Targacept on target for $30M milestone payment from AstraZeneca

Targacept’s phase II clinical trial results on its compound to treat schizophrenia put the Winston-Salem, North Carolina company in line for a $30 million milestone payment from AstraZeneca.

Targacept is one step closer to a $30 million milestone payment from pharma giant AstraZeneca after meeting goals for a phase II clinical trial on its schizophrenia drug candidate.

And if AstraZeneca (NYSE:AZN) licenses the compound, Targacept (NASDAQ:TRGT) could be in line for $212 million more.

Winston-Salem, North Carolina-based Targacept is developing its compound TC-5619 as a schizophrenia therapy. Targacept on Wednesday said that the compound improved cognitive function, the main endpoint of the phase II  study.

Market research firm Business Insights estimated that there were approximately 4.6 million people with schizophrenia in the world’s seven major pharmaceutical markets in 2009. Up to 75 percent of those with schizophrenia are cognitively impaired. There is currently no drug approved in the United States or Europe specifically targeting cognitive dysfunction in schizophrenia.

Targacept and AstraZeneca entered into a collaboration in 2005 focused on developing Targacept compounds for cognitive disorders. Under the agreement, AstraZeneca has the right to license TC-5619, a move that would trigger a $30 million payment to Targacept. AstraZeneca would then assume responsibility for all funding, development and commercialization of the compound. Targacept would be eligible for additional payments of up to $212 million, if the compound reaches certain development, regulatory and commercialization milestones.

The arrangement is an example of a growing trend in the pharmaceutical industry. Big pharmas are scaling back on their own R&D, opting instead to either acquire or license compounds from smaller companies that have done much of the drug discovery and development work.

Targacept said it will continue to analyze the results of the clinical study and will publish and present more detailed results at a future scientific meeting. AstraZeneca is expected to determine in the first half of 2011 whether to exercise its right to license the Targacept compound.