Drugs made of nicotine

Stimulant is key ingredient for tobacco company spinoff Targacept

WINSTON-SALEM -- Three blocks south of Reynolds American's corporate headquarters, an offspring of the cigarette maker is busily reshaping North Carolina's tobacco legacy.

Nicotine has long been known as a powerful, if toxic, stimulant. Targacept, a Reynolds spinoff, is tapping this effect to find treatments for Alzheimer's, depression, obesity and other diseases that will not have nicotine's side effects.

None of Targacept's experimental drugs has been tested enough in patients to prove the company is on the right track, but the drugs look promising. So much so that two deep-pocketed partners -- AstraZeneca and GlaxoSmithKline -- are putting up as much as $750 million and $1.5 billion, respectively. That's more money than any company in the Triangle -- the state's biotech hub -- has had on the line in a drug development deal.

Now, "they're about to find out whether it works," said Edward Levin, a Duke University professor who has researched the effects of nicotine and related chemicals on the brain.

Founded in 1997 as a Reynolds subsidiary and spun out as an independent company three years later, Targacept is part of the North Carolina biotech belt emerging between Kannapolis and the Triangle, home of one of the highest concentrations of biotech companies in the country.

The decision to base the company in Winston-Salem initially raised eyebrows. Board members suggested a move to Boston, the San Francisco Bay area, San Diego and Research Triangle Park, all well-known biotech hubs. "Obviously you're not going to stay here," Donald deBethizy, Targacept's chief executive, recalled at least one of the directors saying.

But the location, which eight years ago was considered a biotech hinterland, is no longer an issue.

Targacept is one of 65 biotech companies in Winston-Salem, Greensboro and Burlington, and it's the first homegrown Triad biotech to start selling stock to the public, according to the N.C. Biotechnology Center.

Drugs in the pipeline

Five of Targacept's drugs are in clinical trials. AstraZeneca has dibs on one, which could be used to treat two disorders. It could help Alzheimer's patients and improve cognitive function among schizophrenia patients. GSK is interested in another, a painkiller.

Analysts and researchers expect positive results for the clinical tests now being done by AstraZeneca, based on earlier studies, including tests in rats. Those test results are expected in the second half of the year.

"That data is what people are focused on," said analyst Terence Flynn of Lazard Capital Markets, who tracks Targacept.

Evidence showing that those treatments -- as well as the GSK painkiller -- are safe and effective would ensure that Targacept's partners remain interested in their continued development.

Flynn projected that the company, which debuted on the Nasdaq stock exchange two years ago, could see its shares more than double, to $16, over 12 months.

But drug development is risky business, a lesson that Triangle biotech companies such as Inspire Pharmaceuticals and Icagen learned the hard way in past years. More than half of all experimental medicines fail in clinical trials, according to the U.S. Food and Drug Administration.

Last year, Targacept halted work on its most advanced painkiller for GSK. In a study involving patients who had wisdom teeth removed, the experimental drug performed no better than ibuprofen, a common painkiller sold under the brand name Advil.

The problem was identified inexpensively and the drug was dropped quickly, deBethizy said.

The drugs remaining in the development pipeline all work a little differently. That leaves Targacept several more "shots on goal," he said.

Nervous system is key

Research at Targacept, which employs about 110, is focused on neuronal nicotinic receptors, switches in the nervous system that allow muscles to move, help control digestion and affect stress responses, memory and attention.

Other pharmaceutical companies are also targeting drugs to stimulate these switches, including Pfizer and Abbott Laboratories.

"This is a very, very popular field," deBethizy said. "We have competition."

The two treatments that AstraZeneca is testing for Alzheimer's and schizophrenia place Targacept at the head of the pack.

Levin, the Duke professor, tested the Alzheimer's drug for Targacept. His studies showed that rats who got the drug did a better job of memorizing the quickest way through a maze to find food. The area in the brain that determines learning is similar in rats and humans, Levin said.

The study results due this year will be a good indication of whether the drug works similarly in rats and humans.