Targacept, Inc. (NASDAQ: TRGT), a clinical-stage biopharmaceutical company developing novel NNR Therapeutics™, today reported its financial results for the fourth quarter and year ended December 31, 2012.
Targacept reported a net loss of $15.9 million for the fourth quarter of 2012, compared to a net loss of $9.8 million for the fourth quarter of 2011. For the year ended December 31, 2012, Targacept reported a net loss of $7.0 million, compared to a net loss of $8.5 million for 2011. As of December 31, 2012, cash and investments in marketable securities totaled $184.9 million.
"I'm excited to be part of Targacept and appreciate the opportunity to lead a company built on impressive science, with an exceptional and resilient team committed to developing innovative therapies that have the potential to make a real difference for patients," said Dr. Stephen A. Hill, Targacept's President and Chief Executive Officer. "We have a strong pipeline of Phase 2b programs representing three distinct nicotinic receptor mechanisms targeting areas where the unmet need is great and current therapies, where they exist at all, are limited. We are fortunate to have a capital base that will support our business needs through and beyond important clinical outcomes, any one of which could be transformative."
Targacept is currently conducting two Phase 2b clinical trials. Enrollment remains ongoing for studies of TC-5619 as a treatment for negative symptoms and cognitive dysfunction in schizophrenia and AZD3480 as a treatment for mild to moderate Alzheimer's disease. In addition, Targacept plans to initiate a Phase 2b study of TC-5214 as a treatment for overactive bladder in the first half of 2013.
Financial Results
Targacept reported a net loss of $15.9 million for the fourth quarter of 2012, compared to a net loss of $9.8 million for the fourth quarter of 2011. The higher net loss for the 2012 period was primarily due to a decrease of $18.4 million in deferred revenue recognition and $1.4 million in charges related to a workforce reduction completed during the fourth quarter of 2012, partially offset by a decrease of $13.7 million in research and development expenses. For the year ended December 31, 2012, Targacept reported a net loss of $7.0 million, compared to a net loss of $8.5 million for 2011. The lower net loss for 2012 was primarily due to a decrease in research and development expenses of $46.1 million, partially offset by a decrease of $39.8 million in deferred revenue recognition and $3.7 million in charges related to two workforce reductions completed during 2012. Non-cash, stock-based compensation charges of $1.4 million and $2.0 million were recorded for the fourth quarter of 2012 and 2011, respectively, and non-cash, stock-based compensation charges of $7.8 million and $8.5 million were recorded for the year ended December 31, 2012 and 2011, respectively.
Net Operating Revenues
Net operating revenues totaled $590,000 for the fourth quarter of 2012, compared to $18.9 million for the fourth quarter of 2011. The decrease was due primarily to deferred revenue recognized during the fourth quarter of 2011 associated with Targacept's now concluded collaboration with AstraZeneca in major depressive disorder (MDD) that did not recur during the fourth quarter of 2012. For the year ended December 31, 2012, net operating revenues totaled $57.9 million, compared to $97.6 million for 2011. The decrease was principally attributable to decreased recognition during the 2012 period of revenue associated with Targacept's collaboration with AstraZeneca in MDD, which concluded in 2012, and recognition during 2011 of deferred revenue associated with Targacept's alliance with GlaxoSmithKline, which concluded in 2011.
Research and Development Expenses
Research and development expenses totaled $12.3 million for the fourth quarter of 2012, compared to $26.1 million for the fourth quarter of 2011, and $49.1 million for the year ended December 31, 2012, compared to $95.2 million for 2011. The decrease for both 2012 periods was principally attributable to lower costs incurred for third-party research and development services in connection with clinical-stage product candidates and preclinical programs and lower research and development-related operating costs. For both 2012 periods: the lower costs for clinical-stage product candidates were principally due to the end of a Phase 3 development program for TC-5214 in MDD and to the first quarter 2012 completion of two exploratory clinical trials of TC-6987; the lower costs for preclinical product candidates were primarily due to a strategic decision to focus resources on clinical programs; and the lower research and development-related operating costs were primarily due to the two 2012 workforce reductions.
General and Administrative Expenses
General and administrative expenses totaled $3.1 million for the fourth quarter of 2012, compared to $3.0 million for the fourth quarter of 2011, and $13.2 million for the year ended December 31, 2012, compared to $12.2 million for 2011. The increase for the full year 2012 was primarily attributable to severance and stock-based compensation charges recorded in connection with the departure of Targacept's former chief executive officer and two other executive officers during the first half of 2012, partially offset by decreased expenses as a result of the two 2012 workforce reductions.
Restructuring Charges
Restructuring charges for the fourth quarter and year ended December 31, 2012 were $1.4 million and $3.7 million, respectively, and reflected severance and other charges related to the workforce reductions completed in the second and fourth quarters of 2012.
Financial Guidance
Based on current operating plans, Targacept expects its operating revenues for the year ending December 31, 2013 to be approximately $2.4 million, its operating expenses for the year ending December 31, 2013 to be in the range of $48 million to $54 million and its cash, cash equivalents and investments balance at December 31, 2013 to be at least $135 million. In addition, Targacept continues to expect that its current cash resources will be sufficient to meet its operating requirements at least through the end of 2015. This financial guidance includes both cash and non-cash revenue and expense items.
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