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Payment for rights to depression drug drives up Targacept’s losses

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WINSTON-SALEM, N.C. – Biopharmaceutical research and development firm Targacept (Nasdaq: TRGT) reported an increase in losses for the fourth quarter and for 2009 even as the company made progress ona key drug deal with drug giant AstraZeneca..

However, most of the losses -$16 million – occurred as part of a drug development deal when Targacept paid an upfront license fee to the University of South Florida for rights to a potential new drug intended to treat depression. That payment occurred after Targacept reported progress in clinical trials which triggered a $200 million payment from its partner AstraZeneca. The $200 million was received after the fiscal year ended.

The losses were higher that expected in a poll of analysts. First Call said analysts were looking for a loss of 34 cents a share and revenues of $4.6 million while Targacept reported a 96-cent per share loss on revenues of $3.4 million.

Targacept and AstraZeneca are developing compound TC-5214 that targets major depressive disorder, The companies plan to launch a Phase III clinical trial later this year and are hoping to win approval for the drug in 2012.

The lucrative deal could be worth over $1 billion for Targacept, which is partnered with AstraZeneca on three other deals as well as several other larger firms such as GlaxoSmithKline in development of drugs.

The company said Thursday after the markets closed that fourth-quarter losses jumped to $26.4 million from $5.4 million a year earlier.

For all 2009, losses climbed to $39.4 million, up $14.2 million from 2008.

“2009 was a breakthrough year for Targacept, highlighted by highly favorable Phase 2b clinical trial results of our investigational product TC-5214 that showed its potential as a new mechanistic approach for the treatment of depression for the millions of patients who do not respond well to first-line antidepressant therapy,” said Targacept Chief Executive Officer J. Donald deBethizy.

Targacept is focused on research into neuronal nicotinic receptors, or NNRs. They are a class of proteins in the nervous system that control levels of chemical messengers such as dopamine. According to Targacept, nicotine has been linked to over-stimulation of dopamine in brain regions that are involved in feelings of reward and pleasure.

(For the complete earnings report, click here.)

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