AstraZeneca has exercised an option on a potential drug compound from Targacept for $2 million.

The agreement is part of a much larger contract the two companies struck in December 2005 through which AstraZeneca received rights to a number of Targacept compounds. The contract announced Monday covers drug candidate TC-5619, which entered Phase 1 clinical trials in July. The compound could be a therapeutic treatment for cognitive disorders.

“Our decision to secure an option to license TC-5619 under our collaboration agreement underscores AstraZeneca’s enthusiasm for the promise of NNRs as a new mechanism for the treatment of cognitive disorders,” said Bob Holland, head of the Neuroscience Therapy Area for AstraZeneca. “We are committed to developing novel therapies in areas of unmet need such as Alzheimer’s disease, cognitive deficits in schizophrenia and other cognitive disorders and are delighted to be able to access Targacept’s innovation in this field.”

If TC-5619 proceeds successfully though a Phase II clinical proof of concept trial, AstraZeneca will pay Targacept $40 million for an exclusive license. If the compound is commercialized, Targacept could receive additional payments of $226 million.

Another compound licened by AstraZeneca from Targacept is in Phase IIb clinical trials as a treatment for Alzheimer’s and schizophrenia.