July 28, 2010 A Model for Corporate Involvement in Workforce Development – NCBioNetwork Meeting at Forsyth Tech, Winston-Salem

July 28, 2010

A Model for Corporate Involvement in Workforce Development – NCBioNetwork Meeting at Forsyth Tech, Winston-Salem

Copyright © 2010 Targacept, Inc. – All rights reserved

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Cautionary Note re: Forward-Looking StatementsCautionary Note re: Forward-Looking Statements

This presentation includes “forward-looking statements” made under the provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements that are not purely historical in nature regarding, without limitation: the progress or scope of development of TC-5214, AZD3480, AZD1446, TC-5619, TC-6987 or any of our other product candidates or programs, such as the size, design, population, conduct, duration or objective of any clinical trial, the timing for initiation or completion of any clinical trial, for availability of results from any clinical trial, for submission or approval of any regulatory filing or for meeting with regulatory authorities, or the indication(s) for which a product candidate may be developed; the competitive position of TC-5214, AZD3480, AZD1446, TC-5619, TC-6987 or any of our other product candidates; the commercial opportunity in any particular indication; any payments that AstraZeneca or GlaxoSmithKline may make to us; the impact on our alliance of GlaxoSmithKline’s shift in discovery research focus announced in February 2010; or our plans, expectations, objectives, prospects or future operations, financial position, revenues, costs or expenses. The words “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” “scheduled” and similar expressions are intended to identify forward-looking statements. Actual results, performance or experience may differ materially from those expressed or implied by any forward-looking statement as a result of various important factors, including our critical accounting policies and the risks and uncertainties described under the heading “Risk Factors” in our most recent Annual Report on Form 10-K and in other filings that we make with the Securities and Exchange Commission. As a result of the risks and uncertainties, the results or events indicated by the forward-looking statements may not occur. In addition, market and industry statistics contained in this presentation are based on information available to us that we believe to be reliable but have not independently verified.All forward-looking statements speak only as of the date this presentation is made and should not be relied upon as representing our views as of any date after this presentation is made. We specifically disclaim any obligation to update any forward-looking statement, except as required by applicable law.


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Targacept, Inc.Targacept, Inc.

Clinical-stage biopharmaceutical company

Discovering and developing NNR Therapeutics™

New class of drugs for the treatment of central nervous system diseases and disorders

HQ and Laboratories


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NNRs: “Volume Knobs” of the Nervous System that Normalize the Brain’s Chemical BalanceNNRs: “Volume Knobs” of the Nervous System that Normalize the Brain’s Chemical Balance

Targacept’s NNR-SelectiveCompounds Optimize

NNR Activity

NNRs Control the Release of All Major Neurotransmitters

from Nerve Endings


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NNR Target Diversity Enables Treatment of Multiple Diseases With Diverse PharmacologiesNNR Target Diversity Enables Treatment of Multiple Diseases With Diverse Pharmacologies

16 Human Genes Encode..

..for a Number of Protein Targetsin the Human Body

Glutamate

GABA

Dopamine

Acetylcholine

Norepinephrine

Serotonin

BDNF, bFGF, NGF

TH, PNMT, NFkB

Nitric Oxide

TNFIL8

Modulating Key Pathways

Relevant to Debilitating Diseases

Alzheimer’s

MCI / AAMI

ADHD / ADD

Schizophrenia

Parkinson’s

Pain

Anxiety

Depression

Obesity

Smoking cessation

Ulcerative colitis


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It takes about 20-25 years to discover and develop a first -in-class medicine Average cost per approved drug ~$1 billion Important to select the right compounds for costly clinical development Targacept’s Proprietary Drug Discovery Platform: Pentad™ = biological

data + sophisticated, computer-based methodologies

High Failure Rate in Discovery……Mitigating the RiskHigh Failure Rate in Discovery……Mitigating the Risk


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Unparalleled Patent Position in NNR SpaceUnparalleled Patent Position in NNR Space

Issued Patents, US and EU

Pfizer

Neurosearch

47474747Merck

43434343

Abbott

AstraZeneca

Sanofi-Aventis

J&JNovartis

74747474

107107

47474747

39393939

17171717

66663333 555544443333

BayerCoMentis Servier

5555

Roche/ Memory

5555

Critical

Chart reflects results or patent literature search conducted by Targacept using Delphion Research; includes patents issued in the U.S. or Europe between January 1990 and April 2009.


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Deep Pipeline – Areas of Large Unmet Medical NeedDeep Pipeline – Areas of Large Unmet Medical Need

•$80-$100M investment in our pipeline in 2010•$0.5B investment over next 5 years•$65M worldwide outsourcing commitment for Phase 3 clinical development in depression program


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Optimistic PragmatismOptimistic Pragmatism

Blue Ocean Strategy

Less Competition/Significant Unmet Medical Need

http://www.blueoceanstrategy.com

Our mission is to provide superior treatment options for complex diseases and disorders to improve patients’ lives by developing innovative new medicines that exploit the unique

role of NNRs.

Compete in Red Oceanswith Big Sharks (alliances

with AstraZeneca andGlaxoSmithKline)

Compete in Blue Oceans with Submarines

(Targacept)

DepressionAnxiety

HypertensionAddiction

AD, ADHD, CDS,Parkinson’s Disease


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Financial Highlights – Cash is KingFinancial Highlights – Cash is King

Operating Statement Year Ended12/31/2009

Year Ended12/31/2008

Operating Revenues $25,062 $20,085

R&D Expense 40,179 40,981

G&A Expense 8,167 6,499

License Fees 16,350 0

Net Loss $(39,404) $(25,661)

Cash Position & Capitalization 12/31/2009 12/31/2008

Cash and Investments $111,066 $88,363

Total Debt 3,756 4,798

Shares Outstanding 28,227 24,964


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Timing is everything………..

Targacept: A Public Company is Born April 2006Targacept: A Public Company is Born April 2006


Impact of Capital Market Conditions, Clinical Trial Outcomes, and Investor Sentiment of Value GeneratorsImpact of Capital Market Conditions, Clinical Trial Outcomes, and Investor Sentiment of Value Generators


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Economic Footprint in Winston-SalemEconomic Footprint in Winston-Salem

2001

$6+ million invested in 2001 up-fit

$1 million in expenses associated with relocation from RJR

Lease of 40,000 square feet (3rd & 4th floors)

2007 1st floor expansion: 14,000 square feet Office and laboratory space Up fit costs: $3+ million 5-year renewal of 3rd and 4th floor space

2010 Further facility expansion by 18,000 square feet


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Economic Footprint in State of North CarolinaEconomic Footprint in State of North Carolina

$ 1,931,622North Carolina State Income Tax paid by

Targacept employees in 2009


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Importance of Optimism in Economic RecoveryImportance of Optimism in Economic Recovery

Targacept Adding ~30 New Jobs in 2010


Investing in Talent DevelopmentInvesting in Talent Development

Targacept’s Internship Programs


Working in BiotechWorking in Biotech

“If you like excitement, really hard work, and aswashbuckling wild ride, and if you like to feel thateverything you do every single day impacts thevitality and viability of your company, then you aregoing to fit in at a biotech firm.”

Gregory L. VerdineProfessor of Chemistry and Chemical BiologyHarvard UniversityFounder of Seven (7) Biotech Start-Ups

Chemical & Engineering News. April 12, 2010, Volume 88, Number 15, pp. 47-50


Birth of Targacept’s Internship ProgramBirth of Targacept’s Internship Program

Originally designed to attract women and minorities to careers in life sciences

Joint venture between Winston-Salem State University, Salem College, and Targacept

Initially undergrads only; later expanded to include high school and graduate students

2002 – 1st year of summer interns – 3 minority women students funded – assignments in scientific research departments


Collaboration Between Forsyth Technical Community College and TargaceptCollaboration Between Forsyth Technical Community College and Targacept

2001 – Collaboration between FTCC and Targacept to jointly develop curriculum elements for Biotechnology Associate’s Degree program

2004 – Two FTCC Biotech Program Interns selected for summer assignment; Regina Whitaker subsequently hired as a full-time Targacept employee


Internship StatisticsInternship Statistics

Since 2002, provided 58 summer internship (10 weeks, 40 hours/week) plus two January-Term (4 weeks, 40 hours/week) student assignments

This includes 10 summer interns currently at Targacept (4 graduate, 5 undergraduate, and 1 high school student)

We have partnered with total of 8 local colleges/universities and one high school plus one international intern from France

75% scientific, 25% business internships

Competitive stipend co-funded equally between TRGT and academic institutions


Targacept’s Internship Program with FTCCTargacept’s Internship Program with FTCC

Associate’s Degree Program

10 weeks, 16 hours per week

Stipend provided by Targacept, as a grant to FTCC

Fulfills requirement for graduation

One or two openings per summer (careful matching of interests)

Assignments typically in our Medicinal Chemistry, Neurochemistry, Molecular Design, and Chemical Process Development laboratories in laboratory technician-type roles


Internship Program RequirementsInternship Program Requirements

Excellent background in the topic area Top grades Professor’s/educator’s recommendation Responsible study habits, an indicator for responsible work

habits Excellent communication skills Relevant computer expertise Ability to quickly adapt to Targacept’s work culture – flexibility,

accountability, execution, personal responsibility, resourcefulness, problem-ID/solving, team skills

Commitment to the full 10-week (Summer) or 4-week (Jan Term) assignment


Targacept’s Internship ProgramTargacept’s Internship Program

Benefits to Intern– Interview experience– Professional experience in area of

study– Summer income– Relationships with fellow interns– “Real world” work experience—

business hours, accountability– Presentation skills– Numerous opportunities for

professional and social interaction with each other and with employees at all levels in the company

– Seminar by HR: “How to Interview” and “Resume Preparation”

– Resume editing upon request


Targacept’s Internship ProgramTargacept’s Internship Program

Benefits to University or Community College– Top quality, relevant work experience provided for student– Grant received for Targacept’s portion of the stipend– Presentation invitation for student advisor and career

services officers– Relationship with Targacept strengthened– Improved understanding of the needs of companies,

allowing curriculum enhancements/adjustments– Ability to use this as a model to encourage other companies

to sponsor internship programs– Ability to raise grant funds from agencies such as NC

Biotech Center, SBTDC and others organizations to support internships


Rob Gould – 2009 Summer Intern – Wake Forest University, Physiology/Pharmacology DepartmentRob Gould – 2009 Summer Intern – Wake Forest University, Physiology/Pharmacology Department

“Overall, my summer internship allowed me to grow as a researcher by expanding my scientific skill set and seeing first-hand the differences between academic and industrial research. However, it was through such personal interactions with Targacept researchers and administrative individuals that made my experience so memorable. It is hard to imagine a similar experience evolving from a “Big Pharma” environment.”

www.whatcanbiotechdoforyou.com


Local SupportLocal Support

“These internships help our students grow as they deliver positive input to Targacept. We are placing in motion the opportunity for our students to compete for one this coming summer…keep up the good opportunities.” November 11, 2009

Stanley W. Mandel, Ph.D., CPA, PEExecutive Professor & Director, Angell

Center for ENTBabcock Graduate School of

ManagementWake Forest University

“This is a very good program to help keep our trained young graduates here in the region. Also, thanks to Targacept for hosting several of our local interns who have received some of our grant support for their research internships. These collaborative efforts are what continue to build our Biotechnology Cluster for the region.” November 11, 2009

Gwyn F. Riddick, MBARegional Director, Piedmont Triad OfficeNorth Carolina Biotechnology Center


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Targacept People: Key to Company SuccessTargacept People: Key to Company Success

15 different countries of national origin

Nearly half of employees have Ph.D. and/or M.D. degree

Many serve as adjunct faculty or academic advisors

Strengths-based organization: opportunities at all levels


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Differentiate and Distinguish Your Company

For the 4th consecutive year, we were just named one of the Top 30 Best Places to Work in Industry by The Scientist

Magazine

Building Health, Restoring Independence™

Documents

July 28, 2010 A Model for Corporate Involvement in Workforce Development – NCBioNetwork Meeting at Forsyth Tech, Winston-Salem