Nicotinic Receptor Therapeutics & Drug Dependence

1. Nicotinic Receptor Therapeutics & Drug Dependence In Depth Analysis of Breaking Research, Drug Development News & Pipeline Activity March/April 2011 Edition(Featuring information published: Mar 10th - May 1st) Next issue June 1st (approx)

2. Executive summary of new activityMarch/April 2011 - Key activity around the α7 receptor • AstraZeneca decides not to license Targacept’s TC-5619 after failure of ADHD study to meet 1O end points: TC-5619 failed to improve the Conners’ Adult ADHD score, the 1O end-point in a Phase 2a study. Improved 2O efficacy outcome measures and safety were demonstrated although a 38% dropout rate was reported. AstraZeneca has since declined to exercise its licensing rights on TC-5619 despite promise in schizophrenia. This has had just a small effect on investor confidence in Targacept. • The fate of TC-5619 remains to be seen. LeadDiscovery understands that AstraZeneca decided not to license the molecule as Targacept was unwilling to renegotiate the terms of the agreement while efficacy in schizophrenia, particular activity against negative symptoms, was further evaluated. It is unclear how much the ADHD study data contributed to AstraZeneca’s decision. • With respect to ADHD, we note that smokers were excluded from the Phase 2a study. Efficacy has not been investigated in patients who smoke although positive data in the schizophrenia study was driven by smokers. Smoking rates in adolescent and adult ADHD patients is high and TC-5619 may offer greater benefit in this cohort. Nonetheless the negative outcome does point to prioritizing TC-5619 for schizophrenia. This was confirmed by Targacept during a presentation at Deutsche Bank Securities. Targacept has also disclosed that long-term toxicology studies and data from the elderly are now available supporting development of TC-5619 in Alzheimer’s disease.

3. Executive summary of new activityMarch/April 2011 - Key activity around the α7 receptor • Studies on TC-6987 expected to read out by year end 2011: Targacept has confirmed that its two novel studies evaluating TC-6987 in diabetes and asthma should read out by the end of the year. The company also disclosed why these two indications were selected as an initial entry point for TC-6987 into inflammation. The decision was dictated in part by safety data being limited to 4 weeks guiding Targacept away from selecting diseases requiring longer duration treatment. • Phase 2b CIAS study of EVP-6124 completes but results yet to be disclosed: EnVivo’s Phase 2b CIAS study of EVP-6124 completed enrolment in November. We expect data to read out in Q1 2011 although to our knowledge this has yet to happen even though the study is now marked as complete on clinicaltrials.gov • The delayed announcement of top-line data is curious and points to slow analysis, negative outcomes or avoidance of announcements due to potential partnering discussions..

4. Executive summary of new activityMarch/April 2011 - Key activity around the α7 receptor • α7 receptors implicated in wound healing: Impaired wound healing is a major problem especially in diabetics, 6% of whom suffer chronic ulcers which frequently progress to amputation. Nicotine has previously been shown to improve healing in a rodent model of diabetes. New data supports a role for α7 receptors in this effect, demonstrating an increase in cells expressing following wounding. • We urge further studies with selective α7 agonists in models of diabetic ulcer. This may be of especial interest given that Targacept has recently opened a study to investigate the efficacy of TC-6987 in diabetes. Such an approach may target the underlying disease as well as its cutaneous effects. • HO-1 mediates the pro-survival effect of nicotine in sepsis: Since the demonstration of nicotine’s protective effect in sepsis in 2004, a handful of papers have extended this field. GTS-21 has been shown to exert a similar effect highlighting a role for α7 receptors. Tsoyi et al have now demonstrated that induction of heme oxygenase is a crucial step following receptor activation. • Sepsis remains a serious yet underexploited potential indication for α7 agonists.

5. Executive summary of new activityMarch/April 2011 - Key activity around the α4β2 receptor • Long-term safety study of TC-5214 has completed enrolment: The 52 week Phase 3 safety study of antidepressant candidate, TC-5214, remains on track for a Q2 2012 read out and NDA submission later the same year. • New Alzheimer’s disease trials possible for AZD3480 and AZD1446 later this year: During its presentation at Deutsche Bank Securities, Targacept commented that AstraZeneca had completed PD studies of AZD1446 in Alzheimer’s patients. The company is expected to decide on whether to advance the molecule for this indication in Q3 2011. In addition, a new Alzheimer’s disease study for AZD3480 is expected to start later this year. An initial study failed to meet it end points with neither AZD3480 nor the positive control donepezil demonstrating efficacy. The study was suggested to be too short. A decision on AZD3480 in ADHD is also imminent. • α7 and α4β2 antagonism implicated as potential approach to preventing relapse of opioid use:Even with new treatments, high relapse rates are a major barrier to the management of drug addiction. New data suggest that both α7 and α4β2 antagonists may reduce relapse.

6. Executive summary of new activityMarch/April 2011 - Key activity around other nicotinic receptors • Academic researchers have reported potent and selective α9α10 antagonists with activity in models of neuropathic pain: Researchers from the University of Kentucky have reported nanomolar antagonists of the α9α10 receptor with activity in sciatic nerve injury and vincristin models of neuropathic pain. Prior studies suggest that these effects are mediated by activity at nerve cells and/or by reducing infiltration of perineuronal lymphocytes.

7. Executive summary of new activityMarch/April 2011 - Key activity around smoking cessation • Extending varenicline exposure prior to smoking “quit date” may improve its efficacy: Varenicline is currently administered for 1 week prior to a “target quit date” and is associated with improved but still modest rates of smoking cessation. New research suggests extending dosing of varenicline prior to quitting reduces smoking reward/motivation and smoking over this period thereby increasing long-term abstinence rates. • Nicoventures announces its UK launch as a independent company within the BAT group dedicated to smoking alternatives: Nicoventures Ltd is a stand-alone company within the British American Tobacco Group and will be managed separately from the tobacco businesses. The company announced its launch in April stating that it is investigating novel alternatives to smoking which are distinct from nicotine formulations such as patches, gums and e-cigarettes. • The nature of the products being developed by Nicoventures is unclear but we assume the products to be similar to Snus.

8. Executive summary of new activityMarch/April 2011 - Key activity around smoking cessation • FDA to accept classification of electronic cigarettes as tobacco products: The FDA has been fighting an ongoing battle in the US courts over how to regulate e-cigarettes. The FDA had argued for a drug delivery device classification while the courts had ruled that e-cigarettes should be regulated as tobacco products unless they are intended for therapeutic purposes. After much legal duelling the FDA has accepted the courts’ decision weakening its power over e-cigarettes preventign the ability to impose (pre)clinical testing prior to launch. The FDA is consideringwhether to issue a guidance and/or a regulation on “therapeutic” claims. This could see a stiffening of the FDA’s power regarding e-cigarettes. • Star to start marketing tobacco lozenges as reduced harm alternatives to smoking: Star Scientific has received notices from the FDA that Ariva-BDL and Stonewall-BDL (tobacco lozenges) are not subject to regulation under FDC Act Chapter IX. In effect this means that Star is exempt from providing evidence of equivalency with currently marketed tobacco products and that it is “appropriate for the protection of the public health”.

9. Executive summary of new activityMarch/April 2011 - Key activity around smoking cessation • Study investigating smoking cessation potential of snus completes in the US: Study NCT00843622 opened in February 2009 aiming to evaluate snus as a smoking cessation strategy. Smokers substituted cigarettes for snus or a placebo over a 4 week period whereafter they were encouraged to cease using snus or tobacco altogether. The 1O end point was the continuous rate of smoking cessation between weeks 6 and 28. This study, sponsored by Swedish Match, was fully enrolled in February 2010 and has now completed. Results have yet to be disclosed. • New research supports the targeting of the endocannabinoid transporter to prevent relapse to smoking: CB1 inverse agonist, rimonabant has previously demonstrated efficacy as a smoking cessation agent but was removed from the market due to reports of anxiety with its use. Blocking the endocannabinoid transporter increases levels of the natural partial agonist, annandamide offering an alternative to administering exogenous CB1 (ant)agonists for smoking cessation. New research supports this demonstrating that endocannabinoid transporter inhibition is efficacious in a model of smoking relapse. • Omeros reports novel link between nicotine addiction and PDE7: Omeros has licensed PDE7 inhibitors from Asubio for the potential treatment of Parkinson’s disease. Omeros has now reported an effect of PDE7 inhibition on nicotine addiction leading to an expanded license agreement.

10. Executive summary of new activityMarch/April 2011 - Key activity around drug dependence (excluding nicotine) • Reckitt Benckiser announces Q1 results: Q1 pharma revenue increased to £156m. This was primarily due to the buy back from Merck of Suboxone rights ex-US. In the US Suboxone film now has a 37% volume share of the market for buprenorphine-based products used for opioid dependence. Reckitt Benckiser has launched the film as a defence against generic equivalents of its Suboxone tablet, which are expected to become available within the next few months. The company has exclusivity in Europe until 2016. • Catalyst Pharma confirms 2013 US filing for CPP-109 in cocaine addiction - investigator sponsored studies of multiple dependencies open: Vigabatrin (CPP-109), a GABA breakdown inhibitor has been fast tracked by the FDA as a candidate treatment of cocaine addiction. Catalyst has confirmed that a Phase 2b registration study should read out Q3 2012 leading to a 2013 launch. Catalyst has also announced that an investigator sponsored Phase 2 study of CPP-109 for cocaine and alcohol co-dependence has started. Finally, Catalyst has announced that an NDA for follow-on compound CPP-115 is likely to be filed in Q2 2011 with Phase 1 data expected for mid-2012.

11. Executive summary of new activityMarch/April 2011 - Key activity around drug dependence (excluding nicotine) • Pilot study reports benefit of atypical antipsychotic aripiprazole in cocaine addiction: The mesolimbic dopamine system mediates the acute rewarding effects of psychostimulants such as cocaine supporting the use of dopamine D3 receptor antagonists as candidate drug abuse treatments. The atypical antipsychotic aripiprazole, which has dopamine D3 partial agonist activity has been shown in a pilot trial to reduces cocaine craving and consumption. • We believe that this study is particularly interesting given the frequent co-morbidity of schizophrenia and drug abuse • D3 antagonism may also be an effective approach to methamphetamine addiction: In addition to being implicated in cocaine addiction, recent data also suggests that D3 targeted therapeutics may be of benefit to amphetamine abuse. Selective D3 antagonist, SB-277011A appears to be able to have the potential to reduce methamphetamine use and relapse following abstention.

12. Executive summary of new activityMarch/April 2011 - Key activity around drug dependence (excluding nicotine) • PDE4 - A new target for alcohol dependence: Increased activity within the cAMP pathway is known to regulate alcohol intake. Researchers have now shown that PDE4 inhibitors, rolipram and Ro 20-1724 decreased ethanol intake in mice genetically predisposed to drink large amounts of ethanol. Of interest PDE4 has been implicated in the dependence on other drugs of abuse as well potentially expanding the interest of this class in dependence disorders.. • A handful of PDE4 inhibitors have overcome adverse event issues that have thwarted this class, to move into advanced development or even the market in the case of roflumilast. The present study suggests that repurposing this class for addictive disorders may be worthy of investigation

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