May 2, 2010

1. May 2, 2010 Seventh Annual Community College Program Day – 2010 BIO International Convention Chicago

2. Cautionary 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.

3. HQ and Laboratories 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

4. NNRs: “Volume Knobs” of the Nervous System that Normalize the Brain’s Chemical Balance Targacept’s NNR-Selective Compounds Optimize NNR Activity NNRs Control the Release of All Major Neurotransmitters from Nerve Endings 4

5. NNR Target Diversity Enables Treatment of Multiple Diseases With Diverse Pharmacologies ..for a Number of Protein Targets in the Human Body Relevant to Debilitating Diseases 16 Human Genes Encode.. Modulating Key Pathways a 1 a7 a4b2 a4b2a5 a4b4 a3b4b2 a6b4b3a5 a3b2 a3b4 a3b2a5 a3b4a5 a1b1g/e Alzheimer’s MCI / AAMI ADHD / ADD Schizophrenia Parkinson’s Pain Anxiety Depression Obesity Smoking cessation Ulcerative colitis Glutamate GABA Dopamine Acetylcholine Norepinephrine Serotonin BDNF, bFGF, NGF TH, PNMT, NFkB Nitric Oxide TNFa, IL8 a 2 a 3 a 4 a 5 a 6 a 7 a 9 a 10 b 1 b 2 b 3 b 4 d g e

6. High Failure Rate in Discovery……Mitigating the Risk • 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

7. Unparalleled Patent Position in NNR Space Issued Patents, US and EU 107 Pfizer 74 Neurosearch Abbott Merck AstraZeneca 47 47 43 39 Sanofi-Aventis Roche/ Memory 17 J&J Critical Bayer Servier CoMentis Novartis 6 5 3 4 5 5 3 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.

8. Deep 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

9. Optimistic Pragmatism Blue Ocean Strategy Less Competition/Significant Unmet Medical Need http://www.blueoceanstrategy.com Compete in Red Oceans with Big Sharks (alliances with AstraZeneca and GlaxoSmithKline) Compete in Blue Oceans with Submarines (Targacept) • Depression • Anxiety • Hypertension • Addiction AD, ADHD, CDS, Parkinson’s Disease 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.

10. Financial Highlights – Cash is King

11. Targacept’s Development Journey Snapshot TC-5214 Entering Phase 3 Clinical Development Spinout IPO CNS Indications Big Pharma Alliances VC Funding

12. Targacept: A Public Company is Born April 2006 Timing is everything………..

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

14. Economic 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

15. Economic Footprint in State of North Carolina $ 1,931,622 North Carolina State Income Tax paid by Targacept employees in 2009

16. Importance of Optimism in Economic Recovery Targacept Adding ~30 New Jobs in 2010

17. Investing in Talent Development Targacept’s Internship Programs

18. Working in Biotech “If you like excitement, really hard work, and a swashbuckling wild ride, and if you like to feel that everything you do every single day impacts the vitality and viability of your company, then you are going to fit in at a biotech firm.” Gregory L. Verdine Professor of Chemistry and Chemical Biology Harvard University Founder of Seven (7) Biotech Start-Ups Chemical & Engineering News. April 12, 2010, Volume 88, Number 15, pp. 47-50

19. Birth 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

20. Collaboration 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

21. Internship Statistics • Since 2002, provided 48 summer internship (10 weeks, 40 hours/week) plus two January-Term (4 weeks, 40 hours/week) student assignments • 11 summer internships planned for 2010 • YTD 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

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

23. Internship 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

24. Targacept’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

25. Targacept’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

26. Rob 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

27. Local 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, PE Executive Professor & Director, Angell Center for ENT Babcock Graduate School of Management Wake 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, MBA Regional Director, Piedmont Triad Office North Carolina Biotechnology Center

28. Targacept 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

29. 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

30. Building Health, Restoring Independence™