WINSTON-SALEM, N.C. (

TheStreet

) --

Targacept

(TRGT)

delivered Thursday on its promise to bag a lucrative, "Big Pharma" partnership for its experimental depression drug TC-5214.

The company and

AstraZeneca

(AZN) - Get Report

have entered into a global collaboration for TC-5214 in depression, the companies announced jointly. The agreement comes about six weeks after Targacept presented jaw dropping, positive results from a phase II study of TC-5214 as an

add-on, anti-depressant therapy

.

The data presented in mid-October positioned TC-5214 as a potential blockbuster anti-depression drug, which is why AstraZeneca is paying a ton of cash to secure the drug's rights.

Under the agreement, AstraZeneca will make an upfront payment to Targacept of $200 million and up to an additional $540 million if specified development, regulatory and initial sale milestones are met.

Targacept will receive stepped double-digit royalties on net worldwide sales of TC-5214 and is eligible for another $500 million in milestone payments if the drug meets certain sales levels.

AstraZeneca and Targacept plan to jointly design a phase III clinical program for TC-5214 as an add-on therapy in depression to begin in the middle of 2010. The goal is to seek regulatory approval for the drug in 2012. AstraZeneca is responsible for 80% of the development costs with Targacept picking up the tab for the remaining 20%.

The two companies are also planning a phase II study to develop TC-5214 as a standalone anti-depression therapy.

Targacept shares closed Wednesday at $23.51.

TC-5214 made its

first splash in July

when Targacept announced top-line results from a phase II study, stating that TC-5214 was able to improve the symptoms of depression in patients who don't respond well to Celexa, a currently prescribed antidepressant marketed by

Forest Labs

(FRX)

. That initial announcement sent Targacept shares soaring more than 600%.

The huge potential of TC-5214 was

confirmed in October

when details from this phase II study were presented at a medical meeting. Depression patients treated with the combination of TC-5214 plus Celexa demonstrated a

6-point

improvement on the Hamilton Rating Scale for Depression, or HAM-D, compared to patients treated with Celexa alone.

To put the data in perspective, expectations going into the data presentation were for TC-5214 to boost HAM-D scores by two or three points.

The stellar efficacy data, coupled with a relatively clean safety profile, positioned TC-5214 as potentially superior to Abilify, a blockbuster drug from

Bristol-Myers Squibb

(BMY) - Get Report

which was recently approved as an add-on, anti-depression therapy.

In an interview after the TC-5214 data were presented in October, Targacept CEO Don DeBethizy told

TheStreet.com

that "two-thirds of depressed people do not achieve relief from an SSRI alone -- that's more than 9 million people. We believe that a well-tolerated drug like TC-5214 as add-on therapy will be a major breakthrough for these patients."

SSRIs are the most common class of anti-depressant drugs prescribed by doctors today.

DeBethizy said at that time that interest from Big Pharma for TC-5214 was strong and the company planned on landing a deal for the drug soon. TC-5214 was definitely high, if not tops, on the list of drugs with the

best chance to be partnered

on lucrative terms in the near future.

Thursday, Targacept brought that big deal home.

-- Reported by Adam Feuerstein in Boston

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;

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