Neurogen Corp.'s stock rose on Friday, following news that the company entered an agreement to privately sell $100 million worth of common shares.

Lead investors in the private placement are Warburg Pincus & Co. LLC and Baker Brothers Investments, both of New York. The stock was priced at $7 per share, and the financing is expected to close during the second quarter.

The Branford, Conn.-based company plans to use proceeds to expand its discovery platform and portfolio of new drug candidates.

Neurogen's stock (NASDAQ:NRGN) rose 63 cents Friday to close at $7.45.

Steve Davis, Neurogen's executive vice president and chief business officer, said the company could not comment due to SEC quiet-period rules.

"The financing provides us with the resources to both expand our discovery efforts and selectively retain rights to programs that are attractive to Neurogen for internal development," said William Koster, president and CEO of Neurogen, in a prepared statement.

Neurogen focuses on internal programs for rheumatoid arthritis, asthma, diabetes and obesity. It has partnerships with Pfizer Inc., Aventis Pharma SA, and Merck & Co. Inc. in the fields of insomnia, depression, anxiety and pain. Most of the products are in preclinical or early clinical development.

Neurogen's C5a antagonist, NGD 2000-1, failed in a Phase IIa asthma trial in January when it did not demonstrate statistical significance. Davis told BioWorld Today that a decision still has not been made about the fate of NGD 2000-1 in asthma. The company is analyzing the results to determine whether to continue development in that indication. The product also is in a Phase IIa trial for rheumatoid arthritis patients. Neurogen expects to complete enrollment this quarter and to report data in the second quarter. (See BioWorld Today, Jan. 14, 2004.)

The C5a antagonist program is not partnered, but since 1992, Neurogen has worked with New York-based Pfizer Inc. on gamma-aminobutyric acid-based drugs. The companies initially were focusing on Alzheimer's disease, anxiety and insomnia, but the first two indications were eliminated due to poor data. In November 2002, a GABA drug failed to show a therapeutic effect in a Phase II Alzheimer's disease study. Now, the companies are working on an insomnia product, NGD 96-3, in Phase I.

Neurogen entered a deal with Aventis Pharma SA in December 2001, to develop stress-related drugs based on Neurogen's corticotrophin-releasing factor (CRF1) antagonist compounds. Neurogen recently received a $1 million payment related to a preclinical milestone.

In December, the company signed a deal potentially worth $118 million with Merck, of Whitehouse Station, N.J., to discover and develop pain medications that target the vanilloid receptor. The companies have advanced lead candidates into preclinical development, focusing mainly on inflammatory pain from osteoarthritis, surgical pain and neuropathic pain. Neurogen's stock rose 64 percent the day the deal was announced. (See BioWorld Today, Dec. 2, 2003.)

The company also has unpartnered product candidates for diabetes and obesity in the early research stage. Those compounds block the melanin-concentrating hormone receptor-1, an important mediator of food intake. Preclinical studies have shown that blocking the MCH-1 receptor can reduce weight gain in animals.

As of Dec. 31, Neurogen reported cash and marketable securities of $45.9 million. However, in January the company received $30 million more in up-front license fees and equity investments with the closing of its collaboration with Merck.

Once the private placement closes, Stewart Hen and Jonathan Leff, both of Warburg Pincus, will join the Neurogen board.