Targacept (Nasdaq:TRGT) remains committed to moving forward with three more Phase 3 clinical trials attempting to develop depression’s first new treatment mechanism in decades despite results of one trial showing that the compound partnered with AstraZeneca (NYSE:AZN) performed no better than a placebo.

CEO Don deBethizy said he could not explain why TC-5214 did not perform as it did in an earlier phase 2b study. But he said the results released early today are only top-line results for one of four planned phase 3 studies of TC-5214. He added that depression is difficult to study and even successful treatments can have negative results in their development.

“It looks like we’re starting with the reality of that environment in that first trial,” deBethizy said in a conference call to discuss the results.

Investors took to the news poorly and Targacept shares plunged by more than 57 percent in trading this morning. But Winston-Salem, North Carolina-based Targacept remains committed to studying TC-5214 and deBethizy reiterated targets to release data from the remaining late-stage clinical trials in the first half of 2012. A new drug application is still expected in the second half of next year. (Read more details here.)

TC-5214, Targacept’s lead drug candidate, is being studied as a treatment to help patients with major depressive disorder who do not respond adequately to existing antidepressants. The compound, like all of Targacept’s drug candidates, is based on the R.J. Reynolds spinout’s technology of developing compounds that have an effect on nicotinic receptors in the nervous system.

AstraZeneca and Targacept entered a collaboration and license agreement in 2009 based on the potential of Targacept’s nicotine science. The deal paid Targacept $200 million up front with the potential of an additional $540 million in milestones. A new depression drug has the potential to become a blockbuster drug. Major depressive disorder affects an estimated 42 million worldwide and the companies peg the market at more than $20 billion. Patients are commonly prescribed serotonin reuptake inhibitors, or SSRIs. TC-5214 is being developed as a depression treatment for the millions who don’t respond to SSRIs.

Patients in this first trial did not meet the endpoint of showing a significant change on the Montgomery-Asberg Depression Rating Scale (MADRS) is a commonly used 10-item questionnaire that psychiatrists employ to measure the severity of depressive episodes. Targacept executives did not go into detail about the preliminary results trial because analysis of the data is still underway. But deBethizy explained that one of the reasons Targacept is conducting four phase 3 studies is because depression is such a tricky area to study. Also, there is debate about whether fixed dosing or flexible dosing will best distinguish a drug from a placebo. Targacept Chief Medical Officer Dr. Geoffrey Dunbar said by doing two of each trial, the company can study both options.

The company expects to next report on TC-5214 when it has completed all of the phase 3 studies in the first half of 2012.

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