Targacept Inc. (TRGT, Financial) filed Quarterly Report for the period ended 2010-09-30.
Targacept Inc. has a market cap of $705.2 million; its shares were traded at around $25.16 with and P/S ratio of 28.2. TRGT is in the portfolios of Jim Simons of Renaissance Technologies LLC.
As of September 30, 2010 we had received $55.4 million in aggregate upfront fees and milestone payments under our cognitive disorders agreement with AstraZeneca and recognized an additional $26.5 million in collaboration research and development revenue for research services that we provided under the agreement. As of September 30, 2010, we had also received $45.0 million in aggregate payments under our alliance agreement with GlaxoSmithKline. We initially deferred recognition of an aggregate of $52.5 million received under our cognitive disorders agreement with AstraZeneca and from GlaxoSmithKline and are recognizing these deferred amounts into revenue over the periods discussed in Note 5 to our unaudited financial statements included in this quarterly report. As of September 30, 2010, we had $28.8 million of the deferred amounts remaining to be recognized in future periods. In October 2010, we received an additional $500,000 from AstraZeneca in connection with an amendment to our cognitive disorders agreement with AstraZeneca.
We acquired rights to Inversine, which is our only product approved for marketing by the FDA, in August 2002. Effective September 30, 2009, we discontinued Inversine. Sales of Inversine generated net revenue of $118,000 and $473,000 for the three and nine months ended September 30, 2009, respectively.
From time to time we seek and are awarded grants or work to be performed under grants awarded to third-party collaborators from which we derive revenue. As of September 30, 2010, we have been awarded two grants from The Michael J. Fox Foundation for Parkinsons Research, or MJFF. One of the grants is to fund preclinical research involving the use of compounds that modulate NNRs to address Levodopa-induced abnormal involuntary movements, known as dyskinesias, and we have received aggregate payments of $641,000 from MJFF since August 2009 in connection with this grant. The other grant is to fund research to identify NNR-related biomarkers relevant to Parkinsons disease, and we expect to receive an aggregate of $304,000 from MJFF over a one-year period that began in December 2009 in connection with this grant. In addition, as of September 30, 2010, we are a named subcontractor under a grant awarded to The California Institute of Technology by the National Institute on Drug Abuse, or NIDA, part of the National Institutes of Health, to fund research on innovative NNR-based approaches to the development of therapies for smoking cessation. We have received approximately $1.1 million in the aggregate over a five-year research term that began in July 2006 in connection with the NIDA grant. Funding for awards under federal grant programs is subject to the availability of funds as determined annually in the federal appropriations process.
We have incurred net operating losses through December 31, 2009 and have not paid federal, state or foreign income taxes for any period through December 31, 2009. We expect that we may incur taxable income, before giving effect to net operating loss carryforwards, for the year ending December 31, 2010. For the three and nine months ended September 30, 2010, we recognized $257,000 and $2.4 million, respectively, of income tax expense primarily as a result of the application of Accounting Standards Codification Topic 740, Income Taxes, or ASC 740, to stock-based compensation. Exercises of stock options during the three and nine months ended September 30, 2010 resulted in tax deductions for stock-based compensation in excess of expense recorded for the stock options under U.S. generally accepted accounting principles, or GAAP, resulting in income tax benefits of $160,000 and $2.3 million, respectively. We recognized the income tax benefit related to the excess tax deductions as an increase to capital in excess of par value, which based on ASC 740 resulted in an offsetting charge in the same amount to income tax expense. As of September 30, 2010, we had net operating loss carryforwards of $66.0 million for federal income tax purposes and $76.8 million for state income tax purposes. We also had research and development income tax credit carryforwards of $7.4 million for federal income tax purposes and $595,000 for state income tax purposes as of September 30, 2010. The federal net operating loss carryforwards begin to expire in 2020. The state net operating loss carryforwards begin to expire in 2015. The federal and state research and development tax credits begin to expire in 2021. As a result of various factors, including the subjectivity of measurements used in the calculation of particular tax positions taken or that may in the future be taken in our tax returns, it is uncertain whether or to what extent we will be eligible to use the tax credits.
These increases were partially offset by a decrease of $141,000 in costs incurred for third-party research and development services in connection with our preclinical programs to $1.3 million for the 2010 period from $1.4 million for the 2009 period. The reduced spending for the 2010 period in connection with our preclinical programs primarily resulted from the uncertainty surrounding the continuation of some of the therapeutic focus areas of our alliance with GlaxoSmithKline.
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Targacept Inc. has a market cap of $705.2 million; its shares were traded at around $25.16 with and P/S ratio of 28.2. TRGT is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
In January 2010, we received a $200.0 million upfront payment under our TC-5214 agreement with AstraZeneca, which we recorded as deferred revenue and are recognizing into revenue on a straight-line basis over the estimated development period for TC-5214 to submission of a new drug application to the U.S. Food and Drug Administration, or FDA. We are eligible under our TC-5214 agreement with AstraZeneca to receive additional payments of over $1.0 billion if development, regulatory, first commercial sale and specified sales related milestone events for TC-5214 are achieved and stepped double-digit royalties on any future TC-5214 product sales. As of September 30, 2010, we had $145.3 million of the deferred portion of the upfront payment remaining to be recognized into revenue. Pursuant to the April 2010 amendment to our cognitive disorders agreement with AstraZeneca, we received an $11.0 million payment in May 2010, which we recorded as deferred revenue and are recognizing into revenue on a straight-line basis over the estimated period of our research and development obligations related to TC-5619.As of September 30, 2010 we had received $55.4 million in aggregate upfront fees and milestone payments under our cognitive disorders agreement with AstraZeneca and recognized an additional $26.5 million in collaboration research and development revenue for research services that we provided under the agreement. As of September 30, 2010, we had also received $45.0 million in aggregate payments under our alliance agreement with GlaxoSmithKline. We initially deferred recognition of an aggregate of $52.5 million received under our cognitive disorders agreement with AstraZeneca and from GlaxoSmithKline and are recognizing these deferred amounts into revenue over the periods discussed in Note 5 to our unaudited financial statements included in this quarterly report. As of September 30, 2010, we had $28.8 million of the deferred amounts remaining to be recognized in future periods. In October 2010, we received an additional $500,000 from AstraZeneca in connection with an amendment to our cognitive disorders agreement with AstraZeneca.
We acquired rights to Inversine, which is our only product approved for marketing by the FDA, in August 2002. Effective September 30, 2009, we discontinued Inversine. Sales of Inversine generated net revenue of $118,000 and $473,000 for the three and nine months ended September 30, 2009, respectively.
From time to time we seek and are awarded grants or work to be performed under grants awarded to third-party collaborators from which we derive revenue. As of September 30, 2010, we have been awarded two grants from The Michael J. Fox Foundation for Parkinsons Research, or MJFF. One of the grants is to fund preclinical research involving the use of compounds that modulate NNRs to address Levodopa-induced abnormal involuntary movements, known as dyskinesias, and we have received aggregate payments of $641,000 from MJFF since August 2009 in connection with this grant. The other grant is to fund research to identify NNR-related biomarkers relevant to Parkinsons disease, and we expect to receive an aggregate of $304,000 from MJFF over a one-year period that began in December 2009 in connection with this grant. In addition, as of September 30, 2010, we are a named subcontractor under a grant awarded to The California Institute of Technology by the National Institute on Drug Abuse, or NIDA, part of the National Institutes of Health, to fund research on innovative NNR-based approaches to the development of therapies for smoking cessation. We have received approximately $1.1 million in the aggregate over a five-year research term that began in July 2006 in connection with the NIDA grant. Funding for awards under federal grant programs is subject to the availability of funds as determined annually in the federal appropriations process.
We have incurred net operating losses through December 31, 2009 and have not paid federal, state or foreign income taxes for any period through December 31, 2009. We expect that we may incur taxable income, before giving effect to net operating loss carryforwards, for the year ending December 31, 2010. For the three and nine months ended September 30, 2010, we recognized $257,000 and $2.4 million, respectively, of income tax expense primarily as a result of the application of Accounting Standards Codification Topic 740, Income Taxes, or ASC 740, to stock-based compensation. Exercises of stock options during the three and nine months ended September 30, 2010 resulted in tax deductions for stock-based compensation in excess of expense recorded for the stock options under U.S. generally accepted accounting principles, or GAAP, resulting in income tax benefits of $160,000 and $2.3 million, respectively. We recognized the income tax benefit related to the excess tax deductions as an increase to capital in excess of par value, which based on ASC 740 resulted in an offsetting charge in the same amount to income tax expense. As of September 30, 2010, we had net operating loss carryforwards of $66.0 million for federal income tax purposes and $76.8 million for state income tax purposes. We also had research and development income tax credit carryforwards of $7.4 million for federal income tax purposes and $595,000 for state income tax purposes as of September 30, 2010. The federal net operating loss carryforwards begin to expire in 2020. The state net operating loss carryforwards begin to expire in 2015. The federal and state research and development tax credits begin to expire in 2021. As a result of various factors, including the subjectivity of measurements used in the calculation of particular tax positions taken or that may in the future be taken in our tax returns, it is uncertain whether or to what extent we will be eligible to use the tax credits.
These increases were partially offset by a decrease of $141,000 in costs incurred for third-party research and development services in connection with our preclinical programs to $1.3 million for the 2010 period from $1.4 million for the 2009 period. The reduced spending for the 2010 period in connection with our preclinical programs primarily resulted from the uncertainty surrounding the continuation of some of the therapeutic focus areas of our alliance with GlaxoSmithKline.
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