Contributing Writer

Neurogen Corp. topped off a busy fourth quarter by bringing in $40 million to support ongoing and planned Phase II programs in insomnia, Parkinson's disease and restless legs syndrome.

The Branford, Conn.-based company sold about 7 million shares at Monday's closing price of $5.72 per share, generating $37.3 million after fees and expenses. Pacific Growth Equities LLC served as lead placement agent, with CIBC World Markets Corp., Leerink Swann & Co. and Merriman Curhan Ford & Co. also acting as placement agents. The registered direct offering is expected to close Dec. 21.

Stephen Davis, executive vice president and chief operating officer, said Neurogen "went out expecting to sell 5 million shares but got orders for 13 million." The company settled on issuing 7 million shares, bringing in enough cash to last "well into 2008," Davis added.

Neurogen had $79 million in cash and marketable securities as of Sept. 30 and reported a nine-month net loss of $37.8 million, or $1.09 per share on 34.5 million weighted average shares outstanding.

The financing came just three weeks after Neurogen acquired the partial D2 dopamine receptor agonist aplindore from Madison, N.J.-based Wyeth. Phase II trials are slated for the second half of 2007 in both Parkinson's disease and restless legs syndrome, and Neurogen hopes the drug will offer a shorter titration period than marketed full D2 dopamine receptor agonists such as GlaxoSmithKline plc's Requip (ropinirole) and Boehringer Ingelheim GmbH's Mirapex (pramiprexole). Neurogen paid $3 million up front for aplindore along with undisclosed milestones, a "modest" one of which will be triggered by the Phase II trial initiations, Davis said. (See BioWorld Today, Nov. 29, 2006).

Also this quarter, Neurogen initiated a Phase II trial in chronic insomnia with NG2-73, a partial GABA receptor agonist. The trial, which will measure the time required to fall asleep, is expected to take about nine months to complete according to industry standards, and Neurogen has plans to initiate a second Phase II trial with the compound to measure sleep maintenance in chronic insomnia next year.

Bill Tanner, analyst at Leerink Swann & Co., pegged NG2-73 as Neurogen's "most attractive" compound, citing relatively low development risk due to the well-known mechanism of action and an attractive insomnia market. The recent failure of Neurocrine Biosciences Inc.'s sleep drug indiplon, which was dropped by development partner Pfizer Inc. this summer just ahead of an FDA request for additional clinical trials prior to approval, opens an opportunity for Neurogen, he said. (See BioWorld Today, June 26, 2006).

Other product candidates keeping Neurogen busy this quarter include MRK-2295 and NGD-4715. Last month, partner Merck & Co. Inc. initiated a Phase II trial with the VR 1 receptor agonist MRK-2295 in postoperative dental pain, triggering a $3 million milestone payment to Neurogen. Tanner estimates that Neurogen may receive up to $15 million in milestone payments from Merck in 2007. Meanwhile NGD-4715, an MCH-1 receptor antagonist for obesity, entered Phase I trials last month.

"We've been building quite a bit of momentum," Davis said, noting that the company has a preclinical CRF-1 receptor antagonist program in depression/anxiety, as well as "a lot of earlier-stage programs" generated in-house. Neurogen's drug discovery engine, which has churned out everything in the pipeline except the recently licensed aplindore, includes a proprietary chemical library of 1.4 million compounds, screening technologies that include functional primary assays, and an artificial intelligence informatics system that helps scientists to decide what to screen and what to synthesize.

"The discovery engine gives us a lot of partnering options," Davis added. "Everything except MK-2295 is unpartnered."

In other financing news:

• Aldagen Inc., of Durham, N.C., raised $14.3 million in a Series C financing and $3 million in debt financing to support ongoing clinical trials using Aldesort to isolate adult stem cells and progenitor cells in ischemic heart failure, critical limb ischemia and cord blood transplantation. Harbert Venture Partners LLC and Intersouth Partners co-led the Series C financing, which included participation by existing investors Aurora Funds, Trelys Funds LP, Tall Oaks Capital, Village Ventures and the Piedmont Angel Network.

• Memory Pharmaceuticals Corp., of Montvale, N.J., raised $5.5 million in the second close of a $32.2 million PIPE. The first close occurred in October and brought in $26.7 million. Proceeds will be used to advance clinical, preclinical and exploratory research programs and for other working capital and general corporate purposes. Last week, the FDA completed a review of toxicology data and released its clinical hold on a Phase IIa trial of MEM 3454 for Alzheimer's disease. The trial is slated to start in the first quarter. (See BioWorld Today, Oct. 18, 2006.)

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