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Winston-Salem, N.C.-Based Biotech Plans to Go Public

Posted on: Tuesday, 17 January 2006, 21:02 CST

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

Jan. 18--Targacept Inc. is making another attempt to go public.

The Winston-Salem biotechnology company said yesterday that it has filed a plan with the Securities and Exchange Commission for an initial public offering to raise an estimated $59.8 million -- less money than the company was targeting in its aborted IPO last year.

Company officials declined to say how many shares it plans to offer this time or when it hopes to enter the market.

Targacept first announced a plan to go public in May 2004, but withdrew its filing 10 months later in March 2005, blaming poor market conditions for biotechnology companies.

The company had offered an estimated $86.3 million in stock in its previous 2004 filing, but lowered the price of its proposed shares because of a weaker stock market, Don deBethizy, Targacept's chief executive said.

"It's just related to market conditions," deBethizy said. "You just have to kind of index the relative size of your offer, relative to the markets."

Targacept, based in the Piedmont Triad Research Park, was spun off from R.J. Reynolds Tobacco Co. in 2000. It is developing drugs based on nicotine to target diseases of the central nervous system, including schizophrenia, Alzheimer's disease and chronic pain ailments.

DeBethizy declined to say why the company was again attempting to go public, but according to one local biotechnology official, Targacept's recent pairing with AstraZeneca PLC could give it the cachet it needs to attract investors in the public market.

Targacept said last month 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. AstraZeneca, based in the United Kingdom, is a major pharmaceutical company known primarily for marketing the acid reflux drug Nexium.

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

"What I really like regarding Targacept is they've done all the necessary strategies to prove legitimacy," said Russ Read, the executive director of the National Center for the Biotechnology Workforce at Forsyth Technical Community College. "To me, it's like the stars, when you've got all your stars in place, it's time to go."

The prposed IPO comes at a time when the company working quicker to develop its products.

Targacept markets the drug Inversine, a treatment for hypertension, but has no other source of product revenue. According to financial records in its SEC filing, it reported about $3.7 million in net revenue in 2004, higher than the $2.4 million it reported in 2003. Complete financial figures from last year are not yet available.

Targacept has a January to December financial year.

The company also reported a net loss of about $24 million in 2004 compared to a loss of $19 million reported the previous year. As of September, Targacept had about $30 million in cash and cash equivalents, according to the filing.

Targacept has proven itself a major player in raising money from the private sector. The company raised about $33 million in private-equity financing in 2004. It raised about $60 million in second-round financing in March 2003, and it got about $30.4 million from investors in 2000.

Still, its future could again be tied to the whims of a volatile stock market. There were only about 250 IPOs filed last year, down from 316 filed in 2004, according to Renaissance Capital, a research company in Connecticut.

Despite the drop, economic-development leaders said they were confident Targacept would be able to pull off its second try at the public market.

"I think it's progress from them," said Gayle Anderson, the chief executive of the Greater Winston-Salem Chamber of Commerce. "They said when they withdrew from the market that it was because tech stocks were down. They've certainly had developments since then."

She added: "Hopefully this time the markets won't tank."

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Copyright (c) 2006, Winston-Salem Journal, N.C.

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AZN,

Source: Winston-Salem Journal

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