Targacept , Inc. (NASDAQ:TRGT)

pf

This stock can't possibly get beat up anymore.... (knocks on wood)... interesting mechanism of action, figure some movement in the clinical development status will up the price

Stock got crushed....has to be some value here.

speculative biology.

Targacept carries more cash on their books than their present market cap. It is especially attractive at this price. They have a strong strategic relationship with AZN. They have a deep pipeline targeting broad markets. In one example TC-6987 was studied in two phase-2 protocols in both diabetes and asthma. The diabetes study was no better than placebo in controlling fasting blood sugar, while the asthma study demonstrated statistically significant symptom improvements versus placebo. The compound was also well tolerated with few adverse events in either study. While the diabetes study showed no benefit the tolerability and pharmacokinetic data is still useful in furthering study for an asthma indication. Bringing drugs from the lab to market remains expensive and serendipitous. All it takes is one moderately successful drug to make this company. Targacept has the capital, expertise, and pipeline to produce at least one such candidate.

Many have already commented on the ludicrous value being assigned to TRGT. Several good potential drugs in the pipeline and trading at less than cash and ST invetments. I have bought in RL @ $5.19.

Do your own research.

I am puzzled both by valuation and short ratio for TRGT.

Zzlangerhans has a longer informative piece written here. Since then we have had a decision to drop TC-5214 (no big surprise, although the chart shows that market decided to be surprised three times in a row), a positive decision by AstraZeneca to move forward with AZD-1446 and a 50/50 outcome for TC-6987.

In summary, we now we have a company with two serious partnerships with big pharma and still a decent pipeline trading at below enterprise value. At these depressed levels and with their cash I would think that any risks from dilution are nil for another year at least, so I really wonder what is the rationale going or staying short at this point? Where would the downside risk come from?

I am leaning heavily in the other direction and have allocated abnormally high share of my portfolio to TRGT at average cost of $5.12.

Seth Klarman has a large position, couple of promising drugs.

Will recover. Buy-out prospect.

Strong pipeline, wide-ranging applications to NNR research, and smart management. If I had real money, this is the long term longshot that I'd put 20% of it into.

Good Fundamentals. Plenty of Cash to sustain/survive. Oversold.

This stock is trading at about a 50% discount to its liquidation value, and I'm not even taking into account fixed and intangible assets. I'm also not taking into account the company's vast pipeline of products in development. No matter how you look at it this stock is a huge bargain!

see tmfbio.....i'm thinking somebody snatches this one up.

Trading at less than cash. Some pipeline-desperate pharma will pick it up.

Sales are close to breakeven. Price/salews unusually low for a biotech company. Stock is trending up and has almost closed the December gap. Consider a tight stop on this one.

Instrinsic value

Klarman buy

Disclaimer: Yesterday I took a major CAPS kick to the teeth when the company reported that the RENAISSANCE 3 phase III trial of TC-5214 for major depression did not meet its primary endpoint. Not only did I green thumb Targacept, but I identified it in May as a GBMB portfolio buy at 20 after it had declined from peaks near 30 over a few months. Fortunately, my skepticism over the current paradoxical strength in the broad markets caused me to place a virtual moratorium on long investments until the debt crisis in Europe has resolved. Therefore I sustained no real money losses when the share price went into the dumper.

I've long held the view that when you advise buying a stock and you end up being completely wrong, you should sit down and shut up. This is apparently a rare concept in the financial media and on blog sites like Seeking Alpha. However, CAPS is a game and I'm going to continue to play Targacept in the game, and when I rate stocks I always write a pitch. So if you believe, like I do, in the integrity of fading away quietly then read no further.

Targacept conveniently dished the bad news only a week after reporting their third quarter financial results. So we know that the company has 271M in cash, 2M in long term debt, and an uptick in quarterly burn to 9M. Meanwhile, the market cap at the close Tuesday was 254M. Yes, that's 15M below the net liquid asset balance. Now, it's not unusual for weak biotechs to be valued below cash - see Insmed and Adventrx - but there are important differences with respect to Targacept.

First is the sheer quantity of the cash. Insmed has 85M to back a market cap of 80M. Adventrx has 38M to back a market cap of 26M. Targacept has a whopping 271M in cash. Even if they maintain the higher 9M burn they have enough cash for seven and a half years of operations. TC-5214 may have brought a lot of pain today, but let's not forget it brought in 200M from Astra Zeneca in January 2010 and powered an 80M dilutive financing in May 2011.

The second issue is future prospects. Adventrx has two busted me-too cancer drugs and a cheaply-acquired moonshot for sickle cell. Insmed has a phase III antibiotic on FDA clinical hold for a cancer signal in animal studies. Investors could be forgiven for thinking that these companies will simply use up their cash fruitlessly a la Myrexis. Targacept, on the other hand, has four drugs besides TC-5214 in advanced clinical trials. The most promising of these, AZD3480, is already in a phase IIb trial in Alzheimer's being run by Astra Zeneca. Phase II trials of TC-6987 in asthma and diabetes will be completed in H1 2012. And furthermore, it's important to remember that RENAISSANCE 3 was only one of four phase III efficacy trials of TC-5214 in progress. The remaining trials will provide topline data in H1 2012.

I think it would be foolhardy to ascribe much value to TC-5214, and the stock could suffer further if Astra Zeneca declines to pick up an option on AZD1446 for Alzheimer's later this year. But I've looked at this situation closely and everything about it is saying over-reaction. For some reason it reminds me of the pummeling Intermune took after the FDA rejected pirfenidone in May 2010. We know how that story turned out. Anyone could be excused for giving speculative stocks like baby pharmas a wide berth given the current imbalance between the markets and the real global economic situation. But if you're looking for something in the sector that has a good chance of bouncing back regardless of the economic headwinds, Targacept may be for you.

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