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) --



announces a

monster partnership

for its depression drug with


(AZN) - Get Astrazeneca PLC Sponsored ADR Report

this morning, yet the stock plunges when trading opened. Earlier this morning, Targacept shares were off 17%; the stock has now "recovered" somewhat and is only down 8% to $21.46.


Chalk it up to a colossal sell-on-the-news reaction. Investors were expecting Targacept to come through with a partnership either before year-end or soon after. The fact that deal terms, including $200 million upfront and total milestone payments of $1.2 billion, were better than expected doesn't apparently count for much.

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That AstraZeneca chose to spend major bucks to license TC-5214 but didn't buy Targacept outright at a big premium is also likely a disappointment for some investors.

And let's not forget that Targacept shares were up more than 660% since July when the company first announced the stellar data for TC-5214. With those kinds of returns in the bank already, a good number of investors are taking profits now that the AstraZeneca deal is done. That Targacept and TC-5214 now enter a relatively quiet period before the phase III studies begin next year doesn't help matters, especially with short-term oriented investors.

Last week, I pegged Targacept and TC-5214 as the drug with the

best chance to be partnered

on lucrative terms. I was right, but clearly, Thursday stock action wasn't what I was expecting.

The sell off today has reached ridiculous levels. It's really just silly. Targacept has something like $10 a share in cash, which means the market is valuing TC-5214 -- a potential blockbuster anti-depression drug entering phase III studies -- at only around $10-11 a share.

Never mind that Targacept has a bunch of other drugs in its pipeline.

Like I said, ridiculous.

Targacept is easily worth high $20 or low $30s on the AstraZeneca deal, alone. Today's sell off means Targacept is going to take some time before it gets to those levels, but it also means that investors who may have missed the previous run now have a chance to buy into the stock at a very reasonable entry price.

-- Reported by Adam Feuerstein in Boston

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

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