Targacept Reports Second Quarter 2007 Financial Results

Business Wire, August 7, 2007

Research and development expenses totaled $9.1 million for the second quarter of 2007, compared to $4.6 million for the corresponding period in 2006. For the six months ended June 30, 2007, research and development expenses totaled $15.3 million, compared to $9.4 million for the corresponding period in 2006. The increase in research and development expenses for each of the 2007 periods was principally attributable to increased contracted research and development services and greater occupancy, salary and benefit, recruitment, supply and infrastructure costs incurred in connection with increased activity in Targacept's preclinical research collaboration with AstraZeneca and in the development of Targacept's product pipeline.

General and administrative expenses totaled $2.6 million for the second quarter of 2007, compared to $1.3 million for the corresponding period in 2006. For the six months ended June 30, 2007, general and administrative expenses totaled $4.0 million, compared to $2.5 million for the corresponding period in 2006. The increase in general and administrative expenses for each of the 2007 periods was primarily attributable to additional stock-based compensation expense resulting primarily from option grants to members of Targacept's board of directors. Targacept's board of directors did not receive any equity compensation in 2006.

Interest income, net of interest expense, totaled $808,000 for the second quarter of 2007, compared to $698,000 for the corresponding period in 2006. Interest income, net of interest expense, totaled $1.7 million for the six months ended June 30, 2007, compared to $974,000 for the corresponding period in 2006. The increase was primarily attributable to a higher average cash balance during the 2007 period following the receipt of a $20.0 million milestone payment from AstraZeneca in January 2007.

Financial Guidance

Based on current operating plans and taking into account the $35.0 million in initial proceeds received from GlaxoSmithKline, Targacept expects that its cash, cash equivalents and short-term investments will be at least $75.0 million at December 31, 2007.

Conference Call

As previously announced, Targacept will be hosting a conference call and webcast today, August 7, 2007, at 5:00 p.m. EDT. A live webcast of the conference call will be available on the Investor Relations page of Targacept's website, www.targacept.com. An archived version of the webcast will also be available on the Event Calendar section of the Investor Relations page of Targacept's website for at least two weeks following the call.

The second quarter earnings conference call may be accessed by dialing 866-510-0711 for domestic participants and 617-579-5379 for international callers (reference passcode 57296653). A replay of the conference call may be accessed through August 21, 2007 by dialing 888-286-8010 for domestic callers and 617-801-6888 for international callers (reference passcode 42193450).

About Targacept

Targacept is a clinical-stage biopharmaceutical company that discovers and develops NNR Therapeutics[TM], a new class of drugs for the treatment of central nervous system diseases and disorders. Targacept's product candidates selectively modulate neuronal nicotinic receptors that serve as key regulators of the nervous system to promote therapeutic effects and limit adverse side effects. Targacept has product candidates in development for Alzheimer's disease and cognitive deficits in schizophrenia, pain, and depression and anxiety disorders, as well as multiple preclinical programs. Targacept also has strategic alliances with AstraZeneca and GlaxoSmithKline. Targacept's news releases are available on its website at www.targacept.com.