<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-18311
NEUROGEN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-2845714
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
35 Northeast Industrial Road
Branford, Connecticut 06405
(Address of principal executive offices) (Zip Code)
(203) 488-8201
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
As of August 15, 1996, the registrant had 14,192,582 shares of Common Stock
outstanding.
<PAGE>
NEUROGEN CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
Number
------
Part I - Financial Information
<S> <C> <C>
Item 1. Financial Statements........................................................... 1
Balance Sheets at June 30, 1996 and
December 31, 1995.......................................................... 1,2
Statements of Operations for the three-month and six-month
periods ended June 30, 1996 and 1995....................................... 3
Statements of Cash Flows for the three-month and six-month
periods ended June 30, 1996 and 1995....................................... 4
Notes to Financial Statements................................................ 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................ 6-10
<CAPTION>
Part II - Other Information
<S> <C> <C>
Item 1. Legal Proceedings.............................................................. 11
Item 2. Changes in Securities.......................................................... 11
Item 3. Defaults upon Senior Securities................................................ 11
Item 4. Submission of Matters to a Vote of Security Holders............................ 11
Item 5. Other Information.............................................................. 11
Item 6. Exhibits and Reports on Form 8-K............................................... 11
Signature.................................................................................. 13
Exhibit Index.............................................................................. 14-16
</TABLE>
1
<PAGE>
Part I - Financial Information
Item 1 - Financial Statements
Neurogen Corporation
Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 49,365,073 $ 26,004,548
Marketable securities 45,056,524 39,881,172
Receivables from corporate partner 1,603,000 --
Other current assets 1,095,683 1,517,543
--------------- ---------------
Total current assets 97,120,280 67,403,263
Marketable securities - long term -- 25,731,798
Property, plant & equipment:
Land 425,000 425,000
Building 8,522,595 8,415,766
Equipment 5,048,015 4,071,650
Furniture 199,144 166,072
Construction in progress 491,709 293,911
--------------- ---------------
14,686,463 13,372,399
Less accumulated depreciation 2,570,991 2,146,482
--------------- ---------------
Net property, plant and equipment 12,115,472 11,225,917
Other assets, net 426,643 495,384
--------------- ---------------
$ 109,662,395 $ 104,856,362
=============== ===============
</TABLE>
See accompanying notes to financial statements.
1
<PAGE>
Neurogen Corporation
Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
Liabilities & Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses $ 1,222,879 $ 1,997,647
Unearned revenue from corporate partners 3,900,000 4,100,000
Current portion of mortgage payable 170,064 159,812
--------------- ---------------
Total current liabilities 5,292,943 6,257,459
Mortgage payable, excluding current portion 372,400 460,075
Other compensation 62,587 62,587
--------------- ---------------
Total liabilities 5,727,930 6,780,121
Stockholders' Equity:
Preferred stock, par value $.025 per share.
Authorized 2,000,000 shares; none issued -- --
Common stock, par value $.025 per share.
Authorized 30,000,000 shares; issued and outstanding
14,176,382 shares at June 30, 1996 and
13,949,064 shares at December 31, 1995 354,410 348,727
Additional paid-in capital 107,437,202 106,039,959
Accumulated deficit (3,684,849) (8,412,660)
Unrealized gain (loss) on marketable securities (172,298) 100,215
--------------- ---------------
Total stockholders' equity 103,934,465 98,076,241
--------------- ---------------
$ 109,662,395 $ 104,856,362
=============== ===============
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
Neurogen Corporation
Statements of Operations and Accumulated Deficit
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating revenues:
License fees $ -- $ 14,000,000 $ 3,000,000 $ 14,000,000
Research and development 3,944,666 1,869,666 7,189,333 3,739,333
-----------------------------------------------------------------------------
Total operating revenues 3,944,666 15,869,666 10,189,333 17,739,333
Operating Expenses:
Research and development 3,380,244 2,845,719 6,431,768 5,889,691
General and administrative 643,070 817,870 1,391,266 1,506,302
--------------- ---------------- ---------------- -----------------
Total operating expenses 4,023,314 3,663,589 7,823,034 7,395,993
Other income (expense):
Investment income 1,238,241 273,095 2,487,732 453,470
Interest expense (11,797) (17,897) (26,220) (35,996)
--------------- ---------------- ---------------- -----------------
Total other income, net 1,226,444 255,198 2,461,512 417,474
Income before provision for income taxes 1,147,796 12,461,275 4,827,811 10,760,814
Provision for income taxes 30,000 227,000 100,000 227,000
--------------- ---------------- ---------------- -----------------
Net income 1,117,796 12,234,275 4,727,811 10,533,814
Earnings per share:
Primary $ 0.07 $ 1.10 $ 0.30 $ 0.96
=============== ================ ================ =================
Fully diluted $ 0.07 $ 1.07 $ 0.30 $ 0.93
=============== ================ ================ =================
Shares used in calculation of
earnings per share:
Primary 15,533,000 11,172,000 15,536,000 10,958,000
=============== ================ ================ =================
Fully diluted 15,533,000 11,401,000 15,536,000 11,381,000
=============== ================ ================ =================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
Neurogen Corporation
Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months Six Months
Ended June 30, Ended June 30,
1996 1995
(Unaudited) (Unaudited)
--------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,727,811 $ 10,533,814
Adjustments to reconcile net income
to net cash provided by (used in) operating
activities:
Depreciation and amortization expense 447,429 379,226
Gain on sale of assets (15,562) --
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable and accrued expenses (774,768) 72,043
Increase (decrease) in unearned revenue from corporate partner (200,000) 3,900,000
Decrease in other current assets 421,860 65,076
Increase in receivable from corporate partners (1,603,000) --
(Increase) decrease in other assets, net 61,383 (29,610)
--------------- ----------------
Net cash provided by operating
activities 3,065,153 14,920,549
Cash flows from investing activities:
Purchase of plant and equipment (1,422,976) (705,648)
Purchases of marketable securities (14,234,684) (7,573,237)
Maturities and sales of marketable securities 34,518,617 8,064,154
Proceeds from sale of asset 108,912 --
--------------- ----------------
Net cash provided by (used in) investing activities 18,969,869 (214,731)
Cash flows from financing activities:
Exercise of employee stock options 1,402,926 199,976
Principal payments under mortgage payable (77,423) (68,370)
Principal payments under capital lease obligations -- (30,858)
--------------- ----------------
Net cash provided by financing
activities 1,325,503 100,748
--------------- ----------------
Net increase in cash and cash equivalents 23,360,525 14,806,566
Cash and cash equivalents at beginning of period 26,004,548 9,439,727
--------------- ----------------
Cash and cash equivalents at end of period 49,365,073 24,246,293
=============== ================
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
Neurogen Corporation
Notes to Financial Statements
June 30, 1996
(Unaudited)
(1) Basis of Presentation and Summary of Significant Accounting Policies
---------------------------------------------------------------------
The unaudited financial statements have been prepared from the books and
records of Neurogen Corporation (the "Company") in accordance with
generally accepted accounting principles for interim financial information
pursuant to Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Interim
results are not necessarily indicative of the results that may be expected
for the fiscal year.
(2) Marketable Securities
---------------------
Marketable securities consist principally of debt securities with
maturities of three months to five years and have been classified as
available for sale securities. Management considers these investments,
which represent funds available for current operations, an integral
component of its cash management activities. Accordingly, marketable
securities have been classified as current assets in the June 30, 1996
balance sheet.
(3) Adoption of New Accounting Pronouncements
-----------------------------------------
The Company had adopted Statement of Financial Accounting Standards No. 121
("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of". SFAS 121 requires impairment losses
to be recorded on the long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount. SFAS
121 also addresses the accounting for any expected disposal of long-lived
assets. The adoption of SFAS 121 had no impact on the financial position or
results of operations of the Company as no indicators of impairment
currently exist.
The Company has adopted the disclosure provisions of Financial Accounting
Standards No. 123 ("SFAS 123"), Accounting and Disclosure of Stock-Based
Compensation. The Company will continue to account for its stock-based
compensation arrangements under the provisions of APB 25, Accounting for
Stock Issued to Employees.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Since its inception in September 1987, Neurogen has been engaged in the
discovery and development of drugs. The Company has not derived any
revenue from product sales and, excluding the effect of license fees
received from Schering-Plough Corporation ("Schering-Plough") in 1995 and
1996 and Pfizer Inc ("Pfizer") in 1995, expects to incur significant losses
in most years prior to deriving any product revenues. Its revenues to date
have come from three collaborative research agreements entered into with
Pfizer, one collaboration with Schering-Plough, and from interest income.
RESULTS OF OPERATIONS
Results of operations may vary from period to period depending on
numerous factors, including the timing of income earned under existing or
future strategic alliances, joint ventures or financings, if any, the
progress of the Company's research and development projects, technological
advances and determinations as to the commercial potential of proposed
products. Neurogen expects research and development costs to increase
significantly over the next several years as its drug development programs
progress. In addition, general and administrative expenses necessary to
support the expanded research and development activities are expected to
increase for the foreseeable future.
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
The Company's operating revenues decreased to $3.9 million for the
three months ended June 30, 1996 from $15.9 million for the same period in
1995. The second quarter results in 1995 include a nonrecurring license fee
of $14.0 million received from Schering-Plough in connection with entering
into the Schering-Plough Agreement (as defined below). Research and
development revenues increased $2.1 million to $3.9 million due to the
commencement of funding under the Schering-Plough Agreement and
the 1995 Pfizer Agreement (as defined below) in July 1995 and November
1995, respectively. Research and development revenues include amounts
received from Pfizer and Schering-Plough, under seperate collaborations, to
fund Neurogen's collaborative research programs and, in the case of its
NPY-obesity collaboration with Pfizer, to reimburse Neurogen for certain
expenses for the clinical development of the Company's lead anti-obesity
drug NGD 95-1.
Research and development costs increased 19 percent to $3.4 million for
the three-month period ended June 30, 1996 as compared to the same period
in 1995. The increase is due to increases in research staff, laboratory
supplies and clinical and development work on the company's lead compound
for eating disorders, NGD 95-1. Research and development costs represented
84 percent of total operating expenses for the second quarter of 1996 as
compared to 78 percent for the same period in 1995.
General and administrative expenses decreased 21 percent to $0.6
million for the three-month period ended June 30, 1996 as compared to
<PAGE>
the same period in 1995. This decrease is due to the ordinary variability in
administrative activities from quarter-to-quarter.
Other income consisting primarily of interest income, and gains and losses
from invested cash and marketable securities increased to $1.2 million for the
second quarter of 1996 from $0.3 million for the same period in 1995 due
primarily to a higher level of invested funds.
The Company recognized net income of $1.1 million for the three months ended
June 30, 1996 as compared with a net income of $12.2 million for the same period
in 1995. The change in earnings is primarily due to the recognition of the
nonrecurring $14.0 million license fee received from Schering-Plough in the
second quarter of 1995 and the increase in research revenues, all as noted
above.
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
The Company's operating revenues decreased to $10.2 million for the six
months ended June 30, 1996 from $17.7 million for the same period in 1995.
Results for the six months ended June 30, 1996 include the recognition of a
previously unearned license fee of $3.0 million received from Schering-Plough in
July 1995 for access to a portion of Neurogen's combinatorial chemistry
libraries. The Company's 1995 results for the six months ended June 30, 1995
include license revenue of $14.0 million received from Schering-Plough in 1995
in connection with entering into the Schering-Plough Agreement. Research and
development revenues increased $3.5 million, or 92 percent, to $7.2 million due
to the commencement of funding under the Schering-Plough Agreement and the 1995
Pfizer Agreement. Research and development revenues include amounts received
from Pfizer and Schering-Plough, under separate collaborations, to fund
Neurogen's collaberative research programs and, in the case of its NPY-obesity
collaboration with Pfizer, to reimburse Neurogen for certain expenses for the
clinical development of the Company's lead anti-obesity drug NGD 95-1.
Research and development costs increased 9 percent to $6.4 million for the
six-month period ended June 30, 1996 as compared to the same period in 1995. The
increase is due to increases in research staff, laboratory supplies and clinical
and development work on the company's lead compound for eating disorders, NGD
95-1. Research and development costs represented 82 percent of total operating
expenses for the six month periods ended June 30, 1996 and 80% for the six month
period ended June 30, 1995.
General and administrative expenses decreased 8 percent to $1.4 million for
the six months ended June 30, 1996 as compared to the same period in 1995. This
decrease is due to the ordinary variability in administrative activities from
quarter-to-quarter.
Other income consisting primarily of interest income, and gains and losses
from invested cash and marketable securities increased to $2.5 million for the
six months ended June 30, 1996 from $0.5 million for the same period in 1995 due
primarily to a higher level of invested funds.
The Company recognized net income of $4.7 million for the six months ended
June 30, 1996 as compared with net income of $10.5 million for the
<PAGE>
same period in 1995. The change in earnings is primarily due to the recognition
of the nonrecurring $14.0 million and $3.0 million license fees and the increase
in research revenues, all as noted above.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996 and December 31, 1995, cash, cash equivalents and marketable
securities were in the aggregate $94.4 million and $91.6 million respectively.
While the Company's aggregate level of cash, cash equivalents and marketable
securities did not change significantly during the first six months of 1996,
these levels have fluctuated significantly in the past and are expected to do so
in the future as a result of the factors described below.
Neurogen's cash requirements to date have been met by the proceeds of its
equity financing activities, nonequity amounts received pursuant to
collaborative arrangements and interest earned on invested funds. The Company's
financing activities include three private placement offerings of its common
stock prior to its initial public offering, underwritten public offerings of the
Company's common stock in 1989, 1991 and 1995, and three private sales of common
stock to Pfizer in connection with entering into the Pfizer Agreements. Total
funding received from these equity financing activities was approximately $104.9
million. The Company's expenditures have been primarily to fund research and
development and general and administrative expenses and to construct and equip
its research and development facility.
In the first quarter of 1992, the Company and Pfizer entered into a
collaborative agreement to develop drugs which modulate the neurotransmitter
gama-aminobutric acid, or GABA, to treat anxiety disorders and cognition
impairment (the "1992 Pfizer Agreement") pursuant to which Pfizer made a $13.8
million equity investment in the Company. Under this agreement, the Company has
received or is scheduled to receive $4.6 million in each year from 1992 through
1996 to fund Neurogen's research in its anxiolytic (anxiety-reducing drugs) and
cognitive enhancer programs. Neurogen could also receive milestone payments of
up to $12.5 million during the development and regulatory approval of products
from these programs. In return, Pfizer received the exclusive rights to
manufacture and market collaboration products and for which it will pay Neurogen
royalties based upon net sales levels, if any, for such products. As of June 30,
1996, Pfizer had provided $20.7 million of research funding to the Company
pursuant to the 1992 Pfizer Agreement, in addition to its $13.8 million equity
investment in 1992.
Neurogen and Pfizer entered into their second collaborative agreement (the
"1994 Pfizer Agreement") in July 1994. Under this agreement, Pfizer made an
additional $9.9 million equity investment in the Company. Additionally, the
Company has received or is scheduled to receive approximately $7.4 million
during the three-year period which commenced July 1, 1994, to fund Neurogen's
sleep disorder program and may receive up to an additional $2.4 million for a
fourth year should Pfizer exercise its option to extend the research program
under the
<PAGE>
collaboration. Neurogen could also receive milestone payments of up to $3.3
million during the development and regulatory approval of its sleep disorder
compounds. As part of this second collaboration, Pfizer received the exclusive
rights to manufacture and market collaboration products for which it will pay
Neurogen royalties depending upon net sales levels, if any. As of June 30, 1996,
Pfizer had provided $5.0 million of research funding to the Company pursuant to
the 1994 Pfizer Agreement, in addition to its $9.9 million equity investment in
1994.
Under both the 1992 Pfizer Agreement and the 1994 Pfizer Agreement, in
addition to making the equity investments and the research and milestone
payments noted above, Pfizer is responsible for funding the cost of all clinical
development and the manufacturing and marketing, if any, of drugs developed from
the collaborations.
Neurogen and Pfizer entered into their third collaborative agreement (the
"1995 Pfizer Agreement") in November 1995 to develop drugs which modulate the
neurotransmitter neuropeptide Y (NPY) to treat disorders, including obesity.
Under this Agreement, Pfizer made an additional $16.5 million equity investment
in the Company and paid a $3.5 million license fee. The Company has received or
is scheduled to receive approximately $7.2 million during the three-year period
which commenced November 1, 1995, to fund Neurogen's NPY program and may receive
up to an additional $2.4 million per year for a fourth and fifth year should
Pfizer exercise its option to extend the research program under the
collaboration. Neurogen could also receive milestone payments of up to
approximately $28 million during the development and regulatory approval of
collaboration products. As of June 30, 1996, Pfizer had provided $1.2 million in
research funding pursuant to the 1995 Pfizer Agreement. As part of this third
collaboration, Pfizer received the exclusive worldwide rights to manufacture and
market NPY-based collaboration compounds, subject to certain rights retained by
Neurogen. In this collaboration, Neurogen will fund a minority share of early
stage NAFTA clinical development costs. Neurogen has retained the right to
manufacture any collaboration products in NAFTA countries and has retained a
profit sharing option with respect to product sales in NAFTA countries. If
Neurogen exercises the profit sharing option, it will fund a minority share of
the cost of late stage NAFTA clinical development and NAFTA marketing costs and
in return receive a specified percentage of any profit generated by sales of
collaboration products in NAFTA countries. If Neurogen chooses not to exercise
its profit-sharing option, Pfizer would pay Neurogen royalties on drugs marketed
in NAFTA countries and would fund a majority of early stage and all late stage
development and marketing expenses. In either case Neurogen would be entitled to
royalties on drugs marketed in non-NAFTA countries.
In June 1995, Neurogen and Schering-Plough entered into an agreement (the
"Schering-Plough Agreement") to collaborate in the discovery and development of
drugs for the treatment of schizophrenia and other disorders which act through
the dopamine family of receptors. Pursuant to the Schering-Plough Agreement, the
Company received one-time license fees of $14.0 million for rights relating to
Neurogen's dopamine program and $3.0 million for the right to test certain of
Neurogen's combinatorial chemistry libraries in selected non-CNS
<PAGE>
assays. Schering-Plough also agreed to pay an additional $3.0 million in 1996
for the right to test additional libraries. Neurogen expects to receive
approximately $7.2 million during the two-year period which commenced June 28,
1995, for research and development funding of the Company's dopamine program.
The Company may receive additional research and development funding of up to
$3.6 million per year for three additional one-year periods depending on whether
and the extent to which Schering-Plough exercises its right to extend the
research program under the collaboration. Neurogen could also receive milestone
payments of up to approximately $32 million if certain development and
regulatory objectives are achieved regarding its products subject to the
collaboration. In return, Schering-Plough received the exclusive worldwide
license to market products subject to the collaboration and Neurogen retained
the rights to receive royalties based on net sales levels, if any, and an option
to manufacture products for the United States market. As of June 30, 1996,
Schering-Plough had provided $4.5 million in research funding (including
$900,000 in unearned revenue) pursuant to the Schering-Plough Agreement. In
addition to the payments described above, Schering-Plough is responsible for
funding the cost of all clinical development and marketing, if any, of drugs
subject to the collaboration.
The Company plans to use its cash balance for its research and development
activities, working capital and general corporate purposes. Neurogen anticipates
that its current cash balance, as supplemented by research funding pursuant to
the Pfizer Agreements and the Schering-Plough Agreement, will be sufficient to
fund its current and planned operations through 1999. However, Neurogen's
funding requirements may change and will depend upon numerous factors, including
but not limited to, the progress of the Company's research and development
programs, the timing and results of preclinical testing and clinical studies,
the timing of regulatory approvals, technological advances, determinations as to
the commercial potential of its proposed products, the status of competitive
products and the ability of the Company to establish and maintain collaborative
arrangements with others for the purpose of funding certain research and
development programs, conducting clinical studies, obtaining regulatory
approvals and, if such approvals are obtained, manufacturing and marketing
products. The Company anticipates that it may augment its cash balance through
financing transactions, including the issuance of debt or equity securities and
further corporate alliances. No arrangements have been entered into for any
future financing and no assurances can be given that adequate levels of
additional funding can be obtained on favorable terms, if at all.
As of December 31, 1995, the Company had approximately $12,240,000 of net
operating loss carryforwards available for federal income tax purposes which
expire from the years 2003 through 2009. The Company had approximately
$10,670,000 of Connecticut state tax net operating loss carryforwards as of
December 31, 1995 which expire in the years 1996 through 1999. Because of
"change in ownership" provisions of the Tax Reform Act of 1986, the Company's
utilization of its net operating loss carryforwards may be subject to an annual
limitation in future periods.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable for the first quarter ended June 30, 1996.
ITEM 2. CHANGES IN SECURITIES
Not applicable for the first quarter ended June 30, 1996.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable for the first quarter ended June 30, 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 4, 1996 the Company held its annual meeting of stockholders
(i) to elect a board of eleven directors (Proposal 1) and (ii) to approve the
appointment by the Board of Directors of Ernst & Young, LLP as the independent
auditors for the Company for fiscal year ending December 31, 1996 (Proposal 2).
The stockholders elected the persons named below, the Company's
nominees for directors, as directors of the Company, casting votes in favor of
such nominees or withholding votes as indicated:
<TABLE>
<CAPTION>
Votes in Favor Votes Withheld
-------------- ---------------
<S> <C> <C>
Barry M. Bloom, Ph.D. 11,893,026 7,755
Robert N. Butler 11,893,026 7,755
Frank C. Carlucci 11,893,026 7,755
Jeffrey J. Collinson 11,893,026 7,755
Robert M. Gardiner 11,892,926 7,855
Richard D. Harrison 11,892,776 8,005
Mark Novitch, M. D. 11,893,026 7,755
Harry H. Penner, Jr. 11,892,926 7,855
Robert H. Roth, Ph.D. 11,893,026 7,755
John Simon 11,893,026 7,755
John F. Tallman, Ph.D 11,892,926 7,855
<CAPTION>
The stockholders approved Proposal 2, voting as follows:
Affirmative Votes Negative Votes Votes Abstained
- ----------------- -------------- ---------------
<S> <C> <C>
11,876,000 16,600 7,381
</TABLE>
ITEM 5. OTHER INFORMATION
Not applicable for the first quarter ended June 30, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Exhibit Index on page 11.
<PAGE>
(b) Exhibits and Reports on Form 8-K
On May 1, 1996 a Current Report on Form 8-K dated April 25, 1996 was
filed disclosing a change in the Company's auditors. On May 15, 1996, the
Company filed an amended Current Report on Form 8-K/A to amend this report.
SAFE HARBOR STATEMENT
Statements which are not historical facts, including statements about the
Company's confidence and strategies, the status of various product development
programs, the sufficiency of cash to fund planned operations and the Company's
expectations concerning its development compounds, drug discovery technologies
and opportunities in the pharmaceutical marketplace are "forward looking
statements" within the meaning of the Private Securities Litigations Reform Act
of 1995 that involve risks and uncertainties and are not guarantees of future
performance. These risks include, but are not limited to, difficulties or
delays in development, testing, regulatory approval, production and marketing of
any of the Company's drug candidates, the failure to attract or retain
scientific management personnel, any unexpected adverse side effects or
inadequate therapeutic efficacy of the Company's drug candidates which could
slow or prevent product development efforts, competition within the Company's
anticipated product markets, the Company's dependence on corporate partners with
respect to research and development funding, regulatory filings and
manufacturing and marketing expertise, the uncertainty of product development in
the pharmaceutical industry, inability to obtain sufficient funds through future
collaborative arrangements, equity or debt financings or other sources to
continue the operation of the Company's business, risk that patents and
confidentiality agreements will not adequately protect the Company's
intellectual property or trade secrets, dependence upon third parties for the
manufacture of potential products, inexperience in manufacturing and lack of
internal manufacturing capabilities, dependence on third parties to market
potential products, lack of sales and marketing capabilities, potential
unavailability or inadequacy of medical insurance or other third-party
reimbursement for the cost of purchases of the Company's products, and other
risks detailed in the Company's Securities and Exchange Commission filings,
including its Annual Report on Form 10-K for the year ended December 31, 1995,
each of which could adversely affect the Company's business and the accuracy of
the forward-looking statements contained herein.
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEUROGEN CORPORATION
By:/s/STEPHEN R. DAVIS
-----------------------
Stephen R. Davis
Vice President-Finance and
Chief Financial Officer
Date: August 15, 1996
<PAGE>
Exhibit Index
-------------
Exhibit
- -------
Number
- ------
10.1 - Neurogen Corporation Stock Option Plan, as amended (incorporated by
reference to Exhibit 10.1 to the Company's Form 10-K for the fiscal
year ended December 31, 1991).
10.2 - Form of Stock Option Agreement currently used in connection with the
grant of options under Neurogen Corporation Stock Option Plan
(incorporated by reference to Exhibit 10.2 to the Company's Form 10-
K for the fiscal year ended December 31, 1992).
10.3 - Neurogen Corporation 1993 Omnibus Incentive Plan, as amended
(incorporated by reference to Exhibit 10.3 to the Company's Form 10-
K for the fiscal year ended December 31, 1993).
10.4 - Form of Stock Option Agreement currently used in connection with the
grant of options under Neurogen Corporation 1993 Omnibus Incentive
Plan (incorporated by reference to Exhibit 10.4 to the Company's
Form 10-K for the fiscal year ended December 31, 1993).
10.5 - Neurogen Corporation 1993 Non-Employee Directors Stock Option
Program (incorporated by reference to Exhibit 10.5 to the Company's
Form 10-K for the fiscal year ended December 31, 1993).
10.6 - Form of Stock Option Agreement currently used in connection with the
grant of options under Neurogen Corporation 1993 Non-Employee
Directors Stock Option Program (incorporated by reference to Exhibit
10.6 to the Company's Form 10-K for the fiscal year ended December
31, 1993).
10.7 - Employment Contract between the Company and Harry H. Penner, Jr.,
dated as of October 12, 1993 (incorporated by reference to Exhibit
10.7 to the Company's Form 10-K for the fiscal year ended December
31, 1993).
10.8 - Employment Contract between the Company and John F. Tallman, dated
as of December 1, 1993 (incorporated by reference to Exhibit 10.25
to the Company's Form 10-Q for the quarterly period ended September
30, 1994).
10.9 - Open-End Mortgage Deed and Security Agreement between the Company
and Orion Machinery & Engineering Corp., dated March 16, 1989
(incorporated by reference to Exhibit 10.15 to Registration
Statement No. 33-29709 on Form S-1).
10.10 - Form of Proprietary Information and Inventions Agreement
(incorporated by reference to Exhibit 10.31 to Registration
Statement No. 33-29709 on Form S-1).
<PAGE>
10.11 - Warrant to Purchase 47,058 Shares of Common Stock to MMC/GATX
Partnership No. I, dated February 20, 1991 (incorporated by reference
to Exhibit 10.34 to the Company's Form 10-K for the fiscal year ended
December 31, 1990).
10.12 - Collaborative Research Agreement and License and Royalty Agreement
between the Company and Pfizer Inc, dated as of January 1, 1992
(confidential treatment requested) (incorporated by reference to
Exhibit 10.35 to the Company's Form 10-K for the fiscal year ended
December 31, 1991).
10.13 - License Agreement between the Company and the National Technical
Information Service, dated as of January 1, 1992 (incorporated by
reference to Exhibit 10.36 to the Company's Form 10-K for the fiscal
year ended December 31, 1991).
10.14 - Cooperative Research and Development Agreement between the Company and
the National Institutes of Health, dated as of January 21, 1993
(incorporated by reference to Exhibit 10.37 to the Company's Form 10-K
for the fiscal year ended December 31, 1991).
10.15 - Letter Agreement between the Company and Barry M. Bloom, dated January
12, 1994 (incorporated by reference to Exhibit 10.25 to the Company's
Form 10-K for the fiscal year ended December 31, 1993).
10.16 - Letter Agreement between the Company and Robert H. Roth, dated April
14, 1994 (incorporated by reference to Exhibit 10.26 to the Company's
Form 10-K for the fiscal year ended December 31, 1994).
10.17 - Collaborative Research Agreement and License and Royalty Agreement
between the Company and Pfizer Inc, dated as of July 1, 1994
(confidential treatment requested) (incorporated by reference of
Exhibit 10.1 to the Company's Form 10-Q for the quarterly period ended
June 30, 1994).
10.18 - Stock Purchase Agreement between the Company and Pfizer dated as of
July 1, 1994 (incorporated by reference to Exhibit 10.2 to the
Company's Form 10-Q for the quarterly period ended June 30, 1994).
10.19 - Registration Rights and Standstill Agreement among the Company and the
Persons and Entities listed on Schedule I thereto, dated as of July
11, 1994 (incorporated by reference to Exhibit 10.29 to the Company's
Form 10-Q for the quarterly period ended September 30, 1994).
10.20 - Collaboration and License Agreement and Screening Agreement between
the Company and Schering-Plough Corporation (confidential treatment
requested) (incorporated by reference to Exhibit 10.1 to the Company's
Form 8-K dated July 28, 1995).
<PAGE>
10.21 - Lease Agreement between the Company and Commercial Building Associates
dated as of August 30, 1995 (incorporated by reference to Exhibit
10.27 to the Company's Form 10-Q for the quarterly period ended
September 30, 1995).
10.22 - Collaborative Research Agreement between the Company and Pfizer dated
as of November 1, 1995 (confidential treatment requested)
(incorporated by reference to Exhibit 10.1 of the Company's Form 8-K
dated November 1, 1995).
10.23 - Development and Commercialization Agreement between the Company and
Pfizer dated as of November 1, 1995 (confidential treatment requested)
(incorporated by reference to Exhibit 10.2 of the Company's Form 8-K
dated November 1, 1995).
10.24 - Stock Purchase Agreement between the Company and Pfizer dated as of
November 1, 1995 (incorporated by reference to Exhibit 10.3 of the
Company's Form 8-K dated November 1, 1995).
10.25 - Underwriting Agreement dated August 17, 1995 between the Company and
Smith Barney Inc., Robertson, Stephens & Company and Pacific Growth
Equities, Inc. incorporated by reference to the Company's Registration
Statement on Form S-3 (File No. 33-60929).
11.1 - Computation of Earnings per Common Share.
27.1 - Financial Data Schedule
<PAGE>
Exhibit 11.1
Neurogen Corporation
Computation of Net Income Per Common Share
(in thousands, except Net Income per Common Share amounts)
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Primary:
Weighted average shares of
common stock outstanding 14,141 10,105 14,081 10,094
Dilutive effect of:
Warrants 43 37 43 36
Stock options 1,349 1,030 1,412 828
------------ ------------ ------------ ------------
Common and common
equivalent shares 15,533 11,172 15,536 10,958
============ ============ ============ ============
Net income $ 1,118 $ 12,234 $ 4,728 $ 10,534
============ ============ ============ ============
Earnings per common and
common equivalent shares $ 0.07 $ 1.10 $ 0.30 $ 0.96
============ ============ ============ ============
Fully Diluted:
Weighted average shares of
common stock outstanding 14,141 10,105 14,081 10,094
Dilutive effect of:
Warrants 43 40 43 39
Stock options 1,349 1,256 1,412 1,248
------------ ------------ ------------ ------------
Common and common
equivalent shares 15,533 11,401 15,536 11,381
============ ============ ============ ============
Net income $ 1,118 $ 12,234 $ 4,728 $ 10,534
============ ============ ============ ============
Earnings per common and
common equivalent shares $ 0.07 $ 1.07 $ 0.30 $ 0.93
============ ============ ============ ============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 49,365,073
<SECURITIES> 45,056,524
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 97,120,280
<PP&E> 14,686,463
<DEPRECIATION> 2,570,991
<TOTAL-ASSETS> 109,662,395
<CURRENT-LIABILITIES> 5,292,943
<BONDS> 0
0
0
<COMMON> 354,410
<OTHER-SE> (172,298)
<TOTAL-LIABILITY-AND-EQUITY> 109,662,395
<SALES> 0
<TOTAL-REVENUES> 10,089,333
<CGS> 0
<TOTAL-COSTS> 7,823,034
<OTHER-EXPENSES> (2,461,512)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,220
<INCOME-PRETAX> 4,827,811
<INCOME-TAX> 100,000
<INCOME-CONTINUING> 4,727,811
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,727,811
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
