[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)  OF THE SECURITIES EXCHANGE ACT OF 1934  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002  OR  [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)  OF THE SECURITIES EXCHANGE ACT OF 1934

 COMMISSION FILE NUMBER 0-18311

NEUROGEN CORPORATION(Exact name of registrant as specified in its charter)

| DELAWARE   (State or other jurisdiction of   incorporation or organization) | 22-2845714(I.R.S. Employer      Identification No.) |
|-----------------------------------------------------------------------------|-----------------------------------------------------|

35 NORTHEAST INDUSTRIAL ROAD  BRANFORD, CONNECTICUT 06405(Address of principal executive offices) (Zip Code)

 (203) 488-8201(Registrant's telephone number, including area code)

 Securities    registered pursuant to Section 12(b) of the Act:None

 Securities registered pursuant to Section 12(g) of the Act:  Common Stock, par value $.025 per share (the "Common Stock")(Title of Class)

 Indicate by check mark  whether the registrant (1) has filed all reports required to be filed by Section  13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months  (or for such shorter period that the registrant was required to file such reports),  and (2) has been subject to filing requirements for the past 90 days. YES [X]  NO [ ]

 Indicate by check mark  if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is  not contained herein, and will not be contained, to the best of registrant's  knowledge, in definitive proxy or information statements incorporated by reference  in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark  whether the registrant is an accelerated filer (as defined in Rule 12b-2 of  the Act). Yes [X] No [ ]

The approximate aggregate market value of the registrant’s Common Stock  held by non-affiliates was $158,297,000, based on the closing price of a share  of Common Stock as reported on the NASDAQ National Market on June 28, 2002,  which is the last business day of the registrant’s most recently completed  second fiscal quarter. In determining the market value of non-affiliate voting  stock, shares of Common Stock beneficially owned by officers and directors and  one shareholder owning more than 20% of the Common Stock have been excluded  from the computation. This number is provided only for purposes of this report  and does not represent an admission by either the registrant or any person as  to the status of such person.

 As of February 28, 2003,  the registrant had 17,955,859 shares of Common Stock outstanding.

 DOCUMENTS INCORPORATED  BY REFERENCE

(1) Portions of the Neurogen  Corporation Proxy Statement for the Annual Meeting of Stockholders to be held  on May 19, 2003 are incorporated by reference into Items 10, 11, 12 and 13 of  Part III of this Form 10-K. 

**PART I**

**ITEM 1. BUSINESS**

**Overview**

 Neurogen Corporation    (NASDAQ:  NRGN) (“Neurogen” or “the Company”), incorporated    under  the laws of the State of Delaware in 1987, is a drug discovery and    development  company targeting new small molecule drugs to improve the lives of patients     suffering from disorders with significant unmet medical needs including    inflammation,  pain, insomnia, depression, anxiety and obesity. Neurogen has generated a portfolio    of  compelling new drug programs through its fully integrated drug discovery    and  development processes. Neurogen’s Accelerated Intelligent Drug Discovery   (“AIDD”)TM process and its expertise in cellular functional    assays enhance the Company's ability to rapidly and cost effectively identify  small molecule drug candidates. Small molecule drugs typically are suitable    for oral administration as a pill, while large molecule drugs typically are  administered by injection. The Company conducts its research and development    independently and, when advantageous, collaborates with leading pharmaceutical  companies during the drug research and development process to obtain additional    resources and to access complementary expertise. Currently, Neurogen has   active  collaborations with Pfizer and Aventis. 

 Neurogen has diversified  its drug discovery and development efforts across a broad number of disease-related  targets and employs a strategy designed to efficiently discover multiple drug  candidates for each target. In addition, several of the Company’s programs  focus on medical targets which are implicated in numerous, related disease states.  Throughout the pharmaceutical industry the majority of all drug candidates fail  to overcome all of the obstacles on the way to commercialization. Because of  this high attrition rate, the Company believes that the true value of a drug  discovery and development company’s pipeline is most accurately measured  by the company’s ability to rapidly discover multiple generations of  improved candidates within each of several programs. Neurogen believes that  this ability  to rapidly and systematically produce multiple generations of  drug candidates  in multiple programs is the Company’s most valuable  asset. Although much smaller than major pharmaceutical companies, Neurogen has  discovered ten small molecule drug candidates that together with our pharmaceutical  company partners have entered human clinical trials. During 2002, the Company  completed Phase I human testing (see Government Regulation section below) of  its lead drug candidate for the treatment of inflammatory disorders and is currently  conducting two Phase II trials in rheumatoid arthritis and asthma. Neurogen  owns all commercial rights to this program. Another candidate from the Company’s  program for the treatment of insomnia is currently being tested in Phase I human  trials by our partner, Pfizer Inc (“Pfizer”). 

**Background on the  Drug Discovery Industry**

**The Traditional  Drug Discovery Process**

 Most drugs work by binding  to a particular protein, cell, or receptor, called a target, in the human body,  thereby altering communication between cells or otherwise regulating cellular  activity. Therefore, the traditional path to discovering small molecule drugs  typically begins with the identification of a biological target that is believed  to regulate cellular communication or activities which could be modulated to  treat a given disorder. A test, or assay, is then developed in order to expose  compounds to the target and determine whether biological activity occurs. Such  an assay facilitates the screening of the target against a library of many compounds  that have been synthesized in the laboratory. Compounds that bind to the target  protein and alter its activity are referred to as "hits." Medicinal  chemists then work to improve, or optimize these hits until they have sufficient  potency to become lead candidates and then improve their “drug-like”  properties, such as gastrointestinal absorption, stability, freedom from unwanted  activities, etc., with the goal of producing a successful drug development candidate.

 Some drug companies try  to streamline the drug discovery process by copying chemical structures from  known active compounds. Even taking this approach, however, the number of possible  compounds that could be made is too vast to actually test against even a single  target using any available technology. Generally, the search is further narrowed  only by educated guessing. As a result of the uncertainty of this approach,  traditional methods can take many years or may fail entirely.

 If it were possible to  predict in advance which compounds would result in a hit, and which chemical  changes would help optimize hits into drug candidates, the drug discovery process  would be vastly simplified. Unfortunately, the traditional drug discovery process  has had to rely on a trial and error approach that has proven extremely expensive,  inefficient and unreliable. Optimization of hits to achieve the extremely delicate  balance of properties necessary for a successful drug is still a daunting task.  Most hits are never optimized into successful drugs despite years of effort.

**Neurogen’s  Competitive Advantage**

 Neurogen’s drug     discovery and development platform is designed to rapidly discover small    molecule  drug candidates for medical targets where other pharmaceutical or biotechnology     companies have failed or for recently discovered targets. The Company’s      proprietary platform enables the rapid and efficient discovery of compounds  that hit potential drug targets, evaluate the utility of those targets, and      optimize useful hits into new drug candidates. Neurogen’s C5a program       for inflammatory diseases serves as a recent example of the Company’s        capabilities. While many in the pharmaceutical industry searched for       many years  to discover small molecule C5a drug hits, Neurogen believes it is the first        to discover small molecule C5a antagonists and, more importantly, the       first to optimize these hits  and advance a small molecule C5a antagonist drug candidate into human testing.

 Neurogen discovers and     develops orally available, or small molecule drugs which are orally available.    Small molecule drugs are  usually more stable and easily absorbed through cell layers than large molecule    drugs, and so in most cases may be administered as a pill, a patch, or an    ointment.    In    addition,  small molecule drugs are generally much easier and less expensive to manufacture,     distribute, and store. Protein-based large molecule drugs typically are    administered  by injection and require refrigeration, while most small molecule drugs do    not.  Small molecule drugs can also be safely shipped and stored at regular    temperatures.  Small molecule drugs that can be taken orally currently make up about three     quarters of the sales of the top 100 prescription drugs. Where there is    a choice,  patients generally would rather take a pill than an injection.

**Neurogen's Business  Strategy**

 Neurogen's vision is    to excel at the creation of small molecule drugs using a seamless, integrated    discovery,  development, clinical and regulatory paradigm. The following are the key elements    of the business strategy the Company is employing to achieve the Neurogen    vision:

-  Create          a risk-balanced drug portfolio. To increase the probability of successful          drug discovery          and          development efforts, Neurogen is pursuing multiple promising        targets with multiple drug candidates for multiple disorders. The Company      believes that the robustness of a drug portfolio should be based on the          diversity and development risk of        the programs in the pipeline. The Company is concentrating its efforts          on key therapeutic areas (inflammation, pain, insomnia, depression          and obesity)      within        which clinical indications may be developed for a variety of disorders,          balancing risk against potential value. The Company believes that its          ability to efficiently        produce multiple generations of candidates in multiple programs using          AIDDTM distinguishes        Neurogen among drug discovery and development companies.
- Expand development      capability. Neurogen possesses a powerful drug discovery capability which      is closely linked to pharmaceutical development and clinical  initiatives to continuously optimize drug properties. The Company believes  this integrated medical feedback loop will aid in the development of compounds  in the clinic, and is deploying additional resources to support the early clinical  trials of lead drug candidates.
- Selectively        partner drug programs. Neurogen's partnering strategy seeks to retain        ownership      and control of      some programs – taking them further  into human clinical testing – while partnering other programs at earlier  stages, so that the Company’s financial risk is reduced while maximizing  return for shareholders. Neurogen’s development capabilities enable the  Company to pursue a flexible business model, of partnering programs when competitively  and economically advantageous. When Neurogen partners programs, it seeks to  collaborate with pharmaceutical leaders with demonstrated strengths and resources  which complement the Company’s.  
-     Continually optimize the efficiency of the organization and control                costs. Focused on both its scientific and business processes,                Neurogen initiated      its Operational Excellence program during 2002 to conserve resources without      affecting strategy or major program output. The program has achieved improvements      in organizational structure, reduced operating costs, and the installation      of technology advancements for producing and selecting development candidates.

**Components of Neurogen's Discovery and Development Platform**

The Company’s      AIDDTM system, as well as its focused compound library  and Virtual LibraryTM, are key components of the drug discovery infrastructure.  AIDDTM is an integrated system of hardware, software, and processes that  allows scientists to improve on the trial and error approach traditionally  associated with drug discovery and development. This system incorporates automated  robotics guided by state-of-the-art computerization, including neural network-based  artificial intelligence, to aid the Company’s scientists in decision-making,  in the design, modeling, synthesis and screening of new chemical compounds.   Neurogen’s AIDDTM system works in tandem with the Company’s    focused compound library. Instead of randomly generating a compound library    for chemical diversity as many other pharmaceutical and drug discovery companies  have done, Neurogen has chosen to bias or "enrich" its compound library  in favor of selected families of compounds. Because the number of small organic  compounds    that can be synthesized is virtually infinite, the Company believes that    to be successful in the drug discovery process, it is not the biggest or    most diverse library that counts, but rather the richest and most intelligently    designed.    Also critical to Neurogen’s drug discovery and development capabilities    is the Company’s biological expertise. Neurogen believes it has one    of the leading receptor biology teams in the industry, and utilizes this    expertise in the design and construction of screening assays to capitalize    on medical targets. The Company focuses on discovering novel drugs, and all    of the drug candidates that have entered human testing in clinical trials    have worked by new or more selective target mechanisms which have the potential    to provide significant therapeutic advantages over existing drugs. 

**Neurogen Drug Programs**

 Neurogen designs and      develops drugs that have the potential to offer enhanced therapeutic efficacy      or      reduced side effects over drugs currently available    to treat a particular disease. Most of the Company’s programs address    novel targets for which significant scientific evidence exists to suggest    that the target mechanism plays a meaningful role in the disease or disorder.    By    designing drugs specifically targeting a new more selective mechanism, Neurogen    compounds offer the potential for equivalent or improved efficacy with fewer    side effects    than drugs currently on the market, or may cause markets to grow in areas    where few effective therapeutics currently exist. In addition, drugs active    against    new targets may offer the possibility of adding to or synergistically improving    existing therapy.

 The following table summarizes our most advanced programs in our current  drug pipeline:

| **Disorder**                                                                                            | **Target Mechanism** | **Program Status**                                 | **Commercial        Rights**                                       |
|---------------------------------------------------------------------------------------------------------|----------------------|----------------------------------------------------|--------------------------------------------------------------------|
| Inflammation and Autoimmune      Disease:   Rheumatoid arthritis   Asthma | C5a                  | Phase II  (NGD 2000-1)      Phase II  (NGD 2000-1) |  

Neurogen                                                   |
| Insomnia                                                                                                | GABA                 | Phase I      (NGD 96-3)                            | Pfizer Marketing/      Neurogen Royalty                            |
| Pain                                                                                                    | VR-1                 | Preclinical research and development               | Neurogen                                                           |
| Depression and Stress                                                                                   | CRF-1                | Preclinical research                               | Aventis Pharmaceuticals      Inc. Marketing/      Neurogen Royalty |
| Obesity                                                                                                 | MCH-1                | Preclinical research                               | Neurogen                                                           |

Below, we describe our most significant active drug development programs  in detail.

**Inflammation Program: C5a receptor antagonist**

Inflammatory and autoimmune conditions are debilitating diseases afflicting  millions of Americans, causing substantial human suffering, and costing the  United States economy billions of dollars in health care and lost productivity.  These diseases include the many different forms of arthritis, autoimmune diseases,  and pulmonary disorders. Most are chronic and many cause life-long pain, disability,  or disfigurement. These diseases affect people of all ages, racial and ethnic  populations, and economic strata. Industry estimates value sales of drugs to  treat inflammation, autoimmune, and pulmonary disorder at over $23 billion  annually.

Neurogen scientists      believe that blocking the activation of the C5a receptor of the complement      cascade may work to treat inflammation in rheumatoid arthritis,  other autoimmune diseases and asthma.  Complement component C5a is a protein in the body that is part of the innate  immune system that protects the body against invading micro-organisms attracting  and activating white blood cells, but when inappropriately stimulated may trigger  the immune system  to  start  attacking  the body's own tissues, an inappropriate  reaction central to autoimmune and inflammatory diseases. 

Rheumatoid arthritis involves inflammation in the lining of the joints and/or  other internal organs. It is a systemic disease affecting the entire body and  is one of the most common forms of arthritis, characterized by the inflammation  of the membrane lining the joint, resulting in pain, stiffness, warmth, redness  and swelling. This disease affects 2.1 million Americans, mostly women--1.5  million women suffer from rheumatoid arthritis as compared to 600,000 men.  Musculoskeletal conditions such as rheumatoid arthritis cost the U.S. economy  nearly $65 billion in medical care and indirect expenses such as lost wages  and production.

Currently, several types      of drugs are used to treat rheumatoid arthritis. Recently, drugs which      inhibit the      tumor necrosis factor alpha (TNFa) protein,  such as Enbrel® and Remicade®, have demonstrated the ability to not  only treat the symptoms of rheumatoid arthritis but also slow the progression  of the disease by inhibiting the destruction of healthy joint tissue. However,  as large molecule proteins, these drugs must be taken by injection and are  expensive to manufacture, distribute and administer. Anti-tumor necrosis factor  drugs also have some side effects such as development of antinuclear antibodies  (these are antibodies seen in various autoimmune diseases such as Lupus), Urticaria  (reddish blotchy areas on the skin), infections, and rejection of these antibodies  by the patients own immune system (similar to the body's rejection of an organ  transplant).

Other drugs used to      treat rheumatoid arthritis include the COX-2 inhibitors. Since the synthesis      of aspirin      in 1897, inhibitors of cyclooxygenase (an enzyme  that controls inflammation) have been a source of relief from arthritis pain.  These drugs are now collectively called non-steroidal anti-inflammatory drugs  (NSAID’s). The newest generation of NSAID’s is called COX-2 selective  inhibitors. Brand names of this type of medication include Celebrex® and  Vioxx®. While COX-2 inhibitors are small molecule drugs and feature less  risk of side effects such as blood thinning or stomach ulceration than earlier  treatments, these drugs do not slow the tissue destruction associated with  the progression of rheumatoid arthritis.

Neurogen believes that      blocking the C5a receptor in patients with rheumatoid arthritis may inhibit      the      destruction of healthy tissue by blunting the immune    system’s overreaction to the presence of the C5a protein. The Company    believes that our small molecule drug candidate, taken as a pill for the    treatment of rheumatoid arthritis, may offer many of the advantages of the    COX-2 inhibitors    with the potential to also slow the progression of the disease.

Asthma is an inflammatory      condition suffered by more Americans than ever before. This chronic lung      disease      is characterized by inflammation of the air passages,    which results in the temporary narrowing of the airways that transport air    from the nose and mouth to the lungs. The prevalence of asthma has been increasing    since the early 1980’s across all age, sex, and racial groups and affects    more children than adults. It is the only chronic disease, besides AIDS and    tuberculosis, with an increasing death rate; each day 14 Americans die from    asthma.

The cost of asthma to the American economy is estimated to be over $11.3 billion;  direct costs accounted for $7.5 billion with hospitalizations accounting for  the single largest portion. Indirect costs were $3.8 billion of the total.

Currently, a number of medications are available to treat asthma. These treatments  target different aspects of the disease: some focus on bronchospasm, or contraction  of the muscles which line the airways, while others have their main effect  on inflammation, swelling, and mucus production. Side effects can include jitteriness,  palpitations, or abnormally fast heart rhythms. Steroids are the most powerful  inflammation inhibitors currently available and are administered both orally  and through inhalation. At this time, there is only limited information on  adverse side effects from inhaled steroids, especially with higher doses. However,  there is a concern for the potential of adverse effects and a recent clinical  report raises concerns about the use of high dose inhaled steroids and an increased  risk of developing ocular hypertension or glaucoma. Neurogen believes that  blocking the C5a receptor in patients with asthma may represent an alternative  to existing treatments. 

The Company has identified      several small molecule compounds that potently block the activation of      C5a receptors. Neurogen's leading compound in this  program, NGD 2000-1, is currently starting two Phase II clinical trials for      rheumatoid arthritis and for asthma. 

In the rheumatoid arthritis Phase II study, Neurogen will examine the ability  of the compound to lower the levels of C-reactive protein (CRP is an important  biomarker in rheumatoid arthritis patients) in patients with mild to moderate  conditions. The study is multi-centered, double blinded and placebo controlled  and will explore multiple doses of NGD 2000-1. 

The asthma Phase II trial will study the safety and preliminary efficacy of  NGD 2000-1 in patients with mild to moderate asthma. This trial is multi-centered,  double-blinded, and placebo-controlled and will assess multiple doses of NGD  2000-1 using improvement in lung capacity (FEV1) as the primary endpoint. 

Phase I study results indicated that NGD 2000-1 was safe and well-tolerated.  These studies also indicated that NGD 2000-1 interacts with the 3A4 liver enzyme  which metabolizes many drugs. This characteristic may limit the use of NGD  2000-1 by patients also taking other medications which are metabolized by the  3A4 enzyme. Further studies will be required to determine the extent of any  such limitation. 

To date, Neurogen has retained all rights to this C5a antagonist program. 

**Insomnia Program: unique GABA modulation profile**

 Recent studies indicate      that as many as 20 million people in the United States experience chronic      insomnia      and an additional 20 to 30 million Americans  experience intermittent sleep disorders. Industry analysts estimate that the  annual market for drugs to treat insomnia is more than $1.5 billion worldwide  and over $500 million in the United States. While currently marketed drugs  to treat sleep disorders, known as hypnotics, are effective, they may cause  numerous side effects, including "hangovers," rebound insomnia, short-term  memory loss and addiction. Neurogen is developing drugs to treat sleep disorders,  primarily insomnia, which selectively modulate certain receptor subtypes of  the gamma-aminobutyric acid (GABA) neurotransmitter system.

 The link between the      GABA system and sleep is illustrated by the benzodiazepine class of drugs      such as Valium(R), which cause sleepiness, and    by  drugs marketed to treat insomnia such as Ambien(R) and Sonata(R), which work  through the same broad range of GABA receptors as the benzodiazepines. Neurogen  has identified drug candidates to treat insomnia that have a more specific  GABA receptor binding profile and limit the degree of receptor activation than      currently marketed drugs. Animal studies, to date, suggest that these compounds      are      efficacious      in      inducing      sleep with  fewer side effects than existing therapies. Drugs to treat insomnia should  not only induce sleep but they should have pharmacokinetic properties which  cause the drug to work quickly and then be cleared from the patient's body      before morning. Pfizer, our partner in this program, is currently evaluating      our lead compound, NGD 96-3, in Phase I clinical studies.

**Pain Management Program: VR-1 receptor antagonist**

 Industry sources estimate more than 60 million persons in the United States  suffer from some type of persistent or recurrent acute pain sufficient to significantly  impact their lives. Not only does such chronic pain adversely affect physical  and psychological well-being, it also costs society billions of dollars in  lost productivity, health care expenditures, and disability compensation. The  health care costs incurred by patients with chronic pain range from $500 to  more than $35,000 per year. Among cancer patients, available estimates suggest  that chronic pain affects up to 95% of patients with advanced disease with  less than 50% of these experiencing effective pain relief.

 The Company believes      that its approach to pain management offers the potential to relieve pain      without      the side effect profile of existing pain drugs such  as opiates and non-steroidal anti-inflammatory drugs (NSAID’s). Opiates  can result in respiratory depression, gastrointestinal tract motility, and  are frequently abused by patients. NSAID’s side effect profile includes  gastrointestinal tract toxicity and negative cardiovascular and renal effects.

 Neurogen is currently advancing multiple, highly potent candidates for potential  development in its vanilloid receptor-1 (VR-1) program, which targets a broad  spectrum of pain indications including osteoarthritis, neuropathic pain, and  bone cancer pain.

 Studies in genetically altered mice lacking the VR-1 receptor provide strong  evidence for a VR-1 role in the sensation of noxious heat as well as thermal  hyperalgesia (heightened sensitivity to pain) in models of inflammatory pain.  Neurogen researchers believe that a drug which blocks the VR-1 receptor could  benefit patients suffering from various types of inflammatory pain states and  specific types of nociceptive, or localized, pain.

 Neurogen has established a broad intellectual property position on this new  target for the relief of pain. In addition to establishing the first patent  publications on small molecule VR-1 antagonists, the Company has been awarded  a patent on a human VR-1 receptor gene sequence, has broad applications filed  encompassing highly potent chemotypes, and has patent applications pending  on the general use of VR-1 antagonists for the treatment of peripheral pain.

 Neurogen is currently profiling and evaluating its most advanced compounds  in consideration for human testing. To date, Neurogen retains all commercial  rights to this program.

**Depression/Anxiety Program: CRF-1 receptor antagonist**

 Depression is one of the most prevalent mental illnesses in the United  States, affecting approximately 17 million people or 9% of the adult population  annually according to the National Institute of Mental Health. While recent  pharmaceutical research has led to improved drugs, such as Prozac(R), for the  treatment of depression, these medications have limitations in their use,  primarily because of their slow onset of therapeutic action (often greater  than  10 days from the commencement of dosing), lack of efficacy in some patients,  and  side effects such as sexual dysfunction. Industry analysts estimate the current  annual market for antidepressants to be over $17 billion worldwide.

 Anxiety and stress are conditions commonly associated with depression. A  number of neuropeptide receptors that appear to be involved in stress responses,  including receptors for CRF-1, exhibit altered characteristics in depressed  patients.

 Neurogen believes that an orally available drug candidate that blocks the  CRF-1 receptor may be efficacious in relieving depression, anxiety and/or stress  related disorders without significant side effects. A number of companies are  seeking to develop CRF-1 drug candidates. To date, many companies have experienced  difficulties in identifying CRF-1 blockers which have drug properties appropriate  for commercialization. Neurogen believes this is due to the fact that the scope  of known chemical structures which block CRF-1 is relatively narrow.

 Neurogen has discovered      a number of compounds that block the CRF-1 receptor subtype and have demonstrated      efficacy in animal models of depression and stress.  Importantly, the chemical structure of these compounds is significantly outside  of the scope of known CRF-1 blockers. We believe these novel chemical templates  hold the potential of avoiding the development issues of known CRF-1 structures.  In December of 2001, Neurogen entered into a collaborative agreement with Aventis  Pharmacuticals Inc. (“Aventis”) (described below) to research and  develop compounds to modulate CRF-1 receptors. Together Neurogen and Aventis  are currently optimizing lead candidates in this program.

**Obesity/Diabetes Program: MCH-1 receptor antagonist**

 Neurogen is optimizing      lead compounds blocking the melanin concentrating hormone receptor-1 (MCH-1),      which is an important mediator of food intake.  These receptors are expressed in the hypothalamus, the feeding center of the  brain. While obesity is caused by a complex process involving many hormones,  neurotransmitters, nerve cells, and genes, the MCH neurotransmitter is now  known to play a key role in controlling eating behavior. In industry preclinical      studies, deleting the genes coding of the MCH peptide or MCH receptor gene      has resulted      in lean animals, while administering MCH peptide caused increased weight      gain. The      Company      is currently      optimizing  lead drug candidates in this program. Neurogen owns all commercial rights to  its MCH-1 receptor antagonist program.

**Neurogen Collaborations**

 Neurogen conducts its research and development independently and, when advantageous,  collaborates with world-class pharmaceutical companies during the drug development  process to obtain additional resources and to access complementary expertise.  The Company's collaboration agreements may provide funding for drug discovery  and development programs as well as clinical, manufacturing, marketing, and  sales expertise. At the same time, Neurogen has retained certain rights to  future royalties or profit-sharing for successful drugs resulting from collaborative  programs. These strategic alliances balance the Company's exposure to research  and development risks inherent in the industry while retaining a share in the  success of future products.

 A summary of the material terms of agreements which relate to two currently  partnered programs follows: 

  o The 1994 Pfizer Agreement - covers our GABA-based sleep disorder  program  - Pfizer purchased approximately 1.1 million shares of our common  stock for approximately $9.9 million.    - We received funding from 1994 through 2001 for research and  development under this program.    - Pfizer has the right to determine when to advance compounds in the  clinical process.    - We will receive milestone payments if specified development and  regulatory objectives are achieved.    - Pfizer received the exclusive worldwide license to manufacture,  use and sell GABA-based sleep disorder products developed in the  collaboration.    - Pfizer is required to pay us royalties based on net sales levels,  if any, for such products.    - In December 2001, our collaborative research program came to its  scheduled conclusion. Pfizer is currently developing our lead candidate from  this collaboration in Phase I studies and evaluating other candidates from  the program to determine whether further development is desirable.

o The 2001 Aventis Agreement – covers      our CRF1-based depression and anxiety program    - Aventis paid $10 million for the licensing of Neurogen's CRF1  drug candidates and technology.    - Neurogen receives committed research payments and is reimbursed for research  expenses for three years from the effective date.    - Neurogen will receive milestone payments if specified development  and regulatory objectives are achieved.    - Aventis received the exclusive worldwide license to manufacture,  use and sell CRF1 receptor modulatory products developed in the  collaboration.    - Aventis is required to pay Neurogen royalties based on net sales levels,  if any, for such products.

 Neurogen incurred research  and development costs (net of stock compensation) of $34,093,000, $34,494,000  and $28,048,000 for the years ending December 31, 2002, 2001 and 2000, respectively.  During those same time periods, the Company recognized research and development  revenue from its collaboration agreements (including the two agreements described  above and other prior agreements), of $4,276,000, $3,056,000 and $9,205,000,  respectively. Thus, during those time periods, overall research and development  revenue as a percentage of total research and development costs (for both partnered  and unpartnered programs) was 13%, 9% and 33%, respectively.

**Patents and Proprietary Technology**

 Neurogen’s success depends, in part, on the Company’s      ability to obtain and enforce patents, maintain trade secrets and operate      without infringing  the intellectual property rights of third parties. Neurogen files patent applications  both in the United States and in foreign countries, as the Company deems appropriate,  for protection of both products and processes. At December 31, 2002, Neurogen  is the sole assignee of 204 issued United States patents and numerous foreign  patents.  Neurogen is not currently engaged in any research based on any technology transfer  that would obligate the Company to pay royalties to any third party.

 The patent position      of biotechnology and pharmaceutical firms is highly uncertain and involves      many complex      legal and technical issues. There is  considerable uncertainty regarding the breadth of claims allowed in such cases  and the degree of protection afforded under such patents. As a result, Neurogen  cannot assure you that patent applications will be successful or that current  or future patents will afford the Company protection against competitors. It  is possible that Neurogen patents will be successfully challenged or that patents  issued to others may preclude the Company from commercializing its products.  Litigation to establish the validity of patents, to defend against infringement  claims or to assert infringement claims against others can be lengthy and expensive,  even if a favorable result is obtained. Moreover, much of the Company’s  expertise and technology cannot be patented.

 Neurogen also relies      heavily on trade secrets and confidentiality agreements with collaborators,      advisors,      employees, consultants, vendors and other service  providers. The Company cannot assure you that these agreements will not be  breached or that trade secrets will not otherwise become known or be independently  discovered by competitors. Neurogen’s business would be adversely affected  if competitors were able to learn the Company’s secrets or if the Company  were unable to protect its intellectual property.

**Competition**

 The biopharmaceutical      industry is highly competitive and subject to rapid and substantial technological      change. Developments by others may render Neurogen’s  drug candidates or technologies noncompetitive or obsolete, or we may  be unable to keep pace with technological developments or other market factors.  Technological competition in the industry from pharmaceutical and biotechnology  companies, universities, governmental entities and others diversifying into  the  field is intense and is expected to increase. Many of these entities have  significantly greater research and development capabilities than Neurogen,  as well as substantially more marketing, manufacturing, financial and managerial  resources. These entities represent significant competition. In addition, acquisitions  of, or investments in, competing development-stage pharmaceutical or biotechnology  companies by large corporations could increase such competitors' financial,  marketing, manufacturing and other resources.

 Competitors have developed      or are in the process of developing products or technologies that are,      or      in the future may be, the basis for competitive products.  The Company’s competitors may develop products that are safer, more effective  or less costly than any Neurogen products or may be able to complete their  development more quickly. Neurogen would be at a significant competitive disadvantage  if a competitor developed and successfully commercialized a drug similar to  a Neurogen drug candidate ahead of the Company’s efforts.

**Manufacturing**

 Neurogen is currently relying, in part, on third-party manufacturers to produce  large quantities of development candidate compounds for preclinical development  and dosage forms of these candidates to support clinical trials.

 Pfizer manufactures or will be responsible for manufacturing, drugs for  clinical trials which are subject to the 1994 Pfizer Agreement and has the    right to manufacture future products under this collaboration, if any, for    commercialization.

 Aventis will be responsible for manufacturing, or having manufactured, drugs  for clinical trials which are subject to the Aventis Agreement, and has the  right to manufacture future products under the collaboration, if any, for commercialization.

 With respect to compounds not currently subject to collaborations, the Company  currently utilizes third-party manufacturers for preclinical development and  clinical trials.

**Sales and Marketing**

 Neurogen's strategy      is to market products either directly or through co-promotion arrangements      or other licensing arrangements with large pharmaceutical or biotechnology  companies. The Company does not expect to establish a direct sales capability  for at least the next several years, though it may pursue such a capability  in the future. Pfizer has the right to market worldwide future products, if  any, resulting from the  Pfizer Agreement. Aventis has the right to market  worldwide future products, if any, resulting from the Aventis Agreement.

**Government Regulation**

 The production and      marketing of Neurogen’s products, as well as research    and development activities are subject to regulation for safety, efficacy  and quality by numerous governmental authorities in the United States and other    countries. In the United States, drugs are subject to rigorous federal regulation    (Food and Drug Administration or FDA) and, to a lesser extent, state regulation.    The Federal Food, Drug and Cosmetic Act, as amended, and the regulations  promulgated    thereunder, and other federal and state statutes and regulations govern,  among other things, the testing, manufacture, safety, efficacy, labeling, storage,    record keeping, approval, advertising and promotion of our products. Product    development and approval within this regulatory framework will take a number    of years and involve the expenditure of substantial resources.

 The steps required before a pharmaceutical agent may be marketed in the  United States include:

> 
 1. Preclinical laboratory tests, in vivo preclinical studies and formulation      studies,    2. The submission to the FDA of an Investigational New Drug      Application (IND) for human clinical testing which must become      effective before human clinical trials can commence,    3. Adequate and well-controlled human clinical trials to establish the      safety and efficacy of the drug,    4. The submission of a New Drug Application (NDA) or Product License Application      to the FDA, and    5. FDA approval of the NDA or Product License Application prior to any commercial      sale or shipment of the drug.

 In addition to obtaining FDA approval for each product, each domestic drug  manufacturing establishment must be registered with, and approved by, the FDA.  Domestic manufacturing establishments are subject to biennial inspections by  the  FDA and must comply with the FDA's Good Manufacturing Practices for both drugs  and devices. To supply products for use in the United States, foreign  manufacturing establishments must comply with Good Manufacturing Practices  and  are subject to periodic inspection by the FDA or by regulatory authorities  in  such countries under reciprocal agreements with the FDA.

 Preclinical testing includes laboratory evaluation of product chemistry  and formulation, as well as animal studies to assess the potential safety and  efficacy of the product. Preclinical safety tests must be conducted by  laboratories that comply with FDA regulations regarding Good Laboratory  Practices. The results of the preclinical testing are submitted to the FDA  as  part of an IND and are reviewed by the FDA prior to the commencement of human  clinical trials. Unless the FDA objects to an IND, the IND will become effective  30 days following its receipt by the FDA.

 Clinical trials involve      the administration of the new drug to healthy volunteers or to patients      under the supervision of a qualified principal  investigator. Clinical trials must be conducted in accordance with Good Clinical  Practices under protocols that detail the objectives of the study, the  parameters to be used to monitor safety and the efficacy criteria to be  evaluated. Each protocol must be submitted to the FDA as part of the IND.  Further, each clinical study must be conducted under the auspices of an  independent Institutional Review Board. The Institutional Review Board will      consider, among other things, ethical factors, the safety of human subjects      and the possible liability of  the  institution. Compounds must be formulated according to Good Manufacturing  Practices.

 Clinical trials are      typically conducted in three sequential phases, but the phases may overlap.      In Phase I, the initial introduction of the drug into  healthy human subjects, the drug is tested for safety,  absorption, dosage tolerance, metabolism, bio-distribution, excretion and pharmacodynamics  (clinical pharmacology). Phase II typically involves studies in a limited patient  population:

> 
 1. to determine the efficacy of the drug for specific, targeted      indications,    2. to determine dosage tolerance and optimal dosage, and    3. to identify possible adverse side effects and safety risks.

 When a compound is found to be effective and to have an acceptable safety  profile in Phase II evaluations, Phase III trials are undertaken to further  evaluate clinical efficacy and to test for safety within an expanded patient  population at geographically dispersed clinical study sites. Neurogen or the  FDA may suspend clinical trials at any time if it is believed that the individuals  participating in such trials are being exposed to unacceptable health risks.

 The results of the pharmaceutical development, preclinical studies and  clinical studies are submitted to the FDA in the form of a NDA for approval    of the marketing and commercial shipment of the drug. The testing and approval    process is likely to require substantial time and effort. The approval process    is affected by a number of factors, including the severity of the disease,    the availability of alternative treatments and the risks and benefits demonstrated    in clinical trials. Consequently, there can be no  assurance that any approval will be granted on a timely basis, if at all. The  FDA may deny an NDA if applicable regulatory criteria are not satisfied, require  additional testing or information or require post-marketing testing and surveillance  to monitor the safety of a company's products if it does not believe the NDA  contains adequate evidence of the safety and efficacy of the drug. Notwithstanding  the submission of such data, the FDA may ultimately decide that an NDA does  not satisfy its regulatory criteria for approval. Moreover, if regulatory approval  of a drug is granted, such approval may entail limitations on the indicated  uses for which it may be marketed. Finally, product approvals may be withdrawn  if compliance with regulatory standards is not maintained or if problems occur  following initial marketing.

 Among the conditions      for NDA approval is the requirement that any prospective manufacturer's      quality control and manufacturing procedures conform to Good  Manufacturing Practices. In complying with standards set forth in these regulations,  manufacturers must continue to expend time, money and effort in the area of  production and quality control to ensure full technical  compliance. Manufacturing establishments, both foreign and domestic, also are  subject to inspections by or under the authority of the FDA and by other  federal, state or local agencies.

 Whether or not FDA approval has been obtained, approval of a product by  regulatory authorities in foreign countries must be obtained prior to the  commencement of commercial sales of the product in such countries. The  requirements governing the conduct of clinical trials and product approvals  vary  widely from country to country, and the time required for approval may be longer  or shorter than that required for FDA approval. Although there are some  procedures for unified filings for certain European countries, in general,  each  country at this time has its own procedures and requirements.

 In addition to regulations      enforced by the FDA, Neurogen is also subject to regulation under the Occupational      Safety and Health Act, the Environmental    Protection Act, the Toxic Substances Control Act, the Resource Conservation    and Recovery Act and other present and potential future federal, state or  local regulations. The Company’s research and development involves the  controlled use of hazardous materials, chemicals, and various low-level radioactive  compounds.    Although the Company believes that safety procedures for handling and disposing    of such materials comply with the standards prescribed by state and federal    regulations, the risk of accidental contamination or injury from these materials    cannot be completely eliminated. In the event of any accident, Neurogen could    be held liable for any damages that result and any such liability could exceed    our resources.

**Employees**

 As of December 31, 2002, the Company had 163 full-time employees, of which  121 persons were scientists and, of these scientists, 56 had Ph.D. degrees.  None of the employees are covered by collective bargaining agreements, and  the Company considers relations with employees to be good. All current scientific  personnel have entered into confidentiality and non-competition agreements  with the Company. 

**Research and  Development Expenses**

 The Company incurred research and development expenses of $34,093,000, $34,494,000  and $28,048,000 in 2002, 2001, and 2000, which exclude non-cash stock compensation  charges of $51,000, $901,000 and $4,637,000, respectively.

**Available Information**

The Company’s website address is www.neurogen.com. Neurogen makes available  free of charge through its website all of the Company’s filings with  the Securities and Exchange Commission (“SEC”), including its Annual  Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form  8-K and all amendments to these reports. The Company’s filings are made  available as soon as reasonably practicable after such material is electronically  filed with the SEC. Copies are also available, without charge, from Neurogen  Corporation, 35 Northeast Industrial Road, Branford, CT 06405.

**ITEM 2. PROPERTIES**

 The Company conducts      its operations in laboratory and administrative facilities on a single      site located in      Branford, Connecticut. The total facilities under    ownership comprise approximately 148,000 square feet, of which 106,000 square    feet is in use. Approximately 27,000 square feet has not yet been adapted  for the Company’s research and development efforts.

 In 1995, the Company leased approximately 24,000 square feet of a 39,000  square foot building under a ten-year agreement, which provided an option to  purchase the entire facility effective after the fifth year of the original  term of the lease. In January 2001, Neurogen elected to purchase the entire  facility for $2.4 million. The additional space acquired of approximately 15,000  square feet continues to be leased through Neurogen to the third-party tenants  who occupied the facilities at the time of purchase.

**ITEM 3. LEGAL PROCEEDINGS**

 The Company knows of no material litigation or proceeding pending or threatened  to which Neurogen is, or may become, a party.

**ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

 None.

**CAUTIONARY STATEMENT FOR PURPOSES OF THE"SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES  LITIGATION REFORM ACT OF 1995.**

 Except for historical      matters, the matters discussed in this Form 10-K are"  forward-looking statements" within the meaning of the Private Securities  Litigation Reform Act of 1995 or any rules, regulations or releases of the  Securities and Exchange Commission with respect thereto. Forward-looking  statements in this Form 10K include, but are not limited to, statements in    Item  1 under the caption "Business--Neurogen Drug Programs" with respect    to the  Company's various product development programs and statements in Item 7 under  the caption "Management's Discussion and Analysis of Financial Condition    and  Results of Operations" with respect to the sufficiency of the Company's    cash  balance to fund planned operations. In addition, the Company may from time    to  time make forward-looking statements in the future.

 Neurogen wishes to caution readers, and others to whom forward-looking  statements are addressed, that any such forward-looking statements are not  guarantees of future performance and that actual results may differ materially  from estimates in the forward looking statements. In addition to the important  factors described elsewhere in this Form 10-K and the Company's other filings  with the Securities and Exchange Commission, the following important factors,  among others, could affect Neurogen's actual future results and could cause  such  results to differ materially from estimates expressed in any forward-looking  statements made by, or on behalf of, Neurogen:

-  Failures, difficulties          or delays in discovery, research, development, testing, regulatory approval,          production and marketing of any of the Company's drug      candidates, including without limitation any unanticipated pre-clinical or      clinical failures, delays, delays in regulatory approvals, the failure to develop      follow-on candidates in a given program, the failure to attract or retain scientific      and management personnel, adverse side effects or inadequate therapeutic efficacy      or inadequate drug properties which could prevent or slow product development      efforts at any stage of product development by delaying or preventing clinical      trials, delaying or preventing regulatory approval for commercialization or      adversely affecting acceptance by the market. A very significant majority (estimated      to be between 80 and 90 percent) of all drugs which enter human clinical trials      fail to reach the market.
-   Vigorous competition        within the Company's anticipated product markets, including without limitation        competition from    fully-integrated pharmaceutical companies, specialty biotechnology    companies and platform technology companies, many or all of which may    have substantially greater capabilities, experience and resources than    the Company.
-  Risk that competitors        will succeed in developing technologies (including drug discovery techniques)        and products that are more    effective than those of the Company or that are commercialized prior    to similar technologies or products of the Company.
-  Neurogen's dependence        on its corporate partners with respect to research and development funding,        pre-clinical evaluation of drug    candidates, human clinical trials of drug candidates, regulatory    filings and manufacturing and marketing expertise with respect to most    of its most advanced compounds.
-   Risk that Neurogen's        interests will not coincide with those of its collaborators with respect        to the timing or conduct of clinical    development of compounds, the future production of developed products    or strategies with respect to development and commercialization of    such products.
-  Risk that actual research        and development costs and associated general and administrative costs may        exceed budgeted amounts for a    variety of reasons, including the uncertainty of product development    in the pharmaceutical industry.
-  Risk that drug targets        pursued by the company may prove to be invalid after substantial investments        by the Company.
-   Inability to obtain        sufficient funds through future collaborative arrangements, technology        transfers, equity or debt financings or other    sources to continue the operation of the Company's business which may    require the Company to reduce substantially or eliminate expenditures    for product development, to relinquish rights to certain of its    technologies or potential products or to cease operations.
-   Risk that the Company's        patents and trade secrets and confidentiality agreements with collaborators,        employees, consultants or vendors will    be invalidated or not adequately protect the Company's intellectual    property.
-   Uncertainty of the        scope and enforceability of patents in the pharmaceutical and biotechnology        industries which purport to enable    competitors to restrict others from pursuing certain drug targets.
-   Risk that the Company        may be prohibited or otherwise restricted from working on certain targets        relevant to the Company's business.
-  The Company's dependence        upon third parties for the manufacture of its potential products and the        Company's inexperience in manufacturing if    the Company establishes internal manufacturing capabilities, each of    which could adversely affect the Company's future profit margins, if    any, and its ability to develop and manufacture products on a timely    and competitive basis.
-  Neurogen's dependence        on third parties to market potential products and Neurogen's lack of sales        and marketing capabilities, each of which    could adversely affect the success of any sales and marketing efforts    for the Company's products.
-   Unavailability or        inadequacy of medical insurance or other third-party reimbursement for        the cost of purchases of the Company's products.
-   Inability of the Company        to attract and retain qualified management, employees and consultants.

**PART II**

**ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**

 The common stock of Neurogen is traded on the NASDAQ Stock Market under the  symbol NRGN. As of February 28, 2003, there were approximately 209 holders    of record of the Company's common stock. No dividends have been paid on the    common stock to date, and the Company currently intends to retain any earnings    for further development of the Company's business.

 The following table sets forth the high and low closing bid prices for the  common stock as reported by NASDAQ.

|           | HIGH     |        | LOW      |
|----------------|----------|--------|----------|
|           |          |   |          |
| FISCAL 2002:   |     |   |     |
| First Quarter  | $17.5100 |        | $12.6700 |
| Second Quarter | 14.2500  |        | 8.3000   |
| Third Quarter  | 12.1000  |        | 7.2500   |
| Fourth Quarter | 8.7300   |        | 3.6300   |
|           |          |        |          |
| FISCAL 2001:   |          |        |          |
| First Quarter  | $36.9375 |        | $19.4688 |
| Second Quarter | 23.5938  |        | 18.3700  |
| Third Quarter  | 23.4300  |        | 13.5500  |
| Fourth Quarter | 22.6000  |        | 15.6100  |

**ITEM 6. SELECTED FINANCIAL DATA**

|                                                                           | For        the Year Ended December 31       (in thousands, except per share data) |
|--------------------------------------------------------------------------------|-----------------------------------------------------------------------------------|
|                                                                                |                                                                                   |
|                                                                           |  2002                                                                        |   | 2001 |   | 2000 |   | 1999 |   | 1998 |
|                                                                           |                                                                                   |   |  |  |  |  |  |   |  |
|  Total      operating revenues                                            |  $      15,725                                                               |   |  $      11,514 |   |  $      20,413 |   |  $      10,209 |   | $      11,081 |
| Total operating      expenses                                                  |  $      41,382                                                               |   |  $      42,577 |   |  $      40,858 |   |   $      28,465 |   |  $      24,834 |
|  Net          loss                                                        |  $(23,692)                                                                   |   |   $(25,362) |   |  $(15,471) |   |   $(14,618) |   |  $      (9,458) |
| Net          loss per share-basic and diluted                                  |   $      (1.35)                                                              |   |   $      (1.45) |   |  $      (0.94) |   |  $      (1.00) |   |  $      (.66) |
| Total          assets                                                          |  $115,779                                                                    |   |  $145,956 |   |   $142,588 |   |  $      92,134 |   |   $101,810 |
| Long-term          debt                                                        |   $      19,650                                                              |   |   $      21,029 |   |   $      1,912 |   |  $      1,912 |   |   $      - |
| Stockholders'          equity                                                  |   $      83,297                                                              |   |  $105,383 |   |  $126,120 |   |   $      84,710 |   |  $      98,567 |
| Weighted          average number of shares outstanding-      basic and diluted |  17,614                                                                      |   |  17,441 |   |  16,490 |   |   14,576 |   |  14,419 |

```
**ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS**
```

**OVERVIEW**

 Since its inception in September 1987, Neurogen has been engaged in the  discovery and development of drugs. The Company has not derived any revenue    from  product sales and expects to incur significant losses in most years prior to  deriving any such product revenues. Revenues to date have come from five  collaborative research agreements, one license agreement and one technology  transfer agreement.

 The preparation of Neurogen's  financial statements in conformity with generally accepted accounting principles  requires management to make certain estimates and assumptions that affect the  reported amounts of assets and liabilities and disclosure of contingent liabilities  at the date of the financial statements and the reported amounts of revenues  and expenses during the reporting period. Management makes estimates in the  areas of revenue recognition, income taxes, stock-based compensation and marketable  securities and investments. Estimates are based on historical experience and  on various other assumptions that management believes to be reasonable under  the circumstances. Actual amounts could differ from those estimates.

 The Company believes the following critical accounting policies affect  management's more significant judgments and estimates used in the preparation    of  Neurogen's financial statements:

**Revenue Recognition**

 Each of Neurogen’s collaborative research, licensing and technology  transfer agreements are significant since the terms of such arrangements may  cause the Company’s operating results to vary considerably from period  to period.

 The Company has entered  into collaborative research agreements which provide for the partial funding  of specified projects in exchange for the grant of certain rights related to  potential discoveries. Revenue under these arrangements typically includes upfront  non-refundable fees, ongoing payments for specified levels of staffing for research  and milestone payments upon occurrence of certain events. The upfront fees are  recognized as revenue ratably over the period of performance under the research  agreement. The research funding is recognized as revenue as the related research  effort is performed. Revenue derived from the achievement of milestones is recognized  when the milestone event occurs and such event represents the achievement of  a specific, substantive goal measuring a substantive stage of development towards  a long-term goal, such as the filing of a New Drug Application with the Food  and Drug Administration.

 Neurogen has also entered  into, and now completed, a technology transfer agreement under which revenue  has been recognized when a contractual arrangement exists, fees are fixed and  determinable, delivery of the technology has occurred and collectibility is  reasonably assured. When customer acceptance was required, revenue was deferred  until acceptance occurred. Where there were on-going services or obligations  after delivery, revenue has been recognized over the related term of the service  on a percentage of completion basis, unless such service was maintenance, in  which case revenue has been recognized on a straight line basis. For a contract  with multiple elements, total contract fees are allocated to the different elements  based on evidence of fair value.

**Income Taxes**

The liability method of Statement  of Financial Accounting Standards (“SFAS”) No. 109, “Accounting  for Income Taxes”, is used to account for income taxes. Deferred tax assets  and liabilities are determined based on net operating loss carryforwards and  differences between financial reporting and income tax bases of assets and liabilities.  Deferred items are measured using the enacted tax rates and laws that are expected  to be in effect when the differences reverse. Deferred tax assets may be reduced  by a valuation allowance to reflect the uncertainty associated with their ultimate  realization. Any subsequently recognized tax benefits relating to the valuation  allowance for deferred tax assets would be recorded as an income tax benefit  in the Statement of Operations or a charge to Additional Paid-In Capital.

**Stock-Based Compensation**

 The Company primarily  grants qualified stock options for a fixed number of shares to employees with  an exercise price equal to the fair market value of the shares at the date of  grant. The Company has also issued restricted stock to key executives which  vest over specified service periods. The Company has adopted the disclosure-only  provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”  and therefore accounts for grants of stock options and restricted stock in accordance  with Accounting Principles Board (“APB”) Opinion No. 25, "Accounting  for Stock Issued to Employees." Accordingly, Neurogen recognizes no compensation  expense for the options when the option grants to employees have an exercise  price equal to the fair market value at the date of grant and other relevant  terms are fixed or determinable. If compensation cost for the Company's grant  of stock awards was determined based on the fair value at the grant date consistent  with the provisions of SFAS No. 123, the Company's net loss and loss per share  would be materially effected.

The Company occasionally  grants stock option awards to consultants. Such grants are accounted for pursuant  to Emerging Issues Task Force (“EITF”) Issue No. 96-18, “Accounting  for Equity Instruments That Are Issued to Other Than Employees for Acquiring,  or in Conjunction with Selling, Goods or Services”, and accordingly recognizes  compensation expense equal to the fair value of such awards. The fair value  of each award is estimated using the Black-Scholes model with certain weighted  average assumptions (described in Note 7 to the consolidated financial statements).

**Marketable Securities**

 The Company invests in  U.S. government and corporate debt securities. The fair value of these securities  is subject to volatility and change. The Company considers its investment portfolio  to be available-for-sale securities as defined in SFAS No. 115, "Accounting  for Certain Investments in Debt and Equity Securities." Marketable securities  at December 31, 2002 and 2001 consisted of debt securities with maturities of  three months to six years. Available for sale securities are carried at fair  value with the unrealized gains/losses reported as other comprehensive income.  Realized gains and losses have been determined by the specific identification  method and are included in investment income. Different classifications of the  Company’s marketable securities pursuant to SFAS No. 115 would possibly  result in material impacts to the valuation of the securities and investment  income.

**RESULTS OF OPERATIONS**

 Results of operations      may vary from period to period depending on numerous factors, including      the timing      of income earned under existing or future  collaborative research agreements, technology transfer agreements or joint  ventures, the progress of the Company's partnered research and development  projects, the size of the Company’s staff and the level of preclinical  and clinical development spending on drug candidates in unpartnered programs.  Neurogen believes its research and development costs may increase significantly  over the next several years as its drug development programs progress. In addition,  general and administrative expenses would be expected to increase to support  any expanded research and development activities.

**Years Ended December 31, 2002, 2001 and 2000**

 The Company's fiscal      2002 operating revenues increased 37 percent to $15.7 million from 2001      operating revenues      of $11.5 million. The revenue increase    consists of a $3.0 million increase in license fee revenues and a $1.2 million    increase in research and development revenues. The $3.0 million increase      in license fees is due to the recognition of a one-time $2.0 million payment    from Pfizer to satisfy all obligations from Pfizer’s use of the AIDDTM technology    as a part of the companies’ 1999 Technology Transfer Agreement (described    below), a $1.8 million increase in license fees recognized from Aventis as    part of the Aventis Agreement (described below) offset by a $0.8 million    decrease in AIDDTM technology development and improvement services related    to the Pfizer Technology Transfer Agreement. The increase in research revenues    is due to a $4.1 million increase in research revenues from Aventis (to reflect    a full year of research funding under the companies’ December 2001    collaboration agreement to develop drugs to treat depression and anxiety)    offset in part by a $2.9 million decrease in revenues from Pfizer due to    the scheduled conclusion in December 2001 of the companies’ joint research    collaboration on GABA-based drugs.

Fiscal 2001 operating revenues decreased 44 percent from 2000 operating revenues  of $20.4 million. This decrease was primarily due to a $5.9 million decrease  in research and development revenues resulting from a scheduled reduction in  the Company's staffing and related discovery research funding on GABA and neuropeptide  Y (NPY) collaborative drug discovery programs with Pfizer which comprised $2.9  million of operating revenues in 2001 as compared to $8.8 million in 2000.  The recognition of license fee revenues pursuant to the Pfizer Technology Transfer  Agreement also decreased from $11.2 million in 2000 to $8.3 million in 2001.

Research and development  expenses, excluding non-cash stock compensation charges, remained stable for  fiscal 2002 at $34.1 million as compared to $34.5 million in 2001, and increased  23 percent in 2001 from $28.0 million in 2000. External development costs related  to potential drug candidates decreased from $5.5 million in 2001 to $3.5 million  in 2002 in part due to the assumption by Aventis commencing in December 2001  of the costs of developing potential drug candidates from the Company’s  collaborative efforts. This decrease was offset by an overall increase in the  Company’s ongoing investment in scientific personnel and research supplies.  The increase in 2001 was primarily due to external development costs related  to potential drug candidates which increased to $5.5 million from $1.4 million  in 2000. The increase was also driven by the Company's continued expansion of  its AIDDTM program for the discovery of new drug candidates. Research and  development expenses represented 84 percent, 84 percent and 83 percent of total  operating expenses (excluding non-cash stock compensation charges) for the years  ended December 31, 2002, 2001 and 2000, respectively.

The Company expenses      all research and development costs as incurred. While the Company maintains      a system      to record the level of staffing time spent on  its research and development projects, it does not maintain a historical cost  accounting system with sufficient accuracy to reliably estimate its research  and development costs on a specific project-by-project basis. A significant  portion of the Company’s research and development expenses (such as laboratory  supplies, travel, information systems and services and facilities costs) benefit  multiple projects and are not individually tracked to a specific project. Further,  the Company’s staff timekeeping system does not account for differences  in compensation costs between lower level technicians and more senior scientists. 

 General and administrative expenses, excluding non-cash stock compensation  charges, remained stable at $6.7 million in 2002 as compared to $6.6 million    in 2001, and increased 15 percent in 2001 from $5.7 million in 2000. The    increase in 2001 was attributed to additional administrative and technical    services and personnel to support the protection of Neurogen's growing intellectual    property estate and to support Neurogen's expanding research pipeline.

 Total stock compensation expenses were $0.6 million in 2002 compared to $1.5  million in 2001 and $7.1 million in 2000. The 2002 compensation expense is  primarily composed of continuing non-cash charges for grants of certain stock  awards in 1997, 2001 and 2002 to certain officers of the Company. The 2001  expense included non-cash charges to income for grants of certain stock awards  in 1997 and 2001, as well as one-time non-cash charges totaling $1.0 million  for the modification of certain stock options held by two executive officers.  In 2000 the Company recorded $6.5 million in stock compensation expense for  the vesting of restricted stock granted to certain employees in prior years.  A portion of the stock compensation charges (those relating to the 1997 awards)  are variable and as a result may fluctuate significantly in the future.

 Other income was $1.7 million in 2002 compared to $4.5 million in 2001 and  $5.5 million in 2000. The decrease in 2002 is primarily due to an increase  in interest expense of $1.0 million associated with a $17.5 million first mortgage  debt financing the Company entered into in December 2001. The remainder of  the decrease in 2002, as well as the decrease in 2001, was due to a decrease  in investment income due to lower overall returns on invested funds. This was  a result of lower average cash and marketable securities balances as well as  a reduction in prevailing market interest rates. 

 For the years ended December 31, 2002 and 2001, the Company recorded Connecticut  income tax benefits of $0.3 million and $1.2 million, respectively, in the  Statement of Operations. The Company recognized total income tax benefits of  $0.6 million and $2.0 million for the years ended December 31, 2002 and 2001,  respectively, a portion of which has been recorded to Additional Paid-In Capital.  The benefits are the result of Connecticut legislation which allowed certain  companies to obtain cash refunds from the State of Connecticut at an exchange  rate of 65% of their research and development credits in exchange for foregoing  the carryforward of these credits into future tax years.

 The Company recognized a net loss of $23.7 million for the year ended  December 31, 2002, $25.4 million for the year ended December 31, 2001, and    $15.5  million for the year ended December 31, 2000. The decrease in the 2002 net  loss  is primarily due to the increase in operating revenues. The increase in the  2001 net loss is primarily due to the decrease in revenues and the increase  in research and development and general and administrative expenses described  above.

 In December 1999, the      staff of the Securities and Exchange Commission issued its Staff Accounting      Bulletin      ("SAB") No. 101, Revenue Recognition  in  Financial Statements. SAB No. 101, as amended by SAB No. 101A and 101B, provides  guidance on the measurement and timing of revenue recognition in financial  statements of public companies. SAB No. 101 permits application of its guidance  to be treated as a change in accounting principle in accordance with Accounting  Principles Board (“APB”) Opinion No. 20, Accounting Changes.

 The Company adopted the guidance of SAB No. 101 in the fourth quarter of  2000, retroactive to January 1, 2000, and reflected a cumulative effect of  change in accounting principle on prior years of $0.5 million, related to timing  of revenue recognition on certain non-refundable up-front payments previously  recognized on a technology transfer agreement.

**LIQUIDITY AND CAPITAL RESOURCES**

 At December 31, 2002 and  2001, cash, cash equivalents (including restricted cash of $1.5 million in 2001)  and marketable securities in the aggregate were $79.4 million and $106.8 million,  respectively. A total amount of $44.8 million of the marketable securities at  December 31, 2002 have maturities greater than one year. However, the Company  can and may liquidate such investments prior to maturity to meet its strategic  and/or investment objectives. The Company's cash and other short-term investment  levels decreased ratably throughout 2002 due primarily to continued operating  expenses, as well as purchases of property, plant and equipment of $2.1 million  and scheduled payments on outstanding loans (described below) of $2.5 million.  This decrease was partially offset by the receipt of $9.2 million in research  funding and license fees and $2.6 million in income tax benefits from the State  of Connecticut as described below. The levels of cash, cash equivalents and  marketable securities have fluctuated significantly in the past and are expected  to do so in the future as a result of the factors described below. The Company  plans to use its cash, cash equivalents and marketable securities for its research  and development activities, working capital and general corporate purposes.

 Neurogen's cash requirements to date have been met by the proceeds of its  equity financing activities, amounts received pursuant to collaborative  research, licensing or technology transfer arrangements, certain debt  arrangements and interest earned on invested funds. The Company's equity  financing activities have included underwritten public offerings of common  stock, private placement offerings of common stock and private sales of common  stock in connection with collaborative research and licensing agreements. Total  funding received from these financing activities was approximately $146.6  million. The Company's expenditures have been primarily to fund research and  development and general and administrative expenses and to construct and equip  its research and development facilities.

 The Company is in the      early stage of product development. It has not derived any product revenues      from      product sales and does not expect to derive any  product revenues for at least the next several years, if at all. Prior to deriving    any such product revenues, the Company expects to incur significant losses    and negative cash flows which in the aggregate could exceed the Company’s    existing cash resources. To provide cash to fund its operations until such    time as it achieves sustainable revenues, the Company relies extensively    on its ability to develop drug discovery programs of sufficient value to    either    partner the programs with pharmaceutical companies or raise capital through    equity financings. 

 To the extent that      drug candidates progress in the Company’s currently    unpartnered programs, such as its program for the treatment of inflammatory    disorders or earlier stage programs, such progress could lead to the opportunity    to partner on terms which provide capital, revenues and cash flows to the  Company or the opportunity to raise capital through equity offerings. If unpartnered    programs do not progress or do not progress on schedule, such opportunities    would be delayed or may not materialize at all. 

 To the extent that      drug candidates progress in the Company’s partnered  programs, such as the Company’s insomnia program partnered with Pfizer  or its depression and anxiety program partnered with Aventis, such progress  could result in milestone payments and additional research and development  funding to the Company under the respective collaboration agreements. Such  progress could also provide the opportunity to raise capital through equity  offerings. If partnered programs do not progress or do not progress on schedule,  such opportunities would be delayed or may not materialize at all. 

 Lack of progress, scheduling      delays or failures in any of the Company’s  major programs could significantly reduce the Company’s levels of revenues,  cash flows and cash available to fund its business. It could also significantly  increase the Company’s cost of capital and limit its ability to raise  equity capital. All of the Company’s compounds in development, whether  in human clinical trials or not, will require significant additional research,  development and testing before they can be commercialized. Furthermore, the  scope, magnitude and timing of future research and development expenses, as  well as anticipated project completion dates, are a series of steps, ranging  from preclinical testing to clinical studies in humans. Each step in the process  is typically more expensive than the previous step, but actual timing and cost  for completion depends on the specific progress of each product being tested. 

 While the Company cannot accurately predict the time required or the cost  involved in commercializing any one of its candidates, new drug development  typically takes many years and tens or hundreds of millions of dollars. In  addition, developing new drugs is an extremely uncertain process where most  candidates fail and uncertain developments such as clinical or regulatory delays,  side effects, undesirable drug properties or ineffectiveness of a drug candidate  would slow or prevent the development of a product. If we or our partners are  unable to commercialize one or more of our drug products, we will never achieve  product revenues and may eventually be unable to continue our operations. This  result would cause our shareholders to lose all or a substantial portion of  their investment.

 The debt agreements entered  into by the Company to date include the commercial term mortgage loan financing  in December 2001 with Webster Bank, and a construction loan entered into in  October 1999 with Connecticut Innovations, Inc. (“CII”). Total proceeds  received under these agreements were $22.5 million, which are repayable through  monthly installments over a maximum term of 15 years, bearing various interest  rates which approximated 3.9%-7.5% from 1999 through 2002. Of these amounts  received, $21.0 million remained outstanding as of December 31, 2002. An approximate  aggregate amount of $1.4 million is due and payable in each of the next five  years. Thereafter, approximately $14.0 million is payable in regular installments  until the scheduled maturity dates, including a balloon payment of $5.9 million  on the mortgage loan upon maturity in December 2011. The loan with CII contains  certain subjective acceleration clauses, which upon occurrence of certain events,  may cause amounts due under the agreement to become immediately due and payable.  The Company has no indication that it is in default of any such clauses and  therefore has classified its debt based on the dates regular payments are due.  As of December 31, 2002, Neurogen is not engaged in any significant lease or  capital expenditure commitments. 

In October 2002, as a part of its Operational Excellence program, Neurogen  reorganized certain departments and eliminated 24 employee positions, representing  approximately 10% of its total workforce. The Company recorded a charge of  approximately $0.3 million in the fourth quarter of 2002 for employee termination  costs, such as severance pay, continuation of benefits and personal outplacement  support. Restructuring payments of a minimal amount are expected to end in  the first quarter of 2003.

Neurogen anticipates that  under the restructured operating program, its current cash balance, as supplemented  by research funding pursuant to its collaborative research agreement with Aventis,  will be sufficient to fund its current and planned operations into at least  early 2005. However, Neurogen's funding requirements may change and will depend  upon numerous factors, including but not limited to: the progress of the Company's  research and development programs; the timing and results of preclinical testing  and clinical studies; the timing of regulatory approvals; technological advances;  determinations as to the commercial potential of its proposed products; the  status of competitive products and the ability of the Company to establish and  maintain collaborative arrangements with others for the purpose of funding certain  research and development programs; conducting clinical studies; obtaining regulatory  approvals and, if such approvals are obtained, manufacturing and marketing products.  Many of these factors could significantly increase the Company's expenses and  use of cash. The Company anticipates that it may augment its cash balance through  financing transactions, including the issuance of debt or equity securities  and further corporate alliances. The Company has filed an S-3 registration statement  which became effective in February 2003, under which the Company may issue debt,  common or preferred stock or warrants of up to $75 million in total financing  within two years of the effective date. No assurances can be given that adequate  levels of additional funding can be obtained on favorable terms, if at all.

 As of December 31,      2002, the Company had approximately $112.5 million and $7.1 million of      net operating      loss and research and development credit carryforwards,  respectively, available for federal income tax purposes, which expire in the  years 2004 through 2022. The Company also had approximately $99.0 million and  $4.5 million of Connecticut state tax net operating loss and research and development  credit carryforwards, respectively, which expire in the years 2003 through  2022. In September 2002, the Company applied to exchange 2001 Connecticut research  and development credits for cash proceeds under Connecticut tax law provisions  effective at that time (as mentioned above), resulting in the receipt of a  $0.4 million payment from the State of Connecticut in November 2002. Neurogen  also received a payment of $2.2 million in April 2002 for the exchange of 2000  research and development credits. Because of "change in ownership" provisions  of the Tax Reform Act of 1986, the Company's utilization of its net operating  loss and research and development credit carryforwards may be subject to an  annual limitation in future periods.

**COLLABORATIVE RESEARCH AGREEMENTS**

 In December 2001, Neurogen entered into a collaboration and license  agreement with Aventis pursuant to which Aventis made an initial payment of    $10 million and agreed, among other things, to fund a specified level of    resources for three years for Neurogen's program for the discovery and research    of CRF-1 receptor-based drugs for a broad range of applications, including    the therapeutic treatment of depression and anxiety disorders. Aventis has    the option to extend the discovery and research effort for up to an additional    two years or terminate the collaboration prior to its scheduled conclusion    and transfer all rights to the collaborative program to Neurogen. As of December    31, 2002, the Company has received $3.6 million of research funding from    Aventis. Neurogen is also eligible to receive milestone payments if certain    compound discovery, product development or regulatory objectives are achieved    subject to the collaboration. In return, Aventis received the exclusive worldwide    rights to develop, manufacture and market collaboration drugs that act through    the CRF-1 receptor, for all therapeutic indications for which the drugs may    be used. Aventis will pay Neurogen royalties based upon net sales levels,    if any, for collaboration products. Also under the agreement, Aventis is    responsible for funding the cost of development, including clinical trials,    manufacturing and marketing of collaboration products, if any.

 In June 1999, Neurogen  and Pfizer entered into the Pfizer Technology Transfer Agreement. Under the  terms of this agreement, Pfizer agreed to pay Neurogen up to a total of $27.0  million over a three year period for the licensing and transfer to Pfizer of  certain of Neurogen's AIDDTM technologies for the discovery of new drugs,  along with the installation of an AIDDTM system. Additional payments were  also possible upon Pfizer's successful utilization of this technology. Pfizer  received a non-exclusive license to certain AIDDTM intellectual property  and the right to employ this technology in its own drug discovery programs.  As of December 31, 2002, Pfizer had provided $29.0 million pursuant to the Pfizer  Technology Transfer Agreement, which terminated on schedule in June 2002. Total  fees include a $2.0 million one-time payment in December 2002 to satisfy all  obligations from Pfizer’s use of the AIDDTM technology.

**RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS**

In August 2001, the      Financial Accounting Standards Board (“FASB”)  issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived  Assets." SFAS No. 144 supercedes SFAS No. 121, "Accounting for the  Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," in  that it excludes goodwill from its impairment scope and allows for different  approaches in cash flow estimation. However, SFAS No. 144 retains the fundamental  provisions of SFAS No. 121 for recognition and measurement of the impairment  of (a) long-lived assets to be held and used and (b) long-lived assets to be  disposed of other than by sale. Neurogen adopted the provisions of SFAS No.  144 as of January 1, 2002. The implementation of this standard did not have  any impact on the Company’s results of operations and financial position.

 In July 2002, the Financial      Accounting Standards Board issued SFAS No. 146, "Accounting  for Costs Associated with Exit or Disposal Activities". SFAS No. 146 addresses  financial accounting and reporting for costs associated with exit or disposal  activities and nullifies EITF Issue No. 94-3, "Liability Recognition for  Certain Employee Termination Benefits and Other Costs to Exit an Activity (including  Certain Costs Incurred in a Restructuring)." The provisions of SFAS No.  146 are effective for exit or disposal activities initiated after December  31, 2002. However, as encouraged in the statement, the Company has early adopted  SFAS No. 146 and has applied its respective provisions to the exit activity  undertaken in 2002 (described in Note 12 to the consolidated financial statements). 

 In December 2002, the      Financial Accounting Standards Board issued SFAS No. 148, "Accounting for Stock-Based Compensation – Transition and Disclosure".  SFAS No. 148 amends SFAS No. 123 to address alternative methods of transition  for a voluntary change from the intrinsic to the fair value method of accounting  for stock-based employee compensation. The statement also amends certain disclosure  provisions in SFAS No. 123. Neurogen continues to utilize the intrinsic value  method to account for stock-based employee compensation. However, the disclosure  provisions of SFAS No. 148 have been implemented in the 2002 consolidated financial  statements.

In November 2002, the    Financial Accounting Standards Board issued FIN No. 45, "Guarantor's    Accounting and Disclosure Requirements for Guarantees, Including Indirect    Guarantees of Indebtedness of Others”, which elaborates on the disclosures    to be made by a guarantor in its interim and annual financial statements    about its obligations under certain guarantees that it has issued. The Company    has indemnification agreements with three employees as of December 31,2002    for contingent payments which may be required under provisions that exist    in such employees' employment agreements with prior employers. The maximum    amount of this potential obligation is approximately $3.0 million, however    the Company believes the likelihood of payment of any amounts under suchindemnifications is remote.

In January 2003, the      Financial Accounting Standards Board issued EITF Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables”.      EITF 00-21 addresses, for arrangements with multiple deliverables, how      the arrangement  consideration should be measured, whether the arrangement should be divided  into separate units of accounting and how the arrangement consideration should  be allocated among the separate units of accounting. The guidance in EITF 00-21  is effective for revenue arrangements entered into in fiscal periods beginning  after June 15, 2003, and therefore does not have any impact on the 2002 consolidated  financial statements. The consensus in this EITF pronouncement may affect how  the Company recognizes revenue under future collaboration and technology transfer  arrangements since these often include multiple elements such as non-refundable  upfront fees, ongoing payments for specified levels of staffing for research  and milestone payments. 

**ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

*Interest rate risk.* The Company's investment portfolio includes investment  grade debt instruments. These securities are subject to interest rate risk,    and  could decline in value if interest rates fluctuate. Due to the short duration  and conservative nature of these instruments, the Company does not believe  that  it has a material exposure to interest rate risk. Additionally, funds available  from investment activities are dependent upon available investment rates. These  funds may be higher or lower than anticipated due to interest rate volatility.

*Capital market        risk.* The Company currently has no product revenues and is  dependent on funds raised through other sources. One source of funding is  through further equity offerings. The ability of the Company to raise funds  in  this manner is dependent upon capital market forces affecting the stock price  of  the Company.

**ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**

Consolidated Balance Sheets at December 31, 2002 and 2001

Consolidated Statements  of Operations for the years ended December 31, 2002, 2001 and 2000

Consolidated Statements      of Stockholders' Equity for the years ended December 31, 2002, 2001 and  2000

Consolidated Statements  of Cash Flows for the years ended December 31, 2002, 2001 and 2000

Notes to Consolidated Financial Statements

Report of Independent Accountants

| **NEUROGEN CORPORATION**                                                                      |
|-----------------------------------------------------------------------------------------------|
| **CONSOLIDATED BALANCE SHEETS**                                                               |
| (In thousands, except per share data)                                                         |
|                                                                                          |   |   |   |   |
|                                                                                          |   | December 31 |  | December 31 |
|                                                                                          |   | 2002 |  | 2001 |
|                                                                                          |   |  |
| **Assets**                                                                                    |   |  |  |  |
| **Current assets:**                                                                           |   |  |  |  |
|      Cash and cash equivalents                                       |   | $12,248 |  | $51,062 |
|      Restricted cash                                                 |   | - |  | 1,500 |
|      Marketable securities                                           |   | 67,164 |  | 54,237 |
|      Receivables from corporate partners                             |   | 1,333 |  | 1,554 |
|       Other current assets                                           |   | 1,615 |  | 3,027 |
|                                                                                          |   |  |  |  |
|           Total current assets              |   | 82,360 |  | 111,380 |
|                                                                                          |   |  |  |  |
| **Property, plant and equipment :**                                                           |   |  |  |  |
|      Land, building and improvements                                 |   | 31,280 |  | 30,489 |
|      Equipment and furniture                                         |   | 17,328 |  | 16,162 |
|      Construction in progress                                        |   | 109 |  | 462 |
|                                                                                          |   |  |  |  |
|                                                                                          |   | 48,717 |  | 47,113 |
|      Less accumulated depreciation and amortization                  |   | 15,933 |  | 13,062 |
|                                                                                          |   |  |  |  |
|           Net property, plant and equipment |   | 32,784 |  | 34,051 |
|                                                                                          |   |  |  |  |
| **Other assets**                                                                              |   | 635 |  | 525 |
|                                                                                          |   |  |  |  |
|       **Total assets**                                               |   | $115,779 |  | $145,956 |
|                                                                                          |   |  |  |  |
| **Liabilities and Stockholders' Equity**                                                      |   |  |  |  |
| **Current liabilities:**                                                                      |   |  |  |  |
|      Accounts payable and accrued expenses                           |   | $3,547 |  | $3,595 |
|      Unearned revenue from corporate partners, current portion       |   | 2,000 |  | 6,699 |
|      Current portion of loans payable                                |   | 1,380 |  | 1,365 |
|                                                                                          |   |  |  |  |
|           Total current liabilities         |   | 6,927 |  | 11,659 |
|                                                                                          |   |  |  |  |
| **Unearned revenue from corporate partners, net of current portion**                          |   | 5,905 |  | 7,885 |
| **Loans payable, net of current portion**                                                     |   | 19,650 |  | 21,029 |
|                                                                                          |   |  |  |  |
|      Total liabilities                                               |   | 32,482 |  | 40,573 |
|                                                                                          |   |  |  |  |
| **Commitments and Contingencies**                                                             |   |  |  |  |
|                                                                                          |   |  |  |  |
| **Stockholders' Equity:**                                                                     |   |  |  |  |
| Preferred stock, par value $.025 per share                                                    |   |  |  |  |
|      Authorized 2,000 shares; none issued                            |   | - |  | - |
| Common stock, par value $.025 per share                                                       |   |  |  |  |
|      Authorized 30,000 shares; issued and outstanding                |   |  |  |  |
|      17,919 and 17,733 shares at December 31, 2002                   |   |  |  |  |
|      and 2001, respectively                                          |   | 448 |  | 443 |
| Additional paid-in capital                                                                    |   | 176,615 |  | 174,709 |
| Accumulated deficit                                                                           |   | (91,377) |  | (67,685) |
| Deferred compensation                                                                         |   | (3,257) |  | (2,750) |
| Accumulated other comprehensive income                                                        |   | 868 |  | 666 |
|                                                                                          |   |  |  |  |
|      Total stockholders' equity                                      |   | 83,297 |  | 105,383 |
|                                                                                          |   |  |  |  |
| **Total liabilities and stockholders' equity**                                                |   | $115,779 |  | $145,956 |
|                                                                                          |   |  |   |  |
| See accompanying notes to consolidated financial statements                                   |   |   |   |   |

 

| **Neurogen Corporation**                                                                          |
|---------------------------------------------------------------------------------------------------|
| **Consolidated Statements of Operations**                                                         |
|                                                                                              |   |   |   |   |   |
|                                                                                              | **For the Years Ended December 31** |
|                                                                                              | **2002** |  | **2001** |  | **2000** |
|                                                                                              | **(In thousands, except per share data)** |
|                                                                                              |   |   |   |   |   |
| Operating revenues:                                                                               |   |   |   |   |   |
|      License fees                                                        | $11,449 |  | $8,458 |  | $11,208 |
|      Research and development                                            | 4,276 |  | 3,056 |  | 9,205 |
|                                                                                              |  |   |  |   |  |
|           Total      operating revenues         | 15,725 |  | 11,514 |  | 20,413 |
|                                                                                              |  |  |  |  |  |
| Operating expenses:                                                                               |  |  |  |  |  |
|      Research and development:                                           |  |  |  |  |  |
|           Stock      compensation               | 51 |  | 901 |  | 4,637 |
|           Other      research and development   | 34,093 |  | 34,494 |  | 28,048 |
|                                                                                              |  |   |  |   |  |
|      Total research and development                                      | 34,144 |  | 35,395 |  | 32,685 |
|                                                                                              |  |  |  |  |  |
|      General and administrative:                                         |  |  |  |  |  |
|           Stock      compensation               | 564 |  | 601 |  | 2,456 |
|           Other      general and administrative | 6,674 |  | 6,581 |  | 5,717 |
|                                                           |  |   |  |   |  |
|      Total general and administrative                                    | 7,238 |  | 7,182 |  | 8,173 |
|                                                                                              |  |   |  |   |  |
| Total operating expenses                                                                          | 41,382 |  | 42,577 |  | 40,858 |
|                                                                                              |  |   |  |   |  |
| Operating loss                                                                                    | (25,657) |  | (31,063) |  | (20,445) |
|                                                                                              |  |  |  |  |  |
| Other income (expense):                                                                           |  |  |  |  |  |
|      Investment income                                                   | 2,767 |  | 4,604 |  | 5,474 |
|      Interest expense                                                    | (1,090) |  | (114) |  | - |
|                                                                                              |  |   |  |   |  |
|           Total      other income, net          | 1,677 |  | 4,490 |  | 5,474 |
|                                                                                              |  |  |  |  |  |
| Net loss before income taxes                                                                      | (23,980) |  | (26,573) |  | (14,971) |
|                                                                                              |  |  |  |  |  |
| Income tax benefit                                                                                | 288 |  | 1,211 |  | - |
|                                                                                              |  |  |  |  |  |
| Net loss before cumulative effect of change                                                       |  |  |  |  |  |
|      in accounting principle                                             | (23,692) |  | (25,362) |  | (14,971) |
|                                                                                              |  |  |  |  |  |
| Cumulative effect on prior years of the                                                           |  |  |  |  |  |
| application of SAB No. 101, "Revenue Recognition                                                  |  |  |  |  |  |
| in Financial Statements"                                                                          | - |  | - |  | (500) |
|                                                                                              |  |  |  |  |  |
| Net loss                                                                                          | $(23,692) |  | $(25,362) |  | $(15,471) |
|                                                                                              |  |  |  |  |  |
| Basic and diluted loss per share:                                                                 |  |  |  |  |  |
|      Before cumulative effect      of change in                          |  |  |  |  |  |
|           accounting      principle             | $(1.35) |  | $(1.45) |  | $(0.91) |
|      Change in accounting      principle                                 | - |  | - |  | (0.03) |
|                                                                                         |  |   |  |   |  |
|           Basic      and diluted loss per share | $(1.35) |  | $(1.45) |  | $(0.94) |
|                                                                                              |  |  |  |  |  |
| Shares used in calculation of loss per share:                                                     |  |  |  |  |  |
|      Basic and diluted                                                   | 17,614 |  | 17,441 |  | 16,490 |
|                                                                                              |  |   |  |   |  |
| See accompanying notes to financial statements.                                                   |   |   |   |   |   |

 

| **NEUROGEN CORPORATION**                                 |
|----------------------------------------------------------|
| **CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY**      |
| ** **                                               |
| **For the Years Ended December 31, 2002, 2001 and 2000** |
| **(in thousands)**                                       |
| ** **                                               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                               | ** ** |  |  |  |  | **Additional        Paid-in      Capital** |  | **Accumulated****Deficit** |  | **Deferred****Compensation** |  | **Accumulated Other****Comprehensive****Income** |  |  |
| ** **                                               | ** ** | **Common Stock** |  |  |  |  |  |  |
| ** **                                               | ** ** | **Shares** |  | **Amount** |  |  |  |  |  | **Total** |
|                                                     |   |  |
|                                                     | Balance at December 31, 1999 | 14,800 |  | $370 |  | $114,519 |  | $(26,852) |  | $(3,076) |  | $(251) |  | $84,710 |
|                                                     | Stock issued in private placements, net of |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                     |      offering expenses | 1,638 |  | 41 |  | 38,657 |  | - |  | - |  | - |  | 38,698 |
|                                                     | Deferred compensation | - |  | - |  | 5,523 |  | - |  | 1,370 |  | - |  | 6,893 |
|                                                     | Issuance of stock options | - |  | - |  | 200 |  | - |  | - |  | - |  | 200 |
|                                                     | Exercise of stock options | 899 |  | 22 |  | 10,010 |  | - |  | - |  | - |  | 10,032 |
|                                                     | Stock issued in 401(K) match | 13 |  | - |  | 436 |  | - |  | - |  | - |  | 436 |
|                                                     | Exercise of warrants | 36 |  | 1 |  | 95 |  | - |  | - |  | - |  | 96 |
|                                                     | Comprehensive income: |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                     |      Net loss | - |  | - |  | - |  | (15,471) |  |  |  | - |  | (15,471) |
|                                                     |      Unrealized gain on marketable securities | - |  | - |  | - |  | - |  | - |  | 526 |  | 526 |
|                                                     |      Total comprehensive income |  |  |  |  |  |  |  |  |  |  |  |  | (14,945) |
|                                                     |   |  |
|                                                     | Balance at December 31, 2000 | 17,386 |  | 434 |  | 169,440 |  | (42,323) |  | (1,706) |  | 275 |  | 126,120 |
|                                                     | Issuance of restricted stock | 150 |  | 4 |  | 2,905 |  | - |  | (2,909) |  | - |  | - |
|                                                     | Deferred compensation | - |  | - |  | (1,392) |  | - |  | 1,865 |  | - |  | 473 |
|                                                     | Modification to and issuance of stock options | - |  | - |  | 1,029 |  | - |  | - |  | - |  | 1,029 |
|                                                     | Exercise of stock options | 171 |  | 4 |  | 1,439 |  | - |  | - |  | - |  | 1,443 |
|                                                     | Income tax benefits from stock option exercises | - |  | - |  | 765 |  | - |  | - |  | - |  | 765 |
|                                                     | Stock issued in 401(K) match | 26 |  | 1 |  | 523 |  | - |  | - |  | - |  | 524 |
|                                                     | Comprehensive income: |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                     |      Net loss | - |  | - |  | - |  | (25,362) |  |  |  | - |  | (25,362) |
|                                                     |      Unrealized gain on marketable securities | - |  | - |  | - |  | - |  | - |  | 391 |  | 391 |
|                                                     |      Total comprehensive income |  |  |  |  |  |  |  |  |  |  |  |  | (24,971) |
|                                                     |   |  |
|                                                     | Balance at December 31, 2001 | 17,733 |  | 443 |  | 174,709 |  | (67,685) |  | (2,750) |  | 666 |  | 105,383 |
|                                                     | Issuance of restricted stock | 145 |  | 4 |  | 1,408 |  | - |  | (1,412) |  | - |  | - |
|                                                     | Deferred compensation | - |  | - |  | (432) |  | - |  | 1,048 |  | - |  | 616 |
|                                                     | Issuance of stock options | - |  | - |  | 143 |  | - |  | (143) |  | - |  | - |
|                                                     | Exercise of stock options | - |  | - |  | 1 |  | - |  | - |  | - |  | 1 |
|                                                     | Income tax benefits from stock option exercises | - |  | - |  | 350 |  | - |  | - |  | - |  | 350 |
|                                                     | Stock issued in 401(K) match | 41 |  | 1 |  | 436 |  | - |  | - |  | - |  | 437 |
|                                                     | Comprehensive income: |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                     |       Net loss | - |  | - |  | - |  | (23,692) |  | - |  | - |  | (23,692) |
|                                                     |      Unrealized gain on marketable securities | - |  | - |  | - |  | - |  | - |  | 202 |  | 202 |
|                                                     |       Total comprehensive income |  |  |  |  |  |  |  |  |  |  |  |  | (23,490) |
|                                                     |       |  |
|                                                     | Balance at December 31, 2002 | 17,919 |  | $448 |  | $176,615 |  | $(91,377) |  | $(3,257) |  | $868 |  | $83,297 |
|                                                     |   |  |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                     | See accompanying notes to financial statements |   |   |   |   |   |   |   |   |   |   |   |   |   |

 

| **NEUROGEN CORPORATION**                                                                                                                           |
|----------------------------------------------------------------------------------------------------------------------------------------------------|
| **CONSOLIDATED STATEMENTS OF CASH FLOWS**                                                                                                          |
|                                                                                                                                               |   |   |   |
| **For the Years ended December 31**                                                                                                                |
|                                                                                                                                                    |  |
|                                                                                                                                               | **2002** | **2001** | **2000** |
|                                                                                                                                               |  |
|                                                                                                                                                    | **(In thousands)** |
| **Cash flows from operating activities:**                                                                                                          |   |   |   |   |
|      Net loss                                                                                                             | $(23,692) |  | $(25,362) | $(15,471) |
|      Adjustments to      reconcile net loss to                                                                            |  |  |  |  |
|           net      cash (used in) provided by operating activities:                              |  |  |  |  |
|           Depreciation      expense                                                                   | 3,182 |  | 2,735 | 2,762 |
|           Stock      compensation expense                                                        | 615 |  | 1,502 | 7,093 |
|           Other      non-cash expense                                                            | 1,777 |  | 898 | 517 |
|           Loss      on disposal of assets                                                        | 55 |  | 21 | 141 |
|      Changes in operating      assets and liabilities:                                                                    |  |  |  |  |
|           (Decrease)      increase in accounts payable and accrued expenses                      | (178) |  | (1,418) | 2,309 |
|           (Decrease)      increase in unearned revenue from corporate partners                   | (6,679) |  | 5,042 | 6,782 |
|           Decrease      (increase) in receivables from corporate partners                        | 220 |  | (36) | (1,231) |
|           Decrease      (increase) in other assets, net                                          | 1,150 |  | (1,999) | (664) |
|       Income tax benefits      from exercise of stock options                                                             | 350 |  | 765 | - |
|                                                                                                                                               |  |  |  |  |  |
|                Net      cash (used in) provided by operating activities | (23,200) |  | (17,852) |  | 2,238 |
|                                                                                                                                               |  |  |  |  |
| **Cash flows from investing activities:**                                                                                                          |  |  |  |  |
|           Purchases      of property, plant and equipment                                        | (2,072) |  | (6,257) | (7,899) |
|           Purchases      of marketable securities                                                | (84,385) |  | (74,623) | (56,230) |
|           Maturities      and sales of marketable securities                                     | 70,603 |  | 81,253 | 29,580 |
|           Proceeds      from sales of assets                                                     | 103 |  | 30 |  | 31 |
|                Net      cash (used in) provided by investing activities | (15,751) |  | 403 |  | (34,518) |
|                                                                                                                                               |  |  |  |  |
| **Cash flows from financing activities:**                                                                                                          |  |  |  |  |
|           Proceeds      from issuance of debt                                                    | - |  | 20,588 | - |
|           Principal      payments under loans payable                                                 | (1,365) |  | (106) | - |
|           Change      in restricted cash                                                         | 1,500 |  | (1,500) | - |
|           Exercise      of warrants and employee stock options                                   | 2 |  | 1,443 | 10,080 |
|           Proceeds      from private placement of common stock                                   | - |  | - |  | 38,698 |
|                 Net      cash provided by financing activities          | 137 |  | 20,425 |  | 48,778 |
|                                                                                                                                               |  |  |  |  |  |
| Net      (decrease) increase in cash and cash equivalents                                                                                          | (38,814) |  | 2,976 | 16,498 |
| Cash and cash equivalents at beginning of year                                                                                                     | 51,062 |  | 48,086 |  | 31,588 |
| Cash and cash equivalents at end of year                                                                                                           | $12,248 |  | $51,062 |  | $48,086 |
|                                                                                                                                               |  |   |  |   |  |
| See accompanying notes to financial statements                                                                                                     |   |   |   |   |

 

**NEUROGEN CORPORATION**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**BUSINESS--**Neurogen    Corporation ("Neurogen" or the "Company")  is a company  engaged in the discovery and development of new drugs for a broad range of  pharmaceutical uses. Neurogen is focused on discovering new small molecule  drugs  (e.g. drugs which can be taken orally as a pill) where existing therapies achieve  limited therapeutic effects or produce unsatisfactory side effects. The Company  has not derived any revenue from product sales to date.

**USE OF ESTIMATES**--The  preparation of financial statements in conformity with accounting principles  generally accepted in the United States of America requires management to make  estimates and assumptions that affect the reported amounts of assets and liabilities  and disclosure of contingent liabilities at the date of the financial statements  and the reported amounts of revenues and expenses during the reporting period.  Management makes estimates in the valuation of marketable securities and investments,  revenue recognition, collaboration costs, income taxes, accruals and stock compensation.  Actual amounts could differ from those estimates.

**CASH EQUIVALENTS      AND MARKETABLE SECURITIES--**The Company considers    cash equivalents to be only those investments which are highly liquid, readily  convertible to cash and which mature within three months from date of purchase.  The carrying values of cash equivalents at December 31, 2002 and 2001 were  approximately $11,940,000 and $50,774,000, respectively.

The Company considers    its investment portfolio to be available-for-sale securities as defined in    SFAS No. 115, “Accounting for Certain Investments in Debt  and Equity Securities”. Marketable securities at December 31, 2002 and  2001 consist of debt securities with maturities of three months to six years.  Available-for-sale securities are carried at fair value with the unrealized  gains/losses reported as other comprehensive income. Realized gains and losses  have been determined by the specific identification method and are included  in investment income. The Company recognized gross realized gains of $392,000,  $103,000, and $84,000 in 2002, 2001, and 2000, respectively. Gross realized  losses were $65,000, $6,000, and $69,000 in 2002, 2001, and 2000, respectively.

**PROPERTY, PLANT      AND EQUIPMENT--**Property, plant and equipment    are stated at cost. Depreciation is provided using the straight-line method    over the estimated  useful lives of the assets, which are as follows:

| Land,    building and improvements:                     |
|---------------------------------------------------------|
|    Building    and building improvements | 40 years |
|    Land improvements                     | 15 years |
|    Building renovations                  | 7 years |
|                                                    |   |
|    Equipment and furniture               | 3 to 7 years |

**REVENUE RECOGNITION--**The Company has entered into collaborative research  agreements which provide for the partial funding of specified projects in  exchange for the grant of certain rights related to discoveries. Revenue under  these arrangements typically includes upfront non-refundable fees, ongoing  payments for specified levels of staffing for research and milestone paymentsupon the occurrence of certain events. 

Since the adoption of    SAB No. 101, “Revenue Recognition in Financial  Statements”, the upfront fees are recognized as revenue ratably over  the period of performance under the research agreement. The research funding  is recognized as revenue as the related research effort is performed. Each  of the Company’s collaborative research agreements specifies a level  of funding for each annual full-time equivalent (“FTE”) scientist  working on a given project. An FTE is the equivalent of one person working  a certain number of research hours per year. The Company recognizes its research  revenue under such collaborative research agreements based on the number of  FTEs that worked on the project, subject to a maximum number of FTEs, multiplied  by the level of funding per FTE defined in the agreement. 

Revenue derived from the achievement of milestones is recognized when the  milestone event occurs. Each such event represents the achievement of a specific,  substantive goal measuring a substantive stage of development towards a long-term  goal, such as the filing of a New Drug Application with the Food and Drug Administration. 

 Neurogen has entered    into one technology transfer agreement, spanning a three year period, which    is accounted for as a multiple element    arrangement where  the contract fee is allocated to the different elements based on evidence of  fair value. The Company identified three specific elements within the contract,  each of which has a separate earnings process. These elements are: (1) the  construction, delivery, installation and maintenance of a specified number  of AIDDTM (Accelerated Intelligent Drug Discovery) systems (some specifically  contracted for and some to be delivered, at the option of the recipient, at  no additional cost); (2) AIDDTM technology development and improvement  services to be incurred in the second and third years of the contract and (3)  the delivery of specified AIDDTM improvements during the third year of  the agreement. 

 Each element is considered    to be separate as: (1) the AIDDTM systems  could be sold by Neurogen unaccompanied by any of the other elements; (2) similar  development and improvement services have been provided by the Company in the  past to several other collaborative partners and (3) the separately stated  fee for the delivery of the specified improvements is payable upon an acceptance  scheduled at the termination of the agreement. None of the above elements requires  delivery of subsequent elements in order to be functional. 

 Based upon contract provisions,  each AIDDTM system must be accepted by the recipient, and after delivery,  Neurogen has an obligation to provide specified maintenance on the system for  eight months. Therefore, the fee associated with each system is recognized as  revenue ratably over the period beginning at the date of acceptance through  the end of the maintenance period. If the customer elects to not have any of  the optional systems delivered, the fee allocated to such undelivered systems  will be recognized upon contract termination. The contract fee associated with  the AIDDTM technology development and improvement services is recognized  as revenue on a percentage-of-completion basis over the term of service. The  contract fee for the delivery of specified AIDDTM improvements will be  recognized upon acceptance by the recipient.

 Revenue resulting from up-front, non-refundable fees under collaborative  research agreements and all fees under the technology transfer agreement are  recorded as License Fees revenues for purposes of the financial statements.  Research funding for the Company's staffing on projects and milestone payments  under collaborative agreements are recorded as Research and Development revenues.  Deferred revenue arises from the payments received for research and development  to be conducted in future periods or for licenses of Neurogen's rights or technology  where Neurogen has continuing involvement.

 In December 1999, the staff of the Securities and Exchange Commission issued  SAB No. 101. This SAB, as amended by SAB No. 101A and 101B, provides guidance  on the measurement and timing of revenue recognition in financial statements  of public companies. SAB No. 101 permits application of its guidance to be  treated as a change in accounting principle in accordance with APB Opinion  No. 20, Accounting Changes. The Company adopted the guidance of SAB No. 101  in the fourth quarter of 2000, retroactive to January 1, 2000 and reflected  a cumulative effect of the change in accounting principle on prior years of  $500,000, related to timing of revenue recognition on certain non-refundable  up-front payments previously recognized on a technology transfer agreement.

**RESEARCH AND      DEVELOPMENT--**All    research and development costs, which primarily include scientific salaries    and benefits, laboratory    supplies, external  research studies, compound formulation and manufacturing and overhead facilities  expenses, are expensed as incurred.

**PRINCIPLES OF      CONSOLIDATION--**The consolidated financial statements    include the accounts of the parent company and a wholly-owned subsidiary,    Neurogen    Properties LLC, after elimination of intercompany transactions.

**SEGMENT INFORMATION--**SFAS    No. 131, “Disclosures about Segments of an  Enterprise and Related Information”, requires that an enterprise report  financial and descriptive information about each of its reportable operating  segments. The Company operates in one segment: drug discovery and pharmaceutical  development.

**STOCK-BASED COMPENSATION--**The    Company primarily grants qualified stock options for a fixed number of shares    to employees with an exercise    price equal to the  fair market value of the shares at the date of grant. The Company has also  issued restricted stock to key executives which vest over specified service  periods. The Company accounts for grants of stock options and restricted stock  in accordance with APB Opinion No. 25, "Accounting for Stock Issued to  Employees," and, accordingly, recognizes no compensation expense for the  options when the option grants have an exercise price equal to the fair market  value at date of grant. The Company has adopted the disclosure only provisions  of SFAS No. 123, "Accounting for Stock-Based Compensation", as amended  by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition  and Disclosure”.

 In December 2002, the Financial Accounting Standards Board issued SFAS No.  148 to address alternative methods of transition for a voluntary change from  the intrinsic to the fair value method of accounting for stock-based employee  compensation. The statement also amends certain disclosure provisions in SFAS  No. 123. Neurogen continues to utilize the intrinsic value method to account  for stock-based employee compensation. However, the disclosure provisions of  SFAS No. 148 have been implemented in the 2002 financial statements. 

The Company occasionally  grants stock option awards to consultants. Such grants are accounted for pursuant  to Emerging Issues Task Force (“EITF”) Issue No. 96-18, “Accounting  for Equity Instruments That Are Issued to Other Than Employees for Acquiring,  or in Conjunction with Selling, Goods or Services”, and accordingly recognizes  compensation expense equal to the fair value of such awards.

As of December 31, 2002  compensation expense has not been recognized for the stock option plans, except  as noted above. Had compensation cost for the Company's stock option plans been  determined based on the fair value at the grant date for awards in 2002, 2001  and 2000 consistent with the provisions of SFAS No. 123, the Company's net loss  and loss per share would have been adjusted to the pro forma amounts indicated  below (in thousands, except per share data):

|                                                   | 2002      |        | 2001      |        | 2000      |
|--------------------------------------------------------|-----------|--------|-----------|--------|-----------|
|                                                   |      |   |      |   |      |
| Net loss as reported                                   | $(23,692) |        | $(25,362) |        | $(15,471) |
| Net loss pro forma                                     | (34,518)  |        | (36,595)  |        | (21,730)  |
| Additional stock compensation      based on fair value | (10,826)  |        | (11,233)  |        | (6,259)   |
| Basic and diluted      loss per share as reported      | (1.35)    |        | (1.45)    |        | (.94)     |
| Basic and diluted      loss per share-pro forma        | (1.96)    |        | (2.10)    |        | (1.32)    |

As additional options are expected  to be granted in future years and as the options vest over several years, the  above pro forma results are not necessarily indicative of future pro forma results.  

**INCOME TAXES--**The  liability method of SFAS No. 109, “Accounting for Income Taxes”,  is used to account for income taxes. Deferred tax assets and liabilities are  determined based on net operating loss carryforwards and differences between  financial reporting and income tax bases of assets and liabilities. Deferred  items are measured using the enacted tax rates and laws that are expected to  be in effect when the differences reverse. Deferred tax assets may be reduced  by a valuation allowance to reflect the uncertainty associated with their ultimate  realization.

**EARNINGS (LOSS)      PER SHARE (“EPS”)--**Basic EPS is calculated in  accordance with SFAS No. 128, “Earnings per Share”, by dividing  income or loss attributable to common stockholders by the weighted average  common shares outstanding. Diluted EPS is calculated in accordance with SFAS  No. 128 by adjusting weighted average common shares outstanding by assuming  conversion of all potentially dilutive shares. In periods where a net loss  is recorded, no effect is given to potentially dilutive securities, since the  effect would be antidilutive.

**FAIR VALUE OF      FINANCIAL INSTRUMENTS--**The carrying value of    long-term debt approximates its fair value based upon currently available    debt instruments  having similar interest rates and maturities. The carrying amounts of the  Company's other financial instruments approximate their fair value.

**RECENT PRONOUNCEMENTS--**In    August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal  of Long-Lived Assets." SFAS No. 144 supercedes SFAS No. 121, "Accounting  for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed  Of," in that it excludes goodwill from its impairment scope and allows  for different approaches in cash flow estimation. However, SFAS No. 144 retains  the fundamental provisions of SFAS No. 121 for recognition and measurement  of the impairment of (a) long-lived assets to be held and used and (b) long-lived  assets to be disposed of other than by sale. Neurogen adopted the provisions  of SFAS No. 144 as of January 1, 2002. The implementation of this standard  did not have any impact on the Company’s results of operations and financial  position.

In July 2002, the Financial    Accounting Standards Board issued SFAS No. 146, "Accounting  for Costs Associated with Exit or Disposal Activities". SFAS No. 146 addresses  financial accounting and reporting for costs associated with exit or disposal  activities and nullifies Emerging Issues Task Force Issue No. 94-3, "Liability  Recognition for Certain Employee Termination Benefits and Other Costs to Exit  an Activity (including Certain Costs Incurred in a Restructuring)." The  provisions of SFAS No. 146 are effective for exit or disposal activities initiated  after December 31, 2002. However, as encouraged in the statement, the Company  has early adopted SFAS No. 146 and has applied its respective provisions to  the exit activity undertaken in 2002 (described in Note 12). 

In November 2002, the    Financial  Accounting Standards Board issued FIN No. 45, "Guarantor's    Accounting and  Disclosure Requirements for Guarantees, Including Indirect    Guarantees of Indebtedness  of Others”, which elaborates on the disclosures to be made by a guarantor  in its interim and annual financial statements about its obligations under  certain  guarantees that it has issued. The Company has indemnification agreements with  three employees as of December 31,2002 for contingent payments which may be  required under provisions that exist in such employees' employment agreements  with prior employers. The maximum amount of this potential obligation is approximately  $3.0 million, however the Company believes the likelihood of payment of any   amounts under such indemnifications is remote.

In January 2003, the Financial    Accounting Standards Board issued EITF Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables”.    EITF 00-21 addresses, for arrangements with multiple deliverables, how the    arrangement  consideration should be measured, whether the arrangement should be divided  into separate units of accounting and how the arrangement consideration should  be allocated among the separate units of accounting. The guidance in EITF 00-21  is effective for revenue arrangements entered into in fiscal periods beginning  after June 15, 2003, and therefore does not have any impact on the 2002 consolidated  financial statements. The consensus in this EITF pronouncement may affect how  the Company recognizes revenue under future collaboration and technology transfer  arrangements since these often include multiple elements such as non-refundable  upfront fees, ongoing payments for specified levels of staffing for research  and milestone payments.

**2. CORPORATE PARTNER AGREEMENTS**

**AVENTIS**

 In December 2001, Neurogen    entered into a collaboration and license agreement with Aventis (the "Aventis Agreement")    pursuant to which Aventis made  an initial payment of $10 million and agreed, among other things, to fund a  specified level of resources for three years for Neurogen's program for the  discovery and research of CRF-1 receptor-based drugs for a broad range of applications,  including the therapeutic treatment of depression and anxiety disorders. Aventis  has the option to extend the discovery and research effort for up to an additional  two years or to terminate the collaboration prior to its scheduled conclusion  and transfer all rights to the collaborative program to Neurogen. As a result  of the option to extend, the Company is recognizing the initial payment ratably  over five years and is recognizing the funding for research by its scientists  as such work is performed. Revenue pertaining to such research amounted to  $4,276,000 and $176,000 during 2002 and 2001, respectively.

Neurogen is also eligible to receive milestone payments if certain compound  discovery, product development or regulatory objectives are achieved subject  to the collaboration. In return, Aventis received the exclusive worldwide rights  to develop, manufacture and market collaboration drugs that act through the  CRF-1 receptor, for all therapeutic indications for which the drugs may be  used. Aventis will pay Neurogen royalties based upon net sales levels, if any,  for collaboration products. Also under the agreement, Aventis is responsible  for funding the cost of development, including clinical trials, manufacturing  and marketing of collaboration products, if any. For the years ended December  31, 2002 and 2001, the Company recognized $6,276,000 and $291,000 in revenue,  respectively, under the Aventis Agreement.

**PFIZER**In June  of 1999, Neurogen and Pfizer entered into the Pfizer Technology Transfer Agreement.  Under the    terms of this agreement, Pfizer    agreed to pay Neurogen  up to a total of $27,000,000 over a three year period for the licensing and  transfer to Pfizer of certain of Neurogen's AIDDTM technologies for the  discovery of new drugs, along with the installation of an AIDDTM system.  Additional payments were also possible upon Pfizer's successful utilization  of this technology. Pfizer received a non-exclusive license to certain AIDDTM intellectual  property, and the right to employ this technology in its own drug development  programs. As of December 31, 2002, the company had received $29,000,000 in  license fees pursuant to the Pfizer Technology Transfer Agreement, which terminated  per schedule in June 2002, of which $9,449,000, $8,343,000 and $11,208,000  has been recognized as revenue in 2002, 2001 and 2000, respectively. The fees  recognized in 2002 include a $2,000,000 one-time payment to satisfy all obligations  from Pfizer’s use of the AIDDTM technology. 

**COLLABORATION COSTS**

While the Company does  not currently maintain a historical cost accounting system to accurately track  costs on an individual project basis, it does maintain a system to record the  level of staffing time spent on its research and development projects. Based  primarily on the amount of staffing time spent on collaboration projects obtained  from this system, the Company estimates the approximate aggregate amounts of  research and development costs incurred in connection with all of the Company’s  research collaborations were $4,460,000, $4,200,000 and $9,250,000 in 2002,  2001 and 2000, respectively. These collaborations generated $4,276,000, $3,056,000  and $9,205,000 of research and development revenues in the aggregate in 2002,  2001 and 2000, respectively.

**3. MARKETABLE SECURITIES**

 The following tables  summarize the Company's marketable securities (in thousands):

December 31, 2002

|                      | Amortized    Cost |        | Gross      Unrealized    Cost |        | Gross      Unrealized    Loss |        | Fair Value |
|---------------------------|-------------------|--------|-------------------------------|--------|-------------------------------|--------|------------|
|                      |                   |   |                               |   |                               |   |            |
| U.S. Government notes     | $26,812           |        | $390                          |        | $ -                           |        | $27,202    |
| Corporate notes and bonds | 39,491            |        | 475                           |        | (4)                           |        | 39,962     |
|                      |                   |        |                               |        |                               |        |            |
| Total                     | $66,303           |        | $865                          |        | $(4)                          |        | $67,164    |
|                      |                   |        |                               |        |                               |        |            |

December 31, 2001

|                      | Amortized        Cost |        | Gross        Unrealized        Cost |        | Gross        Unrealized        Loss |        | Fair Value |
|---------------------------|-----------------------|--------|-------------------------------------|--------|-------------------------------------|--------|------------|
|                      |                       |   |                                     |   |                                     |   |            |
| U.S. Government notes     | $22,322               |        | $466                                |        | $(9)                                |        | $22,779    |
| Corporate notes and bonds | 31,249                |        | 218                                 |        | (9)                                 |        | 31,458     |
|                      |                       |        |                                     |        |                                     |        |            |
| Total                     | $53,571               |        | $684                                |        | $(18)                               |        | $54,237    |
|                      |                       |        |                                     |        |                                     |        |            |

The following table summarizes    investment maturities at December 31, 2002(in thousands):

|                | Amortized Cost |        | Fair Value |
|---------------------|----------------|--------|------------|
|                |                |   |            |
| Less than one year  | $22,276        |        | $22,379    |
| Due in 1 to 4 years | 44,027         |        | 44,785     |
|                |                |        |            |
|                | $66,303        |        | $67,164    |
|                |                |   |            |

**4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES**

 Accounts payable andaccrued expenses at December 31 are summarized as follows (in thousands):

|                | 2002   |        | 2001   |
|---------------------|--------|--------|--------|
|                |        |   |        |
| Less than one year  | $2,080 |        | $2,211 |
| Due in 1 to 4 years | $1,467 |        | $1,384 |
|                |        |        |        |
|                | $3,547 |        | $3,595 |
|                |        |   |        |

**5. LOANS PAYABLE**

 On December 21, 2001,  Neurogen entered into a commercial term mortgage loan agreement collateralized  by the Company's facilities at 15 and 35 Northeast Industrial Road, Branford,  CT, whereby the lender provided gross proceeds of $17,500,000. The Company expects  to use these proceeds for general corporate purposes. The loan is repayable  in monthly principal installments of approximately $97,000 over 10 years plus  interest at a floating rate tied to the one month LIBOR rate. The effective  interest rate at December 31, 2002 was 3.9%. A final balloon payment of $5,931,000  is due and payable on the maturity date of December 21, 2011.

 Neurogen was required  to maintain $1,000,000 of the mortgage proceeds in a cash collateral account  as collateral for the loan until the outstanding principal balance reached $16,500,000.  Another $500,000 of the proceeds was held in another cash collateral account  until Neurogen completed specified, committed site work at the secured property.  These two conditions were met in 2002, enabling the $1,500,000 in total proceeds  to no longer be classified as restricted cash in current assets.

 In October of 1999, Neurogen  entered into a financing arrangement with Connecticut Innovations, Inc. (CII)  collateralized by the property at 45 Northeast Industrial Road, whereby CII  agreed to loan up to $5,000,000 to Neurogen for the purchase and development  of a new building to create additional laboratory space. CII advanced Neurogen  $1,912,280 for the purchase of the building in October 1999. The remainder of  the loan was advanced when renovation was substantially completed in July 2001.  The loan is repayable in monthly installments of approximately $46,500 over  15 years, bearing interest at an annual rate of 7.5%. Total interest payments  capitalized during the building construction approximated $111,000 in 2001 and  $155,000 in 2000. The loan with CII contains certain subjective acceleration  clauses, which upon occurrence of certain events, may cause amounts due under  the agreement to become immediately due and payable. The Company has no indication  that it is in default of any such clauses and therefore has classified its debt  based on the dates regular payments are due.

Scheduled maturities of total loans payable at December 31, 2002 are:

| (In thousands) |                     |
|----------------|--------------------------|
|                |
| 2003           | $   1,380 |
| 2004           | 1,396                    |
| 2005           | 1,414                    |
| 2006           | 1,433                    |
| 2007           | 1,454                    |
| Thereafter     | 13,953                   |
|           |                          |
|           | $21,030                  |
|           |                          |

In 1995, the Company entered into a ten year operating lease    agreement to lease 24,000 square feet of space at 15 Northeast Industrial    Road. The Company  had an option to purchase the building after the fifth year of the lease which  it exercised on January 11, 2001 for $2,437,500, thereby terminating the lease.  Unamortized leasehold improvement costs were capitalized into the cost basis  of  the building at time of purchase. Prior to the purchase, rent expenseapproximated $4,000 and $140,000 in 2001 and 2000, respectively.

**6. COMMON STOCK**

 On June 30, 2000, the  Company entered into a private placement agreement with certain institutional  investors, pursuant to which the Company issued 1,638,000 shares of its common  stock for net proceeds of $38,698,000. Such shares were registered in a Form  S-3 Registration Statement in July 2000.

**7. STOCK OPTIONSAND RESTRICTED STOCK**

 The Company has various stock incentive plans, under which    it has awarded incentive and non-qualified stock options and restricted stock.    Stock options  are primarily granted at fair market value at the date of grant, vest over  one  to five years and expire up to ten years after grant. Under all plans, there  were 6,375,352 shares of common stock reserved for future issuance (of which  5,304,913 are for options outstanding and 1,070,439 are for options available  for future grant) as of December 31, 2002.

**Options**

 The following table presents the combined activity of its  stock option plans for the years ended December 31, as follows:

|                               | 2002      |        | 2001                                             |        | 2000      |
|------------------------------------|-----------|--------|--------------------------------------------------|--------|-----------|
|                               |           |        |                                                  |        |           |
|                               | Options   |        | Weighted      Average      Exercise        Price |        | Options   |  | Weighted      Average      Exercise    Price |  | Options |  | Weighted      Average      Exercise    Price |
|                               |           |   |                                                  |   |           |   |  |   |  |   |  |
| Outstanding at January 1           | 4,599,818 |        | $19.13                                           |        | 3,702,588 |  | $19.49 |  | 3,940,844 |  | $14.91 |
| Granted                            | 916,250   |        | 6.09                                             |        | 1,199,290 |  | 16.85 |  | 755,540 |  | 33.22 |
| Exercised                          | (300)     |        | 6.50                                             |        | (181,376) |  | 8.02 |  | (901,377) |  | 11.18 |
| Canceled                           | (210,855) |        | 21.10                                            |        | (120,684) |  | 24.52 |  | (92,419) |  | 17.09 |
|                               |           |        |                                                  |        |           |  |  |  |  |  |  |
| Outstanding as of December 31      | 5,304,913 |        | $16.80                                           |        | 4,599,818 |  | $19.13 |  | 3,702,588 |  | $19.50 |
|                               |           |        |                                                  |        |           |  |  |  |  |  |  |
| Options exercisable at December 31 | 3,141,595 |        | $18.45                                           |        | 2,538,702 |  | $17.90 |  | 2,086,033 |  | $15.98 |

With respect to certain  remaining options of 31,250 shares granted on December 31, 1997, if the recipient  remains employed with the Company for a period of seven years from the date  of grant, the exercise price for any of such options which have not been exercised  at the end of the ten year term of such option, shall become zero and the options  will be exercised and the shares will be conveyed to the respective optionees.  The exercise price for any of such options exercised prior to the end of such  ten-year term shall be $13.50 per share, the market price of the common stock  on the date of grant. These options are subject to variable plan accounting  and the deferred compensation is being amortized over the seven year service  period required for these options to vest. The unamortized balance related to  this grant at December 31, 2002 was $32,000, which has been adjusted since 1997  for certain officers that terminated their employment. The Company recognized  stock compensation (benefit) expense of $(232,000), $57,000, and $356,000 for  2002, 2001, and 2000, respectively, relating to these options. The benefit in  2002 was due to a reversal of expense driven by a decline in the Company’s  stock price which reduced the value of these awards.

The Company recorded $0, $23,000  and $34,000 as compensation expense for grants made prior to shareholder approval  of the respective option plan and $45,000, $52,000 and $200,000 as expense for  option grants made to consultants in 2002, 2001 and 2000, respectively. The  expense recorded in 2002 related to a grant in January 2002 to a director of  the Company of 15,000 options to purchase common stock at the exercise price  of $14.30 for consulting services to be performed. In addition, $977,000 was  recorded as expense in 2001 for modifications to stock options made upon termination  of employment of two former officers. The modifications included acceleration  of vesting for one officer and extension of option expiration after termination  of employment for the other officer.

 The following table presents weighted average price and life  information about significant option groups outstanding at December 31, 2002:

| Range          of    Exercise Prices |        | Number    Outstanding |        | Weighted      Average Remaining      Contractual    Life (Yrs.) |        | Weighted      Average      Exercise    Price |        | Number    Exercisable |        | Weighted      Average      Exercise    Price |
|--------------------------------------|--------|-----------------------|--------|-----------------------------------------------------------------|--------|----------------------------------------------|--------|-----------------------|--------|----------------------------------------------|
|                                      |   |                       |   |                                                                 |   |                                              |   |                       |   |                                              |
| Less than $9.99                      |   | 1,223,626             |        | 5.9                                                             |        | $ 4.11                                       |        | 451,200               |        | $ 6.68                                       |
| $10.00-$19.99                        |   | 2,776,475             |        | 5.9                                                             |        | 16.62                                        |        | 1,738,226             |        | 16.42                                        |
| $20.00-$29.99                        |   | 733,432               |        | 3.9                                                             |        | 24.48                                        |        | 662,032               |        | 24.64                                        |
| $30.00-$39.99                        |   | 571,380               |        | 5.7                                                             |        | 34.97                                        |        | 290,137               |        | 34.81                                        |
|                                 |   |                       |        |                                                                 |        |                                              |        |                       |        |                                              |
|                                 |   | 5,304,913             |        |                                                                 |        |                                              |        | 3,141,595             |        |                                              |
|                                 |   |                       |        |                                                                 |        |                                              |        |                       |        |                                              |

The estimated fair value    at the date of grant for options granted in 2002, 2001 and 2000 was $4.14,  $12.81 and $21.87, respectively, using the Black-Scholes model with the following  weighted average assumptions:

|                         | 2002 |        | 2001 |        | 2000 |
|------------------------------|------|--------|------|--------|------|
|                         |      |   |      |   |      |
| Expected life                | 5    |   | 5    |   | 5    |
| Interest rate                | 3.0% |   | 4.4% |   | 5.2% |
| Volatility                   | 84%  |   | 80%  |   | 77%  |
| Expected dividend      yield | 0%   |   | 0%   |   | 0%   |

**Restricted Stock**

In 1998, 137,625 shares  of restricted stock were granted to certain employees. The grant stipulated  that if the stock price closed at or above $45.00 per share within four years  from the date of such grant the restriction would be removed and the stock would  fully vest to the employee with no restriction. If the Company's stock price  did not reach $45.00 the shares would be forfeited. On February 18, 2000, Neurogen  stock closed the trading day at $47.25, thereby removing the restriction and  vesting the stock immediately. A charge to income of $6,503,000 was recorded  in the first quarter of 2000.

 In September 2001, 150,000 shares of restricted stock were granted to certain  officers. Of the total shares granted, 10,000 shares vested immediately, 70,000  shares vest in four years and 70,000 shares vest in five years. In 2002, 145,000  shares of restricted stock were granted to certain officers of which 72,500  shares vest in four years and 72,500 shares vest in five years. In connection  with the grants of restricted stock in 2001 and 2002, the Company recorded  deferred compensation totaling $4,320,150. The portion of the compensation  associated with the shares that vested immediately was recognized as expense  while the remaining deferred compensation is being amortized ratably over the  five year service period. A total of $802,000 and $392,000 was recorded as  compensation expense in 2002 and 2001, respectively. 

**8. INCOME TAXES**

 The difference between    the Company's "expected" tax    benefit, as computed by applying the U.S. federal corporate tax rate of 34%    to income (loss)  before provision for income taxes, and actual tax is reconciled below (in thousands):

|                                     | 2002               |        | 2001     |        | 2000                                                         |
|------------------------------------------|--------------------|--------|----------|--------|--------------------------------------------------------------|
|                                     |                    |   |          |   |                                                              |
| Expected tax benefit at 34%              | $(8,153)           |        | $(9,035) |        | $(5,260)                                                     |
| State tax benefit net of federal benefit | (1,791)            |        | (3,013)  |        | (766)                                                        |
| R & D credit                         | (1,010)            |        | (2,408)  |        | (1,613)                                                      |
| Other                                    | 5                  |        | 130      |        | 15                                                           |
| Change in valuation allowance            | 10,661             |        | 13,115   |        | 7,624                                                        |
|                                     |                    |        |          |        |                                                              |
| Tax benefit                              | $  (288) |        | $(1,211) |        | $             - |
|                                     |                    |        |          |        |                                                              |

The tax effect of temporary differences that give rise to    significant portions of the deferred tax assets and deferred tax liabilities    at December    31,2002 and 2001 are presented below (in thousands):

|                                               | 2002                                                                 |        | 2001                                                                 |
|----------------------------------------------------|----------------------------------------------------------------------|--------|----------------------------------------------------------------------|
|                                               |                                                                 |   |                                                                 |
| DEFERRED TAX ASSETS:                               |                                                                      |   |                                                                      |
| Federal tax operating    loss carryforwards        | $38,250                                                              |        | $28,418                                                              |
| State tax operating    loss carryforwards          | 4,899                                                                |        | 3,629                                                                |
| Research & development    credit carryforwards | 10,051                                                               |        | 8,419                                                                |
| Alternative minimum    tax credit carryforwards    | 362                                                                  |        | 362                                                                  |
| Deferred revenue                                   | 3,071                                                                |        | 5,388                                                                |
| Deferred compensation                              | 940                                                                  |        | 700                                                                  |
| Other                                              | 311                                                                  |        | 402                                                                  |
|                                               |                                                                      |        |                                                                      |
| Gross deferred asset                               | 57,884                                                               |        | 47,318                                                               |
| Valuation allowance                                | (56,996)                                                             |        | (46,335)                                                             |
|                                               |                                                                      |        |                                                                      |
| Net deferred asset                                 | 888                                                                  |        | 983                                                                  |
| DEFERRED TAX LIABILITY:                            |                                                                      |        |                                                                      |
| Depreciation                                       | (888)                                                                |        | (983)                                                                |
|                                               |                                                                      |        |                                                                      |
| Net asset/liability                                | $           - |        | $           - |
|                                               |                                                                      |        |                                                                      |

The valuation allowance increased by $10,661,000 during 2002, which is attributable  to the current year tax provision and is due primarily to the increase in net  operating loss and research and development tax credit carryforwards. The Company  has provided a valuation allowance for the full amount of the net deferred  tax asset, since management has not determined that these future benefits willmore likely than not be realized as of December 31, 2002.

 Any subsequently recognized tax benefits relating to the valuation  allowance for deferred tax assets as of December 31, 2002 and 2001 would be  allocated as follows (in thousands):

|                       |   | 2002    |        | 2001    |
|----------------------------|--------|---------|--------|---------|
|                       |   |         |   |         |
| Income tax provision       |   | $46,016 |        | $35,005 |
| Additional paid-in-capital |   | 10,980  |        | 11,330  |
|                       |   |         |        |         |
|                       |   | $56,996 |        | $46,335 |
|                       |   |         |   |         |

As of December 31, 2002,    the Company had approximately $112,500,000 and $7,091,000 of net operating    loss and research and development credit  carryforwards, respectively, available for federal income tax purposes, which  expire in the years 2004 through 2022. The Company also had approximately  $98,975,000 and $4,485,000 of Connecticut state tax net operating loss and  research and development credit carryforwards, respectively, which expire in  the  years 2003 through 2022. Because of "change in ownership" provisions  of the Tax  Reform Act of 1986, the Company's utilization of its net operating loss and  research and development credit carryforwards may be subject to an annuallimitation in future periods.

 For the years ended December 31, 2002 and 2001, the Company recorded Connecticut  income tax benefits of $638,000 and $1,976,000, respectively, as the result  of Connecticut tax law provisions which allowed certain companies to obtain  cash refunds at an exchange rate of 65% of their research and development credits,  in exchange for foregoing the carryfoward of these credits into future tax  years. The Company filed claims to exchange their 2001 and 2000 research and  development credits for cash and as a result recorded benefits of $288,000  and $1,211,000 in the Statement of Operations for 2002 and 2001, respectively.  Benefits of $350,000 and $765,000 were also recorded to additional paid-in  capital in 2002 and 2001, respectively, for research and development qualifying  expenditures resulting from stock option exercises.

**9. COMMITMENTS AND CONTINGENCIES**

 The Company has granted    Pfizer certain registration rights with respect to 2,846,000 shares of common    stock and limited preemptive rights    with respect    to  future public offerings pursuant to stock purchase agreements entered into  in  connection with the Pfizer Agreements. The Company has granted certain  registration rights to American Home Products with respect to 37,442 shares  of  common stock purchased in connection with entering into a licensing agreement  in  1996.

**10. BENEFIT PLANS**

 The Company maintains a 401(k) plan under which all of the    Company's employees are eligible to participate. Each year the Company may,    but is not  required to, make a discretionary matching contribution to the plan. The Company  currently matches 100% of employee contributions of up to 6% of an employee's  salary. For the fiscal years 2002, 2001 and 2000, one third of the match was  made in cash and two thirds of the match was made in Company stock. Contributions  to the 401(k) plan totaled approximately $812,000, $772,000 and $600,000 in  2002, 2001 and 2000, respectively.

 The Company has made loans to certain officers and employees    subject to various compensation agreements. Certain loans will be forgiven    and recognized  as compensation expense ratably over defined service periods for each employee  ranging from three to seven years. The amount of loans outstanding at December  31, 2002 and 2001 was $593,000 and $481,000 of which $174,000 and $110,000  was short-term, respectively.

**11.	RELATED PARTIES**

 As of December 31, 2002,    Pfizer held 2,846,000 shares of common stock in the Company, which represented    16% of total outstanding shares. Pfizer has been a partner  with Neurogen in several collaborative research agreements since 1992 and one  technology transfer agreement since 1999.

**12. REDUCTION IN FORCE******

In October 2002, the Company  announced a reduction in force as part of its Operational Excellence program  to further enhance the efficiency of its drug discovery platform, reduce costs  and to more closely align the Company’s investment of resources with long-term  business goals. As part of this plan, Neurogen reorganized certain departments  and eliminated 24 employee positions inclusive of both administrative and research  functions, representing approximately 10% of its total workforce. The reduction  in force was communicated to respective employees and severance agreements were  executed in October 2002. Severance payments are expected to be completed by  March 2003. The total amount of costs incurred was $350,000, which includes  $303,000 in one-time termination benefits and $47,000 in associated costs, which  is included in Total Operating Expenses ($252,000 in Other Research and Development  and $98,000 in Other General and Administrative expenses) in the 2002 Statement  of Operations. 

The following table summarizes the activity recorded in the employee termination  cost accrual during 2002 (in thousands):

|                               |   | Year          Ended December 31, 2002                                                        |
|------------------------------------|--------|----------------------------------------------------------------------------------------------|
|                               |   |                                                                                              |
|                               |   | One-Time    Benefits                                                                         |  | Associated    Costs |  | Total |
|                               |   |                                                                                              |
| Accrual balance, beginning of year |   | $               - |   | $               - |   | $               - |
| Estimated termination costs        |   | 303                                                                                          |   | 47 |   | 350 |
| Cash payments on costs             |   | (280)                                                                                        |   | (47) |   | (327) |
|                               |   |                                                                                              |
| Accrual balance, end of year       |   | $            23                  |   | $              - |   | $            23 |
|                               |   |                                                                                              |

**13. SUPPLEMENTAL CASH FLOW INFORMATION**

 The Company made interest payments of approximately $1,095,000 in 2002, $204,000  in 2001 and $155,000 in 2000. The Company made no income tax payments in 2002,  2001 and 2000. In 2002, Neurogen received payments from the State of Connecticut  of $2,248,000 and $366,000 for the exchange of 2000 and 2001 research and development  credits, respectively (see Note 8).

**14. QUARTERLY FINANCIAL DATA(UNAUDITED)  (in thousands except per share data)**

|                                 | First    Quarter |        | Second    Quarter |        | Third    Quarter |        | Fourth    Quarter |
|--------------------------------------|------------------|--------|-------------------|--------|------------------|--------|-------------------|
|                                 |                  |   |                   |   |                  |   |                   |
| 2002                                 |             |   |              |   |             |   |              |
|                                      |             |   |              |   |             |   |              |
| Total revenue                        | $2,638           |   | $8,270            |   | $1,509           |   | $3,308            |
| Total expenses                       | 11,565           |   | 11,685            |   | 10,003           |   | 8,129             |
| Other income, net                    | 456              |   | 537               |   | 335              |   | 349               |
| Income tax benefit                   | (73)             |   | -                 |   | 361              |   | -                 |
| Net loss                             | (8,544)          |   | (2,878)           |   | (7,798)          |   | (4,472)           |
| Basic and diluted earnings per share | (0.49)           |   | (0.16)            |   | (0.44)           |   | (0.25)            |
|                                 |             |   |              |   |             |   |              |
| 2001                                 |             |   |              |   |             |   |              |
|                                      |             |   |              |   |             |   |              |
| Total revenue                        | $1,970           |   | $3,215            |   | $3,106           |   | $3,223            |
| Total expenses                       | 11,403           |   | 10,146            |   | 10,754           |   | 10,274            |
| Other income, net                    | 1,509            |   | 1,242             |   | 1,040            |   | 699               |
| Income tax benefit                   | -                |   | -                 |   | 1,211            |   | -                 |
| Net loss                             | (7,924)          |   | (5,689)           |   | (5,397)          |   | (6,352)           |
| Basic and diluted earningsper share  | (0.46)           |   | (0.33)            |   | (0.31)           |   | (0.36)            |

**REPORT OF INDEPENDENT ACCOUNTANTS**

To the Board of Directors  and Stockholders of Neurogen Corporation:

In our opinion, the accompanying  consolidated balance sheets and the related consolidated statements of operations,  of stockholders' equity and of cash flows present fairly, in all material respects,  the financial position of Neurogen Corporation and its subsidiary at December  31, 2002 and 2001, and the results of their operations and their cash flows  for each of the three years in the period ended December 31, 2002 in conformity  with accounting principles generally accepted in the United States of America.  These financial statements are the responsibility of the Company's management;  our responsibility is to express an opinion on these financial statements based  on our audits. We conducted our audits of these statements in accordance with  auditing standards generally accepted in the United States of America, which  require that we plan and perform the audit to obtain reasonable assurance about  whether the financial statements are free of material misstatement. An audit  includes examining, on a test basis, evidence supporting the amounts and disclosures  in the financial statements, assessing the accounting principles used and significant  estimates made by management, and evaluating the overall financial statement  presentation. We believe that our audits provide a reasonable basis for our  opinion.

As discussed in Note 1 to the financial statements, the Company  changed its method of accounting for revenue recognition in 2000.

PRICEWATERHOUSECOOPERS LLP

  Hartford, Connecticut  February 14, 2003

**ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING  AND FINANCIAL DISCLOSURE**

 None.

**PART III**

**ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT**

 For information relating    to directors and executive officers of the Company, reference is made to    the discussion under the captions "Election  of  Directors", "Executive Officers" and "Section 16 Beneficial  Reporting Compliance" in the Company's Proxy Statement to be delivered  to the stockholders  in connection with the Annual Meeting of Stockholders to be held on May 19,  2003, which information is incorporated herein by reference.

**ITEM 11. EXECUTIVE COMPENSATION**

 For information relating    to executive compensation, reference is made to the discussion under the    captions "Director Compensation", "Compensation  Committee Interlocks and Insider Participation", "Officer Compensation", "Terms  and Conditions of Certain Employment and Severance Agreements", "Report  of the  Compensation Committee of the Board of Directors" and "Performance  Graph" in the  Company's Proxy Statement to be delivered to the stockholders in connection  with the Annual Meeting of Stockholders to be held on May 19, 2003, which information  is incorporated herein by reference.

**ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**

 For information relating    to the security ownership of certain beneficial owners and management, reference    is made to the discussion under    the caption"  Principal Stockholders" in the Company's Proxy Statement to be delivered  to the  stockholders in connection with the Annual Meeting of Stockholders to be held  on  May 19, 2003, which information is incorporated herein by reference.

**ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

 For information relating    to certain relationships and related transactions, reference is made to the    discussion under the caption "Certain Relationships  and  Related Transactions" in the Company's Proxy Statement to be delivered  to the  stockholders in connection with the Annual Meeting of Stockholders to be held  on  May 19, 2003, which information is incorporated herein by reference.

**ITEM 14.	CONTROLS AND PROCEDURES**

During the 90-day period prior to the filing date of this report, management,  including the Company's Chief Executive Officer and Chief Business Officer,  evaluated the effectiveness of the design and operation of the Company's disclosure  controls and procedures. Based upon, and as of the date of that evaluation,  the Chief Executive Officer and Chief Business Officer concluded that the disclosure  controls and procedures were effective, in all material respects, to ensure  that information required to be disclosed in the reports the Company files  and submits under the Exchange Act is recorded, processed, summarized and reported  as and when required. 

There have been no significant changes in the Company's internal controls  or in other factors which could significantly affect internal controls subsequent  to the date the Company carried out its evaluation. 

**PART IV**

**ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K**

(a)(1) Financial Statements

> 
 Reference is made to      the Index to Financial Statements under Item 8 in Part II hereof, where    these documents are listed.

 (2) Financial Statement Schedule

> 
Note: Schedules are omitted as not applicable or not required or on the basis      that the information is included in the financial statements or notes thereto.

 (3) Exhibits

> 
See Exhibit Index.

  (b) Reports on Form 8-K

> 
The Company filed a current report on Form 8-K on January 11, 2002 regarding      a commercial term mortgage loan agreement entered into by the Company on December      21, 2001, whereby the lender provided total gross proceeds of $17.5 million.      The loan is secured by the Company's facilities at 15 and 35 Northeast Industrial      Road, Branford, CT.

The Company filed a      current report on Form 8-K on October 9, 2002 to announce a reorganization      of certain departments and an elimination      of 24 staff positions,    which represented approximately 10% of its total workforce. The move was      part of Neurogen’s ongoing Operational Excellence program.

The Company filed a      current report on Form 8-K on November 12, 2002 to announce clinical results      from two of its drug development programs.      From its Alzheimer’s    disease program, the lead candidate NGD 97-1 did not show a therapeutic effect    in the Phase II study conducted by the Company’s collaborative partner,    Pfizer Inc. From its inflammatory disease program, the Company’s proprietary    C5a drug NGD 2000-1 was safe and well tolerated in single and multiple-ascending    dose Phase I studies. 

**SIGNATURES**

 Pursuant to the requirements of Section 13 or 15(d) of the    Securities Exchange Act of 1934, the registrant has duly caused this report    to be signed    on  its behalf by the undersigned, thereunto duly authorized.

 NEUROGEN CORPORATION

 /S/ STEPHEN R. DAVIS  By:______________________________  Stephen R. Davis  Executive Vice President and   Chief Business Officer

  Date: March 28, 2003

 Pursuant to the requirements of the Securities Exchange Act    of 1934, this report has been signed below by the following persons on behalf    of the  registrant and in the capacities and on the dates indicated:

| SIGNATURE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         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|        *    Chairman of the Board and Director March 28, 2003Frank C. Carlucci      /S/ WILLIAM H. KOSTER                 William H. Koster President, Chief Executive        Officer and Director (Principal ExecutiveOfficer) March 28, 2003     /S/ STEPHEN R. DAVIS    Executive Vice President, ChiefBusiness Officer and Director(Principal Financial and Accounting Officer) March 28, 2003Stephen R. Davis         *    Director March 28,        2003John Simon          Director March 28, 2003Robert          N. Butler, M.D.      *    Director March 28, 2003Suzanne          H. Woolsey      *    Director March 28, 2003Barry M. Bloom      *    Director March 28, 2003Mark Novitch      *    Director March 28, 2003Julian C. Baker      *    Director March 28, 2003Felix J. Baker      *    DirectorMarch 28,        2003Craig Saxton   
  /S/ WILLIAM H. KOSTER and STEPHEN R. DAVIS  *By:_________________________________________________________  William H. Koster and Stephen R. Davis, Attorneys-in-Fact

**CERTIFICATIONS**

  I, William H. Koster, certify that: 
-      I have reviewed this annual report on Form 10-K of Neurogen Corporation; 
- Based on my knowledge, this annual report does not contain      any untrue statement of a material fact or omit to state a material fact      necessary to make the statements    made, in light of the circumstances under which such statements were made,    not misleading with respect to the period covered by this annual report;
-  Based on my knowledge, the financial statements, and other      financial information included in this annual report, fairly present in      all material respects the    financial condition, results of operations and cash flows of the registrant    as of, and for, the periods presented in this annual report; 
-  The registrant's other certifying officers and I are responsible      for establishing and maintaining disclosure controls and procedures (as      defined in Exchange    Act Rules 13a-14 and 15d-14) for the registrant and we have:

a. designed such disclosure controls and procedures to ensure      that material information relating to the registrant, including its consolidated      subsidiaries,    is made known to us by others within those entities, particularly during      the period in which this annual report is being prepared; 

b. evaluated the effectiveness      of the registrant's disclosure controls and procedures as of a date within      90 days prior to the filing      date of this annual    report (the "Evaluation Date"); and 

c. presented in this annual report our conclusions about      the effectiveness of the disclosure controls and procedures based on our      evaluation as of the      Evaluation Date;

- The registrant's other certifying officers and I have disclosed,        based on our most recent evaluation, to the registrant's auditors and      the audit committee      of registrant's board of directors (or persons fulfilling the equivalent      function):

a. all significant deficiencies in the design or operation      of internal controls which could adversely affect the registrant's ability      to record, process, summarize      and report financial data and have identified for the registrant's auditors      any material weaknesses in internal controls; and

b. any fraud, whether or not material, that involves management      or other employees who have a significant role in the registrant's internal      controls; and

The registrant's other certifying officers and I have indicated    in this annual report whether or not there were significant changes in internal    controls or in other factors that could significantly affect internal controls subsequent  to the date of our most recent evaluation, including any corrective actions  with regard to significant deficiencies and material weaknesses.

  By: /s/ William H. Koster   --------------------------  William H. Koster   President and  Chief Executive Officer   Date: March 28, 2003 

I, Stephen R. Davis, certify    that: 
-      I have reviewed this annual report on Form 10-K of Neurogen Corporation; 
- Based on my knowledge, this annual report does not contain      any untrue statement of a material fact or omit to state a material fact      necessary to make the statements    made, in light of the circumstances under which such statements were made,    not misleading with respect to the period covered by this annual report;
-  Based on my knowledge, the financial statements, and other      financial information included in this annual report, fairly present in      all material respects the    financial condition, results of operations and cash flows of the registrant    as of, and for, the periods presented in this annual report; 
-  The registrant's other certifying officers and I are responsible      for establishing and maintaining disclosure controls and procedures (as      defined in Exchange    Act Rules 13a-14 and 15d-14) for the registrant and we have:

a. designed such disclosure controls and procedures to ensure      that material information relating to the registrant, including its consolidated      subsidiaries,    is made known to us by others within those entities, particularly during      the period in which this annual report is being prepared; 

b. evaluated the effectiveness      of the registrant's disclosure controls and procedures as of a date within      90 days prior to the filing      date of this annual    report (the "Evaluation Date"); and 

c. presented in this annual report our conclusions about      the effectiveness of the disclosure controls and procedures based on our      evaluation as of the      Evaluation Date;

- The registrant's other certifying officers and I have disclosed,        based on our most recent evaluation, to the registrant's auditors and      the audit committee      of registrant's board of directors (or persons fulfilling the equivalent      function):

a. all significant deficiencies in the design or operation      of internal controls which could adversely affect the registrant's ability      to record, process, summarize      and report financial data and have identified for the registrant's auditors      any material weaknesses in internal controls; and

b. any fraud, whether or not material, that involves management      or other employees who have a significant role in the registrant's internal      controls; and

The registrant's other certifying officers and I have indicated    in this annual report whether or not there were significant changes in internal    controls or in other factors that could significantly affect internal controls subsequent  to the date of our most recent evaluation, including any corrective actions  with regard to significant deficiencies and material weaknesses.

By: /s/ Stephen R. Davis   --------------------------  Stephen R. Davis   Executive Vice President and  Chief Business Officer   Date: March 28, 2003 
  EXHIBITNUMBERDESCRIPTION3.1 - Restated Certificate of Incorporation, filed June 17,        1994(incorporated by reference to Exhibit 4.1 to Registration StatementNo. 33-81268 on form S-8).3.2 - By-Laws, as amended (incorporated by reference to Exhibit        3.6 to theCompany's Form 10-K for the fiscal year ended December 31, 1993).10.1 -Neurogen Corporation Stock Option Plan, as amended (incorporated        byreference to Exhibit 10.1 to the Company's Form 10-K for the fiscalyear ended December 31, 1991).10.2 - Form of Stock Option Agreement currently used in connection        with thegrant of options under Neurogen Corporation Stock Option Plan(incorporated by reference to Exhibit 10.2 to the Company's Form 10-Kfor the fiscal year ended December 31, 1992).10.3 - Neurogen Corporation 1993 Omnibus Incentive Plan, as amended(incorporated by reference to Exhibit 10.3 to the Company's Form 10-Kfor the fiscal year ended December 31, 1993).10.4 -Form of Stock Option Agreement currently used in connection        with thegrant of options under Neurogen Corporation 1993 Omnibus IncentivePlan (incorporated by reference to Exhibit 10.4 to the Company's Form10-K for the fiscal year ended December 31, 1993).10.5 - Neurogen Corporation 1993 Non-Employee Directors Stock        Option Program(incorporated by reference to Exhibit 10.5 to the Company's Form 10-Kfor the fiscal year ended December 31, 1993).10.6 - Form of Stock Option Agreement currently used in connection        with thegrant of options under Neurogen Corporation 1993 Non-EmployeeDirectors Stock Option Program (incorporated by reference to Exhibit10.6 to the Company's Form 10-K for the fiscal year ended December 31,1993).10.7 - Employment Contract between the Company and Harry H. Penner,        Jr.,dated as of October 12, 1993 (incorporated by reference to Exhibit10.7 to the Company's Form 10-K for the fiscal year ended December 31,1993).10.8 -Employment Contract between the Company and John F. Tallman,        dated asof December 1, 1993 (incorporated by reference to Exhibit 10.25 to theCompany's Form 10-Q for the quarterly period ended September 30,1994).10.9 -Form of Proprietary Information and Inventions Agreement(incorporatedby reference to Exhibit 10.31 to Registration Statement No. 33-29709on Form S-1).10.10 -Collaborative Research Agreement and License and Royalty        Agreementbetween the Company and Pfizer Inc, dated as of January 1, 1992(CONFIDENTIAL TREATMENT REQUESTED) (incorporated by reference toExhibit 10.35 to the Company's Form 10-K for the fiscal year endedDecember 31, 1991).10.11 - Letter Agreement between the Company and Barry M. Bloom,        dated January12, 1994 (incorporated by reference to Exhibit 10.25 to the Company'sForm 10-K for the fiscal year ended December 31, 1993).10.12 - Letter Agreement between the Company and Robert H. Roth,        dated April14, 1994 (incorporated by reference to Exhibit 10.26 to the Company'sForm 10-K for the fiscal year ended December 31, 1994).10.13 -Collaborative Research Agreement and License and Royalty        Agreementbetween the Company and Pfizer Inc, dated as of July 1, 1994(CONFIDENTIAL TREATMENT REQUESTED) (incorporated by reference ofExhibit 10.1 to the Company's Form 10-Q for the quarterly period endedJune 30, 1994).10.14 -Stock Purchase Agreement between the Company and Pfizer        dated as ofJuly 1, 1994 (incorporated by reference to Exhibit 10.2 to theCompany's Form 10-Q for the quarterly period ended June 30, 1994).10.15 - Collaboration and License Agreement and Screening Agreement        betweenthe Company and Schering-Plough Corporation (CONFIDENTIAL TREATMENTREQUESTED) (incorporated by reference to Exhibit 10.1 to the Company'sForm 8-K dated July 28, 1995).10.16 -Lease Agreement between the Company and Commercial Building        Associatesdated as of August 30, 1995 (incorporated by reference to Exhibit10.27 to the Company's Form 10-Q for the quarterly period endedSeptember 30, 1995).10.17 - Collaborative Research Agreement between the Company and        Pfizer datedas of November 1, 1995 (CONFIDENTIAL TREATMENT REQUESTED)(incorporated by reference to Exhibit 10.1 of the Company's Form 8-Kdated November 1, 1995).10.18 -Development and Commercialization Agreement between the        Company andPfizer dated as of November 1, 1995 (CONFIDENTIAL TREATMENT REQUESTED)(incorporated by reference to Exhibit 10.2 of the Company's Form 8-Kdated November 1, 1995).10.19 - Stock Purchase Agreement between the Company and Pfizer        dated as ofNovember 1, 1995 (incorporated by reference to Exhibit 10.3 ofthe Company's Form 8-K dated November 1, 1995).10.20 -Stock Purchase Agreement dated as of November 25, 1996        betweenAmerican Home Products Corporation, acting through its Wyeth-AyerstLaboratories Division, and Neurogen Corporation (CONFIDENTIALTREATMENT REQUESTED) (incorporated by reference to Exhibit 10.1 ofthe Company's Form 8-K dated March 31, 1997).10.21 -Technology agreement between the Company and Pfizer Inc,        dated as ofJune 15, 1999 (CONFIDENTIAL TREATMENT REQUEST) (Incorporated byreference to Exhibit 10.27 to the Company's Form 10-Q for thequarterly period ended June 30, 1999).10.22 -Employment Contract between the Company and Alan J. Hutchison,        datedas of December 1, 1997 (incorporated by reference to Exhibit 10.28to the Company's Form 10-K for the fiscal year ended December 31,1999).10.23 - Employment Contract between the Company and Stephen R.        Davis, datedas of December 1, 1997 (incorporated by reference to Exhibit 10.29to the Company's Form 10-K for the fiscal year ended December 31,1999).10.24 - Employment Contract between the Company and Kenneth R.        Shaw, datedas of December 1, 1999 (incorporated by reference to Exhibit 10.30to the Company's Form 10-K for the fiscal year ended December 31,1999).10.25 - Neurogen Corporation 2000 Non-Employee Directors Stock        Option Program(incorporated by reference to Exhibit 10.31 to the Company's Form10-Q for the quarterly period ended June 30, 2000).10.26 - Form of the Non-Qualified Stock Option Agreement currently        used inconnection with the grant of options under the Neurogen Corporation2000 Non-Employee Directors Stock Option Program (incorporated byreference to Exhibit 10.32 to the Company's Form 10-Q for thequarterly period ended June 30,2000).10.27 -Registration Rights Agreement dated as of June 26, 2000        between theCompany and the Purchasers listed on Exhibit A thereto (incorporatedby reference to Exhibit 10.33 to the Company's Form 10-Q for thequarterly period ended June 30, 2000).10.28 -Severance Agreement between the Company and John F. Tallman,        dated asof January 15, 2001 (incorporated by reference to Exhibit 10.28 to theCompany's Form 10-Q for the quarterly period ended March 31, 2001).10.29 -Amended and Restated Neurogen Corporation 2001 Stock Option        Plan, asamended and restated effective September 4, 2001 (incorporated byreference to Exhibit 10.29 to the Company's Form 10-Q for thequarterly period ended September 30, 2001).10.30 -Form of Incentive Stock Option Agreement currently used        in connectionwith the grant of options under the Amended and Restated NeurogenCorporation 2001 Stock Option Plan (incorporated by reference toExhibit 10.30 to the Company's Form 10-Q for the quarterly periodended September 30, 2001).10.31 - Form of the Non-Qualified Stock Option Agreement currently        used inconnection with the grant of options under the Amended and RestatedNeurogen Corporation 2001 Stock Option Plan (incorporated by referenceto Exhibit 10.31 to the Company's Form 10-Q for the quarterly periodended September 30, 2001).10.32 -Form of Neurogen Special Committee Stock Option Plan (incorporated        byreference to Exhibit 10.32 to the Company's Form 10-Q for thequarterly period ended September 30, 2001).10.33 -Employment Agreement between the Company and William H.        Koster, datedas of September 4, 2001 (incorporated by reference to Exhibit 10.33 tothe Company's Form 10-Q for the quarterly period ended September 30,2001).10.34 -Severance Agreement between the Company and Harry H. Penner,        Jr.,dated as of September 7, 2001 (incorporated by reference to Exhibit10.34 to the Company's Form 10-Q for the quarterly period endedSeptember 30, 2001).10.35 -Collaboration and        License Agreement dated as of December 11, 2001between the Company and Aventis Pharmaceuticals Inc. (CONFIDENTIALTREATMENT REQUESTED) (incorporated by reference to Exhibit 10.35 to the Company’sForm 10-K/A2 for the period ended December 31, 2001).10.36 - Modification Agreement        dated as of December 1, 2000 between NeurogenProperties LLC and Connecticut Innovations, Incorporated (incorporated by referenceto Exhibit 10.36 to the Company’s Form 10-KA/3 for the period ended December31, 2001).10.37 -Construction Loan        Agreement dated as of October 22, 1999 betweenNeurogen Properties LLC and Connecticut Innovations, Incorporated (incorporatedby reference to Exhibit 10.37 to the Company’s Form 10-KA/3 for the periodended December 31, 2001).10.38 -Commercial Term Note        dated as of December 21, 2001 held by theCompany and payable to Webster Bank (incorporated by reference to Exhibit 10.38to the Company’s Form 10-KA/3 for the period ended December 31, 2001).10.39 -Commercial Loan Agreement        dated as of December 21, 2001 betweenWebster Bank and the Company. (incorporated by reference to Exhibit 10.39 tothe Company’s Form 10-KA/3 for the period ended December 31, 2001).10.40 - Employment Agreement        between the Company and Edmund P. Harrigan, dated as of May 13, 2002        (incorporated by reference to Exhibit        10.1 to the Company’s Form 10-Q for the quarterly period ended    June 30, 2002).10.41 -Form of Proprietary        Information and Inventions Agreement (incorporated by reference to Exhibit        10.2 to the Company’s Form    10-Q for the quarterly period ended June 30, 2002).10.42 -Amendments to the        Neurogen Corporation Non-Employee Directors Stock Option Program (incorporated        by reference to Exhibit 10.1 to the        Company’s Form 10-Q for the quarterly period ended September 30,    2002).21.1 -Subsidiary of the registrant(incorporated by reference        to Exhibit 21.1 to the Company's Form 10-K for the fiscal year ended    December 31, 1999).23.1 -Consents of PricewaterhouseCoopers        LLP, Independent Accountants.24.1 -Powers of Attorney of Frank C. Carlucci, John Simon, Robert        N. Butler, Barry M. Bloom, Suzanne H. Woolsey, Mark Novitch, Julian C.    Baker, Felix J. Baker and Craig Saxton.99.1 - Certification of William H. Koster pursuant to 18 U.S.C.        Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley    Act of 2002.99.2 - Certification of Stephen R. Davis pursuant to 18 U.S.C.        Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley    Act of 2002.
**EXHIBIT 23.1**

**Consent of Independent Accountants**

 We hereby consent to the  incorporation by reference in the Registration Statements on Form S-8 (Nos.  333-07957, 333-98307, 333-75215, 333-46324, 333-98309, 333-73586 and 333-73576)  of Neurogen Corporation of our report dated February 14, 2003 relating to the  consolidated financial statements, which appear in this Form 10-K.

PRICEWATERHOUSECOOPERS LLP

Hartford, Connecticut  March 28, 2003

**EXHIBIT 23.1**

**Consent  of Independent Accountants**

 We hereby consent to the  incorporation by reference in the Registration Statement on Form S-3 (No. 333-98237)  of Neurogen Corporation of our report dated February 14, 2003 relating to the  consolidated financial statements, which appear in this Form 10-K.

  PRICEWATERHOUSECOOPERS LLP

Hartford, Connecticut  March 28, 2003

**EXHIBIT 24.1**

**POWER OF ATTORNEY**

  KNOW ALL YE PERSONS BY THESE PRESENTS, that the undersigned does hereby  make, constitute and appoint William H. Koster and Stephen R. Davis, each his  attorney-in-fact and agent with full power of substitution and resubstitution  for him and in his name, place and stead, in any and all capacities, to execute  for him and on his behalf an Annual Report pursuant to Section 13 of the Securities  and Exchange Act of 1934, as amended, on Form 10-K relating to the fiscal year  ended December 31, 2002, of Neurogen Corporation (the "Company"),  and any and all amendments to the foregoing Annual Report on Form 10-K, which  amendments may make such changes in the Annual Report on Form 10-K as such  attorney-in-fact deems appropriate, and any other documents and instruments  incidental thereto, and to file the same, with all exhibits thereto and all  documents in connection therewith, with the Securities and Exchange Commission  and the National Association of Securities Dealers, Inc., granting unto said  attorney-in-fact and agent, full power and authority to do and perform each  and every act and thing requisite and necessary to be done in and about the  premises, as fully to all intents and purposes as the undersigned might or  could do in person, hereby ratifying and confirming all that said attorney-in-fact  and agent, or his substitute or substitutes, may lawfully do or cause to be  done by virtue hereof.

 IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this  28th day of March, 2003.

 /s/ FRANK C. CARLUCCI  ----------------------------  Frank C. Carlucci 

**EXHIBIT 24.1**

**POWER OF ATTORNEY**

 KNOW ALL YE PERSONS BY    THESE PRESENTS, that the undersigned does hereby make, constitute and appoint    William H. Koster and Stephen R.    Davis, each his    attorney-in-fact and agent with full power of substitution and resubstitution    for him and in his name, place and stead, in any and all capacities, to execute    for him and on his behalf an Annual Report pursuant to Section 13 of the    Securities and Exchange Act of 1934, as amended, on Form 10-K relating to    the fiscal year ended December 31, 2002, of Neurogen Corporation (the "Company"),    and any and all amendments to the foregoing Annual Report on Form 10-K, which    amendments may make such changes in the Annual Report on Form 10-K as such    attorney-in-fact deems appropriate, and any other documents and instruments    incidental thereto, and to file the same, with all exhibits thereto and all    documents in connection therewith, with the Securities and Exchange Commission    and the National Association of Securities Dealers, Inc., granting unto said    attorney-in-fact and agent, full power and authority to do and perform each    and every act and thing requisite and necessary to be done in and about the    premises, as fully to all intents and purposes as the undersigned might or    could do in person, hereby ratifying and confirming all that said attorney-in-fact    and agent, or his substitute or substitutes, may lawfully do or cause to    be done by virtue hereof.

 IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this  28th day of March, 2003.

 /s/ JOHN SIMON  ----------------------------  John Simon

**EXHIBIT 24.1**

**POWER OF ATTORNEY**

 KNOW ALL YE PERSONS BY    THESE PRESENTS, that the undersigned does hereby make, constitute and appoint    William H. Koster and Stephen R.    Davis, each his    attorney-in-fact and agent with full power of substitution and resubstitution    for him and in his name, place and stead, in any and all capacities, to execute    for him and on his behalf an Annual Report pursuant to Section 13 of the    Securities and Exchange Act of 1934, as amended, on Form 10-K relating to    the fiscal year ended December 31, 2002, of Neurogen Corporation (the "Company"),    and any and all amendments to the foregoing Annual Report on Form 10-K, which    amendments may make such changes in the Annual Report on Form 10-K as such    attorney-in-fact deems appropriate, and any other documents and instruments    incidental thereto, and to file the same, with all exhibits thereto and all    documents in connection therewith, with the Securities and Exchange Commission    and the National Association of Securities Dealers, Inc., granting unto said    attorney-in-fact and agent, full power and authority to do and perform each    and every act and thing requisite and necessary to be done in and about the    premises, as fully to all intents and purposes as the undersigned might or    could do in person, hereby ratifying and confirming all that said attorney-in-fact    and agent, or his substitute or substitutes, may lawfully do or cause to    be done by virtue hereof.

 IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this  28th day of March, 2003.

 /s/ ROBERT N. BUTLER, M.D.  ----------------------------  Robert N. Butler, M.D.

**EXHIBIT 24.1**

**POWER OF ATTORNEY**

 KNOW ALL YE PERSONS BY    THESE PRESENTS, that the undersigned does hereby make, constitute and appoint    William H. Koster and Stephen R.    Davis, each his    attorney-in-fact and agent with full power of substitution and resubstitution    for him and in his name, place and stead, in any and all capacities, to execute    for him and on his behalf an Annual Report pursuant to Section 13 of the    Securities and Exchange Act of 1934, as amended, on Form 10-K relating to    the fiscal year ended December 31, 2002, of Neurogen Corporation (the "Company"),    and any and all amendments to the foregoing Annual Report on Form 10-K, which    amendments may make such changes in the Annual Report on Form 10-K as such    attorney-in-fact deems appropriate, and any other documents and instruments    incidental thereto, and to file the same, with all exhibits thereto and all    documents in connection therewith, with the Securities and Exchange Commission    and the National Association of Securities Dealers, Inc., granting unto said    attorney-in-fact and agent, full power and authority to do and perform each    and every act and thing requisite and necessary to be done in and about the    premises, as fully to all intents and purposes as the undersigned might or    could do in person, hereby ratifying and confirming all that said attorney-in-fact    and agent, or his substitute or substitutes, may lawfully do or cause to    be done by virtue hereof.

 IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this  28th day of March, 2003.

 /s/ BARRY M. BLOOM  ----------------------------  Barry M. Bloom

**EXHIBIT 24.1**

**POWER OF ATTORNEY**

 KNOW ALL YE PERSONS BY    THESE PRESENTS, that the undersigned does hereby make, constitute and appoint    William H. Koster and Stephen R.    Davis, each his    attorney-in-fact and agent with full power of substitution and resubstitution    for him and in his name, place and stead, in any and all capacities, to execute    for him and on his behalf an Annual Report pursuant to Section 13 of the    Securities and Exchange Act of 1934, as amended, on Form 10-K relating to    the fiscal year ended December 31, 2002, of Neurogen Corporation (the "Company"),    and any and all amendments to the foregoing Annual Report on Form 10-K, which    amendments may make such changes in the Annual Report on Form 10-K as such    attorney-in-fact deems appropriate, and any other documents and instruments    incidental thereto, and to file the same, with all exhibits thereto and all    documents in connection therewith, with the Securities and Exchange Commission    and the National Association of Securities Dealers, Inc., granting unto said    attorney-in-fact and agent, full power and authority to do and perform each    and every act and thing requisite and necessary to be done in and about the    premises, as fully to all intents and purposes as the undersigned might or    could do in person, hereby ratifying and confirming all that said attorney-in-fact    and agent, or his substitute or substitutes, may lawfully do or cause to    be done by virtue hereof.

 IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this  28th day of March, 2003.

 /s/ MARK NOVITCH  ----------------------------  Mark Novitch

**EXHIBIT 24.1**

**POWER OF ATTORNEY**

 KNOW ALL YE PERSONS BY    THESE PRESENTS, that the undersigned does hereby make, constitute and appoint    William H. Koster and Stephen R.    Davis, each his    attorney-in-fact and agent with full power of substitution and resubstitution    for him and in his name, place and stead, in any and all capacities, to execute    for him and on his behalf an Annual Report pursuant to Section 13 of the    Securities and Exchange Act of 1934, as amended, on Form 10-K relating to    the fiscal year ended December 31, 2002, of Neurogen Corporation (the "Company"),    and any and all amendments to the foregoing Annual Report on Form 10-K, which    amendments may make such changes in the Annual Report on Form 10-K as such    attorney-in-fact deems appropriate, and any other documents and instruments    incidental thereto, and to file the same, with all exhibits thereto and all    documents in connection therewith, with the Securities and Exchange Commission    and the National Association of Securities Dealers, Inc., granting unto said    attorney-in-fact and agent, full power and authority to do and perform each    and every act and thing requisite and necessary to be done in and about the    premises, as fully to all intents and purposes as the undersigned might or    could do in person, hereby ratifying and confirming all that said attorney-in-fact    and agent, or his substitute or substitutes, may lawfully do or cause to    be done by virtue hereof.

 IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this  28th day of March, 2003.

 /s/ SUZANNE H. WOOLSEY  ----------------------------  Suzanne H. Woolsey

**EXHIBIT 24.1**

**POWER OF ATTORNEY**

 KNOW ALL YE PERSONS BY    THESE PRESENTS, that the undersigned does hereby make, constitute and appoint    William H. Koster and Stephen R.    Davis, each his    attorney-in-fact and agent with full power of substitution and resubstitution    for him and in his name, place and stead, in any and all capacities, to execute    for him and on his behalf an Annual Report pursuant to Section 13 of the    Securities and Exchange Act of 1934, as amended, on Form 10-K relating to    the fiscal year ended December 31, 2002, of Neurogen Corporation (the "Company"),    and any and all amendments to the foregoing Annual Report on Form 10-K, which    amendments may make such changes in the Annual Report on Form 10-K as such    attorney-in-fact deems appropriate, and any other documents and instruments    incidental thereto, and to file the same, with all exhibits thereto and all    documents in connection therewith, with the Securities and Exchange Commission    and the National Association of Securities Dealers, Inc., granting unto said    attorney-in-fact and agent, full power and authority to do and perform each    and every act and thing requisite and necessary to be done in and about the    premises, as fully to all intents and purposes as the undersigned might or    could do in person, hereby ratifying and confirming all that said attorney-in-fact    and agent, or his substitute or substitutes, may lawfully do or cause to    be done by virtue hereof.

 IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this  28th day of March, 2003.

 /s/ JULIAN C. BAKER  ----------------------------  Julian C. Baker

**EXHIBIT 24.1**

**POWER OF ATTORNEY**

 KNOW ALL YE PERSONS BY    THESE PRESENTS, that the undersigned does hereby make, constitute and appoint    William H. Koster and Stephen R. Davis, each his    attorney-in-fact and agent with full power of substitution and resubstitution    for him and in his name, place and stead, in any and all capacities, to execute    for him and on his behalf an Annual Report pursuant to Section 13 of the    Securities and Exchange Act of 1934, as amended, on Form 10-K relating to    the fiscal year ended December 31, 2002, of Neurogen Corporation (the "Company"),    and any and all amendments to the foregoing Annual Report on Form 10-K, which    amendments may make such changes in the Annual Report on Form 10-K as such    attorney-in-fact deems appropriate, and any other documents and instruments    incidental thereto, and to file the same, with all exhibits thereto and all    documents in connection therewith, with the Securities and Exchange Commission    and the National Association of Securities Dealers, Inc., granting unto said    attorney-in-fact and agent, full power and authority to do and perform each    and every act and thing requisite and necessary to be done in and about the    premises, as fully to all intents and purposes as the undersigned might or    could do in person, hereby ratifying and confirming all that said attorney-in-fact    and agent, or his substitute or substitutes, may lawfully do or cause to    be done by virtue hereof.

 IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this  28th day of March, 2003.

 /s/ FELIX J. BAKER  ----------------------------  Felix J. Baker

**EXHIBIT 24.1**

**POWER OF ATTORNEY**

 KNOW ALL YE PERSONS BY    THESE PRESENTS, that the undersigned does hereby make, constitute and appoint    William H. Koster and Stephen R.    Davis, each his    attorney-in-fact and agent with full power of substitution and resubstitution    for him and in his name, place and stead, in any and all capacities, to execute    for him and on his behalf an Annual Report pursuant to Section 13 of the    Securities and Exchange Act of 1934, as amended, on Form 10-K relating to    the fiscal year ended December 31, 2002, of Neurogen Corporation (the "Company"),    and any and all amendments to the foregoing Annual Report on Form 10-K, which    amendments may make such changes in the Annual Report on Form 10-K as such    attorney-in-fact deems appropriate, and any other documents and instruments    incidental thereto, and to file the same, with all exhibits thereto and all    documents in connection therewith, with the Securities and Exchange Commission    and the National Association of Securities Dealers, Inc., granting unto said    attorney-in-fact and agent, full power and authority to do and perform each    and every act and thing requisite and necessary to be done in and about the    premises, as fully to all intents and purposes as the undersigned might or    could do in person, hereby ratifying and confirming all that said attorney-in-fact    and agent, or his substitute or substitutes, may lawfully do or cause to    be done by virtue hereof.

 IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this  28th day of March, 2003.

 /s/ CRAIG SAXTON  ----------------------------  Craig Saxton

**EXHIBIT 99.1**

**CERTIFICATION PURSUANT TO  18 U.S.C. SECTION 1350,  AS ADOPTED PURSUANT TO  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the    Annual Report of Neurogen Corporation (the "Company")  on Form 10-K for the period ended December 31, 2002, as filed with the Securities  and Exchange Commission on the date hereof (the "Report"), I, William  H. Koster, President and Chief Executive Officer of the Company, certify pursuant  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002, that to my knowledge:
-  The Report fully complies with the requirements of section 13(a) or 15(d)    of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
 The information contained in the Report fairly presents, in all material    respects, the financial condition and results of operations of the Company.

  By: /s/ William H. Koster  --------------------------  William H. Koster   President and  Chief Executive Officer   Date: March 28, 2003 

**EXHIBIT 99.2**

**CERTIFICATION PURSUANT TO  18 U.S.C. SECTION 1350,  AS ADOPTED PURSUANT TO  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the    Annual Report of Neurogen Corporation (the "Company")  on Form 10-K for the period ended December 31, 2002, as filed with the Securities  and Exchange Commission on the date hereof (the "Report"), I, Stephen  R. Davis, Executive Vice President and Chief Business Officer of the Company,  certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section  906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
-  The Report fully complies with the requirements of section 13(a) or    15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
- The      information contained in the Report fairly presents, in all material respects,      the financial condition and results of operations of the Company.

  By: /s/ Stephen R. Davis  --------------------------  Stephen R. Davis  Executive Vice President and  Chief Business Officer  Date: March 28, 2003 |