Neurogen Corp. entered into an alliance worth up to $70 million withSchering-Plough Corp. to develop drugs that bind to specificdopamine receptor subtypes, with the lead indication beingschizophrenia.

Neurogen, of Branford, Conn., is getting $17 million up- front, $3million in one year, and guaranteed research payments for two years.With three years of extensions and milestone payments, the potentialvalue of the deal is $70 million to Neurogen. Schering-Plough, ofMadison, N.J., also will fund all clinical development.

Neurogen, which has two collaborations with Pfizer Inc., made thisdeal without an equity element. Its stock (NASDAQ:NRGN) rose $1per share, or 7 percent, to close at $14.75 Thursday.

The lead compound in the Schering-Plough collaboration - thedopamine D4 antagonist NGD 94-1 - is in Phase I trials forschizophrenia.

Another part of the deal gives Schering-Plough the right to testcertain compounds from Neurogen's combinatorial chemistryprogram in selected non-central nervous system (CNS) assays.

The agreement is subject to approval by Schering-Plough's board ofdirectors, which has the item on the agenda for its June 27 boardmeeting, said Ronald Asinari, a Schering-Plough corporatespokesman.

"This is part of a new initiative, and complements our plans toexpand in the CNS area," Asinari told BioWorld. "We have aninterest and commitment to develop new therapies for schizophrenia,and we feel Neurogen has a superior position vs. other companiespursuing this novel approach."

Harry Penner Jr., president and CEO of Neurogen, said Schering-Plough had a dopamine project focusing on the D1 receptor. Thatclinical experience, as well as Schering-Plough's resources, are twoelements Neurogen needed in a partner, he said.

The potential advantage of NGD 94-1 is its specificity in binding tothe D4 receptor, which, in theory, would produce a more-effectivedrug with fewer side effects.

Neurogen focused on the D4 receptor for a number of reasons,Penner said. One is that Sandoz Pharmaceuticals Corp.'sschizophrenia drug, clozapine, acts disproportionately on the D4receptor. More evidence came from academic research that revealedelevated levels - from 200 to 600 percent - of dopamine D4 inautopsied schizophrenic patients, Penner said.

Neurogen also has dopamine-related drugs in development. Onedevelopment compound, called NGD 94-2, combines a D4 and D2approach. A broad-spectrum compound, NGD 93-1, is intended to bea cleaner version of currently available drugs. And the company hasan early stage D3 antagonist program.

Penner said the Schering-Plough deal is an example of Neurogen's"ratcheted growth strategy," which entails enhancing the company'sdevelopment role through successive corporate collaborations. In thisdeal, Neurogen will have an advisory role in the clinicaldevelopment, and has an option to manufacture resulting products.Future deals might involve Neurogen in sales and marketing, he said.

NGD 94-1 has completed a Phase IA study. A Phase IB multi-dosestudy is ongoing. Neurogen has been telling investors it expected tobe in Phase II by the end of the year. Schering-Plough's takeover ofdevelopment responsibility, however, likely could extend that timeline.

Neurogen's deals with New York-based Pfizer, also in the CNS area,focus on development of drugs that interact with receptor subtypes ofthe gamma-amino butyric acid receptor family.

Neurogen achieved two goals with the Schering-Plough agreement,Penner said. One is the conclusion of another major corporatecollaboration. The second is to finish the year with financing to coverthe company through 1997. That the company didn't add any stockdilution can only be viewed as a bonus.

Before the agreement, Neurogen had a little more than $13 million. Ithas about 10.1 million shares outstanding, 21 percent of which areheld by Pfizer. Neurogen must approve any stock purchase thatwould increase Pfizer's stake.n

-- Jim Shrine

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