Implosion Analysis For Targacept… What Lies Ahead? (TRGT, AZN)

November 8, 2011 · Filed Under Depression, R&D 

Tuesday has been an awful day for shareholders of Targacept Inc. (NASDAQ: TRGT).  The company shares lost more than half of their value on news that initial test results from the Phase III antidepressant (TC-5214) failed to meet their endpoints in treating major depressive disorder.  Targacept is covered under a co-development pact with AstraZeneca PLC (NYSE: AZN) in the United Kingdom and this is supposed to be an add-on treatment for patients where primary treatment was not adequate.

Effectively, this was the first of four Phase III trials and more data on all of the results should come by the first half of 2012.  What is amazing is that the companies have said that they still hope to file for FDA approval in the United States during the second half of 2012.  Depression treatment is such a toss-up that a company’s primary endpoints might be well above what a minimum threshold is for FDA approval. 

Investors are speculating that Targacept does not die on the vine here.  Targacept is down almost 57% today but the stock is still at $8.25 and the market cap is still $275 million.  Shares hit a new 52-week low today and the new 52-week range is $7.93 to $30.47.  To show just how much optimism has been wiped out, the Thomson Reuters pre-news consensus price target was just above $30.00.  AstraZeneca ADRs are down 2% at $46,34 in New York trading.

The hope is that there could still be approval.  We won’t endorse that, but we did want to see what else Targacept has up its sleeve in the pipeline other than TC-5214:

  • TC-5619 for Residual Symptoms in Schizophrenia, Alzheimer’s Disease and ADHD 
  • AZD3480 – ADHD 
  • AZD1446 – Alzheimer’s Disease

As of June 30, 2011, Targacept had nearly $189 million in net tangible assets. If you just look at cash, cash equivalents, short-term investments and long-term investments, the figure is more than $290 million before backing out liabilities.

JON C. OGG

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