(Winston-Salem, N.C.) Targacept, Inc. (Nasdaq: TRGT), a clinical-stage biopharmaceutical company developing a new class of drugs known as NNR Therapeutics™, today announced that its collaboration and license agreement with AstraZeneca for the global development and commercialization of TC-5214 for major depressive disorder (MDD) has become effective as a result of early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. Effectiveness of the agreement triggered an upfront payment of $200 million from AstraZeneca to Targacept.

AstraZeneca and Targacept are preparing for the planned mid 2010 initiation of Phase 3 clinical development of TC-5214 as an adjunct to antidepressant therapy in adults with MDD who do not respond adequately to first-line antidepressant treatment, with the goal of filing a new drug application with the U.S. Food and Drug Administration in 2012. The companies also plan to conduct a Phase 2 study exploring TC-5214 as a monotherapy for MDD.

Details of the Collaboration and License Agreement

As previously announced, Targacept is eligible under the agreement to receive an additional $540 million if specified development, regulatory and first commercial sale milestones are achieved, up to an additional $500 million if specified sales related milestones are achieved and significant stepped double-digit royalties on net sales worldwide. Under the terms of an existing license agreement, Targacept is required to pay a percentage of the upfront payment and each of the milestone payments that may be received from AstraZeneca, as well as royalties, to the University of South Florida Research Foundation. Targacept has retained an option for a co-promotion of TC-5214 to a limited target physician audience in the United States.

Under the terms of the agreement, AstraZeneca is responsible for 80% of the costs of the initial global development program for TC-5214 and Targacept is responsible for the remaining 20%, except that AstraZeneca is responsible for 100% of development costs that are required only to obtain or maintain regulatory approval in countries outside the United States and the European Union. AstraZeneca is also responsible for executing and funding the costs of global commercialization of TC-5214 and has agreed to assume Targacept’s manufacturing and supply agreements with third parties in relation to TC-5214. The agreement also provides for a specified period for the parties to negotiate a potential multi-year research program that would be conducted by Targacept to identify and develop additional NNR Therapeutics for MDD and possibly other indications.

Existing Collaboration for Cognitive Disorders

In addition to the TC-5214 collaboration, Targacept and AstraZeneca have a global collaboration focused on cognitive disorders entered into in 2005. Three product candidates in the collaboration are currently in clinical development; including AZD3480 for attention deficit/hyperactivity disorder (ADHD), AZD1446 for Alzheimer’s disease, and TC-5619 for cognitive dysfunction in schizophrenia.

About Major Depressive Disorder

Major Depressive Disorder is a common illness that has been estimated to affect over 42 million people worldwide, and the global antidepressant market has been estimated at approximately $20 billion. Serotonin reuptake inhibitors (SSRIs) are the most commonly prescribed class of drugs for depression, but many patients fail to respond adequately to them. The STAR*D study conducted by the National Institute of Mental Health suggests that approximately 63 percent of patients do not achieve remission with first-line SSRI treatment.

About TC-5214

Scientific evidence suggests that depressive symptoms are associated with an overstimulation of NNRs and other receptors in the brain that are activated by the neurotransmitter acetylcholine. This overstimulation is referred to as increased cholinergic tone. TC-5214 has properties that modulate forms of NNR subtypes thought to be involved in the increased cholinergic tone associated with depression. In particular, TC-5214 blocks certain NNR channels. In 2009, Targacept completed a Phase 2b trial for TC-5214 in subjects who did not respond adequately to first-line treatment with the SSRI citalopram alone in which the primary outcome measure [mean change between treatment (TC-5214 + citalopram) and placebo (Placebo + citalopram) from baseline on the Hamilton Rating Scale for Depression] and all secondary measures were statistically significant in favor of TC-5214 on an intent to treat basis. In this trial, the most frequent adverse events were headache, dizziness and constipation and there was no clinically significant difference between the dose groups in discontinuations due to adverse events.

Targacept is a clinical-stage biopharmaceutical company that discovers and develops NNR Therapeutics™, a new class of drugs for the treatment of central nervous system diseases and disorders, in support of its vision of building health and restoring independence for patients. Targacept has clinical-stage product candidates in development for major depressive disorder, attention deficit/hyperactivity disorder, Alzheimer’s disease and cognitive dysfunction in schizophrenia, as well as multiple preclinical programs. Targacept has two collaborations with AstraZeneca and a strategic alliance with GlaxoSmithKline. Targacept’s news releases are available on its website at www.targacept.com.