Targacept lays off 46 percent of its workforce (Journalnow) - Apr 27, 2012 - The next research updates for Targacept are expected in Q2-Q4 2012 for a P2 trial for the AZD1446 compound for Alzheimer's disease; Results from P2 trials of TC-5619 for attention-deficit hyperactivity disorder and schizophrenia are expected in H2 2012 and mid-2013, respectively
Anticipated P2 data • Alzheimer's Disease • Schizophrenia
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About half of Targacept Inc.'s workforce experienced the harsh reality of riding on the cutting edge of biotechnology Wednesday.
Targacept confirmed it is eliminating 65 jobs, or 46 percent of its workforce, in an expected restructuring following the failure of TC-5214, its most promising drug compound, in recent clinical trials for major depressive disorder.
Among those affected is Dr. Geoffrey Dunbar, the company's chief medical officer, who will retire May 31 after 11 years with the company.
Targacept is an anchor tenant in the Piedmont Triad Research Park in downtown Winston-Salem. It develops drugs based on its understanding of nicotinic receptors to treat diseases of the central nervous system.
Don deBethizy, the company's chief executive, warned in March that the company would announce restructuring plans by the end of April.
"We knew being in the fast lane of medical needs and innovation that there was high risk on the path," deBethizy said Wednesday.
He said that although the job cuts came "across all levels" of the company, they were concentrated in areas related to the discovery of drug compounds.
"It is extremely difficult to make a business decision that will have such an impact on many talented and dedicated colleagues and their families," deBethizy said.
DeBethizy said the restructuring also was necessary to bolster flagging shareholder confidence in future research that will focus on attention-deficit hyperactivity disorder, schizophrenia, Alzheimer's disease and asthma.
Investors reacted to the restructuring by sending Targacept's share price down 4.2 percent, or 21 cents, to close at $4.81.
By comparison, Targacept reached a record high of $30.42 on March 3, 2011. On Nov. 8, the company announced the first of four Phase 3 clinical trials for TC-5214, all of which eventually failed.
The next research updates for Targacept are expected later this year for a Phase 2 trial for the AZD1446 compound for Alzheimer's disease. Results from Phase 2 trials of TC-5619 for attention-deficit hyperactivity disorder and schizophrenia are expected in the second half of 2012 and mid-2013, respectively.
The company said it has more than $220 million in cash and investments in marketable securities, enough funding to last through 2014 — an eternity for the biotechnology sector. It expects to achieve annual cost savings of $12.9 million with the restructuring.
"We remain well capitalized and focused on operating our business efficiently to ensure we are positioned to exploit our diverse clinical-stage pipeline to bring new medicines to patients," deBethizy said.
The company will spend $2.4 million on one-time severance and related costs. DeBethizy said Targacept has hired an outplacement firm to help the employees find work in the local and state biotechnology markets.
"We hope one positive to come out of this difficult decision is that other biotechnology companies will be able to hire some extremely talented employees who operate at the forefront of research and training," deBethizy said.
Gayle Anderson, president and chief executive of the Winston-Salem Chamber of Commerce, said the Targacept restructuring is "the nature of the industry."
"Targacept is being prudent and doing what it needs to do to sustain its business for the long haul," she said.
"By making these decisions now, it can emerge as a stronger company down the road, as we've seen other biotech companies do."
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