Targacept Reports First Quarter 2013 Financial Results

  Targacept Reports First Quarter 2013 Financial Results

Business Wire

WINSTON-SALEM, N.C. -- May 7, 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.

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

“Wearepleased to have recently completed recruitmentin two Phase
2bclinical 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 ourTC-1734studyinmild 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
weprogress towards theplanned second quarterinitiation of a third Phase 2b
clinical trial,astudyof TC-5214in overactive bladder, weremain focused
onquality execution andcapital 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

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.

About Targacept

Targacept is developing a diverse pipeline of innovative NNR Therapeutics™ for
difficult-to-treat diseases and disorders of the nervous system. NNR
Therapeutics selectively modulate the activity of specific neuronal nicotinic
receptors, unique proteins that regulate vital biological functions that are
impaired in various disease states. Targacept’s clinical pipeline includes
multiple Phase 2 product candidates, all representing first-in-class
opportunities. Targacept leverages its scientific leadership and diverse
pipeline to attract significant collaborations with global pharmaceutical
companies. For more information, please visit www.targacept.com.

Building Health, Restoring Independence®

Forward-Looking Statements

This press release includes “forward-looking statements” made under the
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include statements, other than statements of
historical fact, regarding without limitation: the timing for reporting of
top-line results from Targacept’s Phase 2b clinical trials of TC-5619 or
TC-1734 or for initiation of Targacept’s planned Phase 2b clinical trial of
TC-5214; the medical benefits of TC-5214, TC-5619 or TC-1734; or Targacept’s
plans, expectations or future operations, financial position, revenues, costs
or expenses. Actual results, performance or experience may differ materially
from those expressed or implied by any forward-looking statement as a result
of various important factors, including without limitation Targacept’s
critical accounting policies and risks and uncertainties relating to: the
conduct and results of clinical trials and non-clinical studies and
assessments of TC-5619, TC-5214 and TC-1734, including the performance of
third parties engaged to execute such trials, studies and assessments, delays
resulting from any changes to the applicable protocols and difficulties or
delays in the start-up of clinical trial sites or the completion of subject
enrollment or data analysis; whether favorable findings from Targacept’s
completed clinical trial of TC-5619 in patients with schizophrenia will be
replicated in Targacept’s ongoing clinical trial of TC-5619 or potential
future clinical trials; Targacept’s ability to establish additional strategic
alliances, collaborations or licensing or other comparable arrangements on
favorable terms; Targacept’s ability to protect its intellectual property; and
the timing and success of submission, acceptance and approval of regulatory
filings. Risks and uncertainties that Targacept faces are described in greater
detail under the heading “Risk Factors” in Targacept’s most recent Annual
Report on Form 10-K and in other filings that it makes with the Securities and
Exchange Commission. As a result of the risks and uncertainties, the results
or events indicated by the forward-looking statements may not occur. Targacept
cautions you not to place undue reliance on any forward-looking statement.

In addition, any forward-looking statement in this press release represents
Targacept’s views only as of the date of this press release and should not be
relied upon as representing its views as of any subsequent date. Targacept
disclaims any obligation to update any forward-looking statement, except as
required by applicable law.

NNR Therapeutics™ and Building Health, Restoring Independence^® are trademarks
or service marks of Targacept, Inc. Any other service marks, trademarks and
trade names appearing in this press release are the properties of their
respective owners.

Unaudited Condensed Statements of Operations
(in thousands, except share and per share amounts)
                                        Three Months Ended
                                            March 31,
                                            2013            2012
Net operating revenues                      $ 3,536          $ 22,857
Operating expenses:
Research and development                      8,320            17,801
General and administrative                   3,490          3,070
Total operating expenses                     11,810         20,871
Operating (loss) income                       (8,274     )     1,986
Other income, net                            208            273
Net (loss) income                           $ (8,066     )   $ 2,259
Basic net (loss) income per share           $ (0.24      )   $ 0.07
Diluted net (loss) income per share         $ (0.24      )   $ 0.07
Weighted average common shares
outstanding - basic                          33,616,342     33,390,286
Weighted average common shares
outstanding - diluted                        33,616,342     33,822,010

Unaudited Condensed Balance Sheets
(in thousands)
                                               March 31,  December 31,
                                                   2013        2012
Cash, cash equivalents and investments             $ 175,059   $   184,927
Receivables and other current assets                 1,788         2,782
Property and equipment, net                          1,501         1,639
Other assets, net                                   397          231
Total assets                                       $ 178,745   $   189,579
Current portion of deferred revenue                $ -         $   2,357
Other current liabilities                            8,372         8,992
Deferred revenue, net of current portion             -             1,179
Long-term debt, net of current portion               918           1,136
Total stockholders' equity                          169,455      175,915
Total liabilities and stockholders' equity         $ 178,745   $   189,579


Targacept, Inc.
Alan Musso, 336-480-2186
Linnden Communications
Michelle Linn, 508-362-3087
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