<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, 1997
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 13, 1997 the registrant had 14,355,958 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, 1997 and
December 31, 1996.................................................. 1,2
Statements of Operations for the three-month and six-month
periods ended June 30, 1997 and 1996 ............................. 3
Statements of Cash Flows for the three-month and six-month
periods ended June 30, 1997 and 1996 .............................. 4
Notes to Financial Statements........................................ 5
Item 2. Management's Discussion and Analysis of Financial Condition and....... Results
of Operations .................................................................. 6-9
Part II - Other Information
Item 1. Legal Proceedings..................................................... 10
Item 2. Changes in Securities................................................. 10
Item 3. Defaults upon Senior Securities....................................... 10
Item 4. Submission of Matters to a Vote of Security Holders................... 10
Item 5. Other Information..................................................... 10
Item 6. Exhibits and Reports on Form 8-K...................................... 10
Signature .................................................................... 12
Exhibit Index .................................................................... 13-15
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NEUROGEN CORPORATION
BALANCE SHEETS
(In thousands)
JUNE 30, DECEMBER 31,
1997 1996
----
(UNAUDITED) (AUDITED)
----------- --------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 53,681 $ 62,823
Marketable securities 37,091 32,314
Receivables from corporate partners 711 460
Other current assets 1,087 1,132
--------------- ---------------
Total current assets 92,570 96,729
Property, plant & equipment:
Land and land improvements 523 523
Building and building improvements 8,775 8,679
Leasehold improvements 4,026 4,005
Equipment 7,169 5,903
Furniture 440 311
Construction in progress 3,913 440
--------------- ---------------
24,846 19,861
Less accumulated depreciation and amortization 3,916 3,136
--------------- ---------------
Net property, plant and equipment 20,930 16,725
Other assets, net 373 415
=============== ===============
$ 113,873 $ 113,869
=============== ===============
</TABLE>
See accompanying notes to financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
NEUROGEN CORPORATION
BALANCE SHEETS
(In thousands, except per share data)
JUNE 30, DECEMBER 31,
1997 1996
----
(UNAUDITED) (AUDITED)
---------- ---------
Liabilities & Stockholders' Equity
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued expenses $ 3,757 $ 3,010
Unearned revenue from corporate partners 200 4,100
Current portion of mortgage payable 193 181
--------------- ---------------
Total current liabilities 4,150 7,291
Mortgage payable, excluding current portion 180 279
Other compensation 54 54
--------------- ---------------
Total liabilities 4,384 7,624
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
14,353,108 shares at June 30, 1997 and
14,252,404 shares at December 31, 1996 359 356
Additional paid-in capital 109,081 108,491
Retained earnings (deficit) 76 (2,519)
Unrealized loss on marketable securities (27) (83)
--------------- ---------------
Total stockholders' equity 109,489 106,245
--------------- ---------------
$ 113,873 $ 113,869
=============== ===============
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
Neurogen Corporation
Statements of Operations
(In thousands)
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1997 JUNE 30, 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
---------- ---------- ---------- ----------
Operating revenues:
<S> <C> <C> <C> <C>
License fees $ - $ - $ 3,000 $ 3,000
Research and Development 3,949 3,945 7,928 7,447
-------------- -------------- ---------------- ----------------
Total operating revenues 3,949 3,945 10,928 10,447
Operating Expenses:
Research and development 4,505 3,380 8,874 6,690
General and administrative 965 643 1,920 1,391
-------------- -------------- ---------------- ----------------
Total operating expenses 5,470 4,023 10,794 8,081
-------------- -------------- ---------------- ----------------
Total operating income (loss) (1,521) (78) 134 2,366
Other income (expense):
Investment income 1,276 1,238 2,517 2,488
Interest expense (10) (12) (21) (26)
-------------- -------------- ---------------- ----------------
Total other income, net 1,266 1,226 2,496 2,462
-------------- -------------- ---------------- ----------------
Income (loss) before provision for
income taxes (255) 1,148 2,630 4,828
Provision for income taxes 30 35 100
============== ============== ================ ================
Net income (loss) (255) 1,118 2,595 4,728
============== ============== ================ ================
Earnings (loss) per share:
Primary $ (0.02) $ 0.07 $ 0.17 $ 0.30
============== ============== ================ ================
Fully diluted $ (0.02) $ 0.07 $ 0.17 $ 0.30
============== ============== ================ ================
Shares used in calculation of
earnings (loss) per share:
Primary 14,339 15,533 15,345 15,536
============== ============== ================ ================
Fully diluted 14,339 15,533 15,447 15,536
============== ============== ================ ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
NEUROGEN CORPORATION
STATEMENTS OF CASH FLOWS
(In thousands)
SIX MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996
(UNAUDITED) (UNAUDITED)
---------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,595 $ 4,728
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization expense 802 447
Net gain on sale of assets 3 (16)
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable and
accrued expenses 747 (775)
Decrease in unearned revenue from corporate partners (3,900) (200)
Decrease in other current assets 45 422
Increase in receivable from corporate partners (251) (1,603)
Decrease in other assets, net 32 61
-------------- ---------------
Net cash provided by operating
activities 73 3,064
Cash flows from investing activities:
Purchase of plant and equipment (5,025) (1,423)
Purchases of marketable securities (24,383) (14,235)
Maturities and sales of marketable securities 19,662 34,519
Proceeds from sale of asset 25 109
---------------- ---------------
Net cash provided by (used in) investing activities (9,721) 18,970
Cash flows from financing activities:
Exercise of employee stock options 593 1,403
Principal payments under mortgage payable (87) (77)
-----------------------------------
Net cash provided by financing
activities 506 1,326
---------------- ---------------
Net increase (decrease) in cash and cash equivalents (9,142) 23,360
Cash and cash equivalents at beginning of period 62,823 26,005
---------------- ---------------
Cash and cash equivalents at end of period $ 53,681 $ 49,365
================ ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
NEUROGEN CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(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 balance sheets.
(3) Adoption of New Accounting Pronouncements
-----------------------------------------
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted
on December 31, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share and to
restate all prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options will be
excluded. The impact is expected to have no change and a $.01 increase
in primary earnings per share for the second quarter ended June 30, 1997
and June 30, 1996, respectively. For the six month period ended June 30,
1997 and June 30, 1996 the impact is expected to have a $ .01 and a $.03
increase respectively. The impact of Statement 128 on the calculation of
fully diluted earnings per share for these periods is not expected to be
material.
(4) Reclassifications
-----------------
Certain reclassifications have been made to the 1996 financial
statements in order to conform to the 1997 presentation.
5
<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 one-time license
fees received in 1996 from Schering-Plough and American Home Products
and from Schering-Plough and Pfizer in 1995, expects to incur
significant losses in most years prior to deriving any such product
revenues. Revenues to date have come from three collaborative research
agreements entered into with Pfizer, one collaboration with
Schering-Plough, one license agreement with American Home Products 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, 1997 AND 1996
The Company's operating revenues remained at $3.9 million for the
three months ended June 30, 1997 as compared to the same period in 1996.
Research and development revenues include amounts received from Pfizer
and Schering-Plough, under separate 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 33 percent to $4.5
million for the three-month period ended June 30, 1997 as compared to
the same period in 1996. The increase is due to increases in research
and development personnel, an increase in clinical development costs and
an expansion of Neurogen's AIDD (Accelerated Intelligent Drug Design)
program. Research and development costs represented 82 percent of total
operating expenses for the second quarter of 1997 as compared to 84
percent for the same period in 1996.
General and administrative expenses increased 50 percent to $1.0
million for the three-month period ended June 30, 1997 as compared to
the same period in 1996. This increase is due to an increased level of
administrative expenses necessary to support a growing research staff.
Other income consisting primarily of interest income, and gains
and losses from invested cash and marketable securities remained flat
for the second quarter of 1997 as compared to the same period in 1996.
The Company recognized a net loss of $0.26 million for the three
months ended June 30, 1997 as compared with a net income of $1.1 million
for the same period in 1996. The decrease in earnings is primarily due
to the increase in operating expenses for the second quarter of 1997.
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
The Company's operating revenues increased to $10.9 million for
the six months ended June 30, 1997 from $10.4 million for the same
period in 1996. Research and development revenues increased $0.5
million, or 6 percent, to $7.9 million.
6
<PAGE>
Research and development expenses increased 33 percent to $8.9
million for the six months ended June 30, 1997 as compared to the same
period in 1996. The increase is due to increases in research and
development personnel, an increase in clinical development costs and an
expansion of Neurogen's AIDD (Accelerated Intelligent Drug Design)
program. Research and development costs represented 82 and 83 percent of
total operating expenses for each of the six month periods ended June
30, 1997 and 1996 respectively.
General and administrative expenses increased 38 percent to $1.9
million for the six months ended June 30, 1997 as compared to the same
period in 1996. This increase is due to an increased level of
administrative expenses necessary to support a growing research staff.
Other income consisting primarily of interest income, and gains
and losses from invested cash and marketable securities remained at $2.5
million for the six months ended June 30, 1997 as compared to the same
period in 1996.
The Company recognized net income of $2.6 million for the six
months ended June 30, 1997 as compared with a net income of $4.7 million
for the same period in 1996. The decrease in earnings is primarily due
to the increase in operating expenses for the second quarter of 1997 as
compared to the same period in 1996.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997 and December 31, 1996, cash, cash equivalents and
marketable securities were in the aggregate $90.8 million and $95.1
million respectively. While the Company's aggregate level of cash, cash
equivalents and marketable securities did not change significantly
during the second quarter of 1997, 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 financing activities, 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 the
private sale of common stock to Pfizer in connection with entering into
the Pfizer Agreements and to American Home Products in the American Home
Products Agreement. Total funding received from these financing
activities was approximately $105.6 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 facilities.
In the first quarter of 1992, the Company entered into the 1992
Pfizer Agreement pursuant to which Pfizer made a $13.8 million equity
investment in the Company. Under this agreement, the Company received
$4.6 million in each year from 1992 through 1996. Neurogen could also
receive milestone payments of up to $12.5 million if certain development
and regulatory objectives are achieved regarding its products subject to
the collaboration. In return, Pfizer received the exclusive rights to
manufacture and market collaboration anxiolytics and cognition enhancers
that act through the family of receptors which interact with the
neuro-transmitter gamma-aminobutyric acid, or GABA, and for which it
will pay Neurogen royalties based upon net sales levels, if any, for
such products. As of June 30, 1997, Pfizer had provided $25.6 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, pursuant to which
Pfizer made an additional $9.9 million equity investment in the Company.
Under this agreement, the Company received approximately $7.4 million
during the three-year period which commenced July 1, 1994, to fund
Neurogen's sleep disorder program. Neurogen could also receive milestone
payments of up to $3.3 million if certain development and regulatory
objectives are achieved regarding its products subject to the
collaboration. As part of this second collaboration, Pfizer received the
exclusive rights to
7
<PAGE>
manufacture and market GABA-based sleep disorder products for which it
will pay Neurogen royalties depending upon net sales levels, if any. As
of June 30, 1997, Pfizer had provided $7.4 of research funding to the
Company pursuant to the 1994 Pfizer Agreement, in addition to its $9.9
million equity investment in 1994.
In December 1996, Neurogen and Pfizer extended the research programs
under the 1992 Pfizer Agreement and 1994 Pfizer Agreement through 1998.
Pursuant to the extension agreement, Neurogen expects to receive $5.3
million in each of 1997 and 1998 for research funding of the Company's
GABA-based anxiety, cognition enhancement and sleep disorders programs.
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, pursuant to which Pfizer
made an additional $16.5 million equity investment in the Company
bringing Pfizer's ownership of the Company's common stock up to 21
percent and paid a $3.5 million license fee. The Company is scheduled to
receive approximately $7.2 million during the three-year period which
commenced November 1, 1995, to fund Neurogen's neuropeptide Y (NPY)
eating disorders 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
if certain development and regulatory objectives are achieved regarding
its products subject to the collaboration. 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. Pursuant to the 1995 Pfizer
Agreement, Neurogen will fund a minority share of early stage
development costs and 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 portion of
the cost of late stage clinical trials and 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. As of June 30, 1997, Pfizer had provided $4.2 million
in research funding (including $0.2 million in unearned revenues)
pursuant to the 1995 Pfizer Agreement.
In June 1995, Neurogen and Schering-Plough entered into 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 million for rights relating to Neurogen's dopamine program
and $3 million in 1995 and 1996 for the right to test certain of
Neurogen's combinatorial chemistry libraries in selected non-CNS assays.
Neurogen received an aggregate of 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. In March 1997,
Schering-Plough elected to extend the research program under the
Schering-Plough Agreement for an additional one-year period, through
June 1998. 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
8
<PAGE>
June 30, 1997, Schering-Plough had provided $7.2 million in research
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.
In the fourth quarter of 1996, Neurogen entered into an agreement
with American Home Products Corporation, acting through its Wyeth-Ayerst
Laboratories division. Under the terms of the agreement, Neurogen
received $750,000 in license fees for ADCI, a small molecule
pharmaceutical that Neurogen has been developing for the treatment of
epilepsy and related disorders, and $750,000 for 37,442 shares of common
stock. Neurogen may receive up to an additional $11.0 million in the
form of license fees, equity investment and milestone payments on
world-wide sales of ADCI.
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 2000. 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, 1996, the Company had approximately $11.5 million
of net operating loss carryforwards available for federal income tax
purposes which expire from the years 2003 through 2009. The Company had
approximately $9.4 million of Connecticut state tax net operating loss
carryforwards as of December 31, 1996 which expire in the years 1997
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.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable for the second quarter ended June 30, 1997.
ITEM 2. CHANGES IN SECURITIES
Not applicable for the second quarter ended June 30, 1997.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable for the second quarter ended June 30, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
One June 3, 1997 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, 1997 (Proposal 2).
The stockholders elected the persons named below, the Company's
nominees's for directors, as directors of the Company, casting votes in favor of
such nominees or withholding votes as indicated:
Votes in Favor Votes Withheld
Barry M. Bloom, Ph.D. 11,243,038 20,625
Robert N. Butler 11,243,638 20,025
Frank C. Carlucci 11,243,638 20,025
Jeffrey J. Collinson 11,243,638 20,025
Robert M. Gardiner 11,243,138 20,525
Richard D. Harrison 11,243,638 20,025
Mark Novitch, M.D. 11,243,638 20,025
Harry H. Penner, Jr. 11,243,638 20,025
Robert H. Roth, Ph.D. 11,243,638 20,025
John Simon 11,243,638 20,025
John F. Tallman, Ph.D. 11,243,638 20,025
The stockholders approved Proposal 2, voting as follows:
Affirmative Votes Negative Votes Votes Abstained
- ----------------- -------------- ---------------
11,244,819 8,825 10,019
ITEM 5. OTHER INFORMATION
Not applicable for the second quarter ended June 30, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Exhibit Index on page 11.
(b) None
10
<PAGE>
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, 1996,
each of which could adversely affect the Company's business and the accuracy of
the forward-looking statements contained herein.
11
<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 13, 1997
12
<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).
13
<PAGE>
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).
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).
14
<PAGE>
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).
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 - Licensing Agreement dated as of November 25, 1996
between American Home Products Corporation, acting
through its Wyeth-Ayerst Laboratories Division, and
Neurogen Corporation CONFIDENTIAL TREATMENT REQUESTED)
(incorporated by reference to Exhibit 10.1 of the
Company's Form 8-K dated March 31, 1997).
10. 26 - Stock Purchase Agreement dated as of November 25, 1996
between American Home Products Corporation, acting
through its Wyeth-Ayerst Laboratories Division, and
Neurogen Corporation (CONFIDENTIAL TREATMENT
REQUESTED) (incorporated by reference to Exhibit 10.1
of the Company's Form 8-K dated March 31, 1997).
11.1 - Computation of Earnings per Common Share.
27.1 - Financial Data Schedule
15
<PAGE>
EXHIBIT 11.1
NEUROGEN CORPORATION
COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
(in thousands, except Net Income (Loss) per Common Share amounts)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1997 JUNE 30, 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- ----------
Primary:
<S> <C> <C> <C> <C>
Weighted average shares of
common stock outstanding 14,339 14,141 14,313 14,081
Dilutive effect of :
Warrants (1) 43 36 43
Stock options (1) 1,349 996 1,412
------------ ------------ ------------ ---------------
Common and common
equivalent shares 14,339 15,533 15,345 15,536
============ ============ ============ ===============
Net income (loss) $ (255) $ 1,118 $ 2,595 $ 4,728
============ ============ ============ ===============
Earnings (loss) per common and
common equivalent shares $ (0.02) $ 0.07 $ 0.17 $ 0.30
============ ============ ============ ===============
Fully Diluted:
Weighted average shares of
common stock outstanding 14,339 14,141 14,313 14,081
Dilutive effect of :
Warrants (1) 43 36 43
Stock options (1) 1,349 1,098 1,412
------------ ------------ ------------ ---------------
Common and common
equivalent shares 14,339 15,533 15,447 15,536
============ ============ ============ ===============
Net income (loss) $ (255) $ 1,118 $ 2,595 $ 4,728
============ ============ ============ ===============
Earnings (loss) per common and
common equivalent shares $ (0.02) $ 0.07 $ 0.17 $ 0.30
============ ============ ============ ===============
</TABLE>
(1) The Common Stock Equivalents have not been included as their
inclusion would be antidilutive.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 53681
<SECURITIES> 37091
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 92570
<PP&E> 24846
<DEPRECIATION> 3916
<TOTAL-ASSETS> 113873
<CURRENT-LIABILITIES> 4150
<BONDS> 0
0
0
<COMMON> 359
<OTHER-SE> (27)
<TOTAL-LIABILITY-AND-EQUITY> 113873
<SALES> 0
<TOTAL-REVENUES> 10928
<CGS> 0
<TOTAL-COSTS> 10794
<OTHER-EXPENSES> (2496)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21
<INCOME-PRETAX> 2630
<INCOME-TAX> 35
<INCOME-CONTINUING> 2595
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2595
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>