-----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, HLEBxgQkaRGRnWb9GZHWEGwAIzRW+uPNpJ7Gl/NVAKvJEqdSBr+H2rWDQ4kkO6nf Ki4/oNk4/BiR8GcD5b0sew== 0000950130-97-005056.txt : 19971117 0000950130-97-005056.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950130-97-005056 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: SEC FILE NUMBER: 000-18311 FILM NUMBER: 97719706 BUSINESS ADDRESS: STREET 1: 35 NORTHEAST INDUSTRIAL RD CITY: BRANFORD STATE: CT ZIP: 06405 BUSINESS PHONE: 2034888201 MAIL ADDRESS: STREET 1: 35 NORTHEAST INDUSTRIAL RD CITY: BRANFORD STATE: CT ZIP: 06405 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-18311 NEUROGEN CORPORATION (Exact name of registrant as specified in its charter) Delaware 22-2845714 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 35 Northeast Industrial Road Branford, Connecticut 06405 (Address of principal executive offices) (Zip Code) (203) 488-8201 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- ___ As of November 13, 1997 the registrant had 14,390,786 shares of Common Stock outstanding. NEUROGEN CORPORATION INDEX Page Number ------ Part I - Financial Information Item 1. Financial Statements...................................... 1 Balance Sheets at September 30, 1997 and December 31, 1996....................................... 1,2 Statements of Operations for the three-month and nine-month periods ended September 30, 1997 and 1996.. 3 Statements of Cash Flows for the nine-month period ended September 30, 1997 and 1996............................ 4 Notes to Financial Statements............................ 5-6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 7-11 Part II - Other Information Item 1. Legal Proceedings......................................... 12 Item 2. Changes in Securities..................................... 12 Item 3. Defaults upon Senior Securities........................... 12 Item 4. Submission of Matters to a Vote of Security Holders....... 12 Item 5. Other Information......................................... 12 Item 6. Exhibits and Reports on Form 8-K.......................... 12 Signature ...................................................... 14 Exhibit Index...................................................... 15-18 i PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS NEUROGEN CORPORATION BALANCE SHEETS (In thousands)
SEPTEMBER 30, DECEMBER 31, 1997 1996 ---- ---- (UNAUDITED) (AUDITED) ---------------- --------------- Assets Current assets: Cash and cash equivalents $ 66,307 $ 62,823 Marketable securities 20,625 32,314 Receivables from corporate partners 1,227 460 Other current assets 762 1,132 ---------------- --------------- Total current assets 88,921 96,729 Property, plant & equipment: Land and land improvements 523 523 Building and building improvements 8,804 8,679 Leasehold improvements 4,026 4,005 Equipment 7,455 5,903 Furniture 660 311 Construction in progress 6,063 440 ---------------- --------------- 27,531 19,861 Less accumulated depreciation and amortization 4,333 3,136 ---------------- --------------- Net property, plant and equipment 23,198 16,725 Other assets, net 370 415 ---------------- --------------- $112,489 $113,869 ================ ===============
See accompanying notes to financial statements. 1 NEUROGEN CORPORATION BALANCE SHEETS (In thousands, except per share data)
SEPTEMBER 30, DECEMBER 31, 1997 1996 (UNAUDITED) (AUDITED) ----------------- --------------- Liabilities & Stockholders' Equity Current Liabilities: Accounts payable and accrued expenses $ 3,138 $ 3,010 Unearned revenue from corporate partners 200 4,100 Current portion of mortgage payable 199 181 ----------------- -------------- Total current liabilities 3,537 7,291 Mortgage payable, excluding current portion 128 279 Other compensation 54 54 ----------------- -------------- Total liabilities 3,719 7,624 Stockholders' Equity: Preferred stock, par value $.025 per share Authorized 2,000,000 shares; none issued - - Common stock, par value $.025 per share Authorized 30,000,000 shares; issued and outstanding 14,380,933 shares at September 30, 1997 and 14,252,404 shares at December 31, 1996 360 356 Additional paid-in capital 109,261 108,491 Retained earnings (defecit) (846) (2,519) Unrealized loss on marketable securities (5) (83) ----------------- -------------- Total stockholders' equity 108,770 106,245 ----------------- -------------- $ 112,489 $ 113,869 ================= ==============
See accompanying notes to financial statements. 2 NEUROGEN CORPORATION STATEMENTS OF OPERATIONS (In thousands)
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS ENDED ENDED ENDED ENDED SEPT. 30, 1997 SEPT. 30, 1996 SEPT. 30, 1997 SEPT. 30, 1996 (UNAUDITIED) (UNAUDITIED) (UNAUDITIED) (UNAUDITIED) --------------- --------------- --------------- --------------- Operating revenues: License fees $ - $ - $ 3,000 $ 3,000 Research and Development 3,378 3,511 11,305 10,700 --------------- --------------- --------------- --------------- Total operating revenues 3,378 3,511 14,305 13,700 Operating Expenses: Research and development 4,811 3,578 13,685 10,009 General and administrative 831 861 2,751 2,252 --------------- --------------- --------------- --------------- Total operating expenses 5,642 4,439 16,436 12,261 --------------- --------------- --------------- --------------- Total operating income (loss) (2,264) (928) (2,131) 1,439 Other income (expense): Investment income 1,350 1,274 3,867 3,762 Interest expense (8) (14) (28) (41) --------------- --------------- --------------- --------------- Total other income, net 1,342 1,260 3,839 3,721 --------------- --------------- --------------- --------------- Income (loss) before provision for income taxes (922) 332 1,708 5,160 Provision for income taxes - - 35 100 --------------- --------------- --------------- --------------- Net income (loss) $ (922) $ 332 $ 1,673 $ 5,060 =============== =============== =============== =============== Earnings (loss) per share: Primary $ (0.06) $ 0.02 $ 0.11 $ 0.33 =============== =============== =============== =============== Fully diluted $ (0.06) $ 0.02 $ 0.11 $ 0.33 =============== =============== =============== =============== Shares used in calculation of earnings (loss) per share: Primary 14,362 15,385 15,390 15,466 =============== =============== =============== =============== Fully diluted 14,362 15,449 15,682 15,466 =============== =============== =============== ===============
See accompanying notes to financial statements 3 NEUROGEN CORPORATION STATEMENTS OF CASH FLOWS (In thousands)
NINE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, 1997 1996 (UNAUDITED) (UNAUDITED) ------------------- ------------------- Cash flows from operating activities: Net income $ 1,673 $ 5,060 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization expense 1,226 677 Net gain on sale of assets 4 (16) Changes in operating assets and liabilities: Increase (decrease) in accounts payable and accrued expenses 129 (449) Decrease in unearned revenue from corporate partners (3,900) (55) Decrease in other current assets 369 667 Increase in receivable from corporate partners (767) (1,869) Decrease in other assets, net 29 84 ------------------- ------------------- Net cash provided by (used in) operating activities (1,237) 4,099 Cash flows from investing activities: Purchase of plant and equipment (7,712) (3,204) Purchases of marketable securities (33,214) (26,759) Maturities and sales of marketable securities 44,981 51,538 Proceeds from sale of asset 26 109 ------------------- ------------------- Net cash provided by (used in) investing activities 4,081 21,684 Cash flows from financing activities: Exercise of employee stock options 774 1,581 Principal payments under mortgage payable (134) (118) ------------------- ------------------- Net cash provided by financing activities 640 1,463 ------------------- ------------------- Net increase (decrease) in cash and cash equivalents 3,484 27,246 Cash and cash equivalents at beginning of period 62,823 26,005 ------------------- ------------------- Cash and cash equivalents at end of period $ 66,307 $ 53,251 =================== ====================
See accompanying notes to financial statements. 4 NEUROGEN CORPORATION NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1997 (UNAUDITED) (1) Basis of Presentation and Summary of Significant Accounting Policies --------------------------------------------------------------------- The unaudited financial statements have been prepared from the books and records of Neurogen Corporation (the "Company") in accordance with generally accepted accounting principles for interim financial information pursuant to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of the results that may be expected for the fiscal year. (2) Marketable Securities --------------------- Marketable securities consist principally of debt securities with maturities of three months to five years and have been classified as available for sale securities. Management considers these investments, which represent funds available for current operations, an integral component of its cash management activities. Accordingly, marketable securities have been classified as current assets in the balance sheets. (3) Adoption of New Accounting Pronouncements ----------------------------------------- In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive Income" and Statement No. 131. "Disclosures About Segments of an Enterprise and Related Information." Statement No. 130 establishes standards for the reporting and display of comprehensive income and its components. Statement No. 131 establishes standards for the way that public companies report information about operating segments in financial statements. This Statement supersedes Statement No. 14, "Financial Reporting for Segments of a Business Enterprise," but retains the requirements to report information about major customers. Statements 130 and 131 are effective for the Company in fiscal 1998. The Company does not believe that the adoption of these Statements will have a material effect on the Company's financial statements. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact is expected to have no change in primary earnings per share 5 for the third quarter ended September 30, 1997 and September 30, 1996, respectively. For the nine month period ended September 30, 1997 and September 30, 1996 the impact is expected to have a $.01 and a $.03 increase respectively. The impact of Statement 128 on the calculation of fully diluted earnings per share for these periods is not expected to be material. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Since its inception in September 1987, Neurogen has been engaged in the discovery and development of drugs. The Company has not derived any revenue from product sales and, excluding the effect of one-time license fees received in 1996 from Schering-Plough and American Home Products and from Schering-Plough and Pfizer in 1995, expects to incur significant losses in most years prior to deriving any such product revenues. Revenues to date have come from three collaborative research agreements entered into with Pfizer, one collaboration with Schering-Plough, one license agreement with American Home Products and from interest income. RESULTS OF OPERATIONS Results of operations may vary from period to period depending on numerous factors, including the timing of income earned under existing or future strategic alliances, joint ventures or financings, if any, the progress of the Company's research and development projects, technological advances and determinations as to the commercial potential of proposed products. Neurogen expects research and development costs to increase significantly over the next several years as its drug development programs progress. In addition, general and administrative expenses necessary to support the expanded research and development activities are expected to increase for the foreseeable future. THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 The Company's operating revenues decreased to $3.3 million for the three months ended September 30, 1997 as compared to $3.5 million for the same period in 1996 due to a reduction in the level of research required, and a corresponding reduction in research funding received, pursuant to an extension in December 1996 of the 1992 and 1994 Pfizer agreements, as described 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 increased 34 percent to $4.8 million for the three-month period ended September 30, 1997 as compared to the same period in 1996. The increase is due to increases in research and development personnel and an expansion of Neurogen's AIDD (Accelerated Intelligent Drug Design) program. Research and development costs represented 85 percent of total operating expenses for the second quarter of 1997 as compared to 81 percent for the same period in 1996. General and administrative expenses decreased 3 percent to $0.8 million for the three-month period ended September 30, 1997 as compared to the same period in 1996. 7 Other income consisting primarily of interest income, and gains and losses from invested cash and marketable securities increased 7 percent for the third quarter of 1997 as compared to the same period in 1996 due to a slightly higher rate of return offset by a lower investment balance. The Company recognized a net loss of $0.9 million for the three months ended September 30, 1997 as compared with a net income of $0.3 million for the same period in 1996. The decrease in earnings is primarily due to the increase in operating expenses for the third quarter of 1997. NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 The Company's research and development revenues increased to $11.3 million for the nine months ended September 30, 1997 as compared to $10.7 million for the same period in 1996 due to the receipt of a clinic development milestone pursuant to the 1992 Pfizer Agreement and an increase in the reimbursement of expenses pursuant to the 1995 Pfizer Agreement. Research and development expenses increased 36 percent to $13.7 million for the nine months ended September 30, 1997 as compared to the same period in 1996. The increase is due to increases in research and development personnel, an increase in clinical development costs and an expansion of Neurogen's AIDD (Accelerated Intelligent Drug Design) program. Research and development costs represented 83 and 81 percent of total operating expenses for each of the nine month periods ended September 30, 1997 and 1996 respectively. General and administrative expenses increased 22 percent to $2.8 million for the nine months ended September 30, 1997 as compared to the same period in 1996. This increase is due to an increased level of administrative expenses necessary to support a growing research staff. Other income consisting primarily of interest income, and gains and losses from invested cash and marketable securities increased to $3.8 million for the nine months ended September 30, 1997 as compared to $3.7 million in the same period in 1996 due to a slightly higher rate of return offset by a lower investment balance. The Company recognized net income of $1.7 million for the nine months ended September 30, 1997 as compared with net income of $5.1 million for the same period in 1996. The decrease in earnings is primarily due to the increase in operating expenses for the nine months ended September 30, 1997 as compared to the same period in 1996. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1997 and December 31, 1996, cash, cash equivalents and marketable securities were in the aggregate $86.9 million and $95.1 million respectively. While the Company's aggregate level of cash, cash equivalents and marketable securities decreased slightly during the 8 third quarter of 1997, these levels have fluctuated significantly in the past and are expected to do so in the future as a result of the factors described below. Neurogen's cash requirements to date have been met by the proceeds of its financing activities, amounts received pursuant to collaborative arrangements and interest earned on invested funds. The Company's financing activities include three private placement offerings of its common stock prior to its initial public offering, underwritten public offerings of the Company's common stock in 1989, 1991 and 1995, and the private sale of common stock to Pfizer in connection with entering into the Pfizer Agreements and to American Home Products in the American Home Products Agreement. Total funding received from these financing activities was approximately $105.6 million. The Company's expenditures have been primarily to fund research and development and general and administrative expenses and to construct and equip its research and development facilities. In the first quarter of 1992, the Company entered into a collaborative agreement, the "1992 Pfizer Agreement" pursuant to which Pfizer made a $13.8 million equity investment in the Company. Under this agreement, the Company received $4.6 million in each year from 1992 through 1996 and is receiving additional funding pursuant to a December 1996 extension, as described below. Neurogen could also receive milestone payments of up to $12.5 million if certain development and regulatory objectives are achieved regarding its products subject to the collaboration. In return, Pfizer received the exclusive rights to manufacture and market collaboration anxiolytics and cognition enhancers that act through the family of receptors which interact with the neuro-transmitter gamma-aminobutyric acid, or GABA, and for which it will pay Neurogen royalties based upon net sales levels, if any, for such products. As of September 30, 1997, Pfizer had provided $24.9 million of research funding to the Company pursuant to the 1992 Pfizer Agreement and $0.3 million due to the completion of a clinical development milestone, in addition to its $13.8 million equity investment in 1992. Neurogen and Pfizer entered into their second collaborative agreement, the "1994 Pfizer Agreement", in July 1994, pursuant to which Pfizer made an additional $9.9 million equity investment in the Company. Under this agreement, the Company received approximately $7.4 million during the three-year period which commenced July 1, 1994, to fund Neurogen's sleep disorder program and is receiving additional funding pursuant to a December 1996 extension, as described below. Neurogen could also receive milestone payments of up to $3.3 million if certain development and regulatory objectives are achieved regarding its products subject to the collaboration. As part of this second collaboration, Pfizer received the exclusive rights to manufacture and market GABA-based sleep disorder products for which it will pay Neurogen royalties depending upon net sales levels, if any. As of September 30, 1997, Pfizer had provided $8.1 of research funding to the Company pursuant to the 1994 Pfizer Agreement, in addition to its $9.9 million equity investment in 1994. 9 In December 1996, Neurogen and Pfizer extended the research programs under the 1992 Pfizer Agreement and 1994 Pfizer Agreement through 1998. Pursuant to the extension agreement, Neurogen expects to receive $5.3 million in each of 1997 and 1998 for research funding of the Company's GABA-based anxiety, cognition enhancement and sleep disorders programs. Under both the 1992 Pfizer Agreement and the 1994 Pfizer Agreement, in addition to making the equity investments and the research and milestone payments noted above, Pfizer is responsible for funding the cost of all clinical development and the manufacturing and marketing, if any, of drugs developed from the collaborations. Neurogen and Pfizer entered into their third collaborative agreement, the "1995 Pfizer Agreement", in November 1995, pursuant to which Pfizer made an additional $16.5 million equity investment in the Company bringing Pfizer's ownership of the Company's common stock up to 21 percent and paid a $3.5 million license fee. The Company is scheduled to receive approximately $7.2 million during the three-year period which commenced November 1, 1995, to fund Neurogen's neuropeptide Y (NPY) eating disorders program and may receive up to an additional $2.4 million per year for a fourth and fifth year should Pfizer exercise its option to extend the research program under the collaboration. Neurogen could also receive milestone payments of up to approximately $28 million if certain development and regulatory objectives are achieved regarding its products subject to the collaboration. As part of this third collaboration, Pfizer received the exclusive worldwide rights to manufacture and market NPY-based collaboration compounds, subject to certain rights retained by Neurogen. Pursuant to the 1995 Pfizer Agreement, Neurogen will fund a minority share of early stage development costs and has retained the right to manufacture any collaboration products in NAFTA countries and has retained a profit sharing option with respect to product sales in NAFTA countries. If Neurogen exercises the profit sharing option, it will fund a portion of the cost of late stage clinical trials and marketing costs and in return receive a specified percentage of any profit generated by sales of collaboration products in NAFTA countries. If Neurogen chooses not to exercise its profit-sharing option, Pfizer would pay Neurogen royalties on drugs marketed in NAFTA countries and would fund a majority of early stage and all late stage development and marketing expenses. In either case Neurogen would be entitled to royalties on drugs marketed in non-NAFTA countries. As of September 30, 1997, Pfizer had provided $4.8 million in research funding (including $0.2 million in unearned revenues) pursuant to the 1995 Pfizer Agreement. In June 1995, Neurogen and Schering-Plough entered into 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 million for rights relating to Neurogen's dopamine program and $3 million in each of 1995 and 1996 for the right to test certain of Neurogen's combinatorial chemistry libraries in selected non-CNS assays. Neurogen received scheduled funding aggregating approximately $7.2 million during the two-year period 10 which commenced June 28, 1995, for research and development funding of the Company's dopamine program. In March 1997, Schering-Plough elected to extend the research program under the Schering-Plough Agreement for an additional one-year period, through June 1998 and to pay Neurogen $3.6 million to fund such research. The Company may receive additional research and development funding of up to $3.6 million per year for two additional one-year periods depending on whether and the extent to which Schering- Plough exercises its right to further 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, 1997, Schering-Plough had provided $8.1 million in research pursuant to the Schering-Plough Agreement. In addition to the payments described above, Schering-Plough is responsible for funding the cost of all clinical development and marketing, if any, of drugs subject to the collaboration. In the fourth quarter of 1996, Neurogen entered into an agreement, the "American Home Products Agreement", acting through its Wyeth-Ayerst Laboratories division. Under the terms of the agreement, Neurogen received $750,000 in license fees for ADCI, a small molecule pharmaceutical that Neurogen has been developing for the treatment of epilepsy and related disorders, and $750,000 for 37,442 shares of common stock. Neurogen may receive up to an additional $11.0 million in the form of license fees, equity investment and milestone payments on world-wide sales of ADCI. The Company plans to use its cash balance for its research and development activities, working capital and general corporate purposes. Neurogen anticipates that its current cash balance, as supplemented by research funding pursuant to the Pfizer Agreements and the Schering-Plough Agreement, will be sufficient to fund its current and planned operations through 2000. However, Neurogen's funding requirements may change and will depend upon numerous factors, including but not limited to, the progress of the Company's research and development programs, the timing and results of preclinical testing and clinical studies, the timing of regulatory approvals, technological advances, determinations as to the commercial potential of its proposed products, the status of competitive products and the ability of the Company to establish and maintain collaborative arrangements with others for the purpose of funding certain research and development programs, conducting clinical studies, obtaining regulatory approvals and, if such approvals are obtained, manufacturing and marketing products. The Company anticipates that it may augment its cash balance through financing transactions, including the issuance of debt or equity securities and further corporate alliances. No arrangements have been entered into for any future financing and no assurances can be given that adequate levels of additional funding can be obtained on favorable terms, if at all. 11 As of December 31, 1996, the Company had approximately $11.5 million of net operating loss carryforwards available for federal income tax purposes which expire from the years 2003 through 2009. The Company had approximately $9.4 million of Connecticut state tax net operating loss carryforwards as of December 31, 1996 which expire in the years 1997 through 1999. Because of "change in ownership" provisions of the Tax Reform Act of 1986, the Company's utilization of its net operating loss carryforwards may be subject to an annual limitation in future periods. Part II - Other Information ITEM 1. LEGAL PROCEEDINGS Not applicable for the third quarter ended September 30, 1997. ITEM 2. CHANGES IN SECURITIES Not applicable for the third quarter ended September 30, 1997. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable for the third quarter ended September 30, 1997. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable for the third quarter ended September 30, 1997. ITEM 5. OTHER INFORMATION Not applicable for the third quarter ended September 30, 1997. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) See Exhibit Index on page 11. (b) None 12 SAFE HARBOR STATEMENT Statements which are not historical facts, including statements about the Company's confidence and strategies, the status of various product development programs, the sufficiency of cash to fund planned operations and the Company's expectations concerning its development compounds, drug discovery technologies and opportunities in the pharmaceutical marketplace are "forward looking statements" within the meaning of the Private Securities Litigations Reform Act of 1995 that involve risks and uncertainties and are not guarantees of future performance. These risks include, but are not limited to, difficulties or delays in development, testing, regulatory approval, production and marketing of any of the Company's drug candidates, the failure to attract or retain scientific management personnel, any unexpected adverse side effects or inadequate therapeutic efficacy of the Company's drug candidates which could slow or prevent product development efforts, competition within the Company's anticipated product markets, the Company's dependence on corporate partners with respect to research and development funding, regulatory filings and manufacturing and marketing expertise, the uncertainty of product development in the pharmaceutical industry, inability to obtain sufficient funds through future collaborative arrangements, equity or debt financings or other sources to continue the operation of the Company's business, risk that patents and confidentiality agreements will not adequately protect the Company's intellectual property or trade secrets, dependence upon third parties for the manufacture of potential products, inexperience in manufacturing and lack of internal manufacturing capabilities, dependence on third parties to market potential products, lack of sales and marketing capabilities, potential unavailability or inadequacy of medical insurance or other third-party reimbursement for the cost of purchases of the Company's products, and other risks detailed in the Company's Securities and Exchange Commission filings, including its Annual Report on Form 10-K for the year ended December 31, 1996, each of which could adversely affect the Company's business and the accuracy of the forward-looking statements contained herein. 13 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 10, 1997 14 Exhibit Index ------------- Exhibit ------- Number ------ 10.1 - Neurogen Corporation Stock Option Plan, as amended (incorporated by reference to Exhibit 10.1 to the Company's Form 10-K for the fiscal year ended December 31, 1991). 10.2 - Form of Stock Option Agreement currently used in connection with the grant of options under Neurogen Corporation Stock Option Plan (incorporated by reference to Exhibit 10.2 to the Company's Form 10-K for the fiscal year ended December 31, 1992). 10.3 - Neurogen Corporation 1993 Omnibus Incentive Plan, as amended (incorporated by reference to Exhibit 10.3 to the Company's Form 10-K for the fiscal year ended December 31, 1993). 10.4 - Form of Stock Option Agreement currently used in connection with the grant of options under Neurogen Corporation 1993 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company's Form 10-K for the fiscal year ended December 31, 1993). 10.5 - Neurogen Corporation 1993 Non-Employee Directors Stock Option Program (incorporated by reference to Exhibit 10.5 to the Company's Form 10-K for the fiscal year ended December 31, 1993). 10.6 - Form of Stock Option Agreement currently used in connection with the grant of options under Neurogen Corporation 1993 Non- Employee Directors Stock Option Program (incorporated by reference to Exhibit 10.6 to the Company's Form 10-K for the fiscal year ended December 31, 1993). 10.7 - Employment Contract between the Company and Harry H. Penner, Jr., dated as of October 12, 1993 (incorporated by reference to Exhibit 10.7 to the Company's Form 10-K for the fiscal year ended December 31, 1993). 10.8 - Employment Contract between the Company and John F. Tallman, dated as of December 1, 1993 (incorporated by reference to Exhibit 10.25 to the Company's Form 10-Q for the quarterly period ended September 30, 1994). 10.9 - Open-End Mortgage Deed and Security Agreement between the Company and Orion Machinery & Engineering Corp., dated March 16, 1989 (incorporated by reference to Exhibit 10.15 to Registration Statement No. 33-29709 on Form S-1). 10.10 - Form of Proprietary Information and Inventions Agreement (incorporated by reference to Exhibit 10.31 to Registration Statement No. 33-29709 on Form S-1). 15 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). 16 10.21 - Lease Agreement between the Company and Commercial Building Associates dated as of August 30, 1995 (incorporated by reference to Exhibit 10.27 to the Company's Form 10-Q for the quarterly period ended September 30, 1995). 10.22 - Collaborative Research Agreement between the Company and Pfizer dated as of November 1, 1995 (confidential treatment requested) (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K dated November 1, 1995). 10.23 - Development and Commercialization Agreement between the Company and Pfizer dated as of November 1, 1995 (confidential treatment requested) (incorporated by reference to Exhibit 10.2 of the Company's Form 8-K dated November 1, 1995). 10.24 - Stock Purchase Agreement between the Company and Pfizer dated as of November 1, 1995 (incorporated by reference to Exhibit 10.3 of the Company's Form 8-K dated November 1, 1995). 10.25 - Licensing Agreement dated as of November 25, 1996 between American Home Products Corporation, acting through its Wyeth- Ayerst Laboratories Division, and Neurogen Corporation (CONFIDENTIAL TREATMENT REQUESTED) (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K dated March 31, 1997). 10.26 - Stock Purchase Agreement dated as of November 25, 1996 between American Home Products Corporation, acting through its Wyeth- Ayerst Laboratories Division, and Neurogen Corporation (CONFIDENTIAL TREATMENT REQUESTED) (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K dated March 31, 1997). 11.1 - Computation of Earnings per Common Share. 27.1 - Financial Data Schedule 17 EX-11 2 COMPUTATION OF EARNINGS PER COMMON SHARE 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, 1997 SEPT. 30, 1996 SEPT. 30, 1997 SEPT. 30, 1996 (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) --------------- --------------- --------------- --------------- Primary: Weighted average shares of common stock outstanding 14,362 14,192 14,332 14,118 Dilutive effect of : Warrants (1) 42 36 43 Stock options (1) 1,151 1,022 1,305 --------------- --------------- --------------- --------------- Common and common equivalent shares 14,362 15,385 15,390 15,466 =============== =============== =============== =============== Net income (loss) $ (922) $ 332 1,673 $ 5,060 =============== =============== =============== =============== Earnings (loss) per common and common equivalent shares $ (0.06) $ .02 $ 0.11 0.33 =============== =============== =============== =============== Fully Diluted: Weighted average shares of common stock outstanding 14,362 14,192 14,332 14,118 Dilutive effect of : Warrants (1) 42 36 43 Stock options (1) 1,215 1,314 1,305 --------------- --------------- --------------- --------------- Common and common equivalent shares 14,362 15,449 15,682 15,466 =============== =============== =============== =============== Net income (loss) $ (922) $ 332 1,673 $ 5,060 =============== =============== =============== =============== Earnings (loss) per common and common equivalent shares $ (0.06) $ .02 $ 0.11 0.33 =============== =============== =============== ===============
(1) The Common Stock Equivalents have not been included as their inclusion would be antidilutive. EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 66,307 20,625 0 0 0 88,921 27,422 4,333 112,489 3,537 0 0 0 360 (5) 112,489 0 14,305 0 16,436 (3,839) 0 28 1,708 35 1,673 0 0 0 1,673 .11 .11
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