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| x | ANNUAL      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|---|------------------------------------------------------------------------------------------------|

| ¨ | TRANSITION      REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|--------|-----------------------------------------------------------------------------------------------------|

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| Delaware                                                                |   | 22-2845714                                    |
|-------------------------------------------------------------------------|--------|-----------------------------------------------|
| (State      or other jurisdiction ofincorporation      or organization) |   | (I.R.S.      EmployerIdentification      No.) |

|                                          |   |                                      |
|-----------------------------------------------|--------|-------------------------------------------|
| Title      of Class                           |   | Name      of Exchange on Which Registered |
| Common      Stock, $0.025 par value per share |   | NASDAQ      Global Market                 |

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|                                                                        |   |                                                   |
|-----------------------------------------------------------------------------|--------|--------------------------------------------------------|
|    Large accelerated filer        ¨ |   | Accelerated filer        ¨         |
|         Non-accelerated filer   ¨             |   | Smaller reporting company        x |
|         (Do not check if smaller reporting company)               |   |                                                   |

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TABLE OF CONTENTS

|                      |                                                                                                              | PAGE   |
|---------------------------|-------------------------------------------------------------------------------------------------------------------|--------|
| PART I                    |                                                                                                              |   |
| ITEM 1.                   | Business                                                                                                          | 1      |
| ITEM 1A.                  | Risk Factors                                                                                                      | 11     |
| ITEM 2.                   | Properties                                                                                                        | 23     |
| ITEM 3.                   | Legal Proceedings                                                                                                 | 23     |
| ITEM 4.                   | Submission of Matters to a Vote of Security      Holders                                                          | 23     |
|                      |                                                                                                              |   |
| PART II                   |                                                                                                              |   |
|    ITEM 5. | Market for Registrant's Common Equity, Related Stockholder      matters, and Issue Purchasee of Equity Securities | 24     |
|    ITEM 6. | Selected financial Data                                                                                           | 25     |
| ITEM 7.                   | Management's Discussion and Analysis of Financial Condition      and Results of Operations                        | 25     |
| ITEM 7A.                  | Quantitative and Qualitative Disclosures about Market      Risk                                                   | 41     |
| ITEM 8.                   | Financial Statements and Supplementary    Data                                                                    | 41     |
| ITEM 9.                   | Changes in and Disagreements with Accountants on Accounting      and Financial Disclosure                         | 41     |
| ITEM 9A.                  | Controls and Procedures                                                                                           | 41     |
| ITEM 9B.                  | Other Information                                                                                                 | 42     |
|                      |                                                                                                              |   |
| PART III                  |                                                                                                              |   |
| ITEM 10.                  | Directors, Executive Officers and Corporate      Governance                                                       | 43     |
| ITEM 11.                  | Executive Compensation                                                                                            | 43     |
| ITEM 12.                  | Security Ownership of Certain Beneficial Owners and      Management and Related Stockholder Matters               | 43     |
| ITEM 13.                  | Certain Relationships and Related Transactions, and      Director Independence                                    | 43     |
| ITEM 14.                  | Principal Accounting Fees and Services                                                                            | 43     |
|                      |                                                                                                              |   |
| PART IV                   |                                                                                                              |   |
| ITEM 15.                  | Exhibits, Financial Statement Schedules                                                                           | 44     |

SIGNATURES

EXHIBIT INDEX

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PART I

ITEM 1.  BUSINESS

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| §   | Merck      purchased approximately 1.8 million shares of our common stock for $15.0      million. |
|--------------------|---------------------------------------------------------------------------------------------------|

| §   | Merck      paid us a $15.0 million upfront license fee, plus $7 million in additional      license fees. |
|--------------------|----------------------------------------------------------------------------------------------------------|

| §   | We      received an additional $13.1 million in committed research funding during      the term of the research program component of the collaboration.       While the collaboration continues with respect to the development and      possible commercialization of collaboration candidates, the research      component of the collaboration, and related research funding to Neurogen      concluded on August 28, 2007. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| §   | Merck      received the exclusive worldwide license to develop, manufacture, use, and      sell VR1 receptor modulator products within the collaboration, subject to      our right to receive milestone payments and  royalties. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | We      are entitled to receive milestone payments if specified development and      regulatory objectives are achieved. We have received to date $8.0 million      in milestone payments and are eligible to receive additional milestone      payments, if additional milestones are achieved, on all VR1 compounds      within the collaboration. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Merck      is required to pay us royalties based on net sales levels, if any, for all      VR1 compounds within thecollaboration. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------|

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|     1.   | Completion      of extensive preclinical laboratory tests, in vivo preclinical      studies and formulation studies, all performed in accordance with the      FDA’s current good laboratory practice regulations;                   |
|----------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     2.   | The      submission to the FDA of an Investigational New Drug Application, or 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 of the product candidate for each approved      indication;                                                                  |
|     4.   | The      submission of a New Drug Application,or NDA, to theFDA;                                                                                                                                                                           |
|     5.             | The      satisfactory completion of an FDA preapproval inspection of the      manufacturing facilities at which the product is produced to assess      compliance with current Good Manufacturing Practice, or cGMP, regulations;      and |
|     6.   | FDA      approval of the NDA prior to any commercial marketing, sale or shipment of      the drug.                                                                                                                                         |

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|    1.   | Determine      the efficacy of the drug for specific, targeted    indications; |
|----------------------------------|--------------------------------------------------------------------------------|
|    2.   | Determine      dosage tolerance, optimal dose and dose regimen; and            |
|    3.   | Identify      possible adverse side effects and safetyrisks.                   |

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ITEM 1A.  RISK FACTORS

| §   | limited number of, and competition for,      suitable patients required for enrollment in clinical    trials; |
|--------------------|---------------------------------------------------------------------------------------------------------------|

| §   | limited number of, and competition for,      suitable patients required for enrollment in clinical    trials; |
|--------------------|---------------------------------------------------------------------------------------------------------------|

| §   | limited number of, and competition for,      suitable sites to conduct clinicaltrials; |
|--------------------|----------------------------------------------------------------------------------------|

| §   | delay or failure to obtain FDA approval or      agreement to commence a clinicaltrial; |
|--------------------|----------------------------------------------------------------------------------------|

| §   | delay or failure to obtain sufficient supplies      of the drug candidates for trials; |
|--------------------|----------------------------------------------------------------------------------------|

| §   | delay or failure to obtain sufficient supplies      of the drug candidates for trials; |
|--------------------|----------------------------------------------------------------------------------------|

| §   | delay or failure to reach agreement on      acceptable clinical trial agreement terms or clinical trial protocols with      prospective sites or investigators;and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | delay or failure to obtain institutional review      board, or IRB, approval to conduct a clinical trial at a prospective      site. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|

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| §   | slower than expected rates of patient      recruitment and enrollment; |
|--------------------|------------------------------------------------------------------------|

| §   | failure of patients to complete the clinical      trial; |
|--------------------|----------------------------------------------------------|

| §   | unforeseen safety  issues; |
|--------------------|----------------------------|

| §   | lack of efficacy evidenced during clinical      trials; |
|--------------------|---------------------------------------------------------|

| §   | termination of our human testing by one or more      clinical trial sites; |
|--------------------|----------------------------------------------------------------------------|

| §   | inability or unwillingness of patients or      medical investigators to follow our clinical trial protocols;      and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------|

| §   | inability to monitor patients adequately during      or after treatment |
|--------------------|-------------------------------------------------------------------------|

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| §   | the      continued progress of our research and development      programs; |
|--------------------|----------------------------------------------------------------------------|

| §   | our      ability to market and distribute any products it      develops; |
|--------------------|--------------------------------------------------------------------------|

| §   | our      ability to establish new collaborative and licensing      arrangements; |
|--------------------|----------------------------------------------------------------------------------|

| §   | progress      with preclinical studies and clinical  trials; |
|--------------------|--------------------------------------------------------------|

| §   | the      time and costs involved in pursuing regulatory      clearance; |
|--------------------|-------------------------------------------------------------------------|

| §   | the      costs involved in preparing, filing, prosecuting, maintaining and      enforcing patent claims; and |
|--------------------|--------------------------------------------------------------------------------------------------------------|
| §   | competing      technological and marketdevelopments. |
|--------------------|------------------------------------------------------|

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| §   | that      a collaborator will halt, delay, or repeat clinical      trials; |
|--------------------|----------------------------------------------------------------------------|
| §   | that      a collaborator will alter the amount or timing of resources dedicated to      its collaboration with us; |
|--------------------|--------------------------------------------------------------------------------------------------------------------|

| §   | that      a collaborator will dispute our rights under an      agreement; |
|--------------------|---------------------------------------------------------------------------|

| §   | that      a collaborator will attempt to independently develop a competing drug on      its own or in conjunction with a third  party; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------|

| §   | that      existing collaboration agreements will not be    extended; |
|--------------------|----------------------------------------------------------------------|

| §   | that      a collaborator will not continue to develop a drug candidate after a      collaboration agreement has ended;and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------|

| §   | that      a collaborator will breach or terminate an agreement with      us. |
|--------------------|------------------------------------------------------------------------------|

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| §   | announcements      by us or our competitors of regulatory developments, preclinical testing      and clinical trial results, clinical trial enrollment, regulatory filings,      new products and product launches, significant  acquisitions,      strategic partnerships or jointventures; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | any      intellectual property infringement, product liability or any other      litigation involving us; |
|--------------------|-----------------------------------------------------------------------------------------------------------|

| §   | technological      innovations or new therapeuticproducts; |
|--------------------|------------------------------------------------------------|

| §   | developments      or disputes concerning our patents or other proprietary      rights; |
|--------------------|----------------------------------------------------------------------------------------|

| §   | regulatory      changes or developments; |
|--------------------|------------------------------------------|

| §   | general      market conditions in the pharmaceutical and biotechnology      sectors; |
|--------------------|--------------------------------------------------------------------------------------|

| §   | comments by securities  analysts; |
|--------------------|-----------------------------------|

| §   | economic      or other crises and other external  factors; |
|--------------------|------------------------------------------------------------|

| §   | public      concern as to the safety of products developed by us or      others; |
|--------------------|----------------------------------------------------------------------------------|

| §   | actual      or anticipated period-to-period fluctuations in our results of      operations; |
|--------------------|---------------------------------------------------------------------------------------------|

| §   | our      ability to raise capital; |
|--------------------|------------------------------------|

| §   | departure      of any of our key management personnel;or |
|--------------------|----------------------------------------------------------|

| §   | sales      of our common stock. |
|--------------------|---------------------------------|

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ITEM2.  PROPERTIES

ITEM 3.  LEGAL PROCEEDINGS

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDERMATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

|                   |   | Market      Price |   |
|------------------------|--------|-------------------|--------|
|                   |   | High              |   |   | Low |   |
| Fiscal Year      2008: |   |              |   |   |   |   |
| First      Quarter     |   | $                 | 3.41   |   |   | $ | 1.46 |   |
| Second      Quarter    |   |              | 2.43   |   |   |   | 0.71 |   |
| Third      Quarter     |   |              | 1.02   |   |   |   | 0.23 |   |
| Fourth      Quarter    |   |              | 0.30   |   |   |   | 0.07 |   |
|                   |   |              |   |   |   |   |   |   |
| Fiscal      Year 2007: |   |              |   |   |   |   |   |   |
| First      Quarter     |   | $                 | 6.76   |   |   | $ | 5.75 |   |
| Second      Quarter    |   |              | 8.51   |   |   |   | 6.39 |   |
| Third      Quarter     |   |              | 6.84   |   |   |   | 4.23 |   |
| Fourth      Quarter    |   |              | 4.75   |   |   |   | 2.78 |   |

|                                                            |   | Total      securities to be issued upon exercise of outstanding    options |      |   |                                 |   |
|-----------------------------------------------------------------|--------|----------------------------------------------------------------------------|-----------|--------|--------------------------------------|--------|
|  Plan      category                                        |   | Number                                                                     |      |   | Weighted-average      exercise price |   |   | Securities      remaining available for future issuance under equity compensation plans      (excluding securities reflected in column (a)) |   |
|                                                            |   | (a)                                                                        |      |   | (b)                                  |   |   | (c) |   |
|                                                            |   |                                                                       |      |   |                                 |   |   |   |   |
| Equity      compensation plans approved by security holders     |   |                                                                       | 4,730,710 |   |                                 | $      | 6.19 |   |   |   | 2,841,237 |   |
|                                                            |   |                                                                       |      |   |                                 |   |   |   |   |   |   |   |
| Equity      compensation plans not approved by security holders |   |                                                                       | 7,500     |   |                                 |   | 33.38 |   |   |   | - |   |
|                                                            |   |                                                                       |      |   |                                 |   |   |   |   |   |   |   |
| Total                                                           |   |                                                                       | 4,738,210 |   |                                 | $      | 6.23 |   |   |   | 2,841,237 |   |

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS

| §   | risks      inherent in discovery, research, development, testing, regulatory      approval, production and marketing of any of our drug      candidates; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | risks      deriving from in-licensing of drug candidates, acquisitions or business      combinations; |
|--------------------|-------------------------------------------------------------------------------------------------------|

| §   | our      dependence on current or future corporate partners with respect to      research and development funding, preclinical evaluation of drug      candidates, human clinical trials of drug candidates, regulatory filings      and manufacturing and marketing    expertise; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | risks      deriving from collaborations, alliances, in-licensing or other      transactions; |
|--------------------|----------------------------------------------------------------------------------------------|

| §   | the      risk that actual research and development costs and associated general and      administrative costs may exceed budgeted      amounts; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | the      risk that drug targets we pursue may prove to be invalid after substantial      investments byus; |
|--------------------|------------------------------------------------------------------------------------------------------------|

| §   | inability      to obtain sufficient funds through future collaborative arrangements,      equity or debt financings or other sources to continue the operation of      the Company’sbusiness; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | uncertainty      regarding our patents and trade secrets and confidentiality agreements      with collaborators, employees, consultants or      vendors; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

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| §   | the      risk that we may be prohibited or otherwise restricted from working on      certain targets relevant to our  business; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| §   | dependence      upon third parties for the manufacture of our potential products and our      inexperience in manufacturing if we establish internal manufacturing      capabilities; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | dependence      on third parties to market potential products and our lack of sales and      marketingcapabilities; |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| §   | unavailability      or inadequacy of medical insurance or other third-party reimbursement for      the cost of purchases of our  products; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

| §   | inability      to attract or retain scientific, management and other personnel;      and |
|--------------------|------------------------------------------------------------------------------------------|

| §   | risks      associated with the fact that a majority of our common stock is held by a      limited number ofstockholders. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------|

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| §   | the      milestone payment is    non-refundable; |
|--------------------|--------------------------------------------------|

| §   | the      achievement of the milestone involves a degree of risk and was not      reasonably assured at the inception of the      arrangement; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| §   | substantive      effort is involved in achieving the      milestone; |
|--------------------|----------------------------------------------------------------------|

| §   | the      amount of the milestone payment is reasonable in relation to the effort      expended or the risk associated with achievement of the milestone;      and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | a      reasonable amount of time passes between the upfront license payment and      the first milestone payment as well as between each subsequent milestone      payment. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| §   | The      expected term of options granted represents the period of time that option      grants are expected to be outstanding. In 2008, the employee stock      grants were granted with quarterly vesting for which       no historical data existed. Given that the grants were made at a      price that was unprecedently low and there was no history available for      this type of vesting, the simplified method was used to      determine the expected term of these grants.  The expected      term for Board of Directors grants was calculated based upon historical      analysis.   |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Forfeitures      of options are estimated based upon historical data and are adjusted based      upon actual occurrences.  The cumulative effect of restricted stock      forfeitures wasimmaterial |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | In      predicting expected volatility, assumptions were based solely upon      historical volatilities of our stock over a period equal to the expected      term of the related equity instruments. We rely only      on historical volatility since future volatility is expected to      be consistent with    historical. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Under SFAS      No. 123R, we have separated optionees into two groupings based upon      historical analysis of the exercise behavior of those groupings: first,      management and the Board of Directors, and, second, non-management      employees; however, given our current use of the simplified method, the      establishment of these groupings is not expected to have a significant      impact on the calculation    of expense. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | The      risk-free rate utilized when valuing share-based payment arrangements is      based on the U.S. Treasury yield curve in effect at the time of grant for      the expected term of the option being      valued. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Management’s      selection of the valuation components, such as the Black-Scholes pricing      method, interest rate, and volatility, are consistent with the approach      utilized when reporting pursuant to the disclosure provisions of SFAS      No.123. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| §   | we      believe that we have the ability to hold these investments until a      recovery of fair value, which may be at      maturity; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------|

| §   | we      intend to hold these investments until a recovery of fair value, which may      be at maturity;and |
|--------------------|------------------------------------------------------------------------------------------------------------|

| §   | we      believe the decline in market value is attributable to changes in interest      rates and not credit  quality. |
|--------------------|------------------------------------------------------------------------------------------------------------------------|

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| §   | a      significant adverse change in the extent or manner in which a long-lived      asset is being  used; |
|--------------------|------------------------------------------------------------------------------------------------------------|

| §   | a      significant adverse change in the business climate that could affect the      value of a long-lived asset;  and |
|--------------------|------------------------------------------------------------------------------------------------------------------------|

| §   | a      significant decrease in market value of      assets. |
|--------------------|-------------------------------------------------------------|

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|                          |   | Year      ended December 31, |   |   |   |   |
|-------------------------------|--------|------------------------------|--------|--------|--------|--------|
|                          |   | 2008                         |   |   | 2007   |   |   | Change |   |
|                          |   | (in      thousands)          |   |   |   |   |
| License      fees             |   | $                            | -      |   |   | $      | 10,872 |   |   | $ | (10,872 | ) |
| Research      and development |   |                         | -      |   |   |   | 4,565 |   |   |   | (4,565 | ) |
| Sale      of compound library |   |                         | 3,000  |   |   |   | - |   |   |   | 3,000 |   |
|                          |   |                         |   |   |   |   |   |   |   |   |   |   |
| Total      operating revenue  |   | $                            | 3,000  |   |   | $      | 15,437 |   |   | $ | (12,437 | ) |
|                          |   |                         |   |   |   |   |   |   |   |   |   |   |

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|                                              |   | Year      ended December 31, |   |   |   |   |
|---------------------------------------------------|--------|------------------------------|--------|--------|--------|--------|
|                                              |   | 2008                         |   |   | 2007   |   |   | Change |   |
|                                              |   | (in      thousands)          |   |   |   |   |
| Outsourced      clinical expenses                 |   |                         |   |   |   |   |   |   |   |
| Insomnia      and anxiety                         |   | $                            | 3,665  |   |   | $      | 13,010 |   |   | $ | (9,345 | ) |
| Obesity                                           |   |                         | 140    |   |   |   | 2,581 |   |   |   | (2,441 | ) |
| Parkinson’s      disease and RLS            |   |                         | 8,516  |   |   |   | 1,971 |   |   |   | 6,545 |   |
| Total      outsourced clinical expenses           |   |                         | 12,321 |   |   |   | 17,562 |   |   |   | (5,241 | ) |
| Outsourced      non-clinical development expenses |   |                         | 8,113  |   |   |   | 13,417 |   |   |   | (5,304 | ) |
| Internal      expenses                            |   |                         |   |   |   |   |   |   |   |   |   |   |
| Salary      and benefits                          |   |                         | 6,483  |   |   |   | 19,641 |   |   |   | (13,158 | ) |
| Supplies      and research                        |   |                         | 1,385  |   |   |   | 4,652 |   |   |   | (3,267 | ) |
| Computer      and office supplies                 |   |                         | 378    |   |   |   | 659 |   |   |   | (281 | ) |
| Facilities      and utilities                     |   |                         | 2,076  |   |   |   | 3,719 |   |   |   | (1,643 | ) |
| Travel,      meals and training                   |   |                         | 188    |   |   |   | 587 |   |   |   | (399 | ) |
| Administrative      and other costs               |   |                         | 699    |   |   |   | 736 |   |   |   | (37 | ) |
| Total      internal expenses                      |   |                         | 11,209 |   |   |   | 29,994 |   |   |   | (18,785 | ) |
|                                              |   |                         |   |   |   |   |   |   |   |   |   |   |
| Total      research and development expenses      |   | $                            | 31,643 |   |   | $      | 60,973 |   |   | $ | (29,330 | ) |
|                                              |   |                         |   |   |   |   |   |   |   |   |   |   |

|                                           |   | Year      ended December 31, |   |   |   |   |
|------------------------------------------------|--------|------------------------------|--------|--------|--------|--------|
|                                           |   | 2008                         |   |   | 2007   |   |   | Change |   |
|                                           |   | (in      thousands)          |   |   |   |   |
| Salary      and benefits                       |   | $                            | 2,924  |   |   | $      | 6,020 |   |   | $ | (3,096 | ) |
| Supplies                                       |   |                         | 329    |   |   |   | 730 |   |   |   | (401 | ) |
| Patents                                        |   |                         | 719    |   |   |   | 1,842 |   |   |   | (1,123 | ) |
| Computer      and office supplies              |   |                         | 85     |   |   |   | 210 |   |   |   | (125 | ) |
| Travel,      meals and training                |   |                         | 99     |   |   |   | 298 |   |   |   | (199 | ) |
| Recruiting                                     |   |                         | 34     |   |   |   | 152 |   |   |   | (118 | ) |
| Administrative                                 |   |                         | 2,168  |   |   |   | 2,716 |   |   |   | (548 | ) |
| Facilities      and other costs                |   |                         | 760    |   |   |   | 804 |   |   |   | (44 | ) |
|                                           |   |                         |   |   |   |   |   |   |   |   |   |   |
| Total      general and administrative expenses |   | $                            | 7,118  |   |   | $      | 12,772 |   |   | $ | (5,654 | ) |
|                                           |   |                         |   |   |   |   |   |   |   |   |   |   |

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|                          |   | Year      ended December 31, |   |   |   |   |
|-------------------------------|--------|------------------------------|--------|--------|--------|--------|
|                          |   | 2007                         |   |   | 2006   |   |   | Change |   |
|                          |   | (in      thousands)          |   |   |   |   |
| License      fees             |   | $                            | 10,872 |   |   | $      | 4,467 |   |   | $ | 6,405 |   |
| Research      and development |   |                         | 4,565  |   |   |   | 5,346 |   |   |   | (781 | ) |
|                          |   |                         |   |   |   |   |   |   |   |   |   |   |
| Total      operating revenue  |   | $                            | 15,437 |   |   | $      | 9,813 |   |   | $ | 5,624 |   |
|                          |   |                         |   |   |   |   |   |   |   |   |   |   |

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|                                              |   | Year      ended December 31, |   |   |   |   |
|---------------------------------------------------|--------|------------------------------|--------|--------|--------|--------|
|                                              |   | 2007                         |   |   | 2006   |   |   | Change |   |
|                                              |   | (in      thousands)          |   |   |   |   |
| Outsourced      clinical expenses                 |   |                         |   |   |   |   |   |   |   |
| Insomnia      and anxiety                         |   | $                            | 13,010 |   |   | $      | 9,057 |   |   | $ | 3,953 |   |
| Obesity                                           |   |                         | 2,581  |   |   |   | 667 |   |   |   | 1,914 |   |
| Parkinson’s      disease and RLS            |   |                         | 1,971  |   |   |   | 3,019 |   |   |   | (1,048 | ) |
| Total      outsourced clinical expenses           |   |                         | 17,562 |   |   |   | 12,743 |   |   |   | 4,819 |   |
| Outsourced      non-clinical development expenses |   |                         | 13,417 |   |   |   | 10,389 |   |   |   | 3,028 |   |
| Internal      expenses                            |   |                         |   |   |   |   |   |   |   |   |   |   |
| Salary      and benefits                          |   |                         | 19,641 |   |   |   | 21,483 |   |   |   | (1,842 | ) |
| Supplies      and research                        |   |                         | 4,652  |   |   |   | 5,460 |   |   |   | (808 | ) |
| Computer      and office supplies                 |   |                         | 659    |   |   |   | 481 |   |   |   | 178 |   |
| Facilities      and utilities                     |   |                         | 3,719  |   |   |   | 3,858 |   |   |   | (139 | ) |
| Travel,      meals and training                   |   |                         | 587    |   |   |   | 441 |   |   |   | 146 |   |
| Administrative      and other costs               |   |                         | 736    |   |   |   | 998 |   |   |   | (262 | ) |
| Total      internal expenses                      |   |                         | 29,994 |   |   |   | 32,721 |   |   |   | (2,727 | ) |
|                                              |   |                         |   |   |   |   |   |   |   |   |   |   |
| Total      research and development expenses      |   | $                            | 60,973 |   |   | $      | 55,853 |   |   | $ | 5,120 |   |
|                                              |   |                         |   |   |   |   |   |   |   |   |   |   |

|                                                      |   | Year      ended December 31, |   |   |   |   |
|-----------------------------------------------------------|--------|------------------------------|--------|--------|--------|--------|
|                                                      |   | 2007                         |   |   | 2006   |   |   | Change |   |
|                                                      |   | (in      thousands)          |   |   |   |   |
| Salary      and benefits                                  |   | $                            | 6,020  |   |   | $      | 6,436 |   |   | $ | (416 | ) |
| Supplies                                                  |   |                         | 730    |   |   |   | 409 |   |   |   | 321 |   |
| Patents                                                   |   |                         | 1,842  |   |   |   | 1,346 |   |   |   | 496 |   |
| Computer      and office supplies                         |   |                         | 210    |   |   |   | 189 |   |   |   | 21 |   |
| Travel,      meals and training                           |   |                         | 298    |   |   |   | 246 |   |   |   | 52 |   |
| Recruiting                                                |   |                         | 152    |   |   |   | 40 |   |   |   | 112 |   |
| Administrative                                            |   |                         | 2,716  |   |   |   | 2,162 |   |   |   | 554 |   |
| Facilities      and other costs                           |   |                         | 804    |   |   |   | 732 |   |   |   | 72 |   |
|                                                      |   |                         |   |   |   |   |   |   |   |   |   |   |
| Total      general and administrative  expenses |   | $                            | 12,772 |   |   | $      | 11,560 |   |   | $ | 1,212 |   |
|                                                      |   |                         |   |   |   |   |   |   |   |   |   |   |

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|     § | delay,      reduce the scope of, or eliminate some or all of our development      programs; |
|--------------------------------|---------------------------------------------------------------------------------------------|

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|     § | relinquish      greater or all rights to product candidates at an earlier stage of      development or on less favorable terms than we would otherwise      choose; |
|--------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|     § | eliminate      or defer the start of clinical trials or the chemical formulation and      manufacturing efforts required to advance drug  candidates; |
|--------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|     § |  sell      some or all of our capital assets and lease back a portion;    or |
|--------------------------------|-----------------------------------------------------------------------------------|

|     § | pursue      merger and acquisition strategies. |
|--------------------------------|------------------------------------------------|

| §   | the      progress of our development    programs; |
|--------------------|---------------------------------------------------|

| §   | the      timing and results of preclinical testing and clinical      studies; |
|--------------------|-------------------------------------------------------------------------------|

| §   | the      timing of regulatory    approvals; |
|--------------------|---------------------------------------------|

| §   | determinations      as to the commercial potential of our proposed      products; |
|--------------------|-----------------------------------------------------------------------------------|

| §   | the      status of competitive products;  and |
|--------------------|-----------------------------------------------|

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| §   | our      ability 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. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Lender                                     | Date               |   | Interest      Rate |     |   | Original      Principal      Amount |   |   | Outstanding      Principal Amount |   | Maturity      Date |
|--------------------------------------------|--------------------|--------|--------------------|----------|--------|-------------------------------------|--------|--------|-----------------------------------|--------|--------------------|
|                                       |               |   | (per      annum)   |     |   | (in      thousands)                 |   |   |
| Connecticut      Innovations, Inc., or CII | October      1999  |   |               | 7.5      | %      |                                | $      | 5,000  |                              |   | $                  | 3,141 |   | April      2016 |
| Webster      Bank                          | December      2001 |   |               | 3.9%-7.4 | %      |                                | $      | 17,500 |                              |   | $                  | 4,358 |   | December      2011 |
|                                       |               |   |               |     |   |                                |   |   |                              |   |               |   |   |   |

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ITEM 7A

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A.  CONTROLS AND PROCEDURES

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ITEM 9B.  OTHER INFORMATION

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PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATEGOVERNANCE

ITEM 11.  EXECUTIVE COMPENSATION

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSAND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,AND DIRECTOR INDEPENDENCE

ITEM 14.  PRINCIPAL ACCOUNTING FEES ANDSERVICES

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

| INDEX      TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                       | Page        |
|---------------------------------------------------------------------------------------------------------------------------------------|-------------|
|                                                                                                                                  |        |
| Report of Independent Registered Public Accounting      Firm                                                                          | F-1         |
| Consolidated      Financial Statements                                                                                                |        |
| Consolidated Balance Sheets at December 31, 2008 and      2007                                                                        | F-2         |
| Consolidated Statements of Operations for the years      ended December 31, 2008, 2007 and 2006                                       | F-3         |
| Consolidated Statements of Stockholders' Equity      and Comprehensive Loss for the years ended December 31, 2008, 2007 and      2006 | F-4         |
| Consolidated Statements of Cash Flows for the years ended      December 31, 2008, 2007 and 2006                                       | F-5         |
| Notes to Consolidated Financial      Statements                                                                                       | F-6 to F-26 |

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SIGNATURES

| NEUROGEN      CORPORATION                                                                                                                                  |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                       |
| By: /s/ THOMAS A.      PITLER                                                                                                                              |
|                                                                                                                                                       |
| Thomas      A. PitlerSenior      Vice President and Chief Business and Financial Officer(Principal      Accounting Officer)Dated: March      31,2009  |

| SIGNATURE                                  |   | TITLE                                                                                                   |   | DATE                |
|--------------------------------------------|--------|---------------------------------------------------------------------------------------------------------|--------|---------------------|
|                                       |   |                                                                                                    |   |                |
|                                       |   |                                                                                                    |   |                |
| *                                          |   |                                                                                                    |   |                |
| Craig      Saxton                          |   | Chairman      of the Board and Director                                                                 |   | March      31, 2009 |
|                                       |   |                                                                                                    |   |                |
| /s/      STEPHEN R. DAVIS                  |   |                                                                                                    |   |                |
| Stephen      R. Davis                      |   | President      and Chief Executive Officer (Principal Executive Officer) and      Director              |   | March      31, 2009 |
|                                       |   |                                                                                                    |   |                |
| *                                          |   |                                                                                                    |   |                |
| Julian      C. Baker                       |   | Director                                                                                                |   | March      31, 2009 |
|                                       |   |                                                                                                    |   |                |
| *                                          |   |                                                                                                    |   |                |
| Eran      Broshy                           |   | Director                                                                                                |   | March      31, 2009 |
|                                       |   |                                                                                                    |   |                |
| *                                          |   |                                                                                                    |   |                |
| Stewart      Hen                           |   | Director                                                                                                |   | March      31, 2009 |
|                                       |   |                                                                                                    |   |                |
| *                                          |   |                                                                                                    |   |                |
| John      L. LaMattina                     |   | Director                                                                                                |   | March      31, 2009 |
|                                       |   |                                                                                                    |   |                |
| *                                          |   |                                                                                                    |   |                |
| John      Simon                            |   | Director                                                                                                |   | March      31, 2009 |
|                                       |   |                                                                                                    |   |                |
| /s/      THOMAS A. PITLER                  |   |                                                                                                    |   |                |
| Thomas      A. Pitler                      |   | Senior      Vice President and Chief Business and Financial Officer (Principal      Accounting Officer) |   | March      31, 2009 |
|                                       |   |                                                                                                    |   |                |
| * By:  /s/      THOMAS A. PITLER |
| Thomas      A. Pitler,Attorney-in-Fact     |

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM

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CONSOLIDATED BALANCE SHEETS 

|                                                                     |   | December      31, 2008 |         |   | December      31, 2007 |   |
|--------------------------------------------------------------------------|--------|------------------------|--------------|--------|------------------------|--------|
| Assets                                                                   |   |                   |         |   |                   |   |
| Current      assets:                                                     |   |                   |         |   |                   |   |
| Cash      and cash equivalents                                           |   | $                      | 24,106       |   |                   | $      | 21,227 |   |
| Marketable      securities                                               |   |                   | 6,967        |   |                   |   | 21,362 |   |
| Receivables      from corporate partners                                 |   |                   | 61           |   |                   |   | 188 |   |
| Assets      held for sale                                                |   |                   | 5,108        |   |                   |   | - |   |
| Other      current assets, net                                           |   |                   | 1,394        |   |                   |   | 3,026 |   |
| Total      current assets                                                |   |                   | 37,636       |   |                   |   | 45,803 |   |
| Property,      plant & equipment:                                    |   |                   |         |   |                   |   |   |   |
| Land,      building and improvements                                     |   |                   | 7,868        |   |                   |   | 31,767 |   |
| Equipment      and furniture                                             |   |                   | 3,253        |   |                   |   | 17,932 |   |
|                                                                     |   |                   | 11,121       |   |                   |   | 49,699 |   |
| Less      accumulated depreciation and amortization                      |   |                   | 4,019        |   |                   |   | 24,178 |   |
| Net      property, plant and equipment                                   |   |                   | 7,102        |   |                   |   | 25,521 |   |
| Other      assets, net                                                   |   |                   | 30           |   |                   |   | 46 |   |
| Total      assets                                                        |   | $                      | 44,768       |   |                   | $      | 71,370 |   |
| Liabilities      and Stockholders’ Equity                          |   |                   |         |   |                   |   |   |   |
| Current      liabilities:                                                |   |                   |         |   |                   |   |   |   |
| Accounts      payable and accrued expenses                               |   | $                      | 4,555        |   |                   | $      | 7,787 |   |
| Loans      payable, current portion                                      |   |                   | 4,692        |   |                   |   | 5,835 |   |
| Total      current liabilities                                           |   |                   | 9,247        |   |                   |   | 13,622 |   |
| Loans      payable, net of current portion                               |   |                   | 2,807        |   |                   |   | 3,141 |   |
|    Total      liabilities                                      |   |                   | 12,054  |   |                   |   | 16,763  |   |
| Commitments      and Contingencies (Note 13)                             |   |                   |         |   |                   |   |   |   |
| Stockholders’      equity:                                         |   |                   |         |   |                   |   |   |   |
| Preferred      stock, par value $0.025 per share                         |   |                   |         |   |                   |   |   |   |
| Authorized      10,000 shares; none issued                               |   |                   | -            |   |                   |   | - |   |
| Common      stock, par value $0.025 per share                            |   |                   |         |   |                   |   |   |   |
| Authorized      150,000 shares; issued and outstanding 68,044 and 42,012 |   |                   |         |   |                   |   |   |   |
| shares      at December 31, 2008 and December 31, 2007, respectively     |   |                   | 1,701        |   |                   |   | 1,050 |   |
| Additional      paid-in capital                                          |   |                   | 353,420      |   |                   |   | 341,822 |   |
| Accumulated      deficit                                                 |   |                   | (322,424     | )      |                   |   | (288,148 | ) |
| Accumulated      other comprehensive income (loss)                       |   |                   | 17           |   |                   |   | (117 | ) |
| Total      stockholders’ equity                                    |   |                   | 32,714       |   |                   |   | 54,607 |   |
| Total      liabilities and stockholders’ equity                    |   | $                      | 44,768       |   |                   | $      | 71,370 |   |
|                                                                     |   |                   |         |   |                   |   |   |   |
| See      accompanying notes to consolidated financial statements.        |   |                   |         |   |                   |   |   |   |

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CONSOLIDATED STATEMENTS OF OPERATIONS 

|                                                                                                         |   | For      the Years Ended December 31, |    |
|--------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|---------|
|                                                                                                         |   |                                  |    |   |   |   |   |   |   |
|                                                                                                         |   | 2008                                  |    |   | 2007 |   |   | 2006 |   |
| Operating      revenues:                                                                                     |   |                                  |    |   |   |   |   |   |   |
| License      fees                                                                                            |   | $                                     | -       |   |   | $ | 10,872 |   |   | $ | 4,467 |   |
| Research      and development                                                                                |   |                                  | -       |   |   |   | 4,565 |   |   |   | 5,346 |   |
| Sale      of compound library                                                                                |   |                                  | 3,000   |   |   |   | - |   |   |   | - |   |
| Total      operating revenues                                                                                |   |                                  | 3,000   |   |   |   | 15,437 |   |   |   | 9,813 |   |
|                                                                                                         |   |                                  |    |   |   |   |   |   |   |   |   |   |
| Operating      expenses:                                                                                     |   |                                  |    |   |   |   |   |   |   |   |   |   |
| Research      and development                                                                                |   |                                  | 31,643  |   |   |   | 60,973 |   |   |   | 55,853 |   |
| General      and administrative                                                                              |   |                                  | 7,118   |   |   |   | 12,772 |   |   |   | 11,560 |   |
| Restructuring      and asset impairment charges                                                              |   |                                  | 16,078  |   |   |   | - |   |   |   | - |   |
| Total      operating expenses                                                                                |   |                                  | 54,839  |   |   |   | 73,745 |   |   |   | 67,413 |   |
| Operating      loss                                                                                          |   |                                  | (51,839 | ) |   |   | (58,308 | ) |   |   | (57,600 | ) |
| Gain      on warrants to purchase common stock                                                               |   |                                  | 16,700  |   |   |   | - |   |   |   | - |   |
| Other      income (expense):                                                                                 |   |                                  |    |   |   |   |   |   |   |   |   |   |
| Investment      and other income                                                                             |   |                                  | 1,149   |   |   |   | 3,076 |   |   |   | 3,360 |   |
| Interest      expense                                                                                        |   |                                  | (524    | ) |   |   | (750 | ) |   |   | (841 | ) |
| Total      other income, net                                                                                 |   |                                  | 625     |   |   |   | 2,326 |   |   |   | 2,519 |   |
| Loss      before income taxes                                                                                |   |                                  | (34,514 | ) |   |   | (55,982 | ) |   |   | (55,081 | ) |
| Income      tax benefit                                                                                      |   |                                  | 238     |   |   |   | 276 |   |   |   | 1,305 |   |
| Net      loss                                                                                                |   |                                  | (34,276 | ) |   |   | (55,706 | ) |   |   | (53,776 | ) |
| Deemed      preferred dividends                                                                              |   |                                  | (30,620 | ) |   |   | - |   |   |   | - |   |
| Net      loss attributable to common stockholders                                                            |   | $                                     | (64,896 | ) |   | $ | (55,706 | ) |   | $ | (53,776 | ) |
| Basic      and diluted loss per share attributable to common    stockholders                                 |   | $                                     | (1.22   | ) |   | $ | (1.33 | ) |   | $ | (1.55 | ) |
|                                                                                                         |   |                                  |    |   |   |   |   |   |   |   |   |   |
| Shares      used in calculation of basic and diluted loss per share attributable to      common stockholders |   |                                  | 53,357  |   |   |   | 41,864 |   |   |   | 34,789 |   |
|                                                                                                         |   |                                  |    |   |   |   |   |   |   |   |   |   |
| See      accompanying notes to consolidated financial statements.                                            |   |

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY ANDCOMPREHENSIVE LOSS

|                                                                                                                       |   | Common      Stock |   |   |        |   |   |                                      |   |   |                           |   |   |                             |     |   |                                                                               |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|--------|--------|--------|--------|--------------------------------------|--------|--------|--------------------------------|--------|--------|----------------------------------|----------|--------|-------------------------------------------------------------------------------|--------|
|                                                                                                                       |   | Shares            |   |   | Amount |   |   |        AdditionalPaid-inCapital |   |   |        AccumulatedDeficit |   |   |        DeferredCompensation |     |   |           AccumulatedOtherComprehensiveIncome      (Loss) |   |   |        Total |   |
|                                                                                                                       |
| Balance      at December 31, 2005                                                                                          |   |              | 34,617 |   |   | $      | 865    |                                 |   | $      | 294,436                        |   |   | $                                | (178,666 | )      |                                                                          | $      | (483 | ) |   | $ | (1,644 | ) |   | $ | 114,508 |   |
|                                                                                                                       |   |              |   |   |   |   |   |                                 |   |   |                           |   |   |                             |     |   |                                                                          |   |   |   |   |   |   |   |   |   |   |   |
| Stock      issued in public offering, net of offering expenses of $2.8      million                                        |   |              | 6,993  |   |   |   | 175    |                                 |   |   | 37,038                         |   |   |                             | -        |   |                                                                          |   | - |   |   |   | - |   |   |   | 37,213 |   |
| Recognition      of compensation expense on restricted stock                                                               |   |              | -      |   |   |   | -      |                                 |   |   | 381                            |   |   |                             | -        |   |                                                                          |   | - |   |   |   | - |   |   |   | 381 |   |
| Reclassification      of deferred compensation to Additional Paid-in Capital related to the      adoption of SFAS No. 123R |   |              | -      |   |   |   | -      |                                 |   |   | (483                           | )      |   |                             | -        |   |                                                                          |   | 483 |   |   |   | - |   |   |   | - |   |
| Issuance      of stock options to consultants                                                                              |   |              | -      |   |   |   | -      |                                 |   |   | 39                             |   |   |                             | -        |   |                                                                          |   | - |   |   |   | - |   |   |   | 39 |   |
| Exercise      of stock options                                                                                             |   |              | 17     |   |   |   | -      |                                 |   |   | 65                             |   |   |                             | -        |   |                                                                          |   | - |   |   |   | - |   |   |   | 65 |   |
| Stock      issued for 401(k) match                                                                                         |   |              | 147    |   |   |   | 4      |                                 |   |   | 896                            |   |   |                             | -        |   |                                                                          |   | - |   |   |   | - |   |   |   | 900 |   |
| Compensation      expense                                                                                                  |   |              | -      |   |   |   | -      |                                 |   |   | 4,423                          |   |   |                             | -        |   |                                                                          |   | - |   |   |   | - |   |   |   | 4,423 |   |
| Comprehensive      loss:                                                                                                   |   |              |   |   |   |   |   |                                 |   |   |                           |   |   |                             |     |   |                                                                          |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss                                                                                                              |   |              | -      |   |   |   | -      |                                 |   |   | -                              |   |   |                             | (53,776  | )      |                                                                          |   | - |   |   |   | - |   |   |   | (53,776 | ) |
| Change      in unrealized loss on marketable securities                                                                    |   |              | -      |   |   |   | -      |                                 |   |   | -                              |   |   |                             | -        |   |                                                                          |   | - |   |   |   | 787 |   |   |   | 787 |   |
| Total      comprehensive loss                                                                                              |   |              |   |   |   |   |   |                                 |   |   |                           |   |   |                             |     |   |                                                                          |   |   |   |   |   |   |   |   |   | (52,989 | ) |
| Balance      at December 31, 2006                                                                                          |   |              | 41,774 |   |   |   | 1,044  |                                 |   |   | 336,795                        |   |   |                             | (232,442 | )      |                                                                          |   | - |   |   |   | (857 | ) |   |   | 104,540 |   |
|                                                                                                                       |   |              |   |   |   |   |   |                                 |   |   |                           |   |   |                             |     |   |                                                                          |   |   |   |   |   |   |   |   |   |   |   |
| Recognition      of compensation expense on restricted stock                                                               |   |              | -      |   |   |   | -      |                                 |   |   | 65                             |   |   |                             | -        |   |                                                                          |   | - |   |   |   | - |   |   |   | 65 |   |
| Exercise      of stock options                                                                                             |   |              | 83     |   |   |   | 2      |                                 |   |   | 310                            |   |   |                             | -        |   |                                                                          |   | - |   |   |   | - |   |   |   | 312 |   |
| Stock      issued for 401(k) match                                                                                         |   |              | 155    |   |   |   | 4      |                                 |   |   | 913                            |   |   |                             | -        |   |                                                                          |   | - |   |   |   | - |   |   |   | 917 |   |
| Compensation      expense                                                                                                  |   |              | -      |   |   |   | -      |                                 |   |   | 3,739                          |   |   |                             | -        |   |                                                                          |   | - |   |   |   | - |   |   |   | 3,739 |   |
| Comprehensive      loss:                                                                                                   |   |              |   |   |   |   |   |                                 |   |   |                           |   |   |                             |     |   |                                                                          |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss                                                                                                              |   |              | -      |   |   |   | -      |                                 |   |   | -                              |   |   |                             | (55,706  | )      |                                                                          |   | - |   |   |   | - |   |   |   | (55,706 | ) |
| Change      in unrealized loss on marketable securities                                                                    |   |              | -      |   |   |   | -      |                                 |   |   | -                              |   |   |                             | -        |   |                                                                          |   | - |   |   |   | 740 |   |   |   | 740 |   |
| Total      comprehensive loss                                                                                              |   |              |   |   |   |   |   |                                 |   |   |                           |   |   |                             |     |   |                                                                          |   |   |   |   |   |   |   |   |   | (54,966 | ) |
| Balance      at December 31, 2007                                                                                          |   |              | 42,012 |   |   |   | 1,050  |                                 |   |   | 341,822                        |   |   |                             | (288,148 | )      |                                                                          |   | - |   |   |   | (117 | ) |   |   | 54,607 |   |
|                                                                                                                       |   |              |   |   |   |   |   |                                 |   |   |                           |   |   |                             |     |   |                                                                          |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock upon conversion of preferred stock                                                           |   |              | 25,517 |   |   |   | 638    |                                 |   |   | 29,982                         |   |   |                             | -        |   |                                                                          |   | - |   |   |   | - |   |   |   | 30,620 |   |
| Recognition      of the beneficial conversion feature                                                                      |   |              | -      |   |   |   | -      |                                 |   |   | 10,301                         |   |   |                             | -        |   |                                                                          |   | - |   |   |   | - |   |   |   | 10,301 |   |
| Amortization      of the beneficial conversion feature                                                                     |   |              | -      |   |   |   | -      |                                 |   |   | (10,301                        | )      |   |                             | -        |   |                                                                          |   | - |   |   |   | - |   |   |   | (10,301 | ) |
| Warrants                                                                                                                   |   |              | -      |   |   |   | -      |                                 |   |   | 1,372                          |   |   |                             | -        |   |                                                                          |   | - |   |   |   | - |   |   |   | 1,372 |   |
| Accretion      of warrants and issuance costs                                                                              |   |              | -      |   |   |   | -      |                                 |   |   | (20,319                        | )      |   |                             | -        |   |                                                                          |   | - |   |   |   | - |   |   |   | (20,319 | ) |
| Recognition      of compensation expense on restricted stock                                                               |   |              | -      |   |   |   | -      |                                 |   |   | 39                             |   |   |                             | -        |   |                                                                          |   | - |   |   |   | - |   |   |   | 39 |   |
| Stock      issued for 401(k) match                                                                                         |   |              | 515    |   |   |   | 13     |                                 |   |   | 628                            |   |   |                             | -        |   |                                                                          |   | - |   |   |   | - |   |   |   | 641 |   |
| Compensation      expense                                                                                                  |   |              | -      |   |   |   | -      |                                 |   |   | (104                           | )      |   |                             | -        |   |                                                                          |   | - |   |   |   | - |   |   |   | (104 | ) |
| Comprehensive      loss:                                                                                                   |   |              |   |   |   |   |   |                                 |   |   |                           |   |   |                             |     |   |                                                                          |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss                                                                                                              |   |              | -      |   |   |   | -      |                                 |   |   | -                              |   |   |                             | (34,276  | )      |                                                                          |   | - |   |   |   | - |   |   |   | (34,276 | ) |
| Change      in unrealized loss on marketable securities                                                                    |   |              | -      |   |   |   | -      |                                 |   |   | -                              |   |   |                             | -        |   |                                                                          |   | - |   |   |   | 134 |   |   |   | 134 |   |
| Total      comprehensive loss                                                                                              |   |              |   |   |   |   |   |                                 |   |   |                           |   |   |                             |     |   |                                                                          |   |   |   |   |   |   |   |   |   | (34,142 | ) |
| Balance      at December 31, 2008                                                                                          |   |              | 68,044 |   |   | $      | 1,701  |                                 |   | $      | 353,420                        |   |   | $                                | (322,424 | )      |                                                                          | $      | - |   |   | $ | 17 |   |   | $ | 32,714 |   |
|                                                                                                                       |   |              |   |   |   |   |   |                                 |   |   |                           |   |   |                             |     |   |                                                                          |   |   |   |   |   |   |   |   |   |   |   |
| See      accompanying notes to consolidated financial statements.                                                          |   |

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CASH FLOWS 

|                                                                                                          |   | For      the Years Ended December 31, |    |
|---------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|---------|
|                                                                                                          |   |                                  |    |   |   |   |   |   |   |
|                                                                                                          |   | 2008                                  |    |   | 2007 |   |   | 2006 |   |
| Cash      flows from operating activities:                                                                    |   |                                  |    |   |   |   |   |   |   |
| Net      loss                                                                                                 |   | $                                     | (34,276 | ) |   | $ | (55,706 | ) |   | $ | (53,776 | ) |
| Adjustments      to reconcile net loss to net cash used in operating      activities:                         |   |                                  |    |   |   |   |   |   |   |   |   |   |
| Depreciation      expense                                                                                     |   |                                  | 913     |   |   |   | 2,281 |   |   |   | 2,356 |   |
| Amortization      of investment premium/discount                                                              |   |                                  | 75      |   |   |   | 164 |   |   |   | 539 |   |
| Non-cash      compensation expense                                                                            |   |                                  | (32     | ) |   |   | 3,845 |   |   |   | 4,922 |   |
| Non-cash      gain on warrants to purchase common stock                                                       |   |                                  | (16,700 | ) |   |   | - |   |   |   | - |   |
| 401(k)      match expense                                                                                     |   |                                  | 641     |   |   |   | 917 |   |   |   | 900 |   |
| Impairment      loss on assets held for sale                                                                  |   |                                  | 10,964  |   |   |   | - |   |   |   | - |   |
| Loss      on disposal of assets                                                                               |   |                                  | 164     |   |   |   | 105 |   |   |   | 171 |   |
| Changes      in operating assets and liabilities:                                                             |   |                                  |    |   |   |   |   |   |   |   |   |   |
| Decrease      (increase) in receivables from corporate partners                                               |   |                                  | 127     |   |   |   | 21 |   |   |   | (52 | ) |
| Decrease      (increase) in other assets, net                                                                 |   |                                  | 1,615   |   |   |   | (239 | ) |   |   | 26 |   |
| (Decrease)      increase in accounts payable and accrued expenses                                             |   |                                  | (3,232  | ) |   |   | (694 | ) |   |   | 2,127 |   |
| (Decrease)      increase in unearned revenue from corporate partners                                          |   |                                  | -       |   |   |   | (14,288 | ) |   |   | 250 |   |
| Net      cash used in operating activities                                                                    |   |                                  | (39,741 | ) |   |   | (63,594 | ) |   |   | (42,537 | ) |
| Cash      flows from investing activities:                                                                    |   |                                  |    |   |   |   |   |   |   |   |   |   |
| Purchases      of property, plant and equipment                                                               |   |                                  | (237    | ) |   |   | (822 | ) |   |   | (1,344 | ) |
| Purchases      of marketable securities                                                                       |   |                                  | 1,507   |   |   |   | - |   |   |   | - |   |
| Maturities      and sales of marketable securities                                                            |   |                                  | 14,454  |   |   |   | 30,615 |   |   |   | 52,966 |   |
| Net      cash provided by investing activities                                                                |   |                                  | 15,724  |   |   |   | 29,793 |   |   |   | 51,622 |   |
| Cash      flows from financing activities:                                                                    |   |                                  |    |   |   |   |   |   |   |   |   |   |
| Principal      payments under loans payable                                                                   |   |                                  | (1,477  | ) |   |   | (1,454 | ) |   |   | (1,434 | ) |
| Exercise      of employee stock options                                                                       |   |                                  | -       |   |   |   | 312 |   |   |   | 65 |   |
| Proceeds      from issuance of Series A Preferred Stock, net of issuance      costs                           |   |                                  | 28,373  |   |   |   | - |   |   |   | - |   |
| Proceeds      from sale of common stock                                                                       |   |                                  | -       |   |   |   | - |   |   |   | 37,213 |   |
| Net      cash provided by (used in) financing activities                                                      |   |                                  | 26,896  |   |   |   | (1,142 | ) |   |   | 35,844 |   |
| Net      increase (decrease) in cash and cash equivalents                                                     |   |                                  | 2,879   |   |   |   | (34,943 | ) |   |   | 44,929 |   |
| Cash      and cash equivalents at beginning of period                                                         |   |                                  | 21,227  |   |   |   | 56,170 |   |   |   | 11,241 |   |
| Cash      and cash equivalents at end of period                                                               |   | $                                     | 24,106  |   |   | $ | 21,227 |   |   | $ | 56,170 |   |
|                                                                                                          |   |                                  |    |   |   |   |   |   |   |   |   |   |
|                                                                                                          |   |
| SUPPLEMENTAL      INFORMATION                                                                                 |   |
| Non-cash      financing activities:                                                                           |   |
| See      Notes 3 and 4 to consolidated financial statements for significant      non-cash activities in 2008. |   |
|                                                                                                          |   |
| See      accompanying notes to consolidated financial statements.                                             |   |                                  |    |   |   |   |   |   |   |   |   |   |

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

| §   | delay,      reduce the scope of or eliminate some or all of our development      programs; |
|--------------------|--------------------------------------------------------------------------------------------|

| §   | relinquish      greater or all rights to product candidates at an earlier stage of      development or on less favorable terms than we would otherwise      choose; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | eliminate      or defer the start of clinical trials or the chemical formulation and      manufacturing efforts required to advance drug      candidates; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | sell      some or all of our capital assets and lease back a portion;      and |
|--------------------|--------------------------------------------------------------------------------|

| §   | pursue      merger and acquisitionstrategies. |
|--------------------|-----------------------------------------------|

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| §   | Level      1 - Quoted prices in active markets for identical assets or      liabilities. |
|--------------------|------------------------------------------------------------------------------------------|

| §   | Level      2 - Inputs other than Level 1 that are observable, either directly or      indirectly, such as quoted prices for similar assets or liabilities;      quoted prices in markets that are not active; or other inputs that are      observable or can be corroborated by observable market data for      substantially the full term of the assets or liabilities.  See      Note 6. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| §   | Level      3 - Unobservable inputs that are supported by little or no market activity      and that are significant to the fair value of the assets or      liabilities.   |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| §   | a      significant adverse change in the extent or manner in which a long-lived      asset is beingused; |
|--------------------|----------------------------------------------------------------------------------------------------------|

| §   | a      significant adverse change in the business climate that could affect the      value of a long-lived asset;and |
|--------------------|----------------------------------------------------------------------------------------------------------------------|

| §   | a      significant decrease in market value of      assets. |
|--------------------|-------------------------------------------------------------|

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| §   | The      expected term of options granted represents the period of time that option      grants are expected to be outstanding. In 2008 the employee stock      grants were granted with quarterly vesting for which no historical data      existed. Given that the grants were made at a price that was unprecedently      low and there was no history available for this type of vesting the      simplified method was used to determine the expected term of these      grants.  The expected term for Board of Directors grants was      calculated based upon historical      analysis.   |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Forfeitures      of options are estimated based upon historical data and are adjusted based      upon actualoccurrences.  |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------|

| §   | In      predicting expected volatility, assumptions were based solely upon      historical volatilities of the Company’s stock, over a period equal to the      expected term of the related equity instruments. The Company relies only      on historical volatility since future volatility is expected to be      consistent withhistorical. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Under      SFAS 123R, the Company has separated optionees into two groupings based      upon historical analysis of the exercise behavior of those groupings:      first, management and the Board of Directors, and, second, non-management      employees. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | The      risk-free rate utilized when valuing share-based payment arrangements is      based on the U.S. Treasury yield curve in effect at the time of grant for      the expected term of the option being      valued. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Management’s      selection of the valuation components such as the Black-Scholes pricing      method, interest rate and volatility are consistent with the approach      utilized when reporting pursuant to the disclosure provisions of SFAS No.      123. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                   |   |  Preferred Stock |    |
|--------------------------------------------------------|--------|-----------------------|---------|
| Balance,      April 7, 2008                            |   | $                     | 10,301  |   |
| Accretion      of Warrant and issuance costs           |   |                  | 20,319  |   |
| Recognition      of the beneficial conversion feature  |   |                  | (10,301 | ) |
| Amortization      of the beneficial conversion feature |   |                  | 10,301  |   |
| Conversion      of Preferred Stock into Common Stock   |   |                  | (30,620 | ) |
| Balance,      December 31, 2008:                       |   | $                     | -       |   |

|                         | Year      EndedDecember      31, 2008 |
|------------------------------|---------------------------------------|
|                         |                                  |
| Expected      life           | 4.7-5      years                      |
| Risk-free      interest rate | 2.75-3.45%                            |
| Volatility                   | 76-84%                                |
| Expected      dividend yield | 0%                                    |

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|                              |   | Asset      Impairment |    |   | Severance      and Related Costs |   |   | Other      RestructuringCosts |   |   | Total  |   |
|-----------------------------------|--------|-----------------------|---------|--------|----------------------------------|--------|--------|-------------------------------|--------|--------|--------|--------|
|                              |   |                  |    |   |                             |   |   |                          |   |   |   |   |   |   |   |   |
| Accrual      balance, January 1   |   | $                     | -       |   |                             | $      | -      |                          |   | $      | -      |   |   | $ | - |   |
| Restructuring      charge         |   |                  | 10,964  |   |                             |   | 4,918  |                          |   |   | 196    |   |   |   | 16,078 |   |
| Subtotal                          |   |                  | 10,964  |   |                             |   | 4,918  |                          |   |   | 196    |   |   |   | 16,078 |   |
| Cash      payments                |   |                  | -       |   |                             |   | (4,896 | )                             |   |   | (195   | )      |   |   | (5,091 | ) |
| Non-cash      adjustments         |   |                  | (10,964 | )      |                             |   | -      |                          |   |   | -      |   |   |   | (10,964 | ) |
|                              |   |                  |    |   |                             |   |   |                          |   |   |   |   |   |   |   |   |
| Accrual      balance, December 31 |   | $                     | -       |   |                             | $      | 22     |                          |   | $      | 1      |   |   | $ | 23 |   |

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|                           |   | Level      1 |   |   | Level      2 |   |   | Level      3 |   |   | Total  |   |
|--------------------------------|--------|--------------|--------|--------|--------------|--------|--------|--------------|--------|--------|--------|--------|
|                           |   |         |   |   |         |   |   |         |   |   |   |   |
| U.S.      government notes     |   | $            | -      |   |         | $      | 1,513  |         |   | $      | -      |   |   | $ | 1,513 |   |
| Corporate      notes and bonds |   |         | -      |   |         |   | 5,454  |         |   |   | -      |   |   |   | 5,454 |   |
| Total                          |   | $            | -      |   |         | $      | 6,967  |         |   | $      | -      |   |   | $ | 6,967 |   |

|                           |   | December      31, 2008 |   |
|--------------------------------|--------|------------------------|--------|
|                           |   | Amortized      Cost    |   |   | Gross      Unrealized Gain |   |   | Gross      Unrealized Loss |   |   | Fair      Value |   |
|                           |   |                   |   |   |   |   |   |   |   |   |   |   |
| U.S.      government notes     |   | $                      | 1,500  |   |   | $ | 13 |   |   | $ | - |   |   | $ | 1,513 |   |
| Corporate      notes and bonds |   |                   | 5,450  |   |   |   | 5 |   |   |   | (1 | ) |   |   | 5,454 |   |
| Total                          |   | $                      | 6,950  |   |   | $ | 18 |   |   | $ | (1 | ) |   | $ | 6,967 |   |

|                           |   | December      31, 2007 |   |
|--------------------------------|--------|------------------------|--------|
|                           |   | Amortized      Cost    |   |   | Gross      Unrealized Gain |   |   | Gross      Unrealized Loss |   |   | Fair      Value |   |
|                           |   |                   |   |   |   |   |   |   |   |   |   |   |
| U.S.      government notes     |   | $                      | 2,499  |   |   | $ | 2 |   |   | $ | - |   |   | $ | 2,501 |   |
| Corporate      notes and bonds |   |                   | 18,980 |   |   |   | - |   |   |   | (119 | ) |   |   | 18,861 |   |
| Total                          |   | $                      | 21,479 |   |   | $ | 2 |   |   | $ | (119 | ) |   | $ | 21,362 |   |

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|                          |   | Amortized      Cost |   |   | Fair      Value |   |
|-------------------------------|--------|---------------------|--------|--------|-----------------|--------|
|                          |   |                |   |   |            |   |
| Less      than one year       |   | $                   | 6,950  |   |            | $      | 6,967 |   |
| Due      in 1 year or greater |   |                | -      |   |            |   | - |   |
| Total                         |   | $                   | 6,950  |   |            | $      | 6,967 |   |

|                                                            |   | Less      than 12 Months |   |   | 12      Months or More |   |   | Total           |   |
|-----------------------------------------------------------------|--------|--------------------------|--------|--------|------------------------|--------|--------|-----------------|--------|
| Description      of Securities                                  |   | Fair      Value          |   |   | UnrealizedLosses       |   |   | Fair      Value |   |   | Unrealized      Losses |   |   | Fair      Value |   |   | UnrealizedLosses |   |
|                                                            |   |                     |   |   |                   |   |   |            |   |   |   |   |   |   |   |   |   |   |
| U.S.      Government Obligations and Direct Obligations of U.S. |   | $                        | -      |   |                   | $      | -      |            |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Corporate      Bonds                                            |   |                     | 2,450  |   |                   |   | (1     | )               |   |   | - |   |   |   | - |   |   |   | 2,450 |   |   |   | (1 | ) |
|                                                            |   |                     |   |   |                   |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                           |   | $                        | 2,450  |   |                   | $      | (1     | )               |   | $ | - |   |   | $ | - |   |   | $ | 2,450 |   |   | $ | (1 | ) |

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|                                                 |   | Options |      |   | WeightedAverage      ExercisePrice |   |   | Weighted      Average Remaining Contractual Term |   |   | Aggregate      Intrinsic Value |   |
|------------------------------------------------------|--------|---------|-----------|--------|------------------------------------|--------|--------|--------------------------------------------------|--------|--------|--------------------------------|--------|
|                                                 |   |    |      |   |                               |   |   |                                             |   |   |                           |   |
| Outstanding      at January 1                        |   |    | 5,713,794 |   |                               | $      | 10.50  |                                             |   |   |                           |   |   |   |
| Granted                                              |   |    | 2,346,624 |   |                               |   | 1.19   |                                             |   |   |                           |   |   |   |
| Exercised                                            |   |    | -         |   |                               |   | -      |                                             |   |   |                           |   |   |   |
| Canceled                                             |   |    | 3,322,208 |   |                               |   | 10.01  |                                             |   |   |                           |   |   |   |
| Outstanding      at December 31                      |   |    | 4,738,210 |   |                               |   | 6.23   |                                             |   |   | 5.1                            |   |   |   | * |   |
| Options      exercisable at December 31              |   |    | 2,305,497 |   |                               | $      | 10.62  |                                             |   |   | 3.5                            |   |   |   | * |   |
|                                                 |   |    |      |   |                               |   |   |                                             |   |   |                           |   |   |   |   |   |
| *Aggregate      intrinsic value is less than $1,000. |   |    |      |   |                               |   |   |                                             |   |   |                           |   |   |

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|                         | Twelve      Months Ended December 31, |
|------------------------------|---------------------------------------|
|                         | 2008                                  |   | 2007 |   | 2006 |
|                         |                                  |   |   |   |   |
| Expected      life           | 4.6-6.5      years                    |   | 5.0-6.5      years |   | 5.0-6.5      years |
| Risk-free      interest rate | 1.7%-3.8%                             |   | 3.5%-5.0% |   | 4.5%      - 5.2% |
| Volatility                   | 77%-95%                               |   | 68%-73% |   | 73%      - 82% |
| Expected      dividend yield | 0%                                    |   | 0% |   | 0% |

|    Range      of Exercise Prices |                |   |   NumberOutstanding |      |      | Weighted      AverageRemainingContractual      Life(Yrs.) |   |   |  WeightedAverage      ExercisePrice |   |   |   NumberExercisable |   |   |  WeightedAverage      ExercisePrice |    |
|-------------------------------------------------|---------------------|--------|-------------------------------|-----------|-----------|-----------------------------------------------------------|--------|--------|------------------------------------------|--------|--------|-------------------------------|--------|--------|------------------------------------------|---------|
|                                            |                |   |                          |      |      |                                                      |   |   |                                     |   |   |                          |   |   |                                     |    |
| Less      than $4.99                            |                |   |                          | 2,713,209 |      |                                                      |   | 6.2    |                                     |   | $      | 1.57                          |   |   |                                     | 658,715 |   |   | $ | 2.47 |   |
| $                                               | 5.00      - $7.49   |   |                          |      | 672,748   |                                                      |   |   | 5.7                                      |   |   |                          | 6.22   |   |                                     |    | 317,176 |   |   |   | 6.26 |   |
| $                                               | 7.50      - $9.99   |   |                          |      | 693,944   |                                                      |   |   | 3.8                                      |   |   |                          | 8.86   |   |                                     |    | 671,297 |   |   |   | 8.89 |   |
| $                                               | 10.00      - $14.99 |   |                          |      | 117,850   |                                                      |   |   | 1.2                                      |   |   |                          | 12.20  |   |                                     |    | 117,850 |   |   |   | 12.20 |   |
| $                                               | 15.00      - $19.99 |   |                          |      | 235,143   |                                                      |   |   | 1.4                                      |   |   |                          | 16.54  |   |                                     |    | 235,143 |   |   |   | 16.54 |   |
| $                                               | 20.00      - $24.99 |   |                          |      | 70,700    |                                                      |   |   | 1.6                                      |   |   |                          | 22.07  |   |                                     |    | 70,700 |   |   |   | 22.07 |   |
| $                                               | 25.00      - $29.99 |   |                          |      | 30,200    |                                                      |   |   | 1.1                                      |   |   |                          | 27.92  |   |                                     |    | 30,200 |   |   |   | 27.92 |   |
| $                                               | 30.00      - $34.99 |   |                          |      | 19,750    |                                                      |   |   | 1.6                                      |   |   |                          | 32.21  |   |                                     |    | 19,750 |   |   |   | 32.21 |   |
| $                                               | 35.00      - $39.99 |   |                          |      | 184,666   |                                                      |   |   | 1.7                                      |   |   |                          | 35.44  |   |                                     |    | 184,666 |   |   |   | 35.44 |   |
|                                            |                |   |                          |      |      |                                                      |   |   |                                     |   |   |                          |   |   |                                     |    |   |   |   |   |   |   |
|                                            |                |   |                          |      | 4,738,210 |                                                      |   |   | 5.1                                      |   |   | $                             | 6.23   |   |                                     |    | 2,305,497 |   |   | $ | 10.62 |   |

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|                            |   | Restricted      Stock |    |   | WeightedAverageGrant      DateFair      Value |   |
|---------------------------------|--------|-----------------------|---------|--------|-----------------------------------------------|--------|
|                            |   |                  |    |   |                                          |   |   |   |
| Outstanding      at January 1   |   |                  | 25,000  |   |                                          | $      | 6.23 |   |
| Granted                         |   |                  | -       |   |                                          |   | - |   |
| Vested                          |   |                  | (25,000 | )      |                                          |   | 6.23 |   |
| Canceled                        |   |                  | -       |   |                                          |   | - |   |
| Outstanding      at December 31 |   | $                     | -       |   |                                          | $      | - |   |

|                                           |   | 2008   |   |   | 2007   |   |   | 2006   |   |
|------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                           |   |   |   |   |   |   |   |   |   |
| Restricted      stock (net of cancellations)   |   | $      | 39     |   |   | $      | 65     |   |   | $ | 381 |   |
| Options      granted to consultants            |   |   | -      |   |   |   | -      |   |   |   | 39 |   |
| FAS      123R expense                          |   |   | (104   | )      |   |   | 3,739  |   |   |   | 4,423 |   |
| Total      non-cash stock compensation expense |   | $      | (65    | )      |   | $      | 3,804  |   |   | $ | 4,843 |   |

|                                             |   | 2008   |   |   | 2007   |   |
|--------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                             |   |   |   |   |   |   |
| Accounts      payable and other accrued expenses |   | $      | 3,690  |   |   | $      | 5,653 |   |
| Accrued      employee compensation               |   |   | 865    |   |   |   | 2,134 |   |
|                                             |   |   |   |   |   |   |   |   |
|                                             |   | $      | 4,555  |   |   | $      | 7,787 |   |

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| Lender                             | Date               |   | Interest      Rate(per      annum) |     |   | Original      Principal Amount |   |   | Outstanding      Principal Amount |   | Maturity      Date |
|------------------------------------|--------------------|--------|------------------------------------|----------|--------|--------------------------------|--------|--------|-----------------------------------|--------|--------------------|
|                               |               |   |                               |     |   | (in      thousands)            |   |   |
| Connecticut      Innovations, Inc. | October      1999  |   |                               | 7.5      | %      |                           | $      | 5,000  |                              |   | $                  | 3,141 |   | April      2016 |
| Webster      Bank                  | December      2001 |   |                               | 3.9%-7.4 | %      |                           | $      | 17,500 |                              |   | $                  | 4,358 |   | December      2011 |
|                               |               |   |                               |     |   |                           |   |   |                              |   |               |   |   |   |

|       |   | In      Thousands |   |
|------------|--------|-------------------|--------|
|       |   |              |   |
| 2009       |   |              | 4,692  |   |
| 2010       |   |              | 360    |   |
| 2011       |   |              | 388    |   |
| 2012       |   |              | 418    |   |
| 2013       |   |              | 450    |   |
| Thereafter |   |              | 1,191  |   |
|       |   |              |   |   |
|       |   | $                 | 7,499  |   |

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|                                          |   | 2008   |              |   | 2007   |   |    | 2006   |   |
|-----------------------------------------------|--------|--------|-------------------|--------|--------|--------|---------|--------|--------|
|                                          |   |   |              |   |   |   |    |   |   |
| Expected      tax benefit at 34%              |   | $      | (11,758           | )      |   | $      | (19,034 | )      |   | $ | (18,728 | ) |
| State      tax benefit net of federal benefit |   |   | (3,083            | )      |   |   | (3,244  | )      |   |   | (3,879 | ) |
| R      & D credit                         |   |   | (1,495            | )      |   |   | (2,378  | )      |   |   | (833 | ) |
| Stock      options and restricted stock       |   |   | 598               |   |   |   | 818     |   |   |   | 2,055 |   |
| Gain      on sale of warrants                 |   |   | (5,678            | )      |   |   |  - |   |   |   | -  |   |
| Federal      NOL expiration                   |   |   |        1,339 |   |   |   | -  |   |   |   | -  |   |
| Other                                         |   |   | 80                |   |   |   | 93      |   |   |   | 25 |   |
| Change      in valuation allowance            |   |   | 19,759            |   |   |   | 23,469  |   |   |   | 20,055 |   |
|                                          |   |   |              |   |   |   |    |   |   |   |   |   |
| Tax      benefit                              |   | $      | (238              | )      |   | $      | (276    | )      |   | $ | (1,305 | ) |

|                                                 |   | 2008   |     |   | 2007   |   |
|------------------------------------------------------|--------|--------|----------|--------|--------|--------|
|                                                 |   |   |     |   |   |   |
| Deferred      Tax Assets:                            |   |   |     |   |   |   |
| Federal      tax operating loss carryforwards        |   | $      | 108,499  |   |   | $      | 94,474 |   |
| State      tax operating loss carryforwards          |   |   | 14,164   |   |   |   | 11,928 |   |
| Research      & development credit carryforwards |   |   | 21,310   |   |   |   | 19,374 |   |
| Alternative      minimum tax credit carryforwards    |   |   | 233      |   |   |   | 233 |   |
| Capitalized      R&D                             |   |   | 8,994    |   |   |   | 10,493 |   |
|    Depreciation                       |   |   | 3,739    |   |   |   | -  |   |
| Deferred      compensation                           |   |   | 1,015    |   |   |   | 1,784 |   |
| Accrued      expenses                                |   |   | 414      |   |   |   | 794 |   |
| Unrealized      loss (gain) on investments           |   |   | (6       | )      |   |   | 46 |   |
| Other                                                |   |   | 206      |   |   |   | 388 |   |
| Gross      deferred asset                            |   |   | 158,568  |   |   |   | 139,514 |   |
| Valuation      allowance                             |   |   | (158,568 | )      |   |   | (138,861 | ) |
| Net      deferred asset                              |   |   | -        |   |   |   | 653 |   |
|                                                 |   |   |     |   |   |   |   |   |
| Deferred      Tax Liability:                         |   |   |     |   |   |   |   |   |
| Depreciation                                         |   |   | -        |   |   |   | (653 | ) |
|                                                 |   |   |     |   |   |   |   |   |
| Net      asset/liability                             |   | $      | -        |   |   | $      | - |   |

Table of Contents

----

|                            |   | 2008   |    |   | 2007   |   |
|---------------------------------|--------|--------|---------|--------|--------|--------|
|                            |   |   |    |   |   |   |
| Income      tax provision       |   | $      | 146,916 |   |   | $      | 127,157 |   |
| Other      comprehensive income |   |   | (6      | )      |   |   | 46 |   |
| Additional      paid-in-capital |   |   | 11,658  |   |   |   | 11,658 |   |
|                            |   |   |    |   |   |   |   |   |
|                            |   | $      | 158,568 |   |   | $      | 138,861 |   |

Table of Contents

----

Table of Contents

----

Table of Contents

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|                                                                         |   | FirstQuarter |    |   | SecondQuarter |   |    | ThirdQuarter |   |   | FourthQuarter |   |
|------------------------------------------------------------------------------|--------|--------------|---------|--------|---------------|--------|---------|--------------|--------|--------|---------------|--------|
| 2008                                                                         |   |         |    |   |          |   |    |         |   |   |          |   |
| Total      revenue                                                           |   | $            | -       |   |          | $      | -       |         |   | $      | -             |   |   | $ | 3,000 |   |
| Total      expenses                                                          |   | $            | 16,707  |   |          | $      | 18,591  |         |   | $      | 11,417        |   |   | $ | 8,124 |   |
| Changes      in fair value of warrants to purchase common stock              |   | $            | -       |   |          | $      | 11,954  |         |   | $      | 4,746         |   |   | $ | - |   |
| Other      income, net                                                       |   | $            | 166     |   |          | $      | 180     |         |   | $      | 121           |   |   | $ | 158 |   |
| Income      tax benefit                                                      |   | $            | 23      |   |          | $      | 23      |         |   | $      | 23            |   |   | $ | 169 |   |
| Net      loss                                                                |   | $            | (16,518 | )      |          | $      | (6,434  | )            |   | $      | (6,527        | )      |   | $ | (4,797 | ) |
| Deemed      preferred dividends                                              |   | $            | -       |   |          | $      | (5,407  | )            |   | $      | (25,213       | )      |   | $ | - |   |
| Net      loss attributable to common stockholders                            |   | $            | (16,518 | )      |          | $      | (11,841 | )            |   | $      | (31,740       | )      |   | $ | (4,797 | ) |
| Basic      and diluted loss per share attributable to common    stockholders |   | $            | (0.39   | )      |          | $      | (0.28   | )            |   | $      | (0.52         | )      |   | $ | (0.07 | ) |
|                                                                         |   |         |    |   |          |   |    |         |   |   |          |   |   |   |   |   |
| 2007                                                                         |   |         |    |   |          |   |    |         |   |   |          |   |   |   |   |   |
| Total      revenue                                                           |   | $            | 2,405   |   |          | $      | 5,533   |         |   | $      | 7,499         |   |   | $ | - |   |
| Total      expenses                                                          |   | $            | 22,680  |   |          | $      | 19,846  |         |   | $      | 15,947        |   |   | $ | 15,272 |   |
| Other      income, net                                                       |   | $            | 884     |   |          | $      | 562     |         |   | $      | 517           |   |   | $ | 363 |   |
| Income      tax benefit                                                      |   | $            | 111     |   |          | $      | 112     |         |   | $      | 42            |   |   | $ | 11 |   |
| Net      loss                                                                |   | $            | (19,280 | )      |          | $      | (13,639 | )            |   | $      | (7,889        | )      |   | $ | (14,898 | ) |
| Basic      and diluted earnings per share                                    |   | $            | (0.46   | )      |          | $      | (0.33   | )            |   | $      | (0.19         | )      |   | $ | (0.36 | ) |

18. SUBSEQUENTEVENT 

Table of Contents

----

 EXHIBITINDEX

| EXHIBITNUMBER     | DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                                                    |
|-------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.1               | Restated      Certificate of Incorporation, filed July 7, 1994 (incorporated by      reference to Exhibit 4.1 to Registration Statement No. 33-81268 on Form      S-8).                                                                                                                                                                                                                                        |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.2               | By-Laws,      as amended (incorporated by reference to Exhibit 3.6 to the Company's Form      10-K for the fiscal year ended December 31, 1993).                                                                                                                                                                                                                                                               |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.3               | Restated      Certificate of Incorporation, as amended effective June 8, 2007      (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q for      the quarterly period ended June 30, 2007).                                                                                                                                                                                              |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.4               | Amendment      to Restated Certificate of Incorporation, effective July 31, 2008      (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed      on July 31, 2008).                                                                                                                                                                                                                  |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.5               | Certificate      of Designations, Number, Voting Powers, Preferences and Rights of Series A      Exchangeable Preferred Stock of Neurogen Corporation, filed April 10, 2008      (incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K filed      on April 11, 2008).                                                                                                                      |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.1               | Registration      Rights Agreement, dated April 7, 2008, by and between Neurogen Corporation      and certain selected institutional investors listed on Exhibit A thereof      (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed      on April 11, 2008).                                                                                                                       |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.1              | Neurogen      Corporation 1993 Omnibus Incentive Plan, as amended (incorporated by      reference to Exhibit 10.3 to the Company's Form 10-K for the fiscal year      ended December 31, 1993).                                                                                                                                                                                                                |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.2              | Form      of Stock Option Agreement currently used in connection with the grant of      options under Neurogen Corporation 1993 Omnibus Incentive Plan      (incorporated by reference to Exhibit 10.4 to the Company's Form 10-K for      the fiscal year ended December 31, 1993).                                                                                                                           |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.3              | Neurogen      Corporation 1993 Non-Employee Directors Stock Option Program (incorporated      by reference to Exhibit 10.5 to the Company's Form 10-K for the fiscal      year ended December 31, 1993).                                                                                                                                                                                                       |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.4              | Form      of Stock Option Agreement currently used in connection with the grant of      options under Neurogen Corporation 1993 Non-Employee Directors Stock      Option Program (incorporated by reference to Exhibit 10.6 to the Company's      Form 10-K for the fiscal year ended December 31, 1993).                                                                                                      |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.5              | Form      of Proprietary Information and Inventions Agreement (incorporated by      reference to Exhibit 10.31 to Registration Statement No. 33-29709 on Form      S-1).                                                                                                                                                                                                                                       |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.6              | Collaborative      Research Agreement and License and Royalty Agreement between the Company      and Pfizer Inc, dated as of January 1, 1992 (CONFIDENTIAL TREATMENT      REQUESTED) (incorporated by reference to Exhibit 10.35 to the Company's      Form 10-K for the fiscal year ended December 31, 1991).                                                                                                 |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.7              | Collaborative      Research Agreement and License and Royalty Agreement between the Company      and Pfizer Inc, dated as of July 1, 1994 (CONFIDENTIAL TREATMENT      REQUESTED) (incorporated by reference of Exhibit 10.1 to the Company's      Form 10-Q for the quarterly period ended June 30,1994).                                                                                                     |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.8              | Stock      Purchase Agreement between the Company and Pfizer dated as of July 1, 1994      (incorporated by reference to Exhibit 10.2 to the Company's Form 10-Q for      the quarterly period ended June 30, 1994).                                                                                                                                                                                           |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.9              | Collaboration      and License Agreement and Screening Agreement between the Company and      Schering-Plough Corporation (CONFIDENTIAL TREATMENT REQUESTED)      (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K dated      July 28, 1995).                                                                                                                                              |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.10             | Collaborative      Research Agreement between the Company and Pfizer dated as of November 1,      1995 (CONFIDENTIAL TREATMENT REQUESTED) (incorporated by reference to      Exhibit 10.1 of the Company's Form 8-K dated November 1,      1995).                                                                                                                                                              |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.11             | Development      and Commercialization Agreement between the Company and Pfizer dated as of      November 1, 1995 (incorporated by reference to Exhibit 10.2 of the      Company's Form 8-K dated November 1, 1995).                                                                                                                                                                                           |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.12             | Stock      Purchase Agreement between the Company and Pfizer dated as of November 1,      1995 (incorporated by reference to Exhibit 10.3 of the Company's Form 8-K      dated November 1, 1995).                                                                                                                                                                                                              |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.13             | Stock      Purchase Agreement dated as of November 25, 1996 between American Home      Products Corporation, acting through its Wyeth-Ayerst Laboratories      Division, and Neurogen Corporation (CONFIDENTIAL TREATMENT REQUESTED)      (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K dated      March 31, 1997).                                                                     |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.14             | Technology      agreement between the Company and Pfizer Inc, dated as of June 15, 1999      (CONFIDENTIAL TREATMENT REQUEST) (Incorporated by reference to Exhibit      10.27 to the Company's Form 10-Q for the quarterly period ended June 30,      1999).                                                                                                                                                  |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.15             | Neurogen      Corporation 2000 Non-Employee Directors Stock Option Program (incorporated      by reference to Exhibit 10.31 to the Company's Form 10-Q for the quarterly      period ended June 30, 2000).                                                                                                                                                                                                     |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.16             | Form      of the Non-Qualified Stock Option Agreement currently used in connection      with the grant of options under the Neurogen Corporation 2000 Non-Employee      Directors Stock Option Program (incorporated by reference to Exhibit 10.32      to the Company's Form 10-Q for the quarterly period ended June 30,      2000).                                                                         |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.17             | Registration      Rights Agreement dated as of June 26, 2000 between the Company and the      Purchasers listed on Exhibit A thereto (incorporated by reference to      Exhibit 10.33 to the Company's Form 10-Q for the quarterly period ended      June 30, 2000).                                                                                                                                           |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.18             | Amended      and Restated Neurogen Corporation 2001 Stock Option Plan, as amended and      restated effective September 4, 2001 (incorporated by reference to Exhibit      10.29 to the Company's Form 10-Q for the quarterly period ended September      30, 2001).                                                                                                                                           |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.19             | Form      of Incentive Stock Option Agreement currently used in connection with the      grant of options under the Amended and Restated Neurogen Corporation 2001      Stock Option Plan (incorporated by reference to Exhibit 10.30 to the      Company's Form 10-Q for the quarterly period ended September 30,      2001).                                                                                 |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.20             | Form      of the Non-Qualified Stock Option Agreement currently used in connection      with the grant of options under the Amended and Restated Neurogen      Corporation 2001 Stock Option Plan (incorporated by reference to Exhibit      10.31 to the Company's Form 10-Q for the quarterly period ended September      30, 2001).                                                                         |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.21             | Form      of Neurogen Special Committee Stock Option Plan (incorporated by reference      to Exhibit 10.32 to the Company's Form 10-Q for the quarterly period ended      September 30, 2001).                                                                                                                                                                                                                 |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.22             | Collaboration      and License Agreement dated as of December 11, 2001 between the Company      and Aventis Pharmaceuticals Inc. (CONFIDENTIAL TREATMENT REQUESTED)      (incorporated by reference to Exhibit 10.35 to the Company's Form 10-K/A2      for the period ended December 31, 2001).                                                                                                               |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.23             | Modification      Agreement dated as of December 1, 2000 between Neurogen Properties LLC and      Connecticut Innovations, Incorporated (incorporated by reference to      Exhibit 10.36 to the Company's Form 10-KA/3 for the period ended December      31, 2001).                                                                                                                                           |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.24             | Construction      Loan Agreement dated as of October 22, 1999 between Neurogen Properties      LLC and Connecticut Innovations, Incorporated (incorporated by reference      to Exhibit 10.37 to the Company's Form 10-KA/3 for the period ended      December 31, 2001).                                                                                                                                      |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.25             | Commercial      Term Note dated as of December 21, 2001 held by the Company and payable to      Webster Bank (incorporated by reference to Exhibit 10.38 to the Company's      Form 10-KA/3 for the period ended December 31, 2001).                                                                                                                                                                           |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.26             | Commercial      Loan Agreement dated as of December 21, 2001 between Webster Bank and the      Company (incorporated by reference to Exhibit 10.39 to the Company's Form      10-KA/3 for the period ended December 31, 2001).                                                                                                                                                                                 |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.27             | 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).                                                                                                                                                                                                                   |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.28             | 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).                                                                                                                                                                                    |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.29             | Collaboration      and License Agreement dated as of November 24, 2003 between the Company      and Merck Sharp & Dohme Limited (CONFIDENTIAL TREATMENT REQUESTED)      (incorporated by reference to Exhibit 10.43 to the Company's Form 10-K for      the period ended December 31, 2003).                                                                                                               |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.30             | Stock      Purchase Agreement dated as of November 24, 2003 between the Company and      Merck Sharp & Dohme Limited (CONFIDENTIAL TREATMENT REQUESTED)      (incorporated by reference to Exhibit 10.43 to the Company's Form 10-K for      the period ended December 31, 2003).                                                                                                                          |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.31             | Securities      Purchase Agreement by and between Neurogen Corporation, Warburg Pincus      Private Equity VIII, L.P., entities affiliated with Baker Brothers      Investments and entities affiliated with the Tisch family (incorporated by      reference to Exhibit 99.1 to the Company's Form 8-K dated March 26,      2004).                                                                            |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.32             | Letter      Agreement dated as of March 26, 2004, amending the securities purchase      dated March 19, 2004, by and between Neurogen Corporation, Warburg Pincus      Private Equity VIII, L.P., entities affiliated with Baker Brothers      Investments and entities affiliated with the Tisch family (incorporated by      reference to Exhibit 99.1 to the Company's Form 8-K dated March 26,      2004). |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.33             | Neurogen      Corporation Code of Business Conduct and Ethics, April 27, 2004      (incorporated by reference to Exhibit 14.1 of the Company's Form 10-K/A      dated April 29, 2004).                                                                                                                                                                                                                         |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.34             | Neurogen      Corporation 2000 Non-Employee Directors Stock Option Program, as amended      (incorporated by reference to Appendix B to the Registrant's Definitive      Proxy Statement on Schedule 14A (File No. 000-18311) filed on July 12,      2004).                                                                                                                                                    |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.35             | Amended      and Restated Neurogen Corporation 2001 Stock Option Plan, as amended      (incorporated by reference to Appendix D to the Registrant's Definitive      Proxy Statement on Schedule 14A (File No. 000-18311) filed on July 12,      2004).                                                                                                                                                         |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.36             | Neurogen      Corporation Audit Committee Charter (May 19, 2004) (incorporated by      reference to Appendix E to the Company's Form DEF 14A dated July 12,      2004).                                                                                                                                                                                                                                        |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.37             | Form      of Non-Qualified Stock Option Agreement for the Neurogen Corporation 2000      Non-Employee Directors Stock Option Program (incorporated by reference to      Exhibit 10.1 to the Company's Form 8-K dated December 20,      2004).                                                                                                                                                                  |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.38             | Form      of Incentive Stock Option Agreement for the Amended and Restated Neurogen      Corporation 2001 Stock Option Plan (incorporated by reference to Exhibit      10.2 to the Company's Form 8-K dated December 20,2004).                                                                                                                                                                                 |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.39             | Form      of Non-Qualified Stock Option Agreement for the Amended and Restated      Neurogen Corporation 2001 Stock Option Plan (incorporated by reference to      Exhibit 10.3 to the Company's Form 8-K dated December 20,      2004).                                                                                                                                                                       |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.40             | Form      of Restricted Share Award Agreement for the Amended and Restated Neurogen      Corporation 2001 Stock Option Plan (incorporated by reference to Exhibit      10.4 to the Company's Form 8-K dated December 20,2004).                                                                                                                                                                                 |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.41             | Amended      and Restated Neurogen Corporation 2001 Stock Option Plan (as amended and      restated) (incorporated by reference to Appendix B to the Registrant's      Definitive Proxy Statement on Schedule 14A (File No. 000-18311) filed on      May 19, 2005).                                                                                                                                            |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.42             | Neurogen      Corporation Audit Committee Charter (As Amended on July 20, 2004)      (incorporated by reference to Appendix C to the Company's Form DEF 14A      dated May 19, 2005).                                                                                                                                                                                                                          |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.43             | License      Agreement between Neurogen Corporation and Wyeth Pharmaceuticals dated as      of November 22, 2006 (CONFIDENTIAL TREATMENT REQUESTED) (incorporated by      reference to Exhibit 10.47 to the Company’s Form 10-K filed on March 15,      2007).                                                                                                                                           |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.44             | Neurogen      Corporation 2000 Non-Employee Directors Stock Option Program, as amended      (incorporated by reference to Appendix B to the Registrant's Definitive      Proxy Statement on Schedule 14A (File No. 000-18311) filed on May 1,      2006).                                                                                                                                                      |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.45             | Amended      and Restated Neurogen Corporation 2001 Stock Option Plan, as amended      (incorporated by reference to Appendix D to the Registrant's Definitive      Proxy Statement on Schedule 14A (File No. 000-18311) filed on May 26,      2006).                                                                                                                                                          |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.46             | Amended      and Restated Employment Agreement between Neurogen Corporation and Stephen      R. Davis dated as of May 8, 2007 (incorporated by reference to Exhibit      10.1 to the Company’s Form 10-Q for the quarterly period ended March 31,      2007).                                                                                                                                            |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.47             | Amended      and Restated Employment Agreement between Neurogen Corporation and Stephen      Uden dated as of May 8, 2007 (incorporated by reference to Exhibit 10.2 to      the Company’s Form 10-Q for the quarterly period March 31,      2007).                                                                                                                                                      |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.48             | Amended      and Restated Employment Agreement between Neurogen Corporation and Alan      Hutchison dated as of May 8, 2007 (incorporated by reference to Exhibit      10.3 of the Company’s Form 10-Q for the quarterly period March 31,      2007).                                                                                                                                                    |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.49             | Employment      Agreement between Neurogen Corporation and James Krause dated as of May 8,      2007 (incorporated by reference to Exhibit 10.4 of the Company’s Form 10-Q      for the quarterly period March 31, 2007).                                                                                                                                                                                |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.50             | Employment      Agreement between Neurogen Corporation and Bertrand Chenard dated as of      May 8, 2007 (incorporated by reference to Exhibit 10.5 of the Company’s      Form 10-Q for the quarterly period March 31, 2007).                                                                                                                                                                            |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.51             | Amended      and Restated Neurogen Corporation 2001 Stock Option Plan, as amended      (incorporated by reference to Appendix B of the Registrant's Definitive      Proxy Statement on Schedule 14A (File No. 000-18311) filed on May 14,      2007).                                                                                                                                                          |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.52             | Securities      Purchase Agreement, dated April 7, 2008, between Neurogen Corporation and      certain selected institutional investors listed in Exhibit A thereof      (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K dated      April 11, 2008).                                                                                                                                      |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.53             | Employment      Contract between the Company and Srdjan Stankovic, dated as of April 14,      2008 (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K      dated April 24, 2008).                                                                                                                                                                                                            |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.54        |  Employment      Contract between the Compnay and Thomas A. Pitler dated as of March 30,      2009.                                                                                                                                                                                                                                                                                                       |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
|  10.55  |  Employment      Contract between the Compnay and Kenneth Sprenger dated as of March 30,      2009.                                                                                                                                                                                                                                                                                                       |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.56             |  Employment      Contract between the Company and George Maynard dated as of March 30,      2009.                                                                                                                                                                                                                                                                                                         |
|              |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 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              | Consent of PricewaterhouseCoopers      LLP, Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                                                                                                     |
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| 24.1              | Powers of Attorney      of  Julian C. Baker, Eran Broshy, Stewart Hen, John L.      LaMattina, Craig Saxton, and John Simon.                                                                                                                                                                                                                                                                         |
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| 31.1              | Certification Pursuant to Section      302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                  |
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| 31.2              |  Certification      Pursuant to Section 302 of the Sarbane-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                             |
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| 32.1              | Certification Pursuant to Section      906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                         |
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| 32.2              | Certification      Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                                                                                                                                                                                                 |