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 March 31, 2003

[ ] 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
(State or other jurisdiction
of incorporation or organization) 22-2845714
(I.R.S. Employer
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 _

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes X No _

As of May 15, 2003 the registrant had 17,945,878 shares of Common Stock outstanding.

FORM 10-Q
For the First Quarter Ended
March 31, 2003

Table of Contents

PART I - FINANCIAL INFORMATION

PART II - OTHER INFORMATION

FINANCIAL INFORMATION

ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS

NEUROGEN CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) (UNAUDITED)
	March 31, 2003	December 31, 2002
Assets
Current assets:
Cash and cash equivalents	$                5,669	$                   12,248
Marketable securities	65,600	67,164
Receivables from corporate partners	1,355	1,333
Other current assets, net	1,432	1,615
Total current assets	74,056	82,360
Property, plant & equipment:
Land, building and improvements	31,286	31,280
Equipment and furniture	17,413	17,328
Construction in progress	109	109
	48,808	48,717
Less accumulated depreciation and amortization	16,664	15,933
Net property, plant and equipment	32,174	32,784
Other assets, net	433	635
Total assets	$            106,663	$                  115,779
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses	$                2,663	$                      3,547
Unearned revenue from corporate partner, current portion	2,000	2,000
Current portion of loans payable	6,743	1,380
Total current liabilities	11,406	6,927
Unearned revenue from corporate partner, net of current portion	5,385	5,905
Loans payable, net of current portion	13,943	19,650
Total liabilities	30,734	32,482
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, par value $0.25 per share
Authorized 2,000 shares; none issued	-	-
Common stock, par value $0.25 per share
Authorized 30,000 shares; issued and outstanding
17,916 shares at March 31, 2003 and 17,919
shares at December 31, 2002	448	448
Additional paid-in capital	176,355	176,615
Accumulated deficit	(99,273)	(91,377)
Deferred compensation	(2,631)	(3,257)
Accumulated other comprehensive income	1,030	868
	75,929	83,297
Total liabilities and stockholders' equity	$            106,663	$                  115,779
See accompanying notes to consolidated financial statements

NEUROGEN CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (UNAUDITED)
	Three Months Ended March 31, 2003	Three Months Ended March 31, 2002
Operating revenues:
License fees	$                      500	$                   1,388
Research and development	898	1,250
Total operating revenues	1,398	2,638
Operating Expenses:
Research and development
Stock compensation	83	(56)
Other research and development	7,832	9,452
Total research and development	7,915	9,396
General and administrative:
Stock compensation	153	139
Other general and administrative	1,509	2,030
Total general and administrative	1,662	2,169
Total operating expenses	9,577	11,565
Operating loss	(8,179)	(8,927)
Other income (expense):
Other income	506	736
Interest expense	(223)	(280)
Total other income, net	283	456
Net loss before income taxes	(7,896)	(8,471)
Income tax benefit	-	(73)
Net loss	$                (7,896)	$                (8,544)
Basic and diluted loss per share	$                  (0.45)	$                  (0.49)
Shares used in calculation of loss per share:
Basic and diluted	17,666	17,594
See accompanying notes to consolidated financial statements.

NEUROGEN CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (UNAUDITED)
Three months ended March 31	2003	2002
Cash flows from operating activities:
Net loss	$(7,896)	$(8,544)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization expense	744	781
Stock compensation expense	236	82
Other non-cash expense	453	388
Changes in operating assets and liabilities:
Decrease in accounts payable and accrued expenses	(884)	(113)
Decrease in unearned revenue from corporate partners	(520)	(568)
Decrease in receivables from corporate partners	(22)	(1,199)
Increase (decrease) in other assets, net	385	(347)
Income tax benefits from exercise of stock options	-	345
Net cash used in operating activities	(7,504)	(9,175)
Cash flows from investing activities:
Purchases of property, plant and equipment	(149)	(568)
Purchases of marketable securities	(8,034)	(25,006)
Maturities and sales of marketable securities	9,441	13,725
Proceeds from sales of assets	11	59
Net cash (used in) provided by investing activities	1,269	(11,790)
Cash flows from financing activities:
Principal payments under loans payable	(344)	(340)
Net cash used in financing activities	(344)	(340)
Net decrease in cash and cash equivalents	(6,579)	(21,305)
Cash and cash equivalents at beginning of period	12,248	51,062
Cash and cash equivalents at end of period	$5,669	$29,757
See accompanying notes to consolidated financial statements.

NEUROGEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(UNAUDITED)

(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited consolidated financial statements have been prepared from the books and records of Neurogen Corporation ("Neurogen" or 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 accounting principles generally accepted in the United States of America for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements including the significant accounting policies described in Note 1, for the year ended December 31, 2002 included in the Company's Annual Report on Form 10-K. Interim results are not necessarily indicative of the results that may be expected for the full fiscal year.

(2) COMPREHENSIVE INCOME
Comprehensive loss for the three-month periods ending March 31, 2003 and 2002 was $7,734,000 and $8,987,000, respectively. The differences between net loss and comprehensive net loss are due to changes in the unrealized gain on marketable securities.

(3) STOCK-BASED COMPENSATION
The Company primarily grants qualified stock options for a fixed number of shares to employees with an exercise price equal to the fair market value of the shares at the date of grant. The Company has also issued restricted stock to key executives which vest over specified service periods. The Company accounts for grants of stock options and restricted stock in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees," and, accordingly, recognizes no compensation expense for the options when the option grants have an exercise price equal to the fair market value at date of grant. The Company occasionally grants stock option awards to consultants. Such grants are accounted for pursuant to Emerging Issues Task Force (“EITF”) Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”, and accordingly the Company recognizes compensation expense equal to the fair value of such awards and amortizes such expense over the performance period.

In December 2002, the Financial Accounting Standards Board issued SFAS No. 148 to address alternative methods of transition for a voluntary change from the intrinsic to the fair value method of accounting for stock-based employee compensation. The statement also amends certain disclosure provisions in SFAS No. 123. Neurogen continues to utilize the intrinsic value method to account for stock-based employee compensation. However, the disclosure provisions of SFAS No. 148 have been implemented in the 2002 and 2003 financial statements.

As of March 31, 2003 compensation expense has not been recognized for the stock option plans, except as noted above. Had compensation cost for the Company's stock option plans been determined based on the fair value at the grant date for awards in 2003 and 2002 consistent with the provisions of SFAS No. 123, the Company's net loss and loss per share would have been adjusted to the pro forma amounts indicated below (in thousands, except per share data):

	2003	2002
Net loss as reported	$(7,896)	$(8,544)
Additional stock compensation based on fair value	(1,729)	(2,794)
Net loss pro forma	(9,625)	(11,338)
Basic and diluted loss per share as reported	(.45)	(.49)
Basic and diluted loss per share-pro forma	(.54)	(.64)

In calculating the stock compensation expense above the Black-Scholes method was used with the following assumptions in order to calculate the fair value:

	2003	2002
Expected life	5	5
Interest rate	2.8%	3.0%
Volatility	84%	84%
Expected dividend yield	0	0

As additional options are expected to be granted in future years which may vest over several years, the above pro forma results are not necessarily indicative of future pro forma results.

(4) REDUCTION IN FORCE
In October 2002, the Company announced a reduction in force as part of its Operational Excellence program to further enhance the efficiency of its drug discovery platform, reduce costs and to more closely align the Company’s investment of resources with long-term business goals. As part of this plan, Neurogen reorganized certain departments and eliminated 24 employee positions inclusive of both administrative and research functions, representing approximately 10% of its total workforce. The reduction in force was communicated to respective employees and severance agreements were executed in October 2002. The total amount of costs incurred was $350,000, which included $303,000 in one-time termination benefits and $47,000 in associated costs.

Severance payments were completed by March 2003. The following table summarizes the activity recorded in the employee termination cost accrual during 2003 (in thousands):

	Three Months Ended March 31, 2003
	One-Time Benefits	Associated Costs	Total
Accrual balance, beginning of year	$                     23	$                      -	$                   23
Estimated termination costs	-	-	-
Cash payments on costs	(23)	-	(23)
Accrual balance, end of quarter	$                      -	$                      -	$                      -

(5) SUBSEQUENT EVENT
In December 2001, the Company entered into a $17.5 million loan agreement with a commercial bank which is collateralized by a mortgage on the real properties at 15 and 35 Northeast Industrial Road. The properties represent approximately two-thirds of the Company’s total physical facilities. A provision of the loan agreement requires that the ratio of the outstanding loan balance less any cash collateral, to the appraised value of the real property, as periodically determined by the bank in its sole but reasonable discretion, will not exceed 72%. On May 2, 2003, the Company received notice from the bank asserting that this ratio exceeded 72% by approximately $5.4 million. Neurogen is currently reviewing this matter. Pending resolution of the matter the Company has classified the $5.4 million as a current liability. If the Company is not in compliance with this covenant it has 30 days from the time of notice to either pay down the outstanding balance under the loan by $5.4 million or seek alternative remedies with the bank including but not limited to increasing the cash collateral account.

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 expects to incur significant losses in most years prior to deriving any such product revenues. Revenues to date have come from five collaborative research agreements, one license agreement and one technology transfer agreement.

The preparation of Neurogen's financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management makes estimates in the areas of revenue recognition, income taxes, stock-based compensation and marketable securities and investments. Estimates are based on historical experience and on various other assumptions that management believes to be reasonable under the circumstances. Actual amounts could differ from those estimates.

The Company believes the following critical accounting policies affect management's more significant judgments and estimates used in the preparation of Neurogen's financial statements:

Revenue Recognition
Each of Neurogen’s collaborative research, licensing and technology transfer agreements are significant since the terms of such arrangements may cause the Company’s operating results to vary considerably from period to period.

The Company has entered into collaborative research agreements which provide for the partial funding of specified projects in exchange for the grant of certain rights related to potential discoveries. Revenue under these arrangements typically includes upfront non-refundable fees, ongoing payments for specified levels of staffing for research and milestone payments upon occurrence of certain events. The upfront fees are recognized as revenue ratably over the period of performance under the research agreement. The research funding is recognized as revenue as the related research effort is performed. Revenue derived from the achievement of milestones is recognized when the milestone event occurs and such event represents the achievement of a specific, substantive goal measuring a substantive stage of development towards a long-term goal, such as the filing of a New Drug Application with the Food and Drug Administration.

Neurogen also entered into, and has now completed, a technology transfer agreement under which revenue was recognized when a contractual arrangement existed, fees were fixed and determinable, delivery of the technology occurred and collectibility was reasonably assured. When customer acceptance was required, revenue was deferred until acceptance occurred. Where there were on-going services or obligations after delivery, revenue was recognized over the related term of the service on a percentage of completion basis, unless such service was maintenance, in which case revenue was recognized on a straight line basis. For a contract with multiple elements, total contract fees were allocated to the different elements based on evidence of fair value.

Income Taxes
The liability method of Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes”, is used to account for income taxes. Deferred tax assets and liabilities are determined based on net operating loss carryforwards and differences between financial reporting and income tax bases of assets and liabilities. Deferred items are measured using the enacted tax rates and laws that are expected to be in effect when the differences reverse. Deferred tax assets may be reduced by a valuation allowance to reflect the uncertainty associated with their ultimate realization. Any subsequently recognized tax benefits relating to the valuation allowance for deferred tax assets would be recorded as an income tax benefit in the Statement of Operations or a charge to Additional Paid-In Capital.

Stock-Based Compensation
The Company primarily grants qualified stock options for a fixed number of shares to employees with an exercise price equal to the fair market value of the shares at the date of grant. The Company has also issued restricted stock to key executives which vest over specified service periods. The Company has adopted the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” and therefore accounts for grants of stock options and restricted stock in accordance with Accounting Principles Board (“APB”) Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, Neurogen recognizes no compensation expense for the options when the option grants to employees have an exercise price equal to the fair market value at the date of grant and other relevant terms are fixed or determinable. If compensation cost for the Company's grant of stock awards was determined based on the fair value at the grant date consistent with the provisions of SFAS No. 123, the Company's net loss and loss per share would be materially effected.

The Company occasionally grants stock option awards to consultants. Such grants are accounted for pursuant to Emerging Issues Task Force (“EITF”) Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”, and accordingly recognizes compensation expense equal to the fair value of such awards. The fair value of each award is estimated using the Black-Scholes model with certain weighted average assumptions.

Marketable Securities
The Company invests in U.S. government and corporate debt securities. The fair value of these securities is subject to volatility and change. The Company considers its investment portfolio to be available-for-sale securities as defined in SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Marketable securities at December 31, 2002 and 2001 consisted of debt securities with maturities of three months to five years. Available for sale securities are carried at fair value with the unrealized gains/losses reported as other comprehensive income. Realized gains and losses have been determined by the specific identification method and are included in investment income. Different classifications of the Company’s marketable securities pursuant to SFAS No. 115 would possibly result in material impacts to the valuation of the securities and investment income.

RESULTS OF OPERATIONS

Results of operations may vary from period to period depending on numerous factors, including the timing of revenue earned under existing or future collaborative research agreements, technology transfer agreements or joint ventures, the progress of the Company's partnered research and development projects, the size of the Company’s staff and the level of preclinical and clinical development spending on drug candidates in unpartnered programs. Neurogen believes its research and development costs may increase significantly over the next several years as its drug development programs progress. In addition, general and administrative expenses would be expected to increase to support any expanded research and development activities.

Three Months Ended March 31, 2003 and 2002
The Company's operating revenues for the three months ended March 31, 2003 were $1.4 million compared to $2.6 million for the comparable period in 2002. The $1.2 million decrease consists of a $0.9 million decrease in license fee revenues and a $0.3 million decrease in research and development revenues. The decrease in license fees is due to a decrease in AIDD™ technology development and improvement services related to the Pfizer Technology Transfer Agreement (described below) which was concluded in June 2002 and the decrease in research revenues is due to variable timing of research services performed under the Aventis agreement (described below) due to stages of the research in progress.

The stock compensation expense portion of research and development and general and administrative expense is composed of continuing non-cash charges for grants of certain stock awards in 1997, 2001 and 2002 to certain officers of the Company. A portion of these stock compensation charges (those relating to the 1997 awards) are variable and as a result may fluctuate significantly in the future.

Research and development expenses, excluding non-cash stock compensation charges decreased 17% for the three months ended March 31, 2003 compared to the same period in 2002 due to an average lower number of research staff of approximately 17% which resulted in lower salaries, benefits and laboratory expenses. In October 2002, the Company announced a reduction in force as part of its Operational Excellence program to further enhance the efficiency of its drug development platform, reduce costs and to more closely align the Company’s investment of resources with long-term business goals. Research expenses were 84% and 82% of total operating expenses (excluding non-cash stock compensation charges) for the three months ended March 31, 2003 and 2002 respectively.

The Company expenses all research and development costs as incurred. While the Company maintains a system to record the level of staffing time spent on its research and development projects, it does not maintain a historical cost accounting system with sufficient accuracy to reliably estimate its research and development costs on a specific project-by-project basis. A significant portion of the Company’s research and development expenses (such as laboratory supplies, travel, information systems and services and facilities costs) benefit multiple projects and are not individually tracked to a specific project. Further, the Company’s staff timekeeping system does not account for differences in compensation costs between lower level technicians and more senior scientists.

General and administrative expenses, excluding non-cash stock compensation charges, decreased 26% for the three months ended March 31, 2003 compared to the same period in 2002 due primarily to an average lower number of administrative staff of approximately 17% which resulted in lower salaries and benefits as well as deceases in legal, consulting, investor relations and travel expenses as part of the company’s Operational Excellence program mentioned above, offset by an increase in the Company’s insurance expense.

Other income was $0.3 million for the three months ended March 31, 2003 compared to $0.5 million for the three months ended March 31, 2002. The decrease in 2003 is primarily due to a decrease in investment income due to lower average cash and marketable securities balances as well as a reduction in prevailing market interest rates offset by a decrease in interest expense as a result of a declining outstanding principal balance and lower interest rates.

The Company recognized a net loss of $7.9 million for the three months ended March 31, 2003 compared to $8.5 million for the same period in 2002. The $.6 million decrease in the 2003 net loss is primarily due to the decrease in research and development and general and administrative expenses, offset with decreases in operating revenues and investment income as described above.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2003 and December 31, 2002, cash, cash equivalents and marketable securities in the aggregate were $71.3 million and $79.4 million, respectively. A total amount of $41.7 million of the marketable securities at March 31, 2003 have maturities greater than one year. However, the Company can and may liquidate such investments prior to maturity to meet its strategic and/or investment objectives. The Company's cash and other short-term investment levels decreased in the first quarter of 2003 due primarily to continued operating expenses, and scheduled payments on outstanding loans (described below). This decrease was partially offset by the receipt of the funded research and development payments from Aventis. The levels of cash, cash equivalents and marketable securities have fluctuated significantly in the past and are expected to do so in the future as a result of the factors described below. The Company plans to use its cash, cash equivalents and marketable securities for its research and development activities, working capital and general corporate purposes.

Neurogen's cash requirements to date have been met by the proceeds of its equity financing activities, amounts received pursuant to collaborative research, licensing or technology transfer arrangements, certain debt arrangements and interest earned on invested funds. The Company's equity financing activities have included underwritten public offerings of common stock, private placement offerings of common stock and private sales of common stock in connection with collaborative research and licensing agreements. Total funding received from these financing activities was approximately $146.6 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.

The Company is in the early stage of product development. It has not derived any product revenues from product sales and does not expect to derive any product revenues for at least the next several years, if at all. Prior to deriving any such product revenues, the Company expects to incur significant losses and negative cash flows which in the aggregate could exceed the Company’s existing cash resources. To provide cash to fund its operations until such time as it achieves sustainable revenues, the Company relies extensively on its ability to develop drug discovery programs of sufficient value to either partner the programs with pharmaceutical companies or raise capital through equity financings.

To the extent that drug candidates progress in the Company’s currently unpartnered programs, such as its program for the treatment of inflammatory disorders or earlier stage programs, such progress could lead to the opportunity to partner on terms which provide capital, revenues and cash flows to the Company or the opportunity to raise capital through equity offerings. If unpartnered programs do not progress or do not progress on schedule, such opportunities would be delayed or may not materialize at all.

To the extent that drug candidates progress in the Company’s partnered programs, such as the Company’s depression and anxiety program partnered with Aventis, such progress could result in milestone payments and additional research and development funding to the Company under the respective collaboration agreements. Such progress could also provide the opportunity to raise capital through equity offerings. If partnered programs do not progress or do not progress on schedule, such opportunities would be delayed or may not materialize at all.

Lack of progress, scheduling delays or failures in any of the Company’s major programs could significantly reduce the Company’s levels of revenues, cash flows and cash available to fund its business. It could also significantly increase the Company’s cost of capital and limit its ability to raise equity capital. All of the Company’s compounds in development, whether in human clinical trials or not, will require significant additional research, development and testing before they can be commercialized. Furthermore, the scope, magnitude and timing of future research and development expenses, as well as anticipated project completion dates, are a series of steps, ranging from preclinical testing to clinical studies in humans. Each step in the process is typically more expensive than the previous step, but actual timing and cost for completion depends on the specific progress of each product being tested.

The debt agreements entered into by the Company to date include a commercial term mortgage loan financing in December 2001 with Webster Bank, and a construction loan entered into in October 1999 with Connecticut Innovations, Inc. (“CII”). Total proceeds received under these agreements were $22.5 million, which are repayable through monthly installments over a maximum term of 15 years, bearing various interest rates which approximated 3.8%-7.5% from 1999 through 2003. Of these amounts received, $15.9 million and $4.8 million remained outstanding as of March 31, 2003 under the Webster Bank facility and the CII facility, respectively. An approximate aggregate amount of $1.4 million is due and payable in each of the next five years. Thereafter, approximately $14.0 million is payable in regular installments until the scheduled maturity dates, including a balloon payment of $5.9 million on the mortgage loan upon maturity in December 2011. As of March 31, 2003, Neurogen is not engaged in any significant lease or capital expenditure commitments.

Under the Webster Bank facility the Company is required to comply with certain covenants, including a requirement that the Company maintain at least $25 million in cash and marketable securities and that the ratio of the outstanding loan balance less any cash collateral, to the appraised value of the real property, as periodically determined by the bank in its sole but reasonable discretion, will not exceed 72%. On May 2, 2003, the Company received notice from the bank asserting that this ratio exceeded 72% by approximately $5.4 million. Neurogen has been informed by the bank that it is using a different standard in calculating the Company’s compliance with this covenant than that used when Neurogen and the Bank entered into the loan agreement and that federal regulations require the Bank to use this different standard. Webster Bank has requested that the Company amend the loan agreement to specify that the new standard will be used to establish the appraised value of the real property. Neurogen is currently reviewing this matter. Pending resolution of the matter the Company has classified the $5.4 million as a current liability. If the Company is not in compliance with this covenant it has 30 days from the time of notice to either pay down the outstanding balance under the loan by $5.4 million or seek alternative remedies with the bank including but not limited to increasing the cash collateral account.

While the Company cannot accurately predict the time required or the cost involved in commercializing any one of its candidates, new drug development typically takes many years and tens or hundreds of millions of dollars. In addition, developing new drugs is an extremely uncertain process where most candidates fail and uncertain developments such as clinical or regulatory delays, side effects, undesirable drug properties or ineffectiveness of a drug candidate would slow or prevent the development of a product. If we or our partners are unable to commercialize one or more of our drug products, we will never achieve product revenues and may eventually be unable to continue our operations. This result would cause our shareholders to lose all or a substantial portion of their investment.

Neurogen anticipates its current cash balance, as supplemented by research funding pursuant to its collaborative research agreement with Aventis, will be sufficient to fund its current and planned operations into at least early 2005. 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. Many of these factors could significantly increase the Company's expenses and use of cash. 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. The Company has filed an S-3 registration statement which became effective in February 2003, under which the Company may issue debt, common or preferred stock or warrants of up to $75 million in total financing within two years of the effective date. No assurances can be given that adequate levels of additional funding can be obtained on favorable terms, if at all.

As of December 31, 2002, the Company had approximately $112.5 million and $7.1 million of net operating loss and research and development credit carryforwards, respectively, available for federal income tax purposes, which expire in the years 2004 through 2022. The Company also had approximately $99.0 million and $4.5 million of Connecticut state tax net operating loss and research and development credit carryforwards, respectively, which expire in the years 2003 through 2022. Because of "change in ownership" provisions of the Tax Reform Act of 1986, the Company's utilization of its net operating loss and research and development credit carryforwards may be subject to an annual limitation in future periods.

COLLABORATIVE RESEARCH AGREEMENTS

Aventis
In December 2001, Neurogen entered into a collaboration and license agreement with Aventis pursuant to which Aventis made an initial payment of $10 million and agreed, among other things, to fund a specified level of resources for three years for Neurogen's program for the discovery and research of CRF-1 receptor-based drugs for a broad range of applications, including the therapeutic treatment of depression and anxiety disorders. Aventis has the option to extend the discovery and research effort for up to an additional two years or terminate the collaboration prior to its scheduled conclusion and transfer all rights to the collaborative program to Neurogen. As of March 31, 2003, the Company has received $4.5 million of research funding from Aventis. Neurogen is also eligible to receive milestone payments if certain compound discovery, product development or regulatory objectives are achieved subject to the collaboration. In return, Aventis received the exclusive worldwide rights to develop, manufacture and market collaboration drugs that act through the CRF-1 receptor, for all therapeutic indications for which the drugs may be used. Aventis will pay Neurogen royalties based upon net sales levels, if any, for collaboration products. Also under the agreement, Aventis is responsible for funding the cost of development, including clinical trials, manufacturing and marketing of collaboration products, if any.

Pfizer
In June 1999, Neurogen and Pfizer entered into the Pfizer Technology Transfer Agreement. Under the terms of this agreement, Pfizer agreed to pay Neurogen up to a total of $27.0 million over a three year period for the licensing and transfer to Pfizer of certain of Neurogen's AIDD™ technologies for the discovery of new drugs, along with the installation of an AIDD™ system. Additional payments were also possible upon Pfizer's successful utilization of this technology. Pfizer received a non-exclusive license to certain AIDD™ intellectual property and the right to employ this technology in its own drug discovery programs. As of March 31, 2003, Pfizer had provided $29.0 million pursuant to the Pfizer Technology Transfer Agreement, which terminated on schedule in June 2002. Total fees include a $2.0 million one-time payment in December 2002 to satisfy all obligations from Pfizer’s use of the AIDD™ technology.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In November 2002, the Financial Accounting Standards Board issued FIN No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”, which elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. The Company has indemnification agreements with two employees as of March 31, 2003 for contingent payments which may be required under provisions that exist in such employees’ employment agreements with prior employers. The maximum amount of this potential obligation is approximately $1.3 million, however the Company believes the likelihood of payment of any amounts under such indemnifications is remote.

In January 2003, the Financial Accounting Standards Board issued EITF Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables”. EITF 00-21 addresses, for arrangements with multiple deliverables, how the arrangement consideration should be measured, whether the arrangement should be divided into separate units of accounting and how the arrangement consideration should be allocated among the separate units of accounting. The guidance in EITF 00-21 is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003, and therefore does not have any impact on the March 31, 2003 consolidated financial statements. The consensus in this EITF pronouncement may affect how the Company recognizes revenue under future collaboration and technology transfer arrangements since these often include multiple elements such as non-refundable upfront fees, ongoing payments for specified levels of staffing for research and milestone payments.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk. The Company's investment portfolio includes investment grade debt instruments. These securities are subject to interest rate risk, and could decline in value if interest rates fluctuate. Due to the short duration and conservative nature of these instruments, the Company does not believe that it has a material exposure to interest rate risk. Additionally, funds available from investment activities are dependent upon available investment rates. These funds may be higher or lower than anticipated due to interest rate volatility.

Capital market risk. The Company currently has no product revenues and is dependent on funds raised through other sources. One source of funding is through further equity offerings. The ability of the Company to raise funds in this manner is dependent upon capital market forces affecting the stock price of the Company.

ITEM 4. CONTROLS AND PROCEDURES

During the 90-day period prior to the filing date of this report, management, including the Company's Chief Executive Officer and Chief Business Officer, evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based upon, and as of the date of that evaluation, the Chief Executive Officer and Chief Business Officer concluded that the disclosure controls and procedures were effective, in all material respects, to ensure that information required to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required.

There have been no significant changes in the Company's internal controls or in other factors which could significantly affect internal controls subsequent to the date the Company carried out its evaluation. There were no significant deficiencies or material weaknesses identified in the evaluation and, therefore, no corrective actions were taken.

Part II - Other Information

Item 1. Legal Proceedings

Not applicable for the first quarter ended March 31, 2003.

Item 2. Changes in Securities and Use of Proceeds

Not applicable for the first quarter ended March 31, 2003.

Item 3. Defaults upon Senior Securities

Not applicable for the first quarter ended March 31, 2003.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable for the first quarter ended March 31, 2003.

Item 5. Other Information

Not applicable for the first quarter ended March 31, 2003.

Item 6. Exhibits and Reports on Form 8-K

(a) None.

(b) The Company filed an 8-K reporting its financial results in a press release on May 12, 2003.

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, 2002, each of which could adversely affect the Company's business and the accuracy of the forward-looking statements contained herein.

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 Executive Vice President and Chief Business Officer Date: May 15,2003

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William H. Koster, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Neurogen Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

1. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
2. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
   
   
3. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

1. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
   
   
2. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

By: /s/ William H. Koster

William H. Koster
President and Chief Executive Officer
Date: May 15, 2003

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stephen R. Davis, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Neurogen Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

1. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
   
   
2. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
   
   
3. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

1. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
   
   
2. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

By: /s/ Stephen R. Davis
Stephen R. Davis
Executive Vice President and Chief Business Officer
Date: May 15, 2003

Exhibit Index

Exhibit Number	Description
99.1 -	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 -	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 99.1

Neurogen Corporation
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)

Pursuant to the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sections 1350(a) and (b)), the undersigned hereby certifies as follows:

1. I am the President and Chief Executive Officer of Neurogen Corporation (the “Company”).

2. To the best of my knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2003 accompanying this Certification, in the form filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (the “Exchange Act”); and



2. The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 15, 2003

\s\William H. Koster
William H. Koster
President and Chief Executive Officer

Exhibit 99.2

Neurogen Corporation
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)

Pursuant to the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sections 1350(a) and (b)), the undersigned hereby certifies as follows:

1. I am the Executive Vice President and Chief Business Officer of Neurogen Corporation (the “Company”).

2. To the best of my knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2003 accompanying this Certification, in the form filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (the “Exchange Act”); and
   
   
2. The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 15, 2003

\s\Stephen R. Davis
Stephen R. Davis
Executive Vice President and Chief Financial Officer