Depressing Clinical Trial News

Smoke 'em if you got 'em, boys -- this drug is finished.

AstraZeneca (NYS: AZN) and Targacept (NAS: TRGT) , which was spun out of Reynolds America, said today that two more phase 3 trials of their depression drug TC-5214 failed, so the companies won't attempt to gain FDA approval for the drug.

TC-5214, which affects the same neuronal receptor as nicotine, failed to show a substantial increase in the standard measurement for depression -- the Montgomery-Asberg Depression Rating Scale -- compared to placebo. In reality, it might be the placebo that was the problem; like in the two trials that failed last year, patients getting placebo saw at least a 40% increase in their MADRS score. It's difficult to see an effect with that much background noise.

The companies were testing TC-5214 in combination with another depression drug -- Eli Lilly's (NYS: LLY) Cymbalta or Pfizer's (NYS: PFE) Zoloft, for instance-- that wasn't giving adequate improvement. The add-on strategy is how Bristol-Myers Squibb (NYS: BMY) got its antipsychotic, Abilify, into the depression market, and this is the easiest strategy at this point. With so many generics available, it's easier to join 'em than even try to beat 'em.

AstraZeneca and Targacept are separately testing TC-5214 as a monotherapy to see if it can help patients that didn't respond to other therapies. That phase 2b trial could have the same placebo-effect issues, but at least that trial has an active comparator, Cymbalta, so it'll be easier to see exactly what's going on.

Investors are valuing Targacept at less than its cash on hand, which might be shortsighted. Sure, the valuation is reasonable if TC-5214 is dead and Targacept has to develop the rest of the pipeline on its own -- the biotech will burn through much, maybe all, of its $225 million developing its phase 2 schizophrenia drug and the rest of its pipeline. But the drugs might have value to some other drugmaker, and Targacept plans to announce by the end next month its plan -- a sale, perhaps -- given the TC-5214 phase 3 failure. While today's news was depressing, investors' MADRS score will go through the roof if Targacept is sold.

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