Positive top-line results from TC-5619 Phase 2 trial in patients with schizophrenia

Targacept, Inc. today announced positive top-line results from a Phase 2 clinical proof of concept trial to assess TC-5619 as an augmentation therapy to improve cognition in patients with schizophrenia. In the trial, TC-5619 met the protocol criteria for a positive result on the primary efficacy outcome measure, the Groton Maze Learning Task (GMLT) of the CogState Schizophrenia Battery, and was well tolerated. TC-5619 is a novel small molecule discovered by Targacept scientists using the company's proprietary drug discovery platform known as Pentad™. The highly selective alpha7 neuronal nicotinic receptor modulator is subject to license by Targacept's strategic collaborator AstraZeneca.

The GMLT is a computerized test designed to assess executive function (the ability to organize cognitive processes, including the ability to plan, prioritize, stop and start activities, shift from one activity to another activity and monitor one's own behavior). Impaired executive function is thought to be an important aspect of cognitive dysfunction in schizophrenia. The trial protocol defined a positive outcome on GMLT as superiority (one-sided p-value < 0.10) for the TC-5619 dose group as compared to the placebo dose group after adjusting statistically to account for multiple comparisons.

In the trial, the results on GMLT:

• met the pre-defined success criteria (adjusted p-value = 0.054), as well as at two of the trial's three measurement dates (at 4 weeks, unadjusted p-value = 0.018; and at 12 weeks, unadjusted p-value = 0.041); and

• were favorable for tobacco users as compared to non-tobacco users and for patients at study sites in the United States as compared to patients at study sites in India; there was no activity in non-tobacco users. Estimates of the prevalence of smoking amongst schizophrenia patients vary, with one study indicating as high as 80%.

Each of the p-values reported above was derived after data log transformation, a commonly utilized technique where the data does not follow a normal distribution.

In addition, positive signals were observed in the trial on several secondary efficacy outcome measures, including Scale for Assessment of Negative Symptoms, an investigator assessment of improvement on the negative symptoms of schizophrenia, Clinical Global Impression - Global Improvement, an investigator assessment of overall response, and Subject Global Impression - Cognition scale, a patient self-assessment of cognitive change. Other secondary outcome measures of the trial, including a composite measure of the CogState Schizophrenia Test Battery, did not demonstrate a drug effect.

"Developing treatments for the cognitive dysfunction prevalent in schizophrenic patients is critically important to treating the disease and meeting an unmet clinical need. Currently there are no effective treatments," said Jeffrey A. Lieberman, M.D., the Lawrence C. Kolb Professor and Chairman of Psychiatry at the Columbia University College of Physicians, Surgeons and Director of the New York State Psychiatric Institute and a principal investigator for the TC-5619 trial. "The preliminary results with this new agent are encouraging and offer hope that nicotinic agonists may prove to be effective treatments for cognitive dysfunction in schizophrenia."

TC-5619 exhibited a favorable tolerability profile in the trial, and there was no clinically significant difference between the TC-5619 and placebo dose groups in discontinuations due to adverse events. The most frequent adverse event was nausea (5%), which was mild to moderate in severity and never led to patient dropout. There were two serious adverse events in the trial, one in the placebo dose group and one in the TC-5619 dose group. Both were considered by the applicable investigator as not drug related.

"Companies have historically found it very difficult to achieve signals of cognitive improvement in clinical trials in this patient population, so we are very pleased that our enthusiasm for TC-5619 and the therapeutic application of alpha7 was validated in this study," said J. Donald deBethizy, Ph.D., President and Chief Executive Officer of Targacept.

Analyses of the full dataset from the trial are ongoing. Targacept plans to present and publish more detailed results from the trial at a future scientific meeting.

Based on the outcome of the trial, AstraZeneca has the right to license TC-5619 on terms specified in the parties' December 2005 collaboration agreement focused in cognitive disorders including schizophrenia. If AstraZeneca exercises its right to license TC-5619, the agreement provides for AstraZeneca to make a $30 million payment to Targacept and to assume responsibility for and fund all future development and commercialization. In that event, Targacept would be eligible to receive additional payments of up to $212 million, contingent upon the achievement of development, regulatory, first commercial sale and first detail milestone events for three indications, as well as stepped double-digit royalties on any future TC-5619 product sales. AstraZeneca is expected to determine whether to exercise its license right in the first half of 2011.