Recently, Targacept Inc. (TRGT) suffered a setback when its candidate AZD1446, developed for treating adults suffering from Attention Deficit Hyperactivity Disorder (ADHD), fared disappointingly in a mid-stage study. The multi-center, randomized, double-blind study was conducted by partner AstraZeneca Plc (AZN). The candidate was licensed to AstraZeneca by Targacept following a deal inked in 2005.

 

The results from the placebo-controlled study revealed that treatment with AZD1446 did not result in an improvement in ADHD symptoms compared to placebo. The candidate was, however, well-tolerated in the mid-stage study with no serious adverse events.

 

The study was one of the many studies designed by AstraZeneca to evaluate the efficacy of the candidate in potential late-stage development for Alzheimer’s disease and/or ADHD. The candidate is currently being evaluated in three other studies to test its effectiveness in treating Alzheimer’s disease.

 

Following the disappointing results in the mid-stage ADHD study, AstraZeneca is expected to terminate the development of the candidate for the indication. A decision by AstraZeneca about the potential future development of AZD1446 for Alzheimer’s disease is expected in the coming months.

 

Discontinuance of AZD1446 – A Major Blow

 

We view the failure of the ADHD candidate as a major blow to Targacept as the successful development and commercialization of the candidate for the indication would have boosted its top line significantly since the market for ADHD is significant. The global market is expected to be worth approximately $4.2 billion by 2015.

 

The United States represents a significant market opportunity for ADHD drugs. The market is expected to be worth $3.3 billion by 2012, driven largely by the adult population.

 

Neutral on Targacept and AstraZeneca

 

Currently, we are Neutral on Targacept supported by a Zacks #3 Rank (short-term Hold recommendation). We have a similar short-term as well as long-term stance on AstraZeneca.

 
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