Targacept reports net loss of $8.1 million in first quarter 2013

Targacept, Inc. (NASDAQ: TRGT), a clinical-stage biopharmaceutical company developing novel NNR Therapeutics™, today reported its financial results for the first quarter ended March 31, 2013.

“As we progress towards the planned second quarter initiation of a third Phase 2b clinical trial, a study of TC-5214 in overactive bladder, we remain focused on quality execution and capital efficiency. With our capital base and three clinical programs with diverse NNR pharmacologies in areas of large unmet need, we are enthusiastic about the future.”

Targacept reported a net loss of $8.1 million for the first quarter of 2013, compared to net income of $2.3 million for the first quarter of 2012. As of March 31, 2013, cash and investments in marketable securities totaled $175.1 million.

"We are pleased to have recently completed recruitment in two Phase 2b clinical trials, our TC-5619 study in negative symptoms and cognitive dysfunction in schizophrenia, where we expect to report top-line results by the end of this year, and our TC-1734 study in mild to moderate Alzheimer's disease where we expect to report top-line results in mid-2014," said Dr. Stephen A. Hill, Targacept's President and Chief Executive Officer. "As we progress towards the planned second quarter initiation of a third Phase 2b clinical trial, a study of TC-5214 in overactive bladder, we remain focused on quality execution and capital efficiency. With our capital base and three clinical programs with diverse NNR pharmacologies in areas of large unmet need, we are enthusiastic about the future."

Financial Results

Targacept reported a net loss of $8.1 million for the first quarter of 2013, compared to net income of $2.3 million for the first quarter of 2012, a change of $10.4 million. The change was primarily due to a decrease of $19.1 million in deferred revenue recognition, partially offset by a decrease in research and development expenses of $9.5 million. Non-cash, stock-based compensation charges of $1.6 million and $1.9 million were recorded for the first quarter of 2013 and 2012, respectively.

Net Operating Revenues

Net operating revenues totaled $3.5 million for the first quarter of 2013, compared to $22.9 million for the first quarter of 2012. The decrease was due primarily to $21.8 million in deferred revenue recognized during the first quarter of 2012 associated with Targacept's now concluded collaboration with AstraZeneca in major depressive disorder that did not recur during the first quarter of 2013. This decrease was partially offset by $2.7 million in increased recognition of deferred revenue for the 2013 period related to payments for TC-1734 previously received from AstraZeneca. Targacept recognized into revenue for the 2013 period the remaining unrecognized portion of payments related to TC-1734 previously received from AstraZeneca as a result of AstraZeneca's notification of its return of rights to that compound to Targacept in March 2013.

Research and Development Expenses

Research and development expenses totaled $8.3 million for the first quarter of 2013, compared to $17.8 million for the first quarter of 2012. The decrease was principally attributable to the completion in 2012 of a Phase 3 development program for TC-5214 in MDD, a decision in 2012 to focus resources on clinical programs, and two 2012 workforce reductions. Research and development expenses for the first quarter of 2013 for TC-5619, TC-5214 (overactive bladder program) and TC-1734 totaled $5.1 million in the aggregate.

General and Administrative Expenses

General and administrative expenses totaled $3.5 million for the first quarter of 2013, compared to $3.1 million for the first quarter of 2012. The increase for the 2013 period was primarily attributable to severance and stock-based compensation charges recorded in connection with the departure of a former executive officer from Targacept during the 2013 period.

Conference Call

As previously announced, Targacept will be hosting a conference call and webcast today, May 7, 2013, at 8:30 a.m. Eastern Time. The conference call may be accessed by dialing 866.515.2913 for domestic participants and 617.399.5127 for international callers (reference passcode 92922085). A replay of the conference call may be accessed from approximately two hours following the call through May 21, 2013 by dialing 888.286.8010 for domestic callers and 617.801.6888 for international callers (reference passcode 98152896).

A live audio webcast of the conference call will be accessible from the Investor Relations page of Targacept's website, www.targacept.com. To ensure a timely connection to the webcast, it is recommended that users register at least 15 minutes prior to the scheduled start time. An archived version of the webcast will also be available on the Investor Calendar section of the Investor Relations page of Targacept's website for at least two weeks following the call.