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Targacept Inc. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: March 6, 2012 06:00PM

Targacept Inc. (TRGT) filed Annual Report for the period ended 2011-12-31. Targacept Inc has a market cap of $235.4 million; its shares were traded at around $7.1 with and P/S ratio of 2.4.



Highlight of Business Operations:

In the trial, the results on the Groton Maze Learning task met the pre-defined success criteria (adjusted p-value = 0.054), as well as at two of the trial’s three measurement dates (at 4 weeks, unadjusted p-value = 0.018; and at 12 weeks, unadjusted p-value = 0.041), and were favorable for tobacco users as compared to non-tobacco users (where there was no activity) and for subjects at study sites in the United States as compared to subjects at study sites in India. Estimates of the precise prevalence of smoking amongst schizophrenia patients vary, with many studies indicating a prevalence between 70% and 85%. Each of the p-values noted above was derived after data log transformation, a commonly utilized statistical technique where the data does not follow a normal distribution.

Net operating revenues for the year ended December 31, 2011 increased by $11.9 million as compared to the year ended December 31, 2010. The higher net operating revenues were attributable to an increase of $13.6 million in milestones and license fees from collaborations revenue, partially offset by a decrease of $1.7 million in grant revenue. The increase in milestones and license fees from collaborations revenue was principally due to increases of $15.1 million in recognition of deferred revenue previously received from GlaxoSmithKline, as all amounts that had yet to be recognized as of the time we received notice of termination of our agreement with GlaxoSmithKline were recognized for the first quarter of 2011, and $551,000 in recognition of cumulative payments of $6.0 million received from AstraZeneca in connection with events associated with our Phase 2b clinical trial of AZD3480 as a treatment for mild to moderate Alzheimer’s disease. These increases were partially

Net operating revenues for the year ended December 31, 2010 increased by $60.7 million as compared to the year ended December 31, 2009. The higher net operating revenues were attributable to increases of $64.4 million in milestones and license fees from collaborations revenue and $1.9 million in grant revenue, partially offset by a decrease of $5.2 million in collaboration research and development revenue. The increase in milestones and license fees from collaborations revenue was principally due to recognition of $72.6 million of the $200.0 million upfront payment received under our TC-5214 agreement with AstraZeneca and $6.3 million of the $11.0 million payment received under an April 2010 amendment to our cognitive disorders agreement with AstraZeneca related to TC-5619, partially offset by the achievement in 2009 of a milestone event under the cognitive disorders agreement for which we received $10.0 million, decreases of $2.5 million in aggregate payments received from GlaxoSmithKline upon achievement of milestone events under our product development and commercialization agreement and $1.1 million in license fees derived from the cognitive disorders agreement with AstraZeneca as a result of the expiration of the term of the preclinical research collaboration in January 2010.

Our cost of product sales were those costs related directly to the sale of Inversine. Cost of product sales for the year ended December 31, 2010 decreased by $691,000 as compared to the year ended December 31, 2009 as a result of our discontinuation of the commercialization of Inversine effective as of September 30, 2009.

Net cash provided by financing activities for the year ended December 31, 2011 increased by $76.4 million as compared to the year ended December 31, 2010. The increase was primarily attributable to net proceeds of $80.8 million in May and June 2011 from our common stock offering, partially offset by the income tax effect for 2010 of tax deductions for stock-based compensation in excess of expense recorded for stock options under GAAP of $3.5 million and a decrease of $1.5 million received upon the issuance of common stock related to exercises of stock options. Net cash provided by financing activities for the year ended December 31, 2010 decreased by $40.7 million as compared to the year ended December 31, 2009. The decrease was primarily attributable to net proceeds of $44.4 million in October 2009 from a common stock offering and the receipt in October 2009 of $724,000 from a stockholder for disgorgement of “short-swing” profits under Section 16(b) of the Exchange Act, partially offset by the income tax effect for 2010 of excess tax deductions of $3.5 million discussed above and a decrease in net borrowings under our loan facilities of $1.0 million.

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