Normally, December is a quiet time in the markets -- the third-quarter earnings season has wound down, people are taking extended vacations, and nobody is really looking to make waves. Apparently, British pharmaceutical company AstraZeneca
The latest development came Wednesday morning, when the company announced a partnering agreement with Winston-Salem, N.C.-based Targacept. The deal concerns TC-1734, a drug that acts on neuronal nicotine receptors and has shown promise in treating age-related memory impairment, Alzheimer's disease, and some other cognitive disorders.
Under the agreement, AstraZeneca will pay $10 million up front, another $20 million if or when phase 2 studies begin (presumably for an Alzheimer's indication), and about $26 million in research funding. Should Targacept hit all of the goals, the total potential payments amount to about $300 million, as well as double-digit royalties.
This announcement follows the news last week that AstraZeneca will pay $210 million to acquire British biotechnology company KuDOS and its phase 1 cancer drug. It also follows a recent deal with AtheroGenics
This is pretty much exactly what I've been expecting large pharmaceutical companies to do -- particularly those like AstraZeneca with shaky pipelines. The catch here is that AstraZeneca is wading into some very murky waters. It has now signed agreements for drugs targeting Alzheimer's, atherosclerosis, and sepsis -- a murderer's row of indications that have a long and tortured legacy of high-profile failure in attempts to treat them. So while the success of any one of these drugs would deliver a potential blockbuster, success is far from a sure thing.
As for the stock, sentiment on pharmaceutical companies has certainly brightened a bit. Income Investor recommendation GlaxoSmithKline
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).