If they made a movie about Targacept’s (Nasdaq:TRGT) experience so far this year, it would probably be called Reversal of Fortune II.

The year started out so promising for the 14-year-old Winston-Salem, N.C.-based biopharmaceutical company and its investors. In early March, the company’s shares had hit an all-time high of $30.47, up nearly 14% from the beginning of the year and light years away from the $2.76 it was trading at just two years earlier.

Then the proverbial roof caved in.

One big blow occurred when AstraZeneca (NYSE:AZN) decided to put the kibosh on a potentially lucrative partnership deal.  Looking at a $30 million payment, AstraZeneca declined its option to develop an experimental schizophrenia drug that had recently cleared a Phase II hurdle. If AstraZeneca had picked up the option, it would also have committed itself to $212 million in milestones on the drug known as TC-5619.

Just two months earlier, GlaxoSmithKline (NYSE:GSK) had cancelled a $1.5 billion development agreement on a central nervous system drug with Targacept.

Shortly after GlaxoSmithKline bowed out, Targacept reported that TC-5619 failed to meet its goals in a midstage study focusing on attention-deficit/attention hyperactivity disorder.

Of course, the market despises bad news, and investors demonstrated their disappointment with Targacept by taking the stock down some 30% to $21.62.

Despite the setbacks, Targacept remains optimistic about its pipeline and has vowed to carry on alone if necessary.  The company was probably somewhat puzzled by AstraZeneca’s failure to exercise its option on TC-5619 for schizophrenia. After all, in Targacept reported in January that the compound met its goals in a mid-stage trial in patients with the illness.

Company CEO J. Donald Debethizy acknowledged that with AstraZeneca as a partner, Targacept would have had a great deal more resources to study TC-5619’s potential as a treatment for ADHD and Alzheimer’s Disease. Now that the company is flying solo, its priority will be to develop the drug for use in schizophrenia. He said the company will announce its development plans soon, emphasizing that clinical results indicate the unique potential of TC-5619 to treat negative and cognitive symptoms of schizophrenia, a critical need not met by currently available treatment.

Schizophrenia is a chronic, severe and disabling form of psychosis. In addition to symptoms such as delusions, hallucinations, schizophrenia is often marked by impairment in cognitive functions, such as attention, vigilance, memory, and reasoning. There are close to 5 million people with schizophrenia in the world’s seven major pharmaceutical markets.

Targacept and AstraZeneca still remain partners on Targacept’s lead drug, which is in Phase III clinical studies as an adjunct treatment for major depression. It is a nicotinic channel modulator that is thought to derive antidepressant activity by modulating the activity of various neuronal nicotinic receptors, or NNRs.

 Interestingly, Targacept’s approach is based on research performed by a tobacco company — R.J. Reynolds — that was started in 1982 to study the activity and effects of nicotine. Targacept is developing compounds that interact selectively with specific NNR subtypes to achieve positive medical effects by modulating their activity. The company has a number of patents on its technology.

However, it’s Targacept’s success on its now-solo projects that will decide whether AstraZeneca and GlaxoSmithKline will regret their decisions.