PROSPECTUS SUMMARY
The following summary
highlights information appearing elsewhere in this prospectus. It may not contain all of the information that may be important to you in deciding whether to invest in our common stock. You should read the entire prospectus carefully, including the
“Risk Factors” section and the financial statements and related notes appearing at the end of this prospectus, before making an investment decision.
Targacept, Inc.
We are a biopharmaceutical company engaged in the design, discovery and development of a new class of drugs to treat multiple diseases and disorders of the central
nervous system by selectively targeting neuronal nicotinic acetylcholine receptors, or NNRs. NNRs are found on nerve cells throughout the nervous system and serve as key regulators of nervous system activity. Our product candidates are designed to
selectively target specific NNR subtypes to promote positive medical effects and limit or potentially eliminate adverse side effects.
We are developing our most advanced product candidates as treatments for target indications in three therapeutic areas: cognitive impairment, pain and depression.
Within these areas, we have three product candidates in clinical development and three preclinical product candidates. We have worldwide commercialization rights for all of our product candidates. Our most advanced product candidates are:
Cognitive Impairment
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Ispronicline (TC-1734)
. Ispronicline is a novel small molecule that we are developing as an oral treatment for conditions marked by cognitive impairment that
afflict the elderly, including Alzheimer’s disease and age associated memory impairment, commonly referred to as AAMI. In 2004, we completed two Phase II clinical trials of ispronicline, one in AAMI and one in mild cognitive impairment,
commonly referred to as MCI. We are currently conducting a separate Phase II clinical trial of ispronicline in AAMI. We have two Phase II clinical trials of ispronicline in Alzheimer’s disease planned. We expect the first of these trials, which
we plan to initiate in mid-2005, to assess ispronicline as a stand-alone treatment for mild Alzheimer’s disease. We expect the second of these trials, which we plan to initiate in the first quarter of 2006, to assess ispronicline as a
complementary, or add-on, therapy to a currently approved treatment for mild to moderate Alzheimer’s disease.
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TC-1827
. TC-1827 is a novel small molecule that we are developing as an oral treatment for cognitive impairment associated with schizophrenia. TC-1827 is
currently a preclinical product candidate. We plan to file an investigational new drug application, or IND, and initiate a Phase I clinical trial of TC-1827 in the first half of 2005.
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Pain
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TC-2696.
TC-2696 is a novel small molecule that we are developing as an oral treatment for acute post-operative pain. Depending on clinical trial results,
available resources and other considerations, we may pursue development of TC-2696 for other classes of pain as well. In 2004, we completed a Phase I clinical trial of TC-2696. We plan to initiate a Phase I multiple rising dose clinical trial to
further assess the safety and tolerability profile of TC-2696 in the second quarter of 2005.
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Depression
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Inversine and TC-5214
. Inversine, which we believe is the only FDA-approved product designed to target an NNR, is our only product approved by the FDA for
marketing. Inversine is approved for the management of moderately severe to severe essential hypertension, a high blood pressure disorder with an unknown origin. However, we believe that Inversine is prescribed predominantly for the treatment of
neuropsychiatric disorders, including Tourette’s syndrome, autism and bipolar disorder. We are currently conducting a Phase II clinical trial of Inversine as an add-on therapy in patients with major depressive disorder. TC-5214 is one of the
molecular components of mecamylamine hydrochloride, the active ingredient in Inversine. TC-5214 is currently a preclinical product candidate. If our ongoing Phase II clinical trial of Inversine is successful, we may accelerate the development of
TC-5214 as an add-on therapy for depression.
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TC-2216
. TC-2216 is a novel small molecule that we are developing as an oral treatment for depression and anxiety disorders. TC-2216 is currently a preclinical
product candidate. In 2005, we plan to conduct the additional preclinical toxicology studies necessary to support an IND for clinical trials of TC-2216.
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We also have preclinical programs for target indications outside these therapeutic areas in which we believe NNRs can be exploited for medical
benefit, including schizophrenia, smoking cessation and obesity.
We
trace our scientific lineage to a research program initiated by R.J. Reynolds Tobacco Company in 1982 to study the activity and effects of nicotine, a compound that interacts non-selectively with all nicotinic acetylcholine receptors. There is a
significant amount of published clinical data relating to nicotine, including studies in which individuals with Alzheimer’s disease and other conditions marked by cognitive impairment showed therapeutic improvement when treated with a nicotine
patch. We have used this clinical data, together with our deep understanding of the biological characteristics and functions of NNRs that we have built over more than 20 years, to validate NNRs as potential targets for drugs to act upon. We have
also developed an expertise in designing compounds of low molecular weight, referred to as small molecules, that can selectively interact with specific NNR subtypes, with the objective of eliciting a desired effect and limiting or potentially
eliminating side effects such as those typically seen with nicotine. We have built an extensive patent estate covering the structure or therapeutic use of small molecules designed to regulate the central nervous system by selectively affecting
specific NNR subtypes.
We develop product candidates using our
proprietary databases and computer-based molecular design technologies, which we refer to collectively as Pentad. Together with our proprietary assays and novel screening methods, Pentad enables us to efficiently identify, prioritize, characterize
and optimize novel compounds. We used Pentad to design or optimize ispronicline, TC-1827, TC-2696 and TC-2216.
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Our Business Strategy
Our goal is to become a leader in the discovery, development and commercialization of novel drugs that selectively target NNRs in order to treat diseases and
disorders where there is significant medical need and commercial potential. To achieve this goal, we are pursuing the following strategies:
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Develop and commercialize drugs that selectively target specific NNR subtypes.
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Remain at the forefront of the commercialization of NNR research.
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Identify and prioritize indications in which drugs that selectively target specific NNR subtypes can be exploited for medical benefit.
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Collaborate selectively to develop and commercialize product candidates.
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Build a specialized sales and marketing organization.
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Risks Associated with Our Business
Our business is subject to numerous risks, as more fully described in the section entitled “Risk Factors” immediately following this prospectus summary.
We have a limited operating history and have incurred substantial net losses since our incorporation in 1997. We expect to continue to incur substantial losses for the foreseeable future. Inversine is the only product that we have available for
commercial sale, and it generates limited revenues. All of our other product candidates are undergoing clinical trials or are in early stages of development, and failure is common and can occur at any stage of development. In particular, we
discontinued development of two of our product candidates, TC-5231 and TC-2403, because they failed to meet defined clinical endpoints in Phase II clinical trials that we completed in 2004. We had been developing TC-5231 as a treatment for attention
deficit hyperactivity disorder and TC-2403 as a treatment for ulcerative colitis. None of our product candidates, other than Inversine, has received regulatory approval for marketing and sale. Our ability to generate product revenue in the future
will depend heavily on the successful development and commercialization of these product candidates. Even if we succeed in developing and commercializing one or more of our product candidates, we may never generate sufficient sales revenue to
achieve and then sustain profitability.
Company History
Our history traces back to 1982 when R.J. Reynolds Tobacco Company initiated a program
to study the activity and effects of nicotine in the body. We were incorporated in Delaware in 1997 as a wholly owned subsidiary of RJR and became an independent company in August 2000. Our executive offices are located at 200 East First Street,
Suite 300, Winston-Salem, North Carolina 27101, and our telephone number is (336) 480-2100. Our web site is located at www.targacept.com. Information contained on our web site is not incorporated by reference into, and does not form any part of,
this prospectus. We have included our website address in this document as an inactive textual reference only. Our trademarks include Targacept
®
and Inversine
®
. Other service marks, trademarks and trade names appearing in this prospectus are the property of their respective owners. Unless the context requires otherwise, references in this prospectus to the
“company,” “we,” “us,” and “our” refer to Targacept, Inc.
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