Initial $2 million payment is just the tip of the iceberg in deal worth over $266 million.

AstraZeneca has decided to secure the exclusive license to Targacept’s candidate, TC-5619, for cognitive disorders. The election of this option triggered a $2 million payment.

TC-5619 is Targacept’s lead alpha7 NNR Therapeutics™. Neuronal nicotinic receptors (NNRs) are a class of receptors found in the nervous system that play a role in modulating the release of neurotransmitters to regulate nervous system activity. The alpha7 NNR subtype has been shown in animal studies to be a key regulator of cognitive function, according to Targacept.

AstraZeneca exercised this option upon Targacept’s decision to pursue the development of TC-5619 for cognitive disorders. Targacept can now continue developing TC-5619 independently through a Phase II trial. If TC-5619 achieves clinical proof of concept, AstraZeneca has the option to pay Targacept $40 million for an exclusive license for TC-5619 for various conditions characterized by cognitive impairment.

If AstraZeneca obtains this license, it would assume responsibility for and fund all later-stage development and commercialization of TC-5619. Targacept would then be eligible to receive up to $226 million contingent upon the achievement of development, regulatory, and first commercial sale milestones as well as stepped double-digit royalties on any future product sales.

Targacept and AstraZeneca entered into their exclusive global license and research collaboration agreement in December 2005, initially for the development and commercialization of another of Targacept’s NNR Therapeutics, TC-1734. AstraZeneca refers to this candidate as AZD3480 and is conducting Phase IIb trials in Alzheimer’s disease and cognitive deficits in schizophrenia.

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