Its science rooted deep in North Carolina tobacco country, Targacept Inc. continues to impress observers with its neuronal nicotinic receptor approach to drug discovery.

The Winston-Salem, N.C.-based company on Thursday completed a $46 million Series C equity financing. Targacept, a company spun out of R.J. Reynolds Tobacco Co. two years ago and now building a franchise in central nervous system disease therapies, said it would use the funds to advance current programs into late-stage clinical development and progress its preclinical products.

"We're excited about raising the targeted amount of money, which allows us to continue to build and keep our momentum," Targacept President and CEO J. Donald deBethizy told BioWorld Today. "We've been very fortunate to have generated a very deep pipeline of compounds, and this money primarily will be focused on getting them through the value chain and specifically into clinical development."

The company has raised a combined $76.4 million through its Series B and C rounds. The Series A investment is credited to Winston-Salem-based R.J. Reynolds, which remains a minority shareholder.

Privately held Targacept is developing therapies by combining its nicotinic acetylcholine receptor biology know-how with its chemistry knowledge to identify drug candidates. The firm has development-stage products to treat Alzheimer's disease, Parkinson's disease, Lewy body dementia, ulcerative colitis, depression, pain, anxiety disorders and schizophrenia.

"Investors are attracted to this opportunity because we have a new target for CNS diseases that has been unexploited historically," deBethizy said. "The deep knowledge of these receptors just came out in the last five to eight years. We were in the right place at the right time with significant investment from Reynolds, just to understand the basic science of how nicotine interacts with the body. And this nicotinic acetylcholine receptor has a tremendous diversity in it."

He pointed to the identification of 17 genes in the receptor, coding for 17 proteins that assemble in groups of five protein subtypes.

"And it's this diversity in this subtype that allowed us to get rid of the side effects that classically had been associated with nicotinic compounds," deBethizy said, noting that Targacept managed to reduce activity to near zero for two peripheral subtypes involved in the side effects while simultaneously enhancing activity at the brain receptor subtypes.

The company's work resulted in its most advanced compound to date, TC-2403-12. To develop the compound, Targacept has partnered with Freiburg, Germany-based Dr. Falk Pharma GmbH in an effort to develop a new class of drugs to treat ulcerative colitis.

Targacept in October reported positive Phase I results of TC-2403-12, a neuronal nicotinic receptor agonist. A Phase II trial is planned to start in the first quarter of 2003 in the U.S., while an oral, delayed-release formulation also is in development.

In August Targacept added to its portfolio by acquiring Inversine (mecamylamine HCl) from Layton Bioscience Inc., of Sunnyvale, Calif. Targacept said the drug, developed 50 years ago by Whitehouse Station, N.J.-based Merck & Co. to manage hypertension, also modulates nicotinic acetylcholine receptors. More recently, Inversine has been used off-label for neuropsychiatric indications.

"It's being used at lower doses so you don't see any of the side effects that had been associated with its use as an antihypertensive," deBethizy said. "We're going to reformulate it at a lower dose, and we can go right into Phase IIb trials because there is an open [investigational new drug application] on it for neuropsychiatric indications."

Targacept plans to enter trials early next year for the drug, which has been used in Tourette's syndrome, autism and bipolar disorder, and has been used in treating children.

The company's other clinical compound, TC-1734, is targeted for memory incognition or neurodegenerative diseases. It should enter Phase II next year, deBethizy said.

Targacept also is researching a number of preclinical candidates, and has an alliance with Strasbourg, France-based Aventis Pharma SA to develop Targacept compounds to treat Alzheimer's disease. It owns a compound in preclinical development to treat pain, but deBethizy said the company hopes to partner a compound to treat depression and anxiety and another for schizophrenia and neuroprotection.

Targacept's most recent news is the characterization of a key pathway involved in neuroprotection that has therapeutic applications in Alzheimer's and other neurodegenerative diseases, the company said. Researchers at Targacept and colleagues at the Medical College of Georgia in Augusta published the results in The Journal of Biological Chemistry.

The research demonstrates that the nicotinic receptor stimulates an enzyme called JAK2, activating cellular pathways involved in nerve cell survival. The company said further research into the pathway could help it develop therapeutics that inhibit nerve cell death in the brain.

"This investment we've made over the last 15 years in incubating this capability, both at Reynolds and then with venture money over the last two years, has resulted in this collection of compounds and knowledge about the receptor," deBethizy said. "Our in silico drug design has been very fruitful."

The financing was led by Nomura International's Healthcare Private Equity Group in London. In addition to Nomura, other new investors included New Enterprise Associates, of Menlo Park, Calif.; CDIB BioScience Ventures, of Taipei, Taiwan; and Easton Hunt Capital Partners, of New York. Returning investors included EuclidSR Partners, of New York; Burrill & Company, of San Francisco; Academy Venture Fund, of Charlotte, N.C.; Advent Venture Partners, of London; as well as Auriga Ventures; CDC-IXIS Innovation; Genavent Fund; and Societe Generale Asset Management Finance, all of Paris.

In conjunction with the investment, Targacept made two appointments to its board - Jim Barrett, a general partner at New Enterprise Associates, and John Richard, a former executive vice president of business development at Sequus Pharmaceuticals Inc., also of Menlo Park.