Neurogen Corporation (NASDAQ: NRGN), a drug development company
historically focused on drugs for psychiatric and neurological
disorders, today announced financial and operating results for the
quarter ended September 30, 2009. The Company also announced its
analysis of results from a previously suspended Phase 2 study of
aplindore in Restless Legs Syndrome (RLS) and that it has entered
into an agreement to sell all real estate owned by the Company.
Stephen R. Davis, President and CEO said, "While we saw
indications of efficacy in the RLS study of aplindore, our analysis
of both efficacy and tolerability - when considered in the context
of observations from similar clinical studies with drugs currently
on the market - suggest the partial agonist profile of aplindore
would not be differentiated from the full agonists which either are
or will be generic by the time aplindore could be launched.”
Mr. Davis continued, “We are pleased to have recently entered
into an agreement to sell our real estate at a price higher than we
previously estimated and to have concluded the third quarter with
financial results in line with our expectations.”
As previously announced, the Company has signed a merger
agreement with Ligand Pharmaceuticals, Inc. (“Ligand”) pursuant to
which the Company will become a wholly-owned subsidiary of Ligand.
The Company expects the merger to close during the fourth quarter
of 2009, subject to receipt of Company shareholder approval and the
satisfaction of other customary closing conditions. In the merger,
Company shareholders are entitled to receive shares of Ligand
common stock with an aggregate market value of up to approximately
$11.0 million, as adjusted for the Company’s net cash position
shortly before the shareholder special meeting and subject to a
share cap of 4,200,000 shares, which, if not waived by Ligand,
would cause Company shareholders to receive less than $11.0 million
in Ligand stock. Company shareholders also will receive four
Contingent Value Rights (“CVRs”) in the merger under applicable CVR
agreements, which would entitle Company shareholders to the net
proceeds from the sale or licensing of certain Company assets,
including its aplindore program and real estate holdings, and the
achievement of a specified clinical milestone. The Company expects
to send to Company shareholders a proxy statement/prospectus in
connection with the merger in the near future, which will contain
additional information regarding the merger.
Facilities Sale
Neurogen also announced today that it has entered into an
agreement with a commercial real estate developer to sell the
Company’s real estate holdings, including all laboratory and office
facilities, for a gross selling price of $3.5 million. Neurogen
expects to realize approximately $3.1 million in net proceeds upon
closing of the deal which, subject to the satisfaction of customary
closing conditions, is expected to occur in the first quarter of
2010. Net proceeds from the sale of Neurogen’s real estate will be
eligible for payment to Neurogen’s stockholders through a
Contingent Value Right to be issued upon the closing of Neurogen’s
pending and previously announced merger into Ligand.
Aplindore
This Phase 2 RLS study was a randomized, placebo-controlled,
double-blind, multi-center, parallel-group study designed to assess
the efficacy, safety and tolerability of multiple doses of
aplindore compared to placebo. The 5 treatment groups in the study
were aplindore 0.05 mg, 0.1 mg, 0.25 mg, 0.5 mg and placebo, and
subjects received a total of 4 weeks of treatment. The lowest doses
(0.05 mg and 0.1 mg) were not titrated, while the higher doses were
titrated over 4 days (0.25 mg) and 7 days (0.5 mg). The 0.5 mg
treatment group was discontinued after approximately 2 months of
enrollment. Enrollment of patients in the study was suspended after
randomization of 60% of the planned 195 subjects. The primary
efficacy endpoint was the mean change in the International Restless
Legs Syndrome Rating Scale (IRLS) from baseline. In this study,
aplindore achieved statistically significant results versus placebo
overall and at the 0.05 mg and 0.25 mg doses, but not at the 0.1 mg
dose. In this study, aplindore was well tolerated at the lower
doses.
The study enrolled 118 subjects with moderate-to-severe RLS. The
Modified Intent to Treat (mITT) population was 116 subjects with 14
early terminations, of which 6 were due to aplindore-related
adverse events. Eighteen subjects received the discontinued 0.5 mg
dose. These subjects were not included in the efficacy analysis,
but were included in the safety population. The primary outcome
(IRLS) showed a statistically significant improvement overall
(ANCOVA p=0.0355) with statistically significant pairwise
comparisons to placebo for the 0.05 mg dose (-5.8; p=0.0168) and
the 0.25 mg dose (-6.3; p=0.0097). The 0.1 mg dose showed a lower
numeric improvement over placebo (-3.1; p=0.2025), which did not
reach statistical significance, resulting in a “V”-shaped
dose-response curve. The most common adverse events included
nausea, somnolence, headache, and fatigue. The incidence of these
events in the non-titrated doses was considered comparable to or
higher than those reported with the dopamine full agonists
currently on the market. In a single subject there were two Serious
Adverse Events (“SAE’s”). Neither SAE was considered to be
drug-related.
Neurogen also suspended, earlier this year, a Phase 2 study of
aplindore in Parkinson’s disease. Due to the fact that at the time
of suspending enrollment in that study only nine of an expected 169
Parkinson’s patients were enrolled, no analysis of that partial
study will be performed.
Financial Results
On a GAAP basis, including non-recurring matters, Neurogen
recognized a net loss attributable to common stockholders for the
third quarter of 2009 of $1.9 million, or $0.03 per share as
compared to a GAAP net loss attributable to common stockholders for
the third quarter of 2008 of $31.7 million, or $0.52 per share. On
a non-GAAP basis, excluding non-recurring credits relating to
restructuring of workforce and the adjustments to fair value of
certain assets, net loss for the third quarter of 2009 totaled $2.4
million, or $0.03 per share on 69.0 million weighted shares
outstanding as compared to a non-GAAP net loss during the third
quarter of 2008 of $8.1 million, or $0.13 per share on 61.1 million
weighted average shares outstanding.
Research and development expenses for the third quarter of 2009
decreased to $1.0 million from $6.3 million in the comparable
period of 2008. The decrease in R&D expenses for the quarter
was due primarily to decreased spending in Neurogen’s clinical and
preclinical drug development programs as well as the 2008 and 2009
restructuring of the Company’s workforce.
General and administrative expenses for the third quarter of
2009 decreased to $1.6 million from $2.0 million for the comparable
period of 2008. The decrease for the quarter was due primarily to
the smaller employee base in 2009 versus 2008.
Neurogen’s cash and marketable securities as of September 30,
2009 totaled $15.3 million. Total liabilities at September 30, 2009
were $6.2 million.
Non-recurring matters
There was a $0.4 million credit to asset impairment expense for
the third quarter of 2009, compared to a $3.2 million change for
the third quarter of 2008. The 2009 credit was a result of the
signing of the facilities agreement announced above while the asset
impairment charges in 2008 were associated with writing down the
book value of facilities and equipment associated with previous
research and development activities. Neurogen recorded an
immaterial credit to restructuring of workforce charges in the
third quarters of 2009 and 2008. Restructuring of workforce credits
in each period result from actual expenses paid being lower than
those estimated and expensed in prior quarters.
Webcast
Neurogen will host a conference call and webcast to discuss
third quarter results at 8:30 a.m. EST today, November 6, 2009. The
webcast will be available in the Investor Relations section of
www.neurogen.com and will also be archived there. A replay of the
call will be available after 8:00 p.m. EDT on November 6, 2009 and
accessible through the close of business, November 13, 2009. To
replay the conference call, dial 888-286-8010, or for international
callers, 617-801-6888, and use the pass code: 65972464.
About Neurogen
Neurogen Corporation is a drug development company historically
focusing on small-molecule drugs to improve the lives of patients
suffering from psychiatric and neurological disorders with
significant unmet medical need. Neurogen has conducted its drug
development independently and, when advantageous, collaborated with
world-class pharmaceutical companies to access additional resources
and expertise.
Statement Regarding Adjusted (Non-GAAP) Financial
Information
In addition to disclosing financial results calculated in
accordance with GAAP, the Company has included certain adjusted
financial results. Reconciliations between GAAP and adjusted
earnings for the three and nine months ended September 30, 2009 and
2008 are provided in the table below. The Company believes that the
presentation of adjusted results provides meaningful supplemental
information regarding our financial results for the three and nine
months ended September 30, 2009 as compared to the three and nine
months ended September 30, 2008 because the adjustments between
GAAP and adjusted earnings provide information related to the
ongoing operations of the Company. The Company believes that this
financial information is useful to management and investors in
assessing our historical performance and results. The Company will
use these adjusted financial measures when evaluating its financial
results, as well as for internal planning and forecasting purposes.
The adjusted financial measures disclosed by the Company should not
be considered a substitute for or superior to financial measures
calculated in accordance with GAAP, and the financial results
calculated in accordance with GAAP and reconciliations to those
financial statements should be carefully evaluated. The adjusted
financial measures used by the Company may be calculated
differently from and therefore may not be comparable to similarly
titled measures used by other companies.
Our results under GAAP have been adjusted for the following
events that occurred during the three and nine months ended
September 30, 2009 and 2008: (1) restructuring of the Company’s
workforce that resulted in small credits in each three-month period
and additional expense in each nine-month period, (2) asset
impairment credits and charges associated with adjusting the value
of certain of our facilities and certain related equipment
associated with discontinued research and development activities,
and (3) the sale of certain non-core patent estates. See the table
below for a detailed reconciliation of GAAP and adjusted
earnings.
Reconciliations between GAAP and Non-GAAP earnings for the three
and nine months ended September 30, 2009 and 2008 are provided in
the following table:
Three MonthsEnded
Three MonthsEnded
Nine MonthsEnded
Nine MonthsEnded
September 30,2009
September 30,2008
September 30,2009
September 30,2008
[in thousands except per share amounts] (unaudited) Net loss
attributable to common stockholders (GAAP) $(1,943) $(31,740)
$(20,290) $(60,099) Sale of patent estate - - (2,650) -
Restructuring of workforce (3) (20) 2,674 5,110 Asset impairment
charges (410) 3,173 8,766 10,373 Gain on warrants to purchase
common stock - (4,746) - (16,700) Deemed preferred dividends -
25,213 - 30,620 Adjusted net loss (Non- GAAP) $(2,356) $(8,120)
$(11,500) $(30,696) Basic and diluted loss per share attributable
to common stockholders (GAAP) $(0.03) $(0.52) $(0.30) $(1.24) Basic
and diluted loss per share (Non-GAAP) $(0.03) $(0.13) $(0.17)
$(0.63) Shares used in calc of loss per share: Basic and Diluted
68,974 61,116 68,653 48,451
Safe Harbor Statement
This release contains forward-looking statements that involve
risks and uncertainties. Neurogen cautions readers that any
forward-looking information is not a guarantee of future
performance and actual results could differ materially from those
contained in the forward-looking information. Words such as
"expect," "estimate," "project," "potential," and similar
expressions are intended to identify such forward-looking
statements. Such forward-looking statements include, but are not
limited to, the expected timing of closing the merger, statements
about the benefits of the transaction between Ligand and Neurogen,
including future financial and operating results, expected cash
balance of the combined entity as of the closing, the 2010 pro
forma operating cash burn rate, the possibility of payments being
made under the CVR agreements, the combined entity’s plans,
objectives, expectations and intentions and other statements that
are not historical facts. Among the important factors that could
cause actual results to differ materially from those in any
forward-looking statements are the risks that Merck may not advance
the VR1 program successfully; the risk that Neurogen’s real estate
or the Aplindore program may not be sold and that the conditions of
the H3 and Merck CVR’s may not be met in order to produce proceeds
for the CVR holders; the anticipated synergies and benefits from
the transaction may not be fully realized or may take longer to
realize than expected; failure of Neurogen’s shareholders to
approve the merger; Ligand’s or Neurogen’s inability to satisfy the
conditions of the merger, or that the merger is otherwise delayed
or ultimately not consummated; Neurogen product candidates may have
unexpected adverse side effects or inadequate therapeutic efficacy;
and positive results in clinical trials may not be sufficient to
obtain FDA approval. There can be no assurance that any product in
Ligand’s, Neurogen’s or the projected combined company’s product
pipeline will be successfully developed or manufactured, that final
results of clinical studies will be supportive of regulatory
approvals required to market licensed products, or that any of the
forward-looking information provided herein will be proven
accurate. Additional important factors that may affect future
results are detailed in Ligand’s and Neurogen’s filings with the
Securities and Exchange Commission (the "SEC"), including each
company’s recent filings on Forms 10-K and 10-Q, or in information
disclosed in public conference calls, the date and time of which
are released beforehand. In addition, such forward-looking
statements include, but are not limited to, statements that are not
historical facts relating to the timing and occurrence of
anticipated clinical trials, and potential collaborations or
extensions of existing collaborations. Actual results may differ
materially from such forward-looking statements as a result of
various factors, including, but not limited to, risks associated
with the inherent uncertainty of drug development, difficulties or
delays in development, testing, regulatory approval, production and
marketing of any of Neurogen’s drug candidates, adverse side
effects or inadequate therapeutic efficacy or pharmacokinetic
properties of Neurogen's drug candidates or other properties of
drug candidates which could make them unattractive for
commercialization, advancement of competitive products, dependence
on corporate partners, Neurogen’s ability to retain key employees
for the plans described above, sufficiency of cash to complete the
plans described above, Neurogen’s ability to continue as a going
concern, and patent, product liability and third party
reimbursement risks associated with the pharmaceutical industry.
For such statements, Neurogen claims the protection of applicable
laws. Future results may also differ from previously reported
results. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof.
Neurogen disclaims any intent and does not assume any obligation to
update these forward-looking statements, other than as may be
required under applicable law.
Additional Information and Where to Find it
Ligand has filed with the SEC a Registration Statement on Form
S-4, which included a proxy statement of Neurogen and other
relevant materials in connection with the proposed merger. The
proxy statement, which also constitutes a Ligand prospectus, will
be mailed to Neurogen shareholders. Neurogen shareholders are urged
to read the proxy statement and the other relevant materials
because they will contain important information about Ligand,
Neurogen and the proposed merger. The proxy statement and other
relevant materials, and any other documents filed by Ligand or
Neurogen with the SEC, may be obtained free of charge at the SEC's
web site at www.sec.gov. In addition, Neurogen shareholders may
obtain free copies of the documents filed with the SEC by Ligand by
going to the Investor Relations page on Ligand’s corporate website
at www.ligand.com, and free copies of the documents filed with the
SEC by Neurogen by going to the Investor Relations page on
Neurogen’s corporate website at www.neurogen.com. Neurogen
shareholders are urged to read the proxy statement and the other
relevant materials before making any voting or investment decision
with respect to the proposed merger.
Neurogen and its respective directors and executive officers may
be deemed to be participants in the solicitation of proxies from
Neurogen shareholders in favor of the proposed merger. Information
about Neurogen’s executive officers and directors and their
ownership of Neurogen common stock is set forth in Neurogen’s
amended annual report on Form 10-K filed with the SEC on April 30,
2009. Neurogen shareholders may obtain more detailed information
regarding the direct and indirect interests of Neurogen and its
executive officers and directors in the merger by reading the proxy
statement regarding the merger, which has been filed with the SEC
and will be mailed to Neurogen shareholders.
NEUROGEN CORPORATION CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (Amounts in thousands, except per
share data) (unaudited)
Three MonthsendedSeptember
30,2009
Three MonthsendedSeptember
30,2008
Nine MonthsendedSeptember
30,2009
Nine MonthsendedSeptember
30,2008
Operating revenues: Sale of patent estate $- $- $2,650 $-
Total operating revenues - - 2,650 - Operating expenses:
Research and development 959 6,277 7,010 26,326 General and
administrative 1,567 1,987 4,881 4,906 Restructuring of workforce
(3) (20) 2,674 5,110 Asset impairment charges (410) 3,173 8,766
10,373 Total operating expenses 2,113 11,417 23,331 46,715
Operating loss (2,113) (11,417) (20,681) (46,715) Gain on
warrants to purchase common stock - 4,746 - 16,700 Other income,
net 165 121 341 467 Total other income, net 165 4,867 341 17,167
Tax benefit 5 23 50 69 Net loss (1,943) (6,527) (20,290) (29,479)
Deemed preferred dividends - (25,213) - (30,620) Net loss
attributable to common stockholders $(1,943) $(31,740) $(20,290)
$(60,099) Basic and diluted loss per share attributable to
common stockholders $(0.03) $(0.52) $(0.30) $(1.24) Shares used in
calculation of loss per share attributable to common stockholders:
Basic and diluted 68,974 61,116 68,653 48,451
NEUROGEN
CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands) (unaudited)
September 30,2009
December 31,2008
Assets Current Assets: Cash and cash equivalents $ 15,312 $
24,106 Marketable securities - 6,967 Total cash and
marketable securities 15,312 31,073 Receivables from corporate
partners - 61 Assets held for sale 3,170 5,108 Other current
assets, net 773 1,394 Total current assets 19,255
37,636 Restricted cash 121 - Net property, plant and equipment 5
7,102 Other assets, net - 30
Total assets $
19,381 $ 44,768
Liabilities and Stockholders’ Equity
Current liabilities: Accounts payable and accrued expenses $ 3,216
$ 4,555 Current portion of loans payable 353 4,692
Total current liabilities 3,569 9,247 Long term liabilities: Tenant
Security Deposit 121 Loans payable, net of current portion
2,540 2,807 Total liabilities 6,230 12,054 Total
stockholders’ equity 13,151 32,714
Total
liabilities and stockholders’ equity $ 19,381 $ 44,768
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