Good day ladies and gentlemen and welcome to the Q4 2013 Targacept, Inc. Earnings Conference Call. My name is Theresa, and I'll will be your operator for today. At this time all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the conference. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Dr. Stephen Hill, Targacept's President and CEO. Please proceed sir.

Thank you, Theresa, and good morning everyone and thank you for joining us. With me this morning is Alan Musso, our Chief Financial Officer. First as usual, let me inform you that comments made today may include forward-looking statements made under the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to plans, expectations, objectives or future events, financial results or condition, including, for any of our product candidates, the design, scope or other details of clinical trials, the timing for initiation or completion of, or for reporting of results from, clinical trials or for submission; or approval of regulatory filings; target indications or commercial opportunities; as well as AstraZeneca’s development plans for product candidates licensed from us, our cash runway, revenues or expenses, plans, expectations or any other matter that is not a historical fact. Actual results may differ materially from those expressed or implied by any forward-looking statement, as a result of many factors, including those described under the heading Forward-Looking Statements in our press release from earlier today or under the heading Risk Factors, in our most recent Form 10-K or in later filings with the SEC. We caution you not to place undue reliance on any forward-looking statement. Also, any forward-looking statement that is made speaks only as of today and should not be relied upon as representing our views as of any future date. We disclaim any obligation to update any forward-looking statement except as required by applicable law. So with that traditional introduction, today I am pleased to report good progress towards the completion of our two ongoing Phase-IIb clinical trials, that is TC-5214 for overactive bladder and TC-1734 for Alzheimer's disease, both of which are on track for top line results in the middle of this year. In addition, we remain well…

Thanks Steve. Let me now briefly highlight our financial results for the fourth quarter of 2013 and for the full year, which we released earlier today. For the fourth quarter of 2013, we had a net loss of $13.4 million, compared to a net loss of $15.9 million for the fourth quarter of 2012. The lower net loss for the 2013 period, was due principally to a decrease of $1.6 million in research and development expenses, and non-recurrence of $1.4 million of charges related to a workforce reduction, that we completed during the fourth quarter of 2012. For the year ended December 31st, 2013, we reported a net loss of $46.7 million, compared to a net loss of $7 million for 2012. The higher net loss for 2013, was principally due to a decrease of $53.9 million in deferred revenue recognition, partially offset by a decrease in research and development expenses of $10.2 million and the non-recurrence in 2013, are restructuring charges, for which we incurred $3.7 million of expense in 2012. As of December 31, 2013, cash and investments in marketable securities totaled $143.8 million. Moving to our financial guidance for 2014, based on current operating plans, we expect minimal operating revenue, and we expect our operating expenses to be in the range of $40 million to $45 million. We also expect our cash, cash equivalents and investments balance at the end of 2014 to be at least $140 million. We continue to expect that our current cash resources will be sufficient to meet our operating requirements, at least through the end of 2015. And with that, we will open up the call for your questions.

(Operator Instructions). Your first question comes from the line of Robyn Karnauskas from Deutsche Bank. Please proceed, sir.

Great. Thanks for taking my question. This is Mohit Bansal for Robyn. So I have two questions; first is like, could you just help us understand what according to you would be good data in overactive bladder trial, which would help you make a de novo [ph] decision, and what are your thoughts on partnership for this asset? And then I have a follow-up.

Yeah. So the study is powered to see a reduction in a number of micturitions per day, of one micturition per day, over and above placebo, and in addition, the co-primary endpoint is to see a reduction of one in constant episode per day, over and above placebo. So that would reflect, at least as good and maybe better efficacy than anything currently available. So clearly, if we meet the statistical endpoints, then we believe that we would have a very competitive product into the marketplace. If we were to fall shorter there, and not make the statistical endpoints, we may still see a level of clinical impact, that might be interesting to pursue, in combination currently. But I think we will have to review that in the actual data. In terms of partnering, at this point, we are not proactively seeking partners for this program. We do believe, if we get a positive result, that we have the skills and resources to take the program through a Phase-III pivotal program, certainly in the U.S. and maybe in addition in Europe as well, to submit a package to the regulatory authorities for a potential approval. So we believe that we have the ability to do that, and currently is our plan.

Great. Then maybe another question, so if you do not see a signal in this trial, so what are the other options you are thinking about -- for taking the company far?

Say that again?

I mean the question is like, if the trial does not work, and then -- how should we think about the different options you have for taking the company far ahead?

So in the event that the overactive bladder study proves clearly negative, then we are looking at two options. One, is what I call a selling modest approach, which is the licensing or bring [ph] from our own in-house portfolio. Two or three more, relatively early stage, may be, early Phase-II programs, at the same sort of stage of [indiscernible], as the gastroparesis program that we have already communicated. So we broaden out our portfolio. The alternative is to look for an asset, probably an external asset that we require in licensing, to basically replace the overactive bladder programs. If the overactive bladder program is negative, we then look to apply the resources that we have to a program which should be about the same stage, had the overactive bladder turn out positive. So we are in the process of looking at external opportunities, both as more modest earlier Phase-II programs, but also, late stage programs, that we basically just swap out in the event that OAB is negative.

Good. Thanks.

Thank you.

Thank you for your question. (Operator Instructions). Your next question comes from Alan Carr from Needham and Company. Please proceed.

Hi thanks for taking my questions. A little bit of a follow-up on 5214 and then a question on 5499. So with 5214 in OAB, can you comment on the baseline patient profile of the entire population that's been enrolled? Does it meet your expectations in terms of severity of the disease and that sort of thing? And then with 6499, can you comment on the Phase-I and Phase-II work that's been done on that trial in the past? I am wondering, how you will characterize for this? Thanks.

Yeah. So starting with 5214; we saw the sort of patients exactly in line with what we'd expect to see for a study of this type, both in terms of number of micturitions per day. So typically, these folks that come into these studies, have 12 or 13 micturitions per day. The entry character is a minimal 8, but they average 10, 12, 13, we haven't seen anything unusual in that respect, and we also determined an event, that we wanted to have at least 75% of patients in the study would be wet, i.e. patients who are having constant episodes, and we have indeed met that goal. So the profile of the patients who have entered the study, are very much in line with what you'd expect for the population we were looking to treat. So I don't think there is anything out of the ordinary in that respect. In terms of 6499, this is a compound that has been in humans in the past. And in particular, we started in a relatively small Phase-II study in irritable bowel syndrome, with constipation. And we did indeed, in that study see fairly significant impact in spontaneous bowel movement, although, with other priorities, we didn't progress that compound at that time. So we do know, the compound has an effect on GI motility, particularly lower GI motility, and we are hopeful that we will see that same sort of effect in upper GI, in this case, gastric motility.

Great. Thanks very much.

Thank you for your question. Your next question comes from the line of [indiscernible] Research. Please proceed.

Good morning and thanks for taking my question. In regards to 6499, you are probably familiar with trends on programming gas decrease, you've had a couple of Phase-IIs that failed. Obviously, different target ends and for all kinds of reasons. But was there anything, that you typically, from what happened with that program, regarding baselines or a leading phase, that informed [ph] of your strategy or design going forward?

I think its tough to translate one mechanism to another, and that's why I think the proof-of-principle study that we are doing, actually is a neat way of giving us some early information, roughly cost effective way. So the gastric breath test that we are planning in very simplistic terms was, you provide a standardized breakfast to the patients, who would be studying in the phase one unit, and within that, you give them heavy combinants, not a [indiscernible] combinant, it’s a heavy combinant. We study the measure in the expired breath, size of the food is absorbed and metabolized. So obviously, this slowed the regular gastric emptying, the less the food gets absorbed, and the less carbon, heavy carbon there is, to be metabolized and its reaching the breath. So I think that will give us a pretty good handle on, whether this particular compound might be effective in gastroparesis, which is clearly, not an easy disease to treat. But I am not sure, that we can draw too much from the transom [ph] experience, in terms of the different mechanism of action.

Great. Thanks a lot.

Thank you, Chris. We have no more questions. and I would now like to turn the call over to Dr. Stephen Hill, for closing remarks.

Alan, if you're still on the phone. I think I may have misheard the comment about year-end cash for 2014, so I am going to just ask you to repeat that clipping, I heard a number which may not have been correct, so just for the record, could you just give us --

Yeah, we expect our year end cash at the end of 2014 to be at least $100 million.

One, zero, zero?

Yes. That's right.

Okay. Thank you. Theresa, if there are no more questions?

There are no more questions.

Okay. With that, maybe just thank you very much everybody on the line. We appreciate your attendance on the call, and hope you all have a great day, despite the weather. Wherever you happen to be. Thank you and have a good week. Bye-bye.