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deBethizy out at Targacept

by Ben Fidler | Published June 4, 2012 at 3:24 PM

The shakeup at Targacept Inc. is now in full swing.

Following a year in which it has suffered a number of setbacks in the clinic and its stock has taken a beating, the Winston-Salem, N.C.-based drug developer on Monday, June 4, announced a number of changes at the executive level, headlined by the resignation of president and CEO J. Donald deBethizy, who has stepped down for "personal considerations."

"I am proud of what we have built at Targacept over the years and continue to believe strongly that the company will do great things," said a statement from deBethizy -- who co-founded Targacept in 1997 and has been its CEO ever since.

Targacept has reshaped its board to create an office of the chairman that will be manned by four executives and led by current chairman Mark Skaletsky.

Skaletsky said in the statement that the company created the office to guide the company's strategic direction, resource allocation and pipeline development.

The other three executives making up the office of the chairman are chief business officer Jeffrey Brennan; chief financial officer and treasurer Alan Musso; and general counsel and secretary Peter Zorn.

The group will begin the search for Targacept's new CEO immediately.

Targacept's board shakeup comes after a year in which its stock has plummeted by more than 75% amid disappointing results in clinical trials. Shares traded at $21.91 on June 3, 2011, but changed hands at $4.16 midday Monday. Its worst blow came in November, when its most advanced compound, TC-5214, an antidepressant targeting nicotine receptors in patients with major depressive disorder, flunked two Phase 3 trials.

Targacept had high hopes for TC-5214, a drug that analysts had pegged as a potential blockbuster. Targacept signed a licensing deal to co-develop the drug with AstraZeneca plc in 2009. That deal was worth as much as $1.2 billion in potential payments depending on the drug's success in the clinic. Targacept received $200 million from AstraZeneca up front and then was eligible to receive a further $540 million if the compound hit certain developmental and regulatory milestones and an additional $500 million in sales milestones. It also could have reaped double-digit royalties on worldwide sales had the compound made it to market.

When the drug failed the first two of four Phase 3 trials on Nov. 7, Targacept's shares were crippled, plummeting from $19.12 to $7.61, and have steadily declined ever since. AstraZeneca eventually scrapped the licensing agreement on March 20, when the drug missed the endpoints at its two remaining Phase 3 trials.

TC-5214 didn't represent its only problem in the clinic this year. On March 27, a second compound, TC-6987, failed in Phase 2 trials for type 2 diabetes. And after initially reporting that the same compound met its goals in a separate Phase 2 study testing the drug on asthma, Targacept had to revise the results two weeks later due to an error in the data. The new results showed that TC-6987 didn't meet one of its endpoints in that study either.

The setbacks led Targacept to announce on April 26 that it would slash 46% of its workforce, giving it about $12.9 million in annual savings.

Targacept will now turn its hopes to its remaining pipeline, which includes TC-5619, being tested in schizophrenia, attention deficit hyperactive disorder and Alzheimer's disease; and two other compounds it is co-developing with AstraZeneca for Alzheimer's.

"I leave Targacept well positioned with a talented management team and workforce, diverse Phase 2 first-in-class product candidates, well developed science and a strong balance sheet," deBethizy said. "Targacept is in good hands."

Targacept is a spinout of R.J. Reynolds Tobacco Co., for which it was conducting research on how nicotine affects the nervous system. The company went public in 2006.

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Ben Fidler

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