Deutsche Bank Securities initiated coverage of Targacept Inc. with a Buy rating, saying late stage trial of the biopharmaceutical company's lead compound, TC-5214, to treat major depressive disorder will be positive in late 2011.

The brokerage, which has $32 price target on the stock, believes Targacept has the most upside potential in 2011.

Targacept's TC-5214 phase 2 data looks better than the competitors Bristol Myers Squibb’s Abilify and AstraZeneca’s Seroquil, analyst Robyn Karnauskas wrote in a note to clients. The company is developing TC-5214 with AstraZeneca.

In the mid-stage trial, patients given TC-5214 had an improvement in MADRS score from baseline of 7.5 - the metric used to evaluate depression. This appears better than Abilify which showed a 3.7 improvement and Seroquil which showed 3 point improvement in similar patient populations, Karnauskas said.

With better efficacy and fewer sideeffects than other drugs in this class, we estimate TC-5214 could be a $3.5B plus drug worldwide, Karnauskas said.

Shares of Targacept ended Friday's regular trading 1.89 percent higher at $22.70 on the Nasdaq. For the past 52 weeks, the stock has been trading in the range of $17.80 to $25.33.