Targacept posts profit for first time in four quarters
May 04, 2012 (Menafn - Winston-Salem Journal - McClatchy-Tribune Information Services via COMTEX) --Lower research and development costs enabled Targacept Inc. to post a profit for the first time in four quarters.
The company reported Thursday having 2.2 million in net income for the first quarter, compared with net income of 12.6 million a year ago.
Targacept, an anchor tenant in Piedmont Triad Research Park, develops drugs based on its understanding of the use of nicotinic receptors to treat diseases of the central nervous system.
The company said the lower net income was caused primarily by a 16.3 million drop in amounts turned into revenue from payments previously received from current licensing partner AstraZeneca PLC and former partner GlaxoSmithKline.
Targacept relies on collaboration and milestone payments to bolster revenue.
Targacept offset some of the revenue decline through a 24 percent decrease in research and development expenses to 17.8 million as it concluded Phase 3 trials for its TC-5214 drug compound.
The company also took a 1.9 million compensation charge in the first quarter.
"We will continue to pursue opportunities to collaborate while at the same time executing our strategy of advancing our innovative pipeline of clinical-stage compounds," said Don deBethizy, Targacept's president and chief executive.
Targacept expects operating expenses for fiscal year 2012 to range from 65 million to 75 million. It projects net operating revenues for fiscal 2012 to range from 50 million to 60 million.
As of March 31, cash and investments in marketable securities totaled 223.7 million. Targacept expects to have enough cash resources to meet operating requirements through at least 2015.
That level of cash -- estimated to be worth 7 a share by analysts -- is the main reason why Targacept's share price has not dropped further than the 4.50 to 5 range since the failed Phase 3 clinical trials. Its share price fell 11 cents Thursday to close at 4.60.
The profit was a welcome piece of positive news for Targacept, which has been dealt several financial and research setbacks over the past six months. The biggest was the failure of the four Phase 3 clinical trials for TC-5214 for major depressive disorder.
On Monday, Targacept announced the ending of its pharmaceutical collaboration on TC-5214 with AstraZeneca. Last week, Targacept confirmed it would eliminate 65 jobs, or 46 percent of its workforce, in a restructuring after the TC-5214 failure.
Targacept said other parts of its collaborative research and license agreement with AstraZeneca, which began in December 2005, remain in effect. The agreement focuses on cognitive disorders.
The next research updates for Targacept are expected later this year for a Phase 2 trial for the AZD1446 compound for Alzheimer's disease. Results from Phase 2 trials of TC-5619 for attention-deficit hyperactivity disorder and schizophrenia are expected in the second half of 2012 and mid-2013, respectively. Targacept is evaluating a late preclinical product candidate as a treatment for Parkinson's disease and related disorders. That effort receives grant funding from The Michael J. Fox Foundation for Parkinson's Research.
Ketan Desai, an analyst with Seeking Alpha, said Targacept "has made the right decision to focus on clinical trials that can produce results sooner rather than pursuing new research that could take five to 10 years to show a benefit."
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