Neurogen Corp. on Monday completed a secondary offering of1.8 million shares of stock at $4 a share, plus anoverallotment of 270,000 shares, netting $7.7 million.

Neurogen, which is developing treatments for psychiatric andneurological disorders, hopes to file in 1992 an investigationalnew drug application to begin clinical trials of its leadcompound, NGD91-1. NGD91-1 is an anxiety-reducing drug thatinteracts with receptor subtypes of the gamma-aminobutyricacid (GABA) receptor family.

Animal studies show that NGD91-1 is as effective as drugssuch as diazepam (generic for Valium) and Xanax, but withoutside effects such as drowsiness, said Thomas Paulson,Neurogen's chief financial officer. Benzodiazepines such asdiazepam and Xanax work at GABA receptor sites, but lessselectively, causing side effects. In contrast, NGD91-1operates at only 15 percent to 20 percent of GABA sites,Paulson said.

The U.S. market for anxiety-reducing drugs is $1.2 billion andthe world market is between $2 billion and $3 billion.

Neurogen had originally hoped to sell 2 million shares beforeoverallotments. The stock (NASDAQ:NRGN) closed at $4, down38 cents, on Tuesday. After the offering, the Branford, Conn.,company has 7.8 million shares outstanding.

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