Targacept (Nasdaq: TRGT) has identified a lead compound that it believes could lead to development of a drug for smoking cessation, and the discovery triggered a $500,000 milestone payment from GlaxoSmithKline, its partner in the project.

The compound is based on Targacept’s research into neuronal nicotinic receptors (NNRs).

“We are delighted to have successfully leveraged our expertise in NNRs to bring forward a novel compound for smoking cessation, an area that is not only a major healthcare need but also where application of the NNR mechanism has been validated commercially,” said J. Donald deBethizy, Targacept’s chief executive officer.

“Emerging science has made the promise of NNR-targeted compounds as smoking cessation aids increasingly evident,” he added. “It is important for a smoking cessation aid to specifically target the areas of the brain that serve as pathways for addiction, while addressing limitations of currently available products by minimizing unwanted side effects.”

NNRs 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.

“Compounds that can normalize the activity of these NNR subtypes have the potential to decrease the rewarding effects of nicotine and, as a result, the desire to smoke,” the company said in a statement.

GSK and Targacept formed a drug development alliance in July of 2007 that focuses on NNRs. Five targets for the program include pain, smoking cessation, addiction, obesity and Parkinson’s disease.