Nov. 6--Targacept Inc. posted its first quarterly profit in nearly three years yesterday, bolstered in large part by a $10 million milestone payment by AstraZeneca PLC.

Targacept, based in Piedmont Triad Research Park in Winston-Salem, is developing drugs based on nicotine research to treat diseases of the central nervous system.

The payment was the result of Targacept's research in adult attention deficit/hyperactivity disorder involving its AZD3480 drug compound, also known as TC-1734. Targacept relies on collaboration payments, primarily from AstraZeneca and GlaxoSmithKline, to bolster low revenue.

Counting the payment, the company posted net income of $1.3 million in the third quarter, compared with a loss of $7.6 million in the period a year ago.

Diluted earnings were 5 cents a share compared with a loss of 31 cents a year ago. The average earnings forecast was a loss of 12 cents by analysts surveyed by Zacks Investment Research.

The profitable quarter represents just the latest positive development for Targacept.

On Oct. 15, Targacept's hopes for a breakthrough drug for depression took a major jump forward when its Phase 2B clinical trial results for its TC-5214 drug compound well exceeded analysts' projections.

Also last month, the company completed a public offering of 2.2 million shares of common stock at $21 a share. The company said that the offering generated $44.4 million in net proceeds.

Bret Holley, an analyst with Oppenheimer & Co., said that there is potential for TC-5214 to generate sales of more than $1 billion in 2017 if it is introduced for consumer use by 2013.

Don deBethizy, the president and chief executive of Targacept, said that the milestone payment and the successful TC-5214 results "highlight the breadth of our pipeline of neuronal nicotinic receptors therapeutics and reinforce our leadership position in the space."

DeBethizy said that the company's goal continues to be having a partner by June 30 to move TC-5214 into a Phase 3 trial.

Since Targacept released preliminary results on TC-5214 in July, its share price soared from $2.44 on July 8 to a record high of $24.50 on Oct. 16.

However, in recent weeks the share price has dropped 19 percent from the record high. It closed yesterday at $19.73, up 67 cents.

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