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Neurogen Corp. (NASDAQ: NRGN)
35 Notheast Industrial Road, Branford 06405
(203) 488-8201
President and chief executive officer: Harry H. Penner Jr.
Revenues (FYE December 31, 1998): $11,081,000
Net margin (loss) (FYE December 31, 1998): ($9,458,000)
No. employees: 170
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Business New Haven
7/12/1999
By: BNH
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A decade ago a Yale University professor embarked on a challenge: to help create a company for drug discovery focusing on the treatment of neuropsychiatric disorders.
Today, that company is the Branford-based Neurogen Corp. The company's focus is the development of drug-discovery programs aimed at specific mechanisms that affect communication between and among cells. The company targets these receptors to reduce or eliminate undesirable side effects resulting from the use of currently available medications.
Drug discovery can be a daunting battle with opportunities existing in many theaters of the war against diseases and medical disorders. Rather than hit or miss, Neurogen targets its drug discovery for treatments of diseases/disorders in three specific arenas.
In the psychiatric area, the company is investigating treatments for dementia, insomnia, anxiety, schizophrenia and depression. It also targets drug discovery for metabolic disorders such as diabetes and obesity, and inflammatory disorders like arthritis and asthma.
To successfully wage war takes strategy, and Neurogen has embarked on a three-pronged offensive: First, focusing on the researching of biological mechanisms linked to specific disorders; second, keeping a pipeline going of drug candidates using the expertise it builds; and third, pursuing those product lines that exhibit commercial potential.
Facilitating its drug discovery capabilities is Neurogen's own system, called Accelerated Intelligent Drug Design (AIDD), which uses high-throughput screening as well as robotics and informatics along with the company's combinatorial chemistry systems. These systems allow for quick combinations of chemical agents in its search for multiple drug candidates.
The company recently announced that it had entered into a non-exclusive licensing commitment with Pfizer whereby Neurogen will install its AIDD system at a Pfizer research facility. The deal is expected to bring Neurogen $27 million in licensing payments over the next three years.
Neurogen's partnership with Pfizer dates back to 1992. Unlike David and Goliath, these two companies have successfully allied themselves in programs for anxiety, memory, insomnia and obesity. Neurogen announced last November a two-year extension of its program with Pfizer on the GABA neurotransmitter receptor drug discovery aimed at sleep disorders, anxiety and memory. The program now also extends to depression, with a total deal valued at $12.5 million. In May the company announced a one-year extension of its research program with Pfizer for treating obesity.
In addition to its long relationship with Pfizer, Neurogen has partnered with the Wyeth-Ayerst Laboratories division of American Home Products on an epilepsy drug, but development was stopped due to safety questions. In 1995 Neurogen signed an agreement with Schering-Plough for research on disorders such as schizophrenia.
As with other R&D companies Neurogen 's revenue stream is subject to changes in research agreements and licensing fees. Fiscal year 1998 saw a decrease in revenues from both sources, with none derived from license fees (license fees generated $3 million in the previous year), and a 26 percent reduction of R&D revenues. Total revenues were down 38 percent to $11.1 million, compared to $18 million for the 1997 fiscal year.
For the 1998 fiscal year, the company recorded an operating loss of $13.8 million and net loss of $9.5 million (66 cents per share diluted) compared to an operating loss of $5.3 million and net loss of $257,000 (two cents per share) for FY 1997. Cash and marketable securities stood at $75 million versus $84.2 million for the year before. 1998 recorded interest income of $4.3 million compared to $5.0 million for the 1997 year.
For the first quarter ended March 31, operating revenues were down 18 percent to $2.6 million, versus $3.2 million for the first quarter of calendar 1998. Neurogen's net loss for the first quarter 1998 was $3.4 million (23 cents per diluted share) versus a net loss of $1.7 million (12 cents per) for the comparable 1998 quarter. Cash and marketable securities were at $72 million and stockholders' equity at $95.5 million, down from $75 million and $98.6 million, respectively, from the prior year's quarter.
Looking at stock performance, following announcement of the recent AIDD licensing arrangement with Pfizer, Neurogen's stock rose to 14 5/8, up 2 1/16. Over the past 52 weeks trading reflects a somewhat volatile profile, with highs up to about 18 and lows at around 11. The June 25 closing price of 14 7/16 comes in lower than the stock's high in the early summer of 1998.
On the shareholder side, by 1995 Pfizer held approximately 21 percent of Neurogen's stock as a result of its research agreements with the company. In recent news Neurogen added two new directors, Julian C. Baker and Felix J. Baker, both of whom manage funds for the Tisch family, whose holdings include a 19.4 percent ownership of Neurogen stock.
Besides its continued collaboration with Pfizer on four drug-discovery programs plus the AIDD agreement, Neurogen is looking to ally with other pharmaceutical companies to continue to wage war on targeted disorders through drug discovery programs for depression, anxiety, diabetes and stress.
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