which puts it in an unusually strong position compared to its peers. One question is whether that cash will simply be used for operational expenses "to mid- 2011", as Targacept currently states, or whether they might consider diversifying via M&A or inlicensing. Given the multiple 'shots on goal' offered by the GSK partnership; the prospect of depression data; and the focus and expertise that Targacept has always had upon nicotinics and nicotinics only, the latter seems highly unlikely.

(9/16/08 comment on Phase IIb Alzheimer's data)

Targacept/AstraZeneca's TC-1734/AZD-3480 underwhelmed with its Phase IIb Alzheimer's results, topline data released by partner AstraZeneca. It did not definitively fail, even though it missed its primary endpoint, but even when looking at the silver lining, it does appear expectations for this drug in dementia will have to be ramped down. Here are some of the interesting findings and our conjectures:
1) That confounding placebo effect. The placebo group did not show the modest decline one would expect over just three months, indeed they improved. And of course, the safety/tolerability profile of the placebo was outstanding. In retrospect, AZ may/should kick themselves for not running a six month trial, where such an effect is likely to diminish.
2) The benefit of AZD3480 did not outshine Aricept in any consistent way, though it did outperform Aricept on the ADS-CGIC. That is a caregiver/prescriber assessment of patient outcome, which to some degree represents a shot at capturing real-life functional gains that do not translate well into cognitive test scores, but this kind of data is also more subjective and 'squishy'.
3) The report of benefit on the blunt-instrument MMSE is not entirely reassuring, we would have hoped to see some trend on the more detailed CDR, and perhaps something will yet come from more detailed analysis of the several domains assessed.
4) Aricept did not perform any better, and indeed was worse on the ADS-CGIC. It is a reminder that even this lucrative gold standard drug doesn't present all that high a hurdle to match, and matching it is a consolation prize at best.
5) The patient population in this large (567 patients were dosed, at 84 sites!) trial was from Europe and Canada. We will be curious to see what proportion was enrolled in Eastern Europe, where the quality control and experience that can be assumed in clinical trial execution is not as assured, but rapid enrollment is. Just as we have some qualms about Medivation's reliance upon 181 Russian patients, we wonder if there was any divergence associated with those trial sites.
6) There is a modest signal of effect here, but based on what is known thus far, one would have to project a drug which is as effective, but probably not superior to, Aricept in terms of efficacy, but has better tolerability. Whether that will be enough to persuade AstraZeneca to go into Phase III (which would have to be at least six months of treatment) remains to be seen.
7) This raises the stakes on the schizophreniform cognition Phase IIb results, which will be out in December, the same month that AstraZeneca has to decide whether or not they are going to go into Phase III for AD or schizophrenia, and pay the requisite milestone to Targacept. ADHD data will be out in early 2009, but AZ will have to make its decision before then.

8) While comparing studies is a dicey proposition, it is worth noting that Memory Pharma's nicotinic alpha 7 drug (MEM3454), which has a different target than AZD3840, which is an alpha4beta2 modulator, produced a statistically significant effect on the CDR in just eight weeks. Interestingly, both drugs showed an inverted-U response curve, with the mid-dose performing best. This leaves open the question of which NNR target is optimal for AD, and what about the pharmacokinetics of these drug/receptor interactions lead to this dimunition of effect with higher doses.

(from July/August 2008 NI)

Partner AstraZeneca should report the AD and schizophrenia Phase IIb trial data for TC-1734 before the end of this year. As we predicted, Targacept and AstraZeneca folded in TC-5619 for schizophreniform cognition, with a $2 million milestone payment going to Targacept. TC-1734 is now going to be also tested in ADHD, following Abbott/NeuroSearch's successful Phase II trial with their nicotinic alpha4beta2 drug. Targacept is enthused about its mecamylamine enantiomer TC-5214, which offers patent protection and, they believe, potential as both an adjunct antidepressant (being tested therein first) and as a monotherapy. Targacept's view is that the compound will offer very rapid relief of anxiety symptoms, which may provide patients with a sense of improvement as the slower-to-develop depression effects per se then gradually emerge. GSK recently paid a milestone on a second pain compound, and Targacept has identified a lead for smoking cessation.

(from January 2008 NI)

AstraZeneca has launched two PhIIb trials for TC-1734: a 500pt Alzheimer's study, and a 400pt schizophrenia trial, where TC-1734 is an adjunct to antipsychotic therapy. Those two studies are scheduled to be finished at year-end, though we don't expect any results to be announced until 1Q:09. As we predicted, Targacept and AstraZeneca folded in TC-5619 for schizophreniform cognition, with a $2 million milestone payment going to Targacept. Targacept dropped mecamylamine, instead developing its enantiomer TC-5214, which at the very least, offers patent protection. GSK partnered their pain program with a very progressively structured deal. The first compound failed in Phase II, but GSK has recently paid a milestone on a second one.

(revised NI July-August 2007 entry)

AstraZeneca has launched two PhIIb trials for TC-1734: a 500pt Alzheimer's study, and a 400pt schizophrenia trial, where TC-1734 is an adjunct to antipsychotic therapy. Data will not come from those trials until late next year. We expect that Targacept and AstraZeneca will expand the deal, to fold in TC-5619 for schizophreniform cognition. The depression possibilities for Targacept are more diffuse: they have mecamylamine, but they are choosing to instead develop its enantiomer TC-5214, which at the very least, offers patent protection. There is also TC-2216, an inhouse designed compound. A dental pain acute pain trial for TC-2696 is now expected to produce data near year-end. GSK. Pain, Parkinson's, obesity, addiction are all covered. The most important attribute, reflected in the $35 million upfront ($20 million via equity buy) and the $1.5 billion in theoretically available biobucks in milestones and royalties, is the distinct sense of collegiality in the deal. Targacept's ongoing contributions to the discovery/development process led GSK to pay Phase II prices for what is primarily a preclinical platform. As it should.

(added July 2006)

The AAMI trial for TC-1734/ispronicline (partnered with AstraZeneca ) produced better cognitive data than anyone had expected--Targacept included. Now AZ will develop it for Alzheimer's. They continue to seek a buyer for mecamylamine, which has been hanging in suspended animation for several years--other than producing about $1 million per year to Targacept in sales for Tourette's. They have other, unpartnered molecules nearing the clinic for pain and anxiety/depression, as well as TC-5619, which will probably end up optioned to AstraZeneca as well. With their IPO finally completed, albeit for less than they had sought, bringing in $45 million, they have the funds to move ahead.