GlaxoSmithKline is forming a drug research and development alliance with Targacept that could mean up to $1.5 billion to the Winston-Salem based pharmaceutical firm.

In a deal announced Friday before Wall Street opened, GSK disclosed that it would pay Targacept (NASDAQ: TRGT) $35 million in up front fees for the rights to Targacept’s two lead drugs. The payment includes the purchase of $15 million of Targacept stock by GSK.

News of the deal sent Targacept stock up 33 percent, or $3, to $12 a share in morning trading. For the day, shares closed up $1.79, or 20 percent.

At the core of Targacept’s technology is a proprietary platform called Pentab. The company focuses on so-called neuronal nicotinic receptors (NNRs) that are part of the central nervous system.

GSK wants access to Targacept’s NNR technology. The companies will work on research and discovery targeting pain, smoking cessation, obesity, addiction and Parkinson’s disease.

Overall, GSK could pay Targacept as much as $1.5 billion in payments if milestones are met in the five research areas.

Targacept also would receive double-digit royalties on any drugs that are approved for sale.

"The breadth of this alliance validates the importance of NNRs in the potential treatment of a broad range of CNS-related disorders and diseases," said J. Donald deBethizy, Targacept’s chief executive officer and a co-founder of the firm.

"This uniquely structured deal enables us to accelerate the progression of our pipeline, capitalize on our discovery and development expertise and leverage the resources of a premier global pharmaceutical company while retaining considerable value,” he added. “The alliance also aligns with our business strategy to progress our pipeline through human proof of concept and partner selectively for late-stage development and commercialization in primary care fields."

Targacept was spun out of RJR in 1999, where deBethizy was an executive.

"This alliance provides us access to innovative science and pioneering research and expertise in the promising NNR field,” said Hugh Cowley, who leads GSK’s Center of Excellence for External Drug Discovery.

“We believe there is tremendous potential for NNR therapeutics for a variety of CNS-related diseases and disorders, and look forward to working with Targacept to accelerate the development and delivery of new medicines to patients," he added.

AstraZeneca is already partnered with Targacept to develop an Alzheimer’s drug.

GSK has secured rights to Targacept’s TC-2696, a compound in Phase II clinical trial, and TC-6499, a preclinical compound. TC-2696 targets acute post-operative pain. TC-6499 is a possible treatment for neuropathic pain.

Targacept is searching for means of treating:

• Alzheimer’s
• Cognitive deficits in schizophrenia
• Depression/anxiety
• Pain
• Schizophrenia
• Smoking cessation
• Obesity
• Inflammation