Zacks_Analysts' Blog : Pipeline Setback for Targacept - Analyst Blog

Recently, Targacept Inc. (TRGT) and partner AstraZeneca (AZN) announced that their pipeline candidate TC-5619 fared disappointingly in a mid-stage study.

The candidate, being developed for treating adults suffering from Attention Deficit Hyperactivity Disorder (ADHD), failed to meet the primary end-point.

TC-5619 was evaluated in non-smokers aged between 18 to 65 years suffering from ADHD. Preliminary results from the study suggested that TC-5619 was not more effective than placebo after four, eight and twelve weeks of dosing. Targacept intends to present complete results from the study at an upcoming medical conference.

However, TC-5619 was well tolerated in the study. Patients treated with the candidate did not suffer from any serious adverse reaction. Furthermore, the opt-outs from the study, due to adverse events in the TC-5619 arm, were comparable with the placebo arm. We note that in January 2011, TC-5619 had fared well in a mid-stage study in schizophrenia patients.

Failure of TC-5619- A Major Blow

We view the failure of the ADHD candidate as a major blow to Targacept, as the successful development and commercialization of TC-5619 for the indication would have boosted its top line significantly since the market for ADHD is significant.

According to data released by Decision Resources, approximately 23.3 million adults and 21.6 million children and adolescents were affected by ADHD in 2009 in the US, France, Germany, Italy, Spain, the UK and Japan.

Our Recommendation

Targacept currently carries  a Zacks #4 Rank (short-term 'Sell' rating) highlighting near-term pressure on the stock. In addition to the failure of TC-5619 in ADHD, the decision to end Targacept’s alliance with pharma major GlaxoSmithKline (GSK), from May 2011 is another blow to the company. However, we are more cautious in the long-run and have a ‘Neutral’ stance on Targacept.