-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HBzpVRPCEepbaPEM/19SrH1IpQc79+D9yGMPau7+EQywRK7A+Rv3LEd8YL3nYoXB iImUi9bI9vxjiq7zB8JYlA== 0000950109-96-007456.txt : 19961115 0000950109-96-007456.hdr.sgml : 19961115 ACCESSION NUMBER: 0000950109-96-007456 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEUROGEN CORP CENTRAL INDEX KEY: 0000849043 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 222845714 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18311 FILM NUMBER: 96660598 BUSINESS ADDRESS: STREET 1: 35 NORTHEAST INDUSTRIAL RD CITY: BRANFORD STATE: CT ZIP: 06405 BUSINESS PHONE: 2034888201 10-Q 1 FORM 10-Q 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 September 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 November 7, 1996, the registrant had 14,211,612 shares of Common Stock outstanding. NEUROGEN CORPORATION INDEX Page Number ------ Part I - Financial Information Item 1. Financial Statements.......................................... 1 Balance Sheets at September 30, 1996 and December 31, 1995.......................................... 1,2 Statements of Operations for the three-month and nine-month periods ended September 30, 1996 and 1995.................. 3 Statements of Cash Flows for the nine-month periods ended September 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 Part II - Other Information 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 i Part I - Financial Information Item 1 - Financial Statements Neurogen Corporation Balance Sheets
September 30, December 31, 1996 1995 (Unaudited) (Audited) ----------- --------- Assets Current assets: Cash and cash equivalents $ 53,250,639 $ 26,004,548 Marketable securities 40,649,693 39,881,172 Receivables from corporate partner 1,868,865 - Other current assets 850,416 1,517,543 -------------- -------------- Total current assets 96,619,613 67,403,263 Marketable securities - long term - 25,731,798 Property, plant & equipment: Land and land improvements 523,333 425,000 Building 8,621,852 8,415,766 Equipment 5,333,505 4,071,650 Furniture 207,546 166,072 Construction in progress 1,781,502 293,911 -------------- -------------- 16,467,738 13,372,399 Less accumulated depreciation 2,798,067 2,146,482 -------------- -------------- Net property, plant and equipment 13,669,671 11,225,917 Other assets, net 401,327 495,384 -------------- -------------- $ 110,690,611 $ 104,856,362 ============== ==============
See accompanying notes to financial statements. 1 Neurogen Corporation Balance Sheets
September 30, December 31, 1996 1995 (Unaudited) (Audited) ----------- --------- Liabilities & Stockholders' Equity Current Liabilities: Accounts payable and accrued expenses $ 1,548,651 $ 1,997,647 Unearned revenue from corporate partners 4,044,667 4,100,000 Current portion of mortgage payable 175,434 159,812 --------------- --------------- Total current liabilities 5,768,752 6,257,459 Mortgage payable, excluding current portion 326,476 460,075 Other compensation 62,587 62,587 --------------- --------------- Total liabilities 6,157,815 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 14,202,482 shares at September 30, 1996 and 13,949,064 shares at December 31, 1995 355,062 348,727 Additional paid-in capital 107,614,380 106,039,959 Accumulated deficit (3,352,390) (8,412,660) Unrealized gain (loss) on marketable securities (84,256) 100,215 --------------- --------------- Total stockholders' equity 104,532,796 98,076,241 --------------- --------------- $ 110,690,611 $ 104,856,362 =============== ===============
See accompanying notes to financial statements. 2 Neurogen Corporation Statements of Operations
Three Months Three Months Ended Ended Sept. 30, 1996 Sept. 30, 1995 (Unaudited) (Unaudited) ----------- ----------- Operating revenues: License fees $ - $ - Research and Development 3,510,532 2,644,667 -------------------------------------------------- Total operating revenues 3,510,532 2,644,667 Operating Expenses: Research and development 3,577,608 3,660,341 General and administrative 860,615 654,453 ---------------------- ----------------------- Total operating expenses 4,438,223 4,314,794 Other income (expense): Investment income 1,273,806 647,436 Interest expense (13,656) (17,020) ---------------------- ----------------------- Total other income, net 1,260,150 630,416 ---------------------- ----------------------- Income (loss) before provision for income taxes 332,459 (1,039,711) Provision for income taxes - - ---------------------- ----------------------- Net income (loss) 332,459 (1,039,711) Earnings (loss) per share: Primary $ 0.02 $ (0.09) ====================== ======================= Fully diluted $ 0.02 $ - ====================== ======================= Shares used in calculation of earnings (loss) per share: Primary 15,385,000 11,359,000 ====================== ======================= Fully diluted 15,449,000 - ====================== ======================= Nine Months Nine Months Ended Ended Sept. 30, 1996 Sept. 30, 1995 (Unaudited) (Unaudited) ----------- ----------- Operating revenues: License fees $ 3,000,000 $ 14,000,000 Research and Development 10,699,865 6,384,000 -------------------------------------------- Total operating revenues 13,699,865 20,384,000 Operating Expenses: Research and development 10,009,376 9,550,032 General and administrative 2,251,881 2,160,755 ------------------- -------------------- Total operating expenses 12,261,257 11,710,787 Other income (expense): Investment income 3,761,538 1,100,906 Interest expense (39,876) (53,016) ------------------- -------------------- Total other income, net 3,721,662 1,047,890 ------------------- -------------------- Income (loss) before provision for income taxes 5,160,270 9,721,103 Provision for income taxes 100,000 227,000 ------------------- -------------------- Net income (loss) 5,060,270 9,494,103 Earnings (loss) per share: Primary $ 0.33 $ 0.82 =================== ==================== Fully diluted $ 0.33 $ 0.79 =================== ==================== Shares used in calculation of earnings (loss) per share: Primary 15,466,000 11,600,000 =================== ==================== Fully diluted 15,466,000 12,056,000 =================== ====================
See accompanying notes to financial statements. 3 Neurogen Corporation Statements of Cash Flows
Nine Months Nine Months Ended Sept. 30, Ended Sept. 30, 1996 1995 (Unaudited) (Unaudited) ------------------- ---------------- Cash flows from operating activities: Net income $ 5,060,270 $ 9,494,103 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization expense 677,213 547,615 (Gain) loss on sale of assets (15,562) 3,053 Changes in operating assets and liabilities: Increase (decrease) in accounts payable and accrued expenses (448,996) 760,561 Increase (decrease) in unearned revenue from corporate partner (55,333) 4,494,667 (Increase) decrease in other current assets 667,127 (301,322) Increase in receivable from corporate partners (1,868,865) - (Increase) decrease in other assets, net 83,991 (185,795) ------------------- ---------------- Net cash provided by operating activities 4,099,845 14,812,882 Cash flows from investing activities: Purchase of plant and equipment (3,204,251) (1,157,576) Purchases of marketable securities (26,759,041) (16,647,511) Maturities and sales of marketable securities 51,537,847 16,402,180 Proceeds from sale of asset 108,912 - ------------------- ---------------- Net cash provided by (used in) investing activities 21,683,467 (1,402,907) Cash flows from financing activities: Exercise of employee stock options 1,580,756 354,677 Proceeds from sale of common stock, net - 42,888,595 Principal payments under mortgage payable (117,977) (104,182) Principal payments under capital lease obligations - (30,858) ------------------- ---------------- Net cash provided by financing activities 1,462,779 43,108,232 ------------------- ---------------- Net increase in cash and cash equivalents 27,246,091 56,518,207 Cash and cash equivalents at beginning of period 26,004,548 9,439,727 ------------------- ---------------- Cash and cash equivalents at end of period $ 53,250,639 $65,957,934 =================== ================
See accompanying notes to financial statements. 4 Neurogen Corporation Notes to Financial Statements September 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 September 30, 1996 balance sheet. (3) Adoption of New Accounting Pronouncements ----------------------------------------- The Company has 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. 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 SEPTEMBER 30, 1996 AND 1995 The Company's operating revenues increased to $3.5 million for the three months ended September 30, 1996 from $2.6 million for the same period in 1995. This increase is due to a $0.9 million increase in research and development revenues attributable to the commencement of research funding under the Schering-Plough Agreement and the 1995 Pfizer Agreement (as defined below). 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 of $3.6 million were essentially unchanged for the three-month period ended September 30, 1996 as compared to the same period in 1995. Comparing these periods, an increase in the size of the Company's research staff and related laboratory costs was generally offset by a decrease in clinical development costs, which fluctuate significantly from quarter to quarter. Research and development costs represented 81 percent of total operating expenses for the third quarter of 1996 as compared to 85 percent for the same period in 1995. General and administrative expenses increased 32 percent to $0.9 million for the three-month period ended September 30, 1996 as compared to the same period in 1995. 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 increased to $1.3 million for the third quarter of 1996 from $0.6 million for the same period in 1995 due primarily to a higher level of invested funds. The Company recognized net income of $0.3 million for the three months ended September 30, 1996 as compared with a net loss of $1.0 million for the same period in 1995. The change in earnings is primarily due to the increase in interest income due to the higher level of invested funds and the increase in research revenues, all as noted above. NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 The Company's operating revenues decreased to $13.7 million for the nine months ended September 30, 1996 from $20.4 million for the same period in 1995. The Company's 1995 results for the nine months ended September 30, 1995 include license revenue of $14.0 million received from Schering-Plough in 1995 in connection with entering into the Schering-Plough Agreement. Results for the nine months ended September 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. Research and development revenues increased $4.3 million, or 68 percent, to $10.7 million due to the commencement of research funding under the Schering-Plough Agreement and the 1995 Pfizer Agreement. In addition to the quarterly research funding payments received from Pfizer, research and development revenue for the nine months ended September 30, 1996 includes reimbursements from Pfizer of certain development expenses as part of the cost sharing arrangement on the NPY obesity project. Research and development costs increased 5 percent to $10.0 million for the nine-month period ended September 30, 1996 as compared to the same period in 1995. The increase is due to increases in research staff, laboratory supplies and increases in external 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 in each of the nine month periods ended September 30, 1996 and 1995. General and administrative expenses increased 4 percent to $2.3 million for the nine months ended September 30, 1996 as compared to the same period in 1995, 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, increased to $3.7 million for the nine months ended September 30, 1996 from $1.0 million for the same period in 1995 due primarily to a higher level of invested funds. The Company recognized net income of $5.1 million for the nine months ended September 30, 1996 as compared with net income of $9.5 million for the same period in 1995. The change in earnings is primarily due to the recognition of nonrecurring license fees of $14.0 million in 1995 and $3.0 million in 1996 and the increase in research and development revenues, all as noted above. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1996 and December 31, 1995, cash, cash equivalents and marketable securities were in the aggregate $93.9 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 nine 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-aminobutyric 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 September 30, 1996, Pfizer had provided $21.9 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 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 September 30, 1996, Pfizer had provided $6.2 million of research funding to the Company pursuant to the 1994 Pfizer Agreement (including $0.6 million of unearned revenue), 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 September 30, 1996, Pfizer had provided $1.8 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 assays. Schering-Plough funded an additional $3.0 million in 1996 for the right to test additional libraries which is included in unearned revenue at September 30, 1996. 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 September 30, 1996, Schering-Plough had provided $5.0 million in research funding (including $450,000 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. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable for the third quarter ended September 30, 1996. ITEM 2. CHANGES IN SECURITIES Not applicable for the third quarter ended September 30, 1996. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable for the third quarter ended September 30, 1996. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable for the third quarter ended September 30, 1996. ITEM 5. OTHER INFORMATION Not applicable for the third quarter ended September 30, 1996. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) See Exhibit Index on page 11. (b) None. 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. 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: November 7, 1996 Exhibit Index ------------- Exhibit ------- Number ------ 3.1 - Restated Certificate of Incorporation, filed June 17, 1994. 3.2 - By-Laws, as amended (incorporated by reference to Exhibit 3.6 to the Company's Form 10-K for the fiscal year ended December 31, 1993). 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). 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). 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 EX-11.1 2 COMPUTATION OF NET INCOME
Exhibit 11.1 Neurogen Corporation Computation of Net Income (Loss) Per Common Share (in thousands, except Net Income (Loss) per Common Share amounts) Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995 (Unaudited) (Unaudited) (Unaudited) (Unaudited) --------- --------- --------- --------- Primary: Weighted average shares of common stock outstanding 14,192 11,359 14,118 10,532 Dilutive effect of: Warrants 42 - 43 37 Stock options 1,151 - 1,305 1,031 ------------- ------------- ------------- ------------- Common and common equivalent shares 15,385 11,359 15,466 11,600 ============= ============= ============= ============= Net income (loss) $ 332 $ (1,040) $ 5,060 $ 9,494 ============= ============= ============= ============= Earnings (loss) per common and common equivalent shares $ 0.02 $ (0.09) $ 0.33 $ 0.82 ============= ============= ============= ============= Fully Diluted: Weighted average shares of common stock outstanding 14,192 11,359 14,118 10,532 Dilutive effect of: Warrants 42 - 43 42 Stock options 1,215 - 1,305 1,482 ------------- ------------- ------------- ------------- Common and common equivalent shares 15,449 11,359 15,466 12,056 ============= ============= ============= ============= Net Income (loss) $ 332 $ (1,040) $ 5,060 $ 9,494 ============= ============= ============= ============= Earnings (loss) per common and common equivalent shares $ 0.02 $ - $ 0.33 $ 0.79 ============= ============= ============= =============
EX-27 3 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 53,250,639 40,649,693 0 0 0 96,619,613 16,467,738 2,798,067 110,690,611 5,768,752 0 0 0 355,062 (84,256) 110,690,611 0 13,699,865 0 12,261,257 (3,721,662) 0 39,876 5,160,270 100,000 5,060,270 0 0 0 5,060,270 .33 .33
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