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Targacept Reports Second Quarter 2012 Financial Results

Targacept, Inc. (NASDAQ: TRGT), a clinical-stage biopharmaceutical company developing novel NNR Therapeutics™, today reported its financial results for the second quarter and six months ended June 30, 2012.

“Our focus remains on quality execution of our development programs and the efficient use of capital. We look forward to our next clinical readout, from a Phase 2 study of our lead alpha7 NNR compound, TC-5619, in inattentive-predominant ADHD, where we expect to report top-line results next month,” said Mark Skaletsky, Targacept’s Chairman of the Board of Directors. “With cash and investments of $205.9 million as of June 30, 2012, Targacept is well capitalized and positioned for future success.”

Targacept is currently conducting three Phase 2 clinical trials. Enrollment for a Phase 2 study of TC-5619 in adults with inattentive-predominant attention deficit/hyperactivity disorder has completed, and enrollment for a Phase 2b study of TC-5619 as a treatment for negative symptoms and cognitive dysfunction in schizophrenia and a Phase 2b study of AZD3480 as a treatment for mild to moderate Alzheimer’s disease remains ongoing. Targacept is also evaluating a late preclinical product candidate as a treatment for Parkinson's disease and related disorders supported by grant funding from The Michael J. Fox Foundation for Parkinson’s Research.

Financial Results

Targacept reported net income of $14.5 million for the second quarter of 2012, compared to a net loss of $2.3 million for the second quarter of 2011. The net income position for the 2012 period was principally due to an increase of $12.9 million in deferred revenue recognition and a decrease of $7.7 million in research and development expenses, partially offset by $2.3 million in charges related to a reduction in force. For the six months ended June 30, 2012, Targacept reported net income of $16.8 million, compared to net income of $10.3 million for the corresponding period of 2011. The higher net income for the 2012 period was primarily due to a decrease in research and development expenses of $13.4 million, partially offset by a decrease of $3.2 million in deferred revenue recognition and $2.3 million in charges related to a reduction in force. Non-cash, stock-based compensation charges of $3.1 million and $2.2 million were recorded for the second quarter of 2012 and 2011, respectively, and $5.0 million and $4.4 million for the six months ended June 30, 2012 and 2011, respectively. As of June 30, 2012, cash and investments in marketable securities totaled $205.9 million.

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