Targacept, Inc. (NASDAQ: TRGT), a clinical-stage biopharmaceutical company advancing NNR Therapeutics™, today reported its financial results for the second quarter and six months ended June 30, 2014.
Targacept reported a net loss before income taxes of $8.1 million for the second quarter of 2014, compared to $12.4 million for the second quarter of 2013. For the six months ended June 30, 2014, Targacept reported a net loss before income taxes of $19.7 million compared to $20.4 million for the corresponding 2013 period. As of June 30, 2014, cash and investments in marketable securities totaled $122.8 million.
“Operationally, over the last few months we initiated an exploratory trial of TC-6499 in diabetic gastroparesis and reported on-time the results of two well-designed, definitive Phase 2b trials, TC-1734 in Alzheimer’s disease and TC-5214 in overactive bladder. While both of the trials demonstrated directionally encouraging pharmaceutical activity, neither met our advancement criteria, which require a product profile with clear potential for delivering a superior alternative to available treatment options. As a result, we are discontinuing both of these development programs,” said Dr. Stephen A. Hill, Targacept’s President and Chief Executive Officer.
Dr. Hill continued, “Continuing our strategic planning and business development efforts of the last several months, we are focused on selectively fortifying our pipeline with non-nicotinic opportunities and intend to engage our major shareholders in this process. We remain committed to fiscally disciplined decision making and responsible deployment of our resources as we pursue opportunities that hold promise for improving patients’ lives and providing meaningful upside for our stakeholders.”
Financial Results
Targacept reported a net loss of $8.1
million for the second quarter of 2014, compared to a net loss of $12.4
million for the second quarter of 2013, a decrease of $4.3 million. The
lower net loss was primarily due to a decrease of $4.0 million in
research and development expenses. For the six months ended June 30,
2014, Targacept reported a net loss of $23.1 million compared to net a
net loss of $20.4 million for the corresponding 2013 period. The net
loss for the six months ended June 30, 2014 included a non-cash income
tax adjustment of $3.4 million recorded as a result of an IRS review of
our 2010 federal income tax return completed in the first quarter of
2014. We believe our net loss before income taxes of $19.7 million for
the six months ended June 2014 is more representative of our operating
results for that period. The lower net loss before income taxes for the
2014 period was principally due to a decrease of $4.2 million in
operating expenses, partially offset by a decrease of $3.4 million in
revenue recognized for payments received from collaborations. Non-cash,
stock-based compensation charges of $985,000 and $1.3 million were
recorded for the second quarters of 2014 and 2013, respectively, and
$1.8 million and $2.9 million for the six months ended June 30, 2014 and
2013, respectively.
Net Operating Revenues
Net operating revenues totaled
$36,000 for the second quarter of 2014, compared to no net operating
revenues for the second quarter of 2013. For the six months ended June
30, 2014, net operating revenues totaled $123,000, compared to $3.5
million for the corresponding 2013 period. The decrease for the
six-month period was primarily attributable to deferred revenue
recognized during the 2013 period associated with Targacept’s ongoing
collaboration with AstraZeneca AB. The remaining balance of payments
received under that collaboration became fully recognized in the first
quarter of 2013.
Research and Development Expenses
Research and development
expenses totaled $5.4 million for the second quarter of 2014, compared
to $9.5 million for the second quarter of 2013. For the six months ended
June 30, 2014, research and development expenses totaled $14.5 million,
compared to $17.8 million for the corresponding 2013 period. The
decreases for both 2014 periods were principally due to lower costs
related to our Phase 2b study of TC-5619 in schizophrenia, which we
completed in the fourth quarter of 2013, and were partially offset by
increased costs related to our recently completed Phase 2b study of
TC-5214 in overactive bladder, which we initiated in the second quarter
of 2013, and costs related to our ongoing exploratory study of TC-6499
in diabetic gastroparesis, which we initiated in June 2014. The lower
research and development expenses were also attributable to decreases,
as compared to the corresponding 2013 period, of $588,000 for the second
quarter and $1.6 million for the six-month period in research and
development-related operating costs, including infrastructure and
compensation-related expenses for research and development personnel.
General and Administrative Expenses
General and
administrative expenses totaled $2.9 million for the second quarter of
2014, compared to $3.0 million for the second quarter of 2013. For the
six months ended June 30, 2014, general and administrative expenses
totaled $5.6 million, compared to $6.5 million for the corresponding
2013 period. The lower general and administrative expenses for the
six-month period were due primarily to a non-recurrence of severance
related charges, which totaled $776,000, in connection with the
departure of an executive officer in 2013.
Updated Financial Guidance
Targacept is updating its
financial guidance for 2014 to reflect current operating and program
spending expectations. Targacept now expects its operating expenses for
the year ending December 31, 2014 to be in the range of $32 million to
$36 million, and its cash, cash equivalents and investments balance at
December 31, 2014 to be approximately $107 million. This update
supersedes previous financial guidance that Targacept issued on February
13, 2014 which projected full year operating expenses to be in the range
of $40 million to $45 million, and cash, cash equivalents and
investments at year end 2014 to be at least $100 million. Targacept
continues to not expect significant operating revenues for the year
ending December 31, 2014. Targacept estimates that cash payments in the
second half of 2014 will be approximately $6.4 million for close out
costs on the recently completed clinical trials with TC-1734 in
Alzheimer’s disease and TC-5214 in overactive bladder and approximately
$2.5 million for the exploratory study of TC-6499 in diabetic
gastroparesis.
The updated financial guidance reflects anticipated savings derived from the decisions to discontinue the clinical development programs for TC-1734 and TC-5214, a smaller workforce (currently 30 employees down from 40 at year-end 2013), lower patent related costs and continued emphasis on managing controllable expenses. The updated guidance excludes the financial impacts that may result from actions directed to pipeline diversification or business and corporate development initiatives.
Conference Call
As previously announced, Targacept will be
hosting a conference call and webcast today, August 6, 2014, at 8:30
a.m. Eastern Daylight Time. The conference call may be accessed by
dialing 877.703.6107 for domestic participants and 857.244.7306
for international callers (reference passcode 10713062). 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 dedicated to building health
and restoring independence for patients. For more information, please
visit www.targacept.com.
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 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 any Targacept product candidate, 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 completion of subject
enrollment or data analysis; the control or significant influence that
AstraZeneca has over the development of AZD1446, including as to the
timing, scope and design of any future clinical trials and as to the
conduct at all of further development of AZD1446; 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.
TARGACEPT, INC | ||||||||||||||||
Unaudited Condensed Statements of Operations | ||||||||||||||||
(in thousands, except share and per share amounts) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Net operating revenues | $ | 36 | $ | - | $ | 123 | $ | 3,536 | ||||||||
Operating expenses: | ||||||||||||||||
Research and development | 5,408 | 9,454 | 14,488 | 17,774 | ||||||||||||
General and administrative | 2,867 | 3,034 | 5,630 | 6,524 | ||||||||||||
Total operating expenses | 8,275 | 12,488 | 20,118 | 24,298 | ||||||||||||
Operating loss | (8,239 | ) | (12,488 | ) | (19,995 | ) | (20,762 | ) | ||||||||
Other income, net | 148 | 117 | 317 | 325 | ||||||||||||
Loss before income taxes | (8,091 | ) | (12,371 | ) | (19,678 | ) | (20,437 | ) | ||||||||
Income tax expense | (45 | ) | - | (3,457 | ) | - | ||||||||||
Net loss | $ | (8,136 | ) | $ | (12,371 | ) | $ | (23,135 | ) | $ | (20,437 | ) | ||||
Net loss per share - basic and diluted | $ | (0.24 | ) | $ | (0.37 | ) | $ | (0.69 | ) | $ | (0.61 | ) | ||||
Weighted average common shares | ||||||||||||||||
outstanding - basic and diluted | 33,786,686 | 33,626,980 | 33,766,911 | 33,621,691 | ||||||||||||
TARGACEPT, INC | ||||||
Unaudited Condensed Balance Sheets | ||||||
(in thousands) | ||||||
June 30, | December 31, | |||||
2014 | 2013 | |||||
Cash, cash equivalents and investments | $ | 122,835 | $ | 143,777 | ||
Receivables and other current assets | 1,032 | 1,277 | ||||
Property and equipment, net | 541 | 682 | ||||
Other assets, net | 107 | 137 | ||||
Total assets | $ | 124,515 | $ | 145,873 | ||
Current liabilities | $ | 7,497 | $ | 10,979 | ||
Long-term debt, net of current portion | - | 283 | ||||
Total stockholders' equity | 117,018 | 134,611 | ||||
Total liabilities and stockholders' equity | $ | 124,515 | $ | 145,873 |
Contacts:
Alan Musso, 336-480-2186
SVP, Finance and
Administration and CFO
alan.musso@targacept.com