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Winston-Salem, N.C.-Based Drug Firm, AstraZeneca Team Up on Alzheimer's Drug

Posted on: Thursday, 29 December 2005, 21:00 CST

By M. Paul Jackson, Winston-Salem Journal, N.C.

Dec. 29--Targacept Inc. said yesterday that it plans to enter into a $300 million collaboration agreement with AstraZeneca PLC to develop and market a drug to treat Alzheimer's disease and schizophrenia.

The research and licensing agreement with AstraZeneca, a major international drugmaker based in the United Kingdom, also allows for the development of other Targacept compounds to treat cognitive disorders.

Targacept, based in the Piedmont Triad Research Park, was spun out from R.J. Reynolds Tobacco Co. in 2000. It is developing drugs based on nicotine to treat diseases of the central nervous system.

Under the four-year agreement, AstraZeneca will help pay for the development and marketing of Targacept's drug, called TC-1734, in return for a share of the potential profits, officials said.

The federal government must still approve the deal, which could make Targacept a heavy-hitter in the state's biotechnology industry, said Adam Bianchi, the chief operating officer of Cutting Edge Information, a pharmaceutical research and consulting company in Durham.

"If this product moves forward and shows safety and effectiveness, Targacept will have a fat war chest," Bianchi said. "It's a big deal, in both senses of the word."

The proposed partnership could mean that Targacept will hire more workers, boosting the region's economic development, said Gayle Anderson, the president of the Greater Winston-Salem Chamber of Commerce.

Ultimately, the deal also could raise the profile of the research park, which recently started a major long-term expansion.

The drug collaboration does not come without risks, Bianchi said. AstraZeneca typically backs products estimated to bring in between $1 billion and $5 billion in annual revenues and Targacept would be under pressure to deliver a blockbuster drug, Bianchi said.

The two drug companies were scheduled to submit their collaboration plans to the Federal Trade Commission today, Targacept officials said. The commission could approve the deal by the end of January.

Once the collaboration is approved, AstraZeneca will pay Targacept an initial $10 million, Targacept officials said.

The company could receive as much as $300 million from AstraZeneca over the four-year partnership, primarily through the upfront payment, research money and incentive payments tied to development milestones, officials said.

AstraZeneca, a publicly traded company, has offices in Delaware and Sweden. It markets the popular drug Nexium, which treats acid reflux and other stomach disorders.

The company has about 12,000 employees and is also developing drugs for depression, anxiety, pain control and dementia.

"AstraZeneca is committed to developing innovative therapies in the areas of unmet need of Alzheimer's disease, schizophrenia and other cognitive disorders," said Bob Holland, the vice president and chief of AstraZeneca's neuroscience-therapy area.

Targacept has been successful in raising venture capital over the years, but the potential $300 million pay day could reshape the biotechnology company.

Targacept raised about $33 million in private-equity financing in 2004. It raised about $60 million in second-round financing in March 2003 and got about $30.4 million from investors in 2000.

Targacept announced plans to become a publicly traded company in May 2004, but withdrew its initial public offering 10 months later, blaming the withdrawal on rocky economic conditions within the biotechnology field.

Don deBethizy, Targacept's chief executive officer, declined to say yesterday whether the company would again seek the public market.

DeBethizy said he decided to partner with AstraZeneca partly because of AstraZeneca's development of Seroquel, which helps treat acute and chronic psychosis.

"They have a significant commitment to central nervous system" treatments, he said. "That really encouraged us."

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AZN, RAI, BTI, BATS,

Source: Winston-Salem Journal

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