Neurogen moves to advance clinical development programs

Company announces $30.6M private placement offering, job cuts, delay in schizophrenia trial

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BRANFORD, Conn.—Moving to ramp up its clinical development programs, small molecule drug developer Neurogen Corp. today announced plans to raise $30.6 million in capital, cut jobs for the second time this year and delay the schizophrenia trials of its main drug candidate.

The $30.6 million offering is for the sale of 981,411 units. The net proceeds from this offering will be used for clinical development of existing product candidates and other general corporate purposes. The transaction is expected to occur in the next week.

Neurogen President and CEO Stephen R. Davis also announced the company has cut 45 positions in research and administrative functions in order to focus resources on advancing the company's four clinical programs in insomnia, anxiety, restless legs syndrome (RLS) and Parkinson's disease.

In February, Neurogen had said it would cut 70 jobs. As of Dec. 31, Neurogen had 149 employees.

"This financing, together with our cash and marketable securities of $42.6 million as of Dec. 31, 2007 and the operational changes announced today, enable us to get to important clinical milestones in our insomnia, anxiety, Parkinson's disease and RLS programs in 2008 and to fund our planned operations into the second half of 2009," Davis said in a statement.

Neurogen anticipates data from all four programs by the end of the year, Davis said.

"Our clinical portfolio is expanding and advancing as we leverage the potential of adipiplon and aplindore in several indications. We began Phase 2 studies in both Parkinson's disease and RLS with aplindore earlier this year. An upcoming Phase 2/3 study with adipiplon for insomnia enables us to examine how our drug compares to the current market leader, Ambien CR, in a side-by-side comparison study. We will also run a human proof-of-concept study in anxiety to examine adipiplon's ability to relieve anxiety at doses substantially below those that produce sedation—an exciting finding we have observed in animal studies," Davis said.

Adipiplon was also being studied for schizophrenia, but Neurogen said it expects to defer clinical studies previously planned in 2008 until a future date.

Neurogen expects restructuring charges, mainly related to severance benefits, of about $2.6 million in the second and third quarters. The company also expects to take a non-cash charge to write down the value of property and equipment associated with its research operations but said it could not currently estimate the amount of the charge.

Shares of the biotechnology company fell more than 28 percent to $1.58 in morning trade on Nasdaq.

Kimberly Lee, an analyst with Pacific Growth Equities, told Reuters that Neurogen's plans are a "sound strategy to reduce cash burn so that they have enough cash to last until they get the chronic insomnia data."

"The $30.6 million private placement will sustain operations until the third quarter of 2009," Lee added.

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