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GSK signs USD 1.5bn drug development deal with Targacept

GSK is in the process of forming a potential USD 1.5bn drug R&D alliance with US-based biopharmaceutical company, Targacept

GlaxoSmithKline (GSK) is in the process of forming a potential USD 1.5bn drug R&D alliance with US-based biopharmaceutical company, Targacept.

GSK disclosed on 27 July that it would pay Targacept USD 35m in up front fees for the rights to Targacept's two lead drugs. The payment includes the purchase of USD 15m of Targacept stock by GSK.

Targacept's stock value rose 33 per cent, or USD 3.00, to USD 12.00 a share in morning trading on the announcement.

The deal will give GSK access to Targacept's focus on central nervous system neuronal nicotinic receptors (NNRs) and the proprietary Pentad technology it has developed around them.

Targacept has five clinical-stage product candidates and multiple pre-clinical product candidates. Thus, GSK now has access to TC-2696, a compound in phase II, and TC-6499, a pre-clinical compound. TC-2696 targets acute post-operative pain. TC-6499 is a possible treatment for neuropathic pain as a result of diabetes and other chronic diseases, such as HIV infection.

Targacept could receive as much as USD 1.5bn in payments if milestones are met in the five research areas and would receive double-digit royalties on any drugs that are approved for sale. Nicotine drugs have had a chequered history but the field received a boost in FY06, with the approval of Pfizer's smoking cessation product, Chantix (varenicline).

Hugh Cowley, who leads GSK's centre of excellence for external drug discovery, said of the deal: "We believe there is tremendous potential for NNR therapeutics for a variety of CNS-related diseases and disorders, and look forward to working with Targacept to accelerate the development and delivery of new medicines to patients."

For FY06, Targacept reported net income of USD 2.1m, compared with a net loss of USD 29m for FY05. In January 2007, Targacept received a USD 20m milestone payment from AstraZeneca (AZ), with which it is developing an Alzheimer's disease treatment.

30th July 2007

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