Targacept signs collaboration and license agreement with AstraZeneca

Targacept, Inc. (Nasdaq: TRGT), a clinical-stage biopharmaceutical company developing a new class of drugs known as NNR Therapeutics™, today announced that its collaboration and license agreement with AstraZeneca for the global development and commercialization of TC-5214 for major depressive disorder (MDD) has become effective as a result of early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. Effectiveness of the agreement triggered an upfront payment of $200 million from AstraZeneca to Targacept.

AstraZeneca and Targacept are preparing for the planned mid 2010 initiation of Phase 3 clinical development of TC-5214 as an adjunct to antidepressant therapy in adults with MDD who do not respond adequately to first-line antidepressant treatment, with the goal of filing a new drug application with the U.S. Food and Drug Administration in 2012. The companies also plan to conduct a Phase 2 study exploring TC-5214 as a monotherapy for MDD.

Details of the Collaboration and License Agreement

As previously announced, Targacept is eligible under the agreement to receive an additional $540 million if specified development, regulatory and first commercial sale milestones are achieved, up to an additional $500 million if specified sales related milestones are achieved and significant stepped double-digit royalties on net sales worldwide. Under the terms of an existing license agreement, Targacept is required to pay a percentage of the upfront payment and each of the milestone payments that may be received from AstraZeneca, as well as royalties, to the University of South Florida Research Foundation. Targacept has retained an option for a co-promotion of TC-5214 to a limited target physician audience in the United States.

Under the terms of the agreement, AstraZeneca is responsible for 80% of the costs of the initial global development program for TC-5214 and Targacept is responsible for the remaining 20%, except that AstraZeneca is responsible for 100% of development costs that are required only to obtain or maintain regulatory approval in countries outside the United States and the European Union. AstraZeneca is also responsible for executing and funding the costs of global commercialization of TC-5214 and has agreed to assume Targacept's manufacturing and supply agreements with third parties in relation to TC-5214. The agreement also provides for a specified period for the parties to negotiate a potential multi-year research program that would be conducted by Targacept to identify and develop additional NNR Therapeutics for MDD and possibly other indications.

Existing Collaboration for Cognitive Disorders

In addition to the TC-5214 collaboration, Targacept and AstraZeneca have a global collaboration focused on cognitive disorders entered into in 2005. Three product candidates in the collaboration are currently in clinical development; including AZD3480 for attention deficit/hyperactivity disorder (ADHD), AZD1446 for Alzheimer’s disease, and TC-5619 for cognitive dysfunction in schizophrenia.