Neurogen Corporation Suspends Enrollment and Cuts Staff

BRANFORD, Conn. -- Neurogen Corporation, a drug development company focused on improved drugs for psychiatric and neurological disorders, today announced financial results for the quarter ended March 31, 2009. The Company also announced that it is pursuing strategic options including a sale of the Company or a sale of its assets and that it is taking additional steps to conserve capital while it pursues these options.

Stephen R. Davis, President and CEO said, "The actions we are taking today are a reflection of the dramatic changes that have occurred in the cost of capital for the biotech industry, particularly for clinical development stage companies. We believe over the next year the industry will continue contracting, combining and returning capital to shareholders where appropriate to reflect the economic realities of a changed landscape. Our mission is to efficiently achieve the best result for our shareholders in this new environment."

Neurogen's cash and marketable securities as of March 31, 2009 totaled $25.4 million. Total liabilities at March 31, 2009 were $11.2 million.

In connection with today's announcement, Neurogen has suspended the enrollment of additional patients in its ongoing Phase 2 studies for Parkinson's disease and Restless Legs Syndrome and has eliminated approximately fifty percent of its staff positions. The Company plans to further reduce staff consistent with its planned reduction of operations and its efforts to conserve capital while pursuing the completion of the sale of assets or other strategic alternatives. Neurogen has retained MTS Health Partners as its advisor in considering strategic alternatives.

On a GAAP basis, including non-recurring matters, Neurogen recognized a net loss for the first quarter of 2009 of $10.8 million, or $0.16 per share as compared to a GAAP net loss for the first quarter of 2008 of $16.5 million, or $0.39 per share. On a non-GAAP basis, excluding non-recurring charges relating to reductions in work force and the write down of certain assets, net loss for the first quarter of 2009 totaled $5.3 million, or $0.08 per share on 68 million weighted shares outstanding as compared to a non-GAAP net loss during the first quarter of 2008 of $14.0 million, or $0.33 per share on 42 million weighted average shares outstanding.

Research and development expenses for the first quarter of 2009 decreased to $3.3 million from $12.1 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 reductions in force that occurred in the first and second quarters of 2008.

General and administrative expenses for the first quarter of 2009 decreased to $2.1 million from $2.2 million for the comparable period of 2008. The decrease for the quarter was due mainly to decreases in salaries and benefits expenses, and administrative expenses.

Non-recurring matters

Restructuring and asset impairment charges for the first quarter of 2009 were $0.3 million and $5.3 million, respectively. In the first quarter of 2008, Neurogen recorded a restructuring charge of $2.5 million and no asset impairment charges. Restructuring charges in each period relate to the Company's reductions in staffing levels. Asset impairment charges in the first quarter of 2009 relate to the Company writing down the book value of facilities and equipment associated with previous research and development activities.

Webcast

Neurogen will host a conference call and webcast to discuss first quarter results at 8:30 a.m. ET today, May 12, 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 11:30 a.m. ET on May 12, 2009 and accessible through the close of business, May 19, 2009. To replay the conference call, dial 888-286-8010, or for international callers, 617-801-6888, and use the pass code: 51676946.

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 months ended March 31, 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 months ended March 31, 2009 as compared to the three months ended March 31, 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 months ended March 31, 2009 and 2008: (1) reductions to the Company's workforce that resulted in additional expense in each period, (2) asset impairment charges in the first quarter of 2009 associated with writing down the value of certain of our facilities and certain related equipment associated with discontinued research and development activities. See the table below for a detailed reconciliation of GAAP and adjusted earnings.