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**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549 **

**FORM      10-K **

**[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)**

**OF      THE SECURITIES EXCHANGE ACT OF 1934**

**[   ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)**

**OF      THE SECURITIES EXCHANGE ACT OF 1934**

| Delaware                (State                or other jurisdictionof                incorporation or organization)                      | 22-2845714(I.R.S.                EmployerIdentification                No.) |
|------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------|
|                                                                                                                                     |                                                                        |
|                                                                                                                                     |                                                                        |
| 35                Northeast Industrial Road Branford,                Connecticut (Address                of principal executive offices) | 06405(Zip                Code)                                              |

| Securities                  registered pursuant to Section 12 (b) of the Act: |
|-------------------------------------------------------------------------------|
|                                                                          |   |   |
| Title                  of each class                                          |   | Name                  of each exchange on which registered |
| Common                  Stock, par value $.025 per share                      |   | The                  NASDAQ Stock Market LLC |
| (the                  “Common Stock”)                             |   |   |
|                                                                          |   |   |
| Securities                  registered pursuant to Section 12(g) of the Act:  |
|                                                                          | None |   |

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**NEUROGEN      CORPORATION **

**ANNUAL      REPORT ON FORM 10-K**

**For      the Year Ended December 31, 2006 **

**TABLE      OF CONTENTS **

| **                                ** | **PAGE**  |
|------------------------------------------------------------------------------|----------------|

| **PART                I** |
|---------------------------|

| Item                1.  | Business                                                      | 3  |
|-------------------------|--------------------------------------------------------------------|----|
| Item                1A. | Risk                Factors                                        | 14 |
| Item                1B. | Unresolved                Staff Comments                           | 22 |
| Item                2.  | Properties                                                         | 22 |
| Item                3.  | Legal                Proceedings                              | 22 |
| 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 Issuer Purchase 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                                                                  | 38 |
| Item                8.                         | Financial                Statements and Supplementary                Data                                                                  | 39 |
| Item                9.     | Changes                in and Disagreements with Accountants on                Accounting and Financial Disclosure          | 62 |
| Item                9A.                        | Controls                and Procedures                                                                                                | 62 |
| Item                9B.                        | Other                Information                                                                                                           | 63 |
|                                           |                                                                                                                                       |

| **PART                III**  |
|-----------------------------------|

| Item                10. | Directors,                Executive Officers and Corporate Governance                                                        | 64 |
|-------------------------|------------------------------------------------------------------------------------------------------------------------------|----|
| Item                11. | Executive                Compensation                                                                                   | 64 |
| Item                12. | Security                Ownership of Certain Beneficial Owners and                Management and Related Stockholder Matters | 64 |
| Item                13. | Certain                Relationships and Related Transactions, and                Director Independence                      | 64 |
| Item                14. | Principal                Accountant Fees and Services                                                                        | 64 |

|                       |
|----------------------------|
| **PART                IV** |

|  Item                15. | Exhibits,                Financial Statement Schedules | 65 |
|-------------------------------|--------------------------------------------------------|----|

**SIGNATURES**

**EXHIBIT      INDEX**

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**PART      I**

**ITEM      1. BUSINESS**

**Overview      **

**Neurogen's      Business Strategy **

| · | *Create                a risk-balanced drug portfolio*.                To increase the probability of successful drug discovery and development                efforts, Neurogen is pursuing drug targets representing a spectrum                of                development risk in central nervous system diseases, pain, inflammation,                and metabolic diseases. The Company is capitalizing on its ability                to                rapidly and efficiently produce multiple generations of drug candidates                in                multiple programs through two basic                approaches:  |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | o | *Pursue                "fast follower" or best-in-class drug                targets* |
|--------|---|--------------------------------------------------------------------------------------|

|   | Typically,                for these drug targets, industry efforts have indicated some positive                therapeutic benefit in human clinical trials for the biological target,                but drugs currently approved or in development demonstrate sub-optimal                side effect profiles, dosing regimens or routes of administration                or were                approved by the Food and Drug Administration (FDA) with specific                labeling                issues. In these programs, Neurogen’s goal is to develop drugs with more                favorable properties than competing                drugs. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | *Pursue                "first-in-class" drug targets* |
|--------|---|-------------------------------------------------------|

|   | Neurogen                also evaluates more recently discovered drug targets, where a successful                drug would represent a new therapeutic category. For these targets,                typically a reasonable degree of scientific validation exists to                support a                role in a disease state, but the clinical utility of the target has                yet to                be demonstrated in humans. The Company believes these targets are                generally higher in relative development risk but also represent                opportunities for greater revenue                potential. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | *Independently                develop programs to optimal stages for partnering.*                Neurogen seeks to retain ownership and control of some programs -                taking                them further into human clinical testing - while partnering other                programs                at earlier stages, in order to balance the risks associated with                drug                discovery and seeking to maximize the value of each partnered program.                Neurogen's current cash position and its drug development capabilities                enable the Company to pursue a flexible business model of partnering                programs when competitively and economically advantageous. When Neurogen                partners programs, it seeks to collaborate with pharmaceutical leaders                with a complementary set of demonstrated strengths and                resources. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Research:      Neurogen's Drug Discovery Platform **

**Neurogen      Drug Development Programs **

----

| **Clinical                Development Programs**     |
|------------------------------------------------------|
|                                                 |   |   |   |   |
| **Indication**                                       | **Mechanism** | **Compound** | **Development                Status** | **Commercial                Rights** |
|  Insomnia                                  |  GABAA                partial agonist |  NG2-73 |  Phase                2 |  Neurogen |
|  Pain                                           |  VR1                antagonist |  NGD-8243/MK2295  |  Phase                2 | Merck(Neurogen                Royalty) |
|  Parkinson’s                disease  |  D2                partial agonist |  Aplindore |  Phase                1-2* |  Neurogen |
|  Restless                Legs Syndrome     |  D2                partial agonist |  Aplindore |  Phase                1-2* |  Neurogen |
|  Obesity                                   |  MCH                antagonist |  NGD-4715 |  Phase                1 |  Neurogen |

***Insomnia      Program***

** **

*Medical      Need*
***.***
*source:      AlphaDetail Insomnia ATU, February 2007*
*source:*
*IMS*

*Mechanism      of Action. *

----

*In      vitro*

*Commercial      Rights.*
*** ***

*Clinical      Development Status. *

** **

|    |                               | placebo(n=74) |   | 1                mg(n=73) |   | 3                mg(n=69) |   | 10                mg(n=72) |   | 20                mg(n=71) |
|---------|------------------------------------|---------------|--------|---------------------------|--------|---------------------------|--------|----------------------------|--------|----------------------------|
|    |                               |          |   |                      |   |                      |   |                       |   |                       |
| ● | LPS                                | 30.8          |   | 17.8                      |   | 10.6                      |   | 7.8                        |   | 6.6                        |
| ● | p                value             |          |   | <0.01                  |   | <0.001                 |   | <0.001                  |   | <0.001                  |
| ● | percent                improvement |          |   | 42%                       |   | 65%                       |   | 75%                        |   | 79%                        |
|    | relative                to placebo |          |   |                      |   |                      |   |                       |   |                       |

----

*Primary      endpoint: sleep onset*
* *

*Primary      endpoint: sleep maintenance*
* *

** **

----

***Pain      Management Program***

*Medical      Need. *
*paragraph*
*source:      American Pain Foundation*

*Mechanism      of Action. *

*Commercial      Rights. *

*Clinical      Development Status.*

***Parkinson’s      Disease and Restless Legs Syndrome (RLS)***

*Medical      Need.*
* *

----

*(source:      National Parkinson Foundation)*

*Medical      Need.*
* *
** **

*(source:      Restless Legs Syndrome Foundation)*

*Mechanism      of Action. *

*Commercial      Rights. *

*Clinical      Development Status. *

***Obesity/Diabetes      Program***

*Medical      Need. *

----

*Mechanism      of Action. *

*Commercial      Rights. *

*Clinical      Development Status. *

**Neurogen      Collaborations **

| · | Merck                purchased approximately 1.8 million shares of Neurogen common stock                for                $15.0 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Merck                paid Neurogen a $15.0 million license fee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| · | Neurogen                has received to date an additional $26.9 million and is scheduled                to                receive an additional $2.1 million in committed research funding                and                license fee payments in 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| · | Under                the collaboration, Merck funds a joint research program, including                payments to Neurogen for its efforts. The primary objective of the                program                is to discover VR1 antagonist compounds, test them in multiple assays                and                advance qualified compounds, if any, into consideration for clinical                development. Merck has elected to extend the research program component                of                the collaboration for one year beyond its original scheduled term.                The                research program is now scheduled to conclude on December 28, 2007,                provided that Merck has the option to cancel the research program                earlier                by providing 90 days written notice to Neurogen. Merck has not exercised                the right to terminate as of the date of this filing. Merck also                has the                option to extend the research program for one year beyond December                28,                2007. |
| · | Neurogen                will receive milestone payments if specified development and regulatory                objectives are achieved. The Company has received to date $8.0 million                in                milestone payments and is eligible to receive additional milestone                payments, if additional milestones are achieved, on all VR1 compounds                discovered by either company prior to or during the                collaboration.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| · | Merck                received the exclusive worldwide license to develop, manufacture,                use, and                sell VR1 receptor modulator products developed in the                collaboration.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| · | Merck                is required to pay Neurogen royalties based on net sales levels,                if any,                for such products. Neurogen is eligible to receive royalty payments                on all                VR1 compounds discovered by either company prior to or during the                collaborative research program.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

**Patents      and Proprietary Technology **

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**Competitive      Environment**

**Manufacturing**

**Sales      and Marketing **

**Research      and Development Expenses **

----

**Government      Regulation**

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

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

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**Employees      **

**Available      Information **

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**ITEM      1A. RISK FACTORS**

***The      testing process for the Company’s drug candidates is long, costly, and      uncertain, and most drug candidates do not get approved. Even if approved for      use in humans, the Company’s drug candidates may later prove to be unsafe or      ineffective***
*.*

***The      technologies on which the Company relies may not result in the discovery or      development of commercially viable drugs.***

***The      Company is subject to strict governmental regulation. If the Company cannot      obtain product approvals or if it cannot comply with ongoing governmental      regulations, its business could be adversely      affected.***

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***The      Company faces vigorous competition in the areas of drug discovery and      development, which may result in others developing or commercializing products      before or more successfully than it does.***

***The      Company relies heavily on its collaborative partners for research and      development funding and commercialization.***

| · | 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 the Company; |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | that                the interests of a collaborator will depart from Neurogen’s                interests; |
|--------|-----------------------------------------------------------------------------------------------------------------|

| · | that                a collaborator will dispute the Company’s 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; |
|--------|--------------------------------------------------------------------------------------------|

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| · | 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 the                Company. |
|--------|-----------------------------------------------------------------------------------------------------------|

***A      consequence of its dependence on collaborative arrangements is that the      Company’s potential upside is smaller if a successful product emerges than it      would be if the Company successfully commercialized a product on its      own.***

***The      Company periodically explores new strategic alliances and transactions that      may      never materialize or that may fail.***

***Developing      the Company’s drug candidates, particularly its unpartnered product candidates,      will require significant additional expenditures. The Company is not certain      how      much capital it may need, and it may have difficulty raising needed capital      in      the future on favorable terms or at all.***

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| · | the                continued progress of its research and development                programs; |
|--------|------------------------------------------------------------------------------------------------|

| · | its                ability to market and distribute any products it                develops; |
|--------|----------------------------------------------------------------------------------------------|

| · | its                ability to establish new collaborative and licensing                arrangements; |
|--------|------------------------------------------------------------------------------------------------------|

| · | changes                in its existing collaborative                relationships; |
|--------|------------------------------------------------------------------------------------|

| · | 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 market                developments. |
|--------|--------------------------------------------------------------------------------|

***The      Company’s patents, trade secrets and confidentiality agreements with      collaborators, employees and others may be invalid or inadequate to protect      its      intellectual property.***

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***The      Company is subject to uncertainties regarding healthcare reimbursement and      reform. In the event that it is successful in bringing a product to market,      its      revenues may be adversely affected if it fails to obtain acceptable prices      or      adequate reimbursement for the cost of its products from third-party      payors.***

***The      Company may be unable to attract and retain qualified management and technical      personnel.***

***The      Company relies on third parties for its manufacturing requirements and cannot      assure investors that it will be able to manufacture its products on a timely      and competitive basis.***

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***The      Company lacks sales experience.***

***The      Company’s business exposes it to clinical trial and product liability      claims.***

***The      Company’s business involves hazardous materials and the risk of environmental      liability.***

***The      price of the Company’s common stock may be      volatile.***

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| · | announcements                by the Company or its 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 joint                ventures; |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | any                intellectual property infringement, product liability or any other                litigation involving the Company; |
|--------|----------------------------------------------------------------------------------------------------------------------------------------|

| · | technological                innovations or new therapeutic                products; |
|--------|--------------------------------------------------------------------------------------|

| · | developments                or disputes concerning the Company's 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 the Company or                others; |

| · | actual                or anticipated period-to-period fluctuations in the Company’s results of                operations; |
|--------|---------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                            |
| · | the                Company’s ability to raise capital;                                                                    |

| · | departure                of any of the Company’s key management personnel;                or |
|--------|----------------------------------------------------------------------------------------------------|

| · | sales                of the Company’s common stock. |
|--------|-----------------------------------------------------------|

***The      Company may be at risk of securities class action litigation.***

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***The      Company’s current stockholders have significant control of its management and      affairs.***

***If      the Company’s stockholders sell substantial amounts of its common stock, the      market price of its common stock may fall.***

***Future      sales of the Company’s common stock in the public market could lower the stock      price.***

***Because      the Company does not expect to pay dividends on its common stock, investors      in      the Company’s common stock will not realize any income from their investment      unless and until they sell their shares at a profit.***

***The      Company anticipates future losses and may never become      profitable.***

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***Limitation      on the Use of Net Operating Loss Carryforwards (“NOLs”) and Tax      Credits.***

***Delaware      Law and our Charter and Bylaws may Impede or Discourage a Takeover, Which Could      Cause the Market Price of Our Shares to Decline.***

**ITEM      1B. UNRESOLVED STAFF COMMENTS**

**ITEM      2. PROPERTIES**

**ITEM      3. LEGAL PROCEEDINGS**

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*Neurogen      Corporation v. Pam Law, Commissioner of Revenue Services of the State of      Connecticut*

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

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**PART        II**

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

|                            | HIGH   |   | LOW    |
|---------------------------------|--------|--------|--------|
| FISCAL                  2006:   |   |   |   |
| First                  Quarter  | $7.47  |   | $6.01  |
| Second                  Quarter | 6.64   |   | 4.82   |
| Third                  Quarter  | 6.74   |   | 4.58   |
| Fourth                  Quarter | 6.82   |   | 5.16   |
|                            |   |   |   |
| FISCAL                  2005:   |   |   |   |
| First                  Quarter  | $10.04 |   | $6.90  |
| Second                  Quarter | 7.82   |   | 5.85   |
| Third                  Quarter  | 7.80   |   | 6.01   |
| Fourth                  Quarter | 8.83   |   | 6.04   |

**Equity      Compensation Plan Information **

|                                                                      | Total                securities to be issued upon exercise of outstanding options or vesting                of                restricted stock |   | Securities                remaining available for future issuance under equity compensation                plans                (excluding securities reflected in column (a)) |
|---------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  Plan                category                                        | Number                                                                                                                                         |   | Weighted-average                exercise price                                                                                                                                 |   |
|                                                                      | (a)                                                                                                                                            |   | (b)                                                                                                                                                                            |   | (c) |
| Equity                compensation plans approved by security holders     | 5,491,845                                                                                                                                      |   | $11.77                                                                                                                                                                         |   | 1,262,877 |
|                                                                      |                                                                                                                                           |   |                                                                                                                                                                           |   |   |
| Equity                compensation plans not approved by security holders | 13,500                                                                                                                                         |   | 33.38                                                                                                                                                                          |   | - |
|                                                                      |                                                                                                                                           |   |                                                                                                                                                                           |   |   |
| Total                                                                     | 5,505,345                                                                                                                                      |   | $11.82                                                                                                                                                                         |   | 1,262,877 |

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**Equity      Offerings **

**ITEM      6. SELECTED FINANCIAL DATA**

|                                                                             |   | For                  the Year Ended December 31(in                  thousands, except per share data) |    |
|----------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|---------|
|                                                                             |   |                                                                                                  |    |   |   |   |   |   |   |   |   |
|                                                                             |   | 2006                                                                                                  |    | 2005 |   | 2004 |   | 2003 |   | 2002 |   |
| Total                  operating revenues                                        |   | $                                                                                                     | 9,813   |   | $ | 7,558 |   | $ | 19,180 |   | $ | 6,788 |   | $ | 15,725 |   |
| Total                  operating expenses                                        |   | $                                                                                                     | 67,413  |   | $ | 48,115 |   | $ | 40,394 |   | $ | 39,697 |   | $ | 41,382 |   |
| Net                  loss                                                        |   | $                                                                                                     | (53,776 | ) | $ | (37,120 | ) | $ | (18,593 | ) | $ | (31,576 | ) | $ | (23,692 | ) |
| Net                  loss per share-basic and diluted                            |   | $                                                                                                     | (1.55   | ) | $ | (1.08 | ) | $ | (0.63 | ) | $ | (1.78 | ) | $ | (1.35 | ) |
| Total                  assets                                                    |   | $                                                                                                     | 137,739 |   | $ | 146,764 |   | $ | 183,823 |   | $ | 95,369 |   | $ | 115,779 |   |
| Long-term                  debt                                                  |   | $                                                                                                     | 8,976   |   | $ | 10,430 |   | $ | 11,864 |   | $ | 13,278 |   | $ | 19,650 |   |
| Stockholders’                  equity                                      |   | $                                                                                                     | 104,540 |   | $ | 114,508 |   | $ | 150,722 |   | $ | 53,439 |   | $ | 83,297 |   |
| Weighted                  average number of shares outstanding-basic and diluted |   |                                                                                                  | 34,789  |   |   | 34,318 |   |   | 29,703 |   |   | 17,711 |   |   | 17,614 |   |

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

**FORWARD-LOOKING      STATEMENTS**

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| · | risks                inherent in discovery, research, development, testing, regulatory                approval, production and marketing of any of the Company’s drug                candidates; |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | competitive                factors; |
|--------|-------------------------------------|

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

| · | the                Company’s dependence on its 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 pursued by the Company may prove to be invalid                after substantial investments by the                Company; |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| · | uncertainty                regarding the Company’s patents and trade secrets and confidentiality                agreements with collaborators, employees, consultants or                vendors; |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | the                risk that the Company may be prohibited or otherwise restricted from                working on certain targets relevant to the Company’s                business; |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | dependence                upon third parties for the manufacture of the Company’s potential products                and the Company’s inexperience in manufacturing if the Company establishes                internal manufacturing                capabilities; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | dependence                on third parties to market potential products and the Company’s lack of                sales and marketing capabilities; |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | unavailability                or inadequacy of medical insurance or other third-party reimbursement                for                the cost of purchases of the Company’s                products; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| · | risks                associated with the fact that a majority of the Company’s common stock is                held by a limited number of                stockholders. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**OVERVIEW**

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**CRITICAL        ACCOUNTING POLICIES **

**Revenue      Recognition **

----

**Research      and Development Costs **

**Stock-Based      Compensation **

*Share      Based 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 predicting the life of                option                grants, all stock options meet the definition of “plain vanilla” options                under SAB No. 107 with the exception of option grants to the Board                of                Directors, and therefore, the “simplified” method was used to calculate                the term for grants other than the Board of Directors.                The expected term for Board of Directors grants was calculated based                upon                historical analysis. The expected term used during 2006 was not                significantly different from the expected term used when following                the                disclosure-only provisions of SFAS No.                123. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| · |   | 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 with historical. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · |   | Under                SFAS No. 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. However, given the Company’s 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. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Marketable      Securities **

**Income      Taxes **

----

**Long-lived      Assets **

**RESULTS      OF OPERATIONS **

**Years      Ended December 31, 2006 and 2005**

----

**Years      Ended December 31, 2005 and 2004**

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**LIQUIDITY      AND CAPITAL RESOURCES**

**Cash      and Marketable Securities **

**Debt      Arrangements **

----

**Evaluation      of Investments for Other-Than-Temporary Impairment **

**Financing      Activities **

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**Tax      Benefits**

----

**Contractual      Obligations **

|                                       |   | Payment                Due by Period |   |
|--------------------------------------------|--------|--------------------------------------|--------|
| Contractual                Obligations     |   | Total                                |   | Less                than 1 Year |   | 1-3                Years |   | 3-5                Years |   | More                than5                Years |   |
| Long-term                Debt              |   | $                                    | 13,359 |   | $ | 2,201 |   | $ | 4,126 |   | $ | 4,613 |   | $ | 2,419 |   |
| Operating                Lease Obligations |   |                                 | 65     |   |   | 32 |   |   | 33 |   |   | - |   |   | - |   |
| Total                                      |   | $                                    | 13,424 |   | $ | 2,233 |   | $ | 4,159 |   | $ | 4,613 |   | $ | 2,419 |   |

**IN-LICENSING      AGREEMENT**

**RESEARCH      COLLABORATIONS**

----

**RECENTLY      ISSUED ACCOUNTING PRONOUNCEMENTS **

----

* *

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

*Interest      rate risk*

| Fair                value of investments with expected maturities in the following years                (in                thousands): |
|----------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                   |   |   |   |   |   |   |   |
|                                                                                                                                   | 2007 |   | 2008 |   | 2009 |   | Total |
| Fixed                Rate Investments                                                                                                  | $23,052 |   | $19,552 |   | $8,797 |   | $51,401 |
|                                                                                                                                   |   |   |   |   |   |   |   |
| Weighted                Average Interest                                                                                               | 3.6% |   | 4.2% |   | 3.7% |   | 3.9% |

*Capital      market risk*

----

The      Company matches employee contributions into the Neurogen Corporation 401(k)      Retirement Plan with shares of Neurogen common stock. Due to the recently      enacted Pension Protection Act (the “PPA”) of 2006, on January 2, 2007, funds      representing approximately 200,000 shares of the Company’s stock held in the      Plan, which were deposited over a period of several years as Company matching      contributions, became available for transfer by participants in the Plan to      other investment options within the Plan. In addition, all new matching      contributions into the Plan will be freely transferable. If Plan participants      choose to transfer their matched stock from prior to January 2, 2007 into other      investment options within the Plan, some or all of the 200,000 shares may then      be sold by the Plan on the NASDAQ Stock Market. Prior to the implementation      of      the PPA, a participant in the Plan was not allowed to trade his or her matched      stock until the participant terminated employment and withdrew his or her plan      balance. Before January 2009, an additional 330,000 shares of stock in the      Plan      deposited as matched contributions made prior to January 2, 2007 will become      eligible for transfer to other investment options within the Plan. To the extent      that participants holding an interest in such shares elect to transfer amounts      to other funds, such shares could be sold by the Plan on the NASDAQ Stock      Market.

| **ITEM                8. FINANCIAL STATEMENTS AND SUPPLEMENTARY                DATA**                                                                                                   |     |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                                                                                                                                                                                    |     |
| **INDEX                TO CONSOLIDATED FINANCIAL STATEMENTS**                                                                                                                           | **Page** |
|                                                                                                                                                                                    |     |
| Consolidated                Balance Sheets at December 31, 2006 and                2005                                                                                                 | 40       |
|                                                                                                                                                                                    |     |
| Consolidated                Statements of Operations for                the years ended December 31, 2006, 2005 and 2004                                                                | 41       |
|                                                                                                                                                                                    |     |
| Consolidated                Statements of Stockholders' Equity                and Comprehensive Loss for the years ended December 31, 2006, 2005                and                2004 | 42       |
|                                                                                                                                                                                    |     |
| Consolidated                Statements of Cash Flows for the                years ended December 31, 2006, 2005 and 2004                                                                | 43       |
|                                                                                                                                                                                    |     |
| Notes                to Consolidated Financial                Statements                                                                                                                | 44       |
|                                                                                                                                                                                    |     |
| Report                of Independent Registered Public Accounting                Firm                                                                                                   | 61       |

----

**NEUROGEN      CORPORATION**

**CONSOLIDATED      BALANCE SHEETS**

|                                                                                                 |   | **December                31,****2006** |     | **December                31,****2005** |   |
|------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|----------|-----------------------------------------|--------|
| **Assets**                                                                                           |   |                                    |     |                                    |   |
| **Current                assets:**                                                                   |   |                                    |     |                                    |   |
| Cash                and cash equivalents                                                             |   | $                                       | 56,170   |                                    | $      | 11,241 |   |
| Marketable                securities                                                                 |   |                                    | 51,401   |                                    |   | 104,119 |   |
| Receivables                from corporate partners                                                   |   |                                    | 209      |                                    |   | 157 |   |
| Other                current assets, net                                                             |   |                                    | 2,813    |                                    |   | 2,892 |   |
| Total                current assets                                                                  |   |                                    | 110,593  |                                    |   | 118,409 |   |
| **Property,                plant & equipment:**                                                  |   |                                    |     |                                    |   |   |   |
| Land,                building and improvements                                                       |   |                                    | 31,682   |                                    |   | 31,309 |   |
| Equipment                and furniture                                                               |   |                                    | 18,509   |                                    |   | 18,146 |   |
| Construction                in progress                                                              |   |                                    | 85       |                                    |   | 140 |   |
|                                                                                                 |   |                                    | 50,276   |                                    |   | 49,595 |   |
| Less                accumulated depreciation and amortization                                        |   |                                    | 23,191   |                                    |   | 21,327 |   |
| Net                property, plant and equipment                                                     |   |                                    | 27,085   |                                    |   | 28,268 |   |
| Other                assets, net                                                                     |   |                                    | 61       |                                    |   | 87 |   |
| **Total                assets**                                                                      |   | $                                       | 137,739  |                                    | $      | 146,764 |   |
| **Liabilities                and Stockholders’ Equity**                                        |   |                                    |     |                                    |   |   |   |
| **Current                liabilities:**                                                              |   |                                    |     |                                    |   |   |   |
| Accounts                payable and accrued expenses                                                 |   | $                                       | 8,481    |                                    | $      | 6,354 |   |
| Unearned                revenue from corporate partners, current portion                             |   |                                    | 7,520    |                                    |   | 5,158 |   |
| Loans                payable, current portion                                                        |   |                                    | 1,454    |                                    |   | 1,434 |   |
| Total                current liabilities                                                             |   |                                    | 17,455   |                                    |   | 12,946 |   |
| Unearned                revenue from corporate partners, net of current portion                      |   |                                    | 6,768    |                                    |   | 8,880 |   |
| Loans                payable, net of current portion                                                 |   |                                    | 8,976    |                                    |   | 10,430 |   |
| **Total                liabilities:**                                                                |   |                                    | 33,199   |                                    |   | 32,256 |   |
| **Commitments                and Contingencies (Note 8)**                                            |   |                                    |     |                                    |   |   |   |
| **Stockholders’                Equity:**                                                       |   |                                    |     |                                    |   |   |   |
| Preferred                stock, par value $0.025 per share                                           |   |                                    |     |                                    |   |   |   |
| Authorized                2,000 shares; none issued                                                  |   |                                    | -        |                                    |   | - |   |
| Common                stock, par value $0.025 per share                                              |   |                                    |     |                                    |   |   |   |
| Authorized                50,000 shares; issued and outstanding 41,774 and                           |   |                                    |     |                                    |   |   |   |
| 34,617                shares at December 31, 2006 and December 31, 2005,                respectively |   |                                    | 1,044    |                                    |   | 865 |   |
| Additional                paid-in capital                                                            |   |                                    | 336,795  |                                    |   | 294,436 |   |
| Accumulated                deficit                                                                   |   |                                    | (232,442 | )                                       |   | (178,666 | ) |
| Deferred                compensation                                                                 |   |                                    | -        |                                    |   | (483 | ) |
| Accumulated                other comprehensive income                                                |   |                                    | (857     | )                                       |   | (1,644 | ) |
|                                                                                                 |   |                                    | 104,540  |                                    |   | 114,508 |   |
| **Total                liabilities and stockholders’ equity**                                  |   | $                                       | 137,739  |                                    | $      | 146,764 |   |
|                                                                                                 |   |                                    |     |                                    |   |   |   |
| See                accompanying notes to consolidated financial statements                           |   |                                    |     |                                    |   |   |   |

----

**NEUROGEN      CORPORATION**

**CONSOLIDATED      STATEMENTS OF OPERATIONS**

|                                                                        |   | **For                the Years Ended December 31,** |    |
|-----------------------------------------------------------------------------|--------|-----------------------------------------------------|---------|
|                                                                        |   | **2006**                                            |    | **2005** |   | **2004** |   |
| Operating                revenues:                                          |   |                                                |    |   |   |   |   |   |   |   |
| License                fees                                                 |   | $                                                   | 4,467   |   | $ | 3,632 |   | $ | 8,890 |   |
| Research                and development                                     |   |                                                | 5,346   |   |   | 3,926 |   |   | 10,290 |   |
| Total                operating revenues                                     |   |                                                | 9,813   |   |   | 7,558 |   |   | 19,180 |   |
|                                                                        |   |                                                |    |   |   |   |   |   |   |   |
| Operating                expenses:                                          |   |                                                |    |   |   |   |   |   |   |   |
| Research                and development                                     |   |                                                | 55,853  |   |   | 38,487 |   |   | 31,279 |   |
| General                and administrative                                   |   |                                                | 11,560  |   |   | 9,628 |   |   | 9,115 |   |
| Total                operating expenses                                     |   |                                                | 67,413  |   |   | 48,115 |   |   | 40,394 |   |
| Operating                loss                                               |   |                                                | (57,600 | ) |   | (40,557 | ) |   | (21,214 | ) |
| Other                income (expense):                                      |   |                                                |    |   |   |   |   |   |   |   |
| Investment                and other income                                  |   |                                                | 3,360   |   |   | 3,839 |   |   | 3,029 |   |
| Interest                expense                                             |   |                                                | (841    | ) |   | (795 | ) |   | (716 | ) |
| Total                other income, net                                      |   |                                                | 2,519   |   |   | 3,044 |   |   | 2,313 |   |
| Loss                before income taxes                                     |   |                                                | (55,081 | ) |   | (37,513 | ) |   | (18,901 | ) |
| Income                tax benefit                                           |   |                                                | 1,305   |   |   | 393 |   |   | 308 |   |
| Net                loss                                                     |   | $                                                   | (53,776 | ) | $ | (37,120 | ) | $ | (18,593 | ) |
| Basic                and diluted loss per share                             |   | $                                                   | (1.55   | ) | $ | (1.08 | ) | $ | (0.63 | ) |
| Shares                used in calculation of loss per share:                |   |                                                |    |   |   |   |   |   |   |   |
| Basic                and diluted                                            |   |                                                | 34,789  |   |   | 34,318 |   |   | 29,703 |   |
|                                                                        |   |                                                |    |   |   |   |   |   |   |   |
| See                accompanying notes to consolidated financial statements. |   |

----

**NEUROGEN      CORPORATION**

**CONSOLIDATED      STATEMENTS OF STOCKHOLDERS’ EQUITY AND      COMPREHENSIVE LOSS**

| **For                  the Years Ended December 31, 2006, 2005 and                  2004** |
|--------------------------------------------------------------------------------------------|
|                                                                                       | **(In                  thousands)** |   |

|                                                                                                                                                                |   | Common                  Stock |   | AdditionalPaid-inCapital |   | AccumulatedDeficit |   | DeferredCompensation |    | AccumulatedOtherComprehensiveIncome                  (Loss) |   | Total    |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|--------|--------------------------|--------|--------------------|--------|----------------------|---------|-------------------------------------------------------------|--------|----------|--------|
|                                                                                                                                                                |   |
|                                                                                                                                                                |   | Shares                        |   | Amount                   |   |
|                                                                                                                                                                |   |
| Balance                  at December 31, 2003                                                                                                                       |   |                          | 18,095 |                     | $      | 452                |   | $                    | 177,505 |                                                        | $      | (122,953 | )      | $ | (1,986 | ) | $ | 421 |   | $ | 53,439 |   |
|                                                                                                                                                                |   |                          |   |                     |   |               |   |                 |    |                                                        |   |     |   |   |   |   |   |   |   |   |   |   |
| Stock                  issued in private placements, net of offering expenses of $0.8                  million                                                      |   |                          | 14,286 |                     |   | 357                |   |                 | 98,842  |                                                        |   | -        |   |   | - |   |   | - |   |   | 99,199 |   |
| Issuance                  of shares for cash pursuant to corporate partner agreement, net                  of                  offering expenses                    |   |                          | 1,783  |                     |   | 45                 |   |                 | 14,913  |                                                        |   | -        |   |   | - |   |   | - |   |   | 14,958 |   |
| Issuance                  of restricted stock                                                                                                                       |   |                          | 50     |                     |   | 1                  |   |                 | 474     |                                                        |   | -        |   |   | (475 | ) |   | - |   |   | - |   |
| Cancellation                  of restricted stock                                                                                                                   |   |                          | (30    | )                        |   | (1                 | )      |                 | (221    | )                                                           |   |     |   |   | 85 |   |   | - |   |   | (137 | ) |
| Recognition                  of compensation expense                                                                                                                |   |                          | -      |                     |   | -                  |   |                 | 19      |                                                        |   | -        |   |   | 1,068 |   |   | - |   |   | 1,087 |   |
| Issuance                  of stock options to consultants                                                                                                           |   |                          | -      |                     |   | -                  |   |                 | -       |                                                        |   | -        |   |   | 48 |   |   | - |   |   | 48 |   |
| Exercise                  of stock options                                                                                                                          |   |                          | 258    |                     |   | 6                  |   |                 | 1,597   |                                                        |   | -        |   |   | - |   |   | - |   |   | 1,603 |   |
| Stock                  issued for 401(k) match                                                                                                                      |   |                          | 51     |                     |   | 2                  |   |                 | 398     |                                                        |   | -        |   |   | - |   |   | - |   |   | 400 |   |
|                                                                                                                                                                |   |                          |   |                     |   |               |   |                 |    |                                                        |   |     |   |   |   |   |   |   |   |   |   |   |
| Comprehensive                  loss:                                                                                                                                |   |                          |   |                     |   |               |   |                 |    |                                                        |   |     |   |   |   |   |   |   |   |   |   |   |
| Net                  loss                                                                                                                                           |   |                          | -      |                     |   | -                  |   |                 | -       |                                                        |   | (18,593  | )      |   | - |   |   | - |   |   | (18,593 | ) |
| Change                  in unrealized loss on marketable securities                                                                                                 |   |                          | -      |                     |   | -                  |   |                 | -       |                                                        |   | -        |   |   | - |   |   | (1,282 | ) |   | (1,282 | ) |
|                                                                                                                                                                |   |                          |   |                     |   |               |   |                 |    |                                                        |   |     |   |   |   |   |   |   |   |   |   |   |
| Total                  comprehensive loss                                                                                                                           |   |                          |   |                     |   |               |   |                 |    |                                                        |   |     |   |   |   |   |   |   |   |   | (19,875 | ) |
|                                                                                                                                                                |   |                          |   |                     |   |               |   |                 |    |                                                        |   |     |   |   |   |   |   |   |   |   |   |   |
| Balance                  at December 31, 2004                                                                                                                       |   |                          | 34,493 |                     | $      | 862                |   | $                    | 293,527 |                                                        | $      | (141,546 | )      | $ | (1,260 | ) | $ | (861 | ) | $ | 150,722 |   |
|                                                                                                                                                                |   |                          |   |                     |   |               |   |                 |    |                                                        |   |     |   |   |   |   |   |   |   |   |   |   |
| Issuance                  of restricted stock                                                                                                                       |   |                          | 25     |                     |   | -                  |   |                 | 155     |                                                        |   | -        |   |   | (155 | ) |   | - |   |   | - |   |
| Recognition                  of compensation expense                                                                                                                |   |                          | -      |                     |   | -                  |   |                 | -       |                                                        |   | -        |   |   | 929 |   |   | - |   |   | 929 |   |
| Issuance                  of stock options to consultants                                                                                                           |   |                          | -      |                     |   | -                  |   |                 | 119     |                                                        |   | -        |   |   | 3 |   |   | - |   |   | 122 |   |
| Exercise                  of stock options                                                                                                                          |   |                          | 22     |                     |   | 1                  |   |                 | 85      |                                                        |   | -        |   |   | - |   |   | - |   |   | 86 |   |
| Stock                  issued for 401(k) match                                                                                                                      |   |                          | 77     |                     |   | 2                  |   |                 | 508     |                                                        |   | -        |   |   | - |   |   | - |   |   | 510 |   |
| Tax                  benefit from stock option exercises                                                                                                            |   |                          | -      |                     |   | -                  |   |                 | 42      |                                                        |   | -        |   |   | - |   |   | - |   |   | 42 |   |
|                                                                                                                                                                |   |                          |   |                     |   |               |   |                 |    |                                                        |   |     |   |   |   |   |   |   |   |   |   |   |
| Comprehensive                  loss:                                                                                                                                |   |                          |   |                     |   |               |   |                 |    |                                                        |   |     |   |   |   |   |   |   |   |   |   |   |
| Net                  loss                                                                                                                                           |   |                          | -      |                     |   | -                  |   |                 | -       |                                                        |   | (37,120  | )      |   | - |   |   | - |   |   | (37,120 | ) |
| Change                  in unrealized loss on marketable securities                                                                                                 |   |                          | -      |                     |   | -                  |   |                 | -       |                                                        |   | -        |   |   | - |   |   | (783 | ) |   | (783 | ) |
|                                                                                                                                                                |   |                          |   |                     |   |               |   |                 |    |                                                        |   |     |   |   |   |   |   |   |   |   |   |   |
| Total                  comprehensive loss                                                                                                                           |   |                          |   |                     |   |               |   |                 |    |                                                        |   |     |   |   |   |   |   |   |   |   | (37,903 | ) |
|                                                                                                                                                                |   |                          |   |                     |   |               |   |                 |    |                                                        |   |     |   |   |   |   |   |   |   |   |   |   |
| 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 |   |

----

**NEUROGEN      CORPORATION**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

|                                                                                         |   | **For                  the Years Ended December 31,** |    |
|----------------------------------------------------------------------------------------------|--------|-------------------------------------------------------|---------|
|                                                                                         |   | **2006**                                              |    | **2005** |   | **2004** |   |
| **Cash                  flows from operating activities:**                                   |   |                                                  |    |   |   |   |   |
| Net                  loss                                                                    |   | $(53,776)                                             |    | $(37,120) |   | $(18,593) |   |
| Adjustments                  to reconcile net loss to net cash used in operating activities: |   |                                                  |    |   |   |   |   |   |   |   |
| Depreciation                  expense                                                        |   |                                                  | 2,356   |   |   | 2,493 |   |   | 2,511 |   |
| Amortization                  of investment premium/discount                                 |   |                                                  | 539     |   |   | 1,161 |   |   | 1,133 |   |
| Non-cash                  compensation expense                                               |   |                                                  | 4,922   |   |   | 1,145 |   |   | 1,126 |   |
| 401(k)                  match expense                                                        |   |                                                  | 900     |   |   | 510 |   |   | 399 |   |
| Loss                  on disposal of assets                                                  |   |                                                  | 171     |   |   | 7 |   |   | 94 |   |
| Changes                  in operating assets and liabilities:                                |   |                                                  |         |   |   |  |   |   |  |   |
| (Increase)                  decrease in receivables from corporate partners                  |   |                                                  | (52     | ) |   | 129 |   |   | 16,676 |   |
| (Increase)                  decrease in other assets, net                                    |   |                                                  | 26      |   |   | (187 | ) |   | (618 | ) |
| Increase                  (decrease) in accounts payable and accrued expenses                |   |                                                  | 2,127   |   |   | 2,051 |   |   | (517 | ) |
| Decrease                  in unearned revenue from corporate partners                        |   |                                                  | 250     |   |   | (1,482 | ) |   | (5,340 | ) |
| Net                  cash used in operating activities                                       |   |                                                  | (42,537 | ) |   | (31,293 | ) |   | (3,129 | ) |
| **Cash                  flows from investing activities:**                                   |   |                                                  |         |   |   |  |   |   |  |   |
| Purchases                  of property, plant and equipment                                  |   |                                                  | (1,344  | ) |   | (1,860 | ) |   | (1,419 | ) |
| Purchases                  of marketable securities                                          |   |                                                  | -       |   |   | (21,303 | ) |   | (164,135 | ) |
| Maturities                  and sales of marketable securities                               |   |                                                  | 52,966  |   |   | 52,194 |   |   | 61,284 |   |
| Proceeds                  from sales of assets                                               |   |                                                  | -       |   |   | - |   |   | 51 |   |
| Net                  cash provided by (used in) investing activities                         |   |                                                  | 51,622  |   |   | 29,031 |   |   | (104,219 | ) |
| **Cash                  flows from financing activities:**                                   |   |                                                  |         |   |   |  |   |   |  |   |
| Principal                  payments under loans payable                                      |   |                                                  | (1,434  | ) |   | (1,414 | ) |   | (2,972 | ) |
| Exercise                  of employee stock options                                          |   |                                                  | 65      |   |   | 86 |   |   | 1,603 |   |
| Proceeds                  from sale of common stock                                          |   |                                                  | 37,213  |   |   | - |   |   | 114,157 |   |
| Net                  cash provided by (used in) financing activities                    |   |                                                  | 35,844  |   |   | (1,328 | ) |   | 112,788 |   |
| Net                  increase (decrease) in cash and cash equivalents                        |   |                                                  | 44,929  |   |   | (3,590 | ) |   | 5,440 |   |
| Cash                  and cash equivalents at beginning of period                            |   |                                                  | 11,241  |   |   | 14,831 |   |   | 9,391 |   |
| Cash                  and cash equivalents at end of period                                  |   | $                                                     | 56,170  |   | $ | 11,241 |   | $ | 14,831 |   |
|                                                                                         |   |                                                  |    |   |   |   |   |   |   |   |
| See                  accompanying notes to consolidated financial statements.                |   |                                                  |    |   |   |   |   |   |   |   |

----

**NEUROGEN      CORPORATION**

**       **
**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS  **

**1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES **

**BUSINESS**

**USE      OF ESTIMATES**

**CASH      EQUIVALENTS AND MARKETABLE SECURITIE**

**PROPERTY,      PLANT AND EQUIPMENT**

----

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

**LONG-LIVED      ASSETS**

**REVENUE      RECOGNITION**

----

**RESEARCH      AND DEVELOPMENT**

**PRINCIPLES      OF CONSOLIDATION**

**SEGMENT      INFORMATION**

**STOCK-BASED      COMPENSATION - **
*Share      Based Payment *
*,      *

----

| · |   | The                expected term of options granted represents the period of time that                option                grants are expected to be outstanding. In predicting the life of                option                grants, all stock options meet the definition of “plain vanilla” options                under SAB No. 107 with the exception of option grants to the Board                of                Directors, and therefore, the “simplified” method was used to calculate                the term for grants other than the Board of Directors. The expected                term                for Board of Directors grants was calculated based upon historical                analysis. The expected term used during 2006 was not significantly                different from the expected term used when following the disclosure-only                provisions of SFAS No. 123. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| · |   | 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 with historical. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · |   | Under                SFAS No. 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. However, given the Company’s 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. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**INCOME      TAXES**

**EARNINGS      (LOSS) PER SHARE ("EPS")**

**FAIR      VALUE OF FINANCIAL INSTRUMENTS**
** **

----

**RECLASSIFICATIONS**

**RECENTLY      ISSUED ACCOUNTING PRONOUNCEMENTS**

* *

**2.      COLLABORATIONS **

----

**WYETH**

**MERCK**

----

**AVENTIS**

**COLLABORATION      COSTS **

**3.      MARKETABLE SECURITIES **

|                                     |   | December                31, 2006 |   |
|------------------------------------------|--------|----------------------------------|--------|
|                                     |   |  AmortizedCost              |   | GrossUnrealizedGain |   | GrossUnrealizedLoss |   |  FairValue |   |
| U.S.                government notes     |   | $                                | 11,997 |   | $ | - |   | $ | (152 | ) | $ | 11,845 |   |
| Corporate                notes and bonds |   |                             | 40,261 |   |   | - |   |   | (705 | ) |   | 39,556 |   |
| Total                                    |   | $                                | 52,258 |   | $ | - |   | $ | (857 | ) | $ | 51,401 |   |

----

|                                     |   | December                31, 2005 |    |
|------------------------------------------|--------|----------------------------------|---------|
|                                     |   |  AmortizedCost              |    | GrossUnrealizedGain |   | GrossUnrealizedLoss |   |  FairValue |   |
| U.S.                government notes     |   | $                                | 29,492  |   | $ | - |   | $ | (462 | ) | $ | 29,030 |   |
| Corporate                notes and bonds |   |                             | 76,272  |   |   | 37 |   |   | (1,220 | ) |   | 75,089 |   |
| Total                                    |   | $                                | 105,764 |   | $ | 37 |   | $ | (1,682 | ) | $ | 104,119 |   |

|                                   |   | Amortized                Cost |   | Fair                Value |   |
|----------------------------------------|--------|-------------------------------|--------|---------------------------|--------|
| Less                than one year      |   | $                             | 23,234 |                      | $      | 23,052 |   |
| Due                in 1 to 2 1/3 years |   |                          | 29,024 |                      |   | 28,349 |   |
|                                   |   |                          |   |                      |   |   |   |
| Total                                  |   | $                             | 52,258 |                      | $      | 51,401 |   |

|                                                                        |   | 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. |   | $                                    | -      |                               | $      | -                           |   | $ | 11,845 |   | $ | (152 | ) | $ | 11,845 |   | $ | (152 | ) |
| Asset                  Backed Securities                                    |   |                                 | -      |                               |   | -                           |   |   | 3,441 |   |   | (69 | ) |   | 3,441 |   |   | (69 | ) |
| Corporate                  Bonds                                            |   |                                 | -      |                               |   | -                           |   |   | 36,115 |   |   | (636 | ) |   | 36,115 |   |   | (636 | ) |
| Total                                                                       |   | $                                    | -      |                               | $      | -                           |   | $ | 51,401 |   | $ | (857 | ) | $ | 51,401 |   | $ | (857 | ) |

----

**4.      ACCOUNTS PAYABLE AND ACCRUED EXPENSES **

|                                                       |   | 2006   |   | 2005   |   |
|------------------------------------------------------------|--------|--------|--------|--------|--------|
| Accounts                payable and other accrued expenses |   | $      | 5,480  |   | $      | 4,025 |   |
| Accrued                employee compensation               |   |   | 3,001  |   |   | 2,329 |   |
|                                                       |   | $      | 8,481  |   | $      | 6,354 |   |

**5.      LOANS PAYABLE**

|       |   | In                Thousands |   |
|------------|--------|-----------------------------|--------|
| 2007       |   | $                           | 1,454  |   |
| 2008       |   |                        | 1,477  |   |
| 2009       |   |                        | 1,501  |   |
| 2010       |   |                        | 1,527  |   |
| 2011       |   |                        | 2,413  |   |
| Thereafter |   |                        | 2,058  |   |
|       |   | $                           | 10,430 |   |

----

**6.      STOCK OPTIONS AND RESTRICTED STOCK**

| · |   | The                expected term of options granted represents the period of time that                option                grants are expected to be outstanding. In predicting the life of                option                grants, all stock options meet the definition of “plain vanilla” options                under SAB No. 107 with the exception of option grants to the Board                of                Directors, and therefore, the “simplified” method was used to calculate                the term for grants other than the Board of Directors. The expected                term                for Board of Directors grants was calculated based upon historical                analysis. The expected term used during 2006 was not significantly                different from the expected term used when following the disclosure-only                provisions of SFAS No. 123. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| · |   | 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 with historical. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · |   | Under                SFAS No. 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. However, given the Company’s 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. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                                                             |   | 2005   |    | 2004 |   |
|----------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|------|--------|
| Net                loss as reported                                                                                              |   | $      | (37,120 | )    | $      | (18,593 | ) |
| Total                stock-based compensation expense determinedunder                fair value-based method for employee awards |   |   | (6,449  | )    |   | (6,636 | ) |
| Net                loss pro forma                                                                                                |   | $      | (43,569 | )    | $      | (25,229 | ) |
| Basic                and diluted loss per share as reported                                                                      |   | $      | (1.08   | )    | $      | (.63 | ) |
| Basic                and diluted loss per share-pro forma                                                                        |   | $      | (1.27   | )    | $      | (.85 | ) |

**Stock      Options **

|                                                        |   |   | Options  |   |   | WeightedAverage                  ExercisePrice |   |   | Weighted                  Average Remaining Contractual Term |   |   | Aggregate                  Intrinsic Value |   |
|-------------------------------------------------------------|--------|--------|---------------|--------|--------|------------------------------------------------|--------|--------|--------------------------------------------------------------|--------|--------|--------------------------------------------|--------|
| Outstanding                  at January 1                   |   |   | 5,468,142     |   | $      | 13.17                                          |   |   |                                                         |   |   |                                       |   |
| Granted                                                     |   |   | 656,000       |   |   | 5.82                                           |   |   |                                                         |   |   |                                       |   |
| Exercised                                                   |   |   | (17,007       | )      |   | 3.86                                           |   |   |                                                         |   |   |                                       |   |
| Canceled                                                    |   |   | (664,290      | )      |   | 16.07                                          |   |   |                                                         |   |   |                                       |   |
|                                                        |   |   |          |   |   |                                           |   |   |                                                         |   |   |                                       |   |
| Outstanding                  at December 31                 |   |   | 5,442,845     |   | $      | 11.96                                          |   |   | 4.9                                                          |   | $      | 919,954                                    |   |
| Vested                  and expected to vest at December 31 |   |   | 5,321,644     |   | $      | 11.95                                          |   |   | 4.8                                                          |   | $      | 905,850                                    |   |
| Options                  exercisable at December 31         |   |   | 3,749,772     |   | $      | 14.02                                          |   |   | 3.7                                                          |   | $      | 749,363                                    |   |

----

|                                   | 2006                         |   | 2005                     |   | 2004                     |
|----------------------------------------|------------------------------|--------|--------------------------|--------|--------------------------|
| Expected                life           | 5.0-6.5                years |   | 5.0                years |   | 5.0                years |
| Risk-free                interest rate | 4.5%-5.2%                    |   | 3.8%-4.4%                |   | 2.8%-3.9%                |
| Volatility                             | 73%-82%                      |   | 77%-81%                  |   | 87%                      |
| Expected                dividend yield | 0%                           |   | 0%                       |   | 0%                       |

|     Range                of Exercise Prices |    NumberOutstanding      |   |  Weighted                AverageRemainingContractual                Life(Yrs.) |   |   WeightedAverage                ExercisePrice |   |    NumberExercisable      |   |   WeightedAverage                ExercisePrice |
|-----------------------------------------------------------------|------------------------------------------|--------|-------------------------------------------------------------------------------------|--------|----------------------------------------------------------|--------|------------------------------------------|--------|----------------------------------------------------------|
| Less                than $4.99                                  | 403,538                                  |   | 4.1                                                                                 |   | $3.97                                                    |   |                  368,429            |   | $3.98                                                    |
| $5.00                - $7.49                                    |   1,157,430                    |   | 7.9                                                                                 |   | 6.28                                                     |   |                  330,709            |   | 6.51                                                     |
| $7.50                - $9.99                                    | 1,848,170                                |   | 5.4                                                                                 |   | 8.87                                                     |   | 1,023,527                                |   | 8.98                                                     |
| $10.00                - $14.99                                  |                   443,239      |   | 1.7                                                                                 |   | 13.04                                                    |   | 437,839                                  |   | 13.08                                                    |
| $15.00                - $19.99                                  | 1,157,798                                |   | 3.2                                                                                 |   | 18.02                                                    |   | 1,156,598                                |   | 18.02                                                    |
| $20.00                - $24.99                                  | 125,450                                  |   | 2.4                                                                                 |   | 21.44                                                    |   |                   125,450      |   | 21.44                                                    |
| $25.00                - $29.99                                  | 44,850                                   |   | 2.3                                                                                 |   | 27.74                                                    |   |                    44,850 |   | 27.74                                                    |
| $30.00                - $34.99                                  |                    30,750 |   | 2.7                                                                                 |   | 32.34                                                    |   |                    30,750 |   | 32.34                                                    |
| $35.00                - $39.99                                  |                   231,620      |   | 3.3                                                                                 |   | 35.66                                                    |   |                   231,620      |   | 35.66                                                    |
|                                                            | 5,442,845                                |   | 4.9                                                                                 |   | $11.96                                                   |   | 3,749,772                                |   | $14.02                                                   |

----

**Restricted      Stock **

|                                      |   | Restricted                Stock |     | Weighted                Average                Grant                Date Fair                Value |   |
|-------------------------------------------|--------|---------------------------------|----------|----------------------------------------------------------------------------------------------------|--------|
| Outstanding                at January 1   |   |                            | 190,000  |                                                                                               | $      | 13.26 |   |
| Granted                                   |   |                            | -        |                                                                                               |   | - |   |
| Vested                                    |   |                            | (127,500 | )                                                                                                  |   | 15.33 |   |
| Canceled                                  |   |                            | -        |                                                                                               |   | - |   |
| Outstanding                at December 31 |   |                            | 62,500   |                                                                                               | $      | 9.02 |   |

**Non-Cash      Stock Compensation Expense**

|                                                   |   |  2006 |   |  2005 |   |  2004 |   |
|--------------------------------------------------------|--------|------------|--------|------------|--------|------------|--------|
| Restricted                stock (net of cancellations) |   | $          | 381    |       | $      | 929        |   | $ | 1,000 |   |
| Options                granted to consultants          |   |       | 39     |       |   | 122        |   |   | 48 |   |
| FAS                123R expense                        |   |       | 4,423  |       |   | -          |   |   | - |   |
| 1997                options (net of cancellations)     |   |       | -      |       |   | -          |   |   | (50 | ) |
| Total                non-cash compensation expense     |   | $          | 4,843  |       | $      | 1,051      |   | $ | 998 |   |

----

**7.      INCOME TAXES**

|                                                    |   | 2006   |    | 2005   |   | 2004    |   |
|---------------------------------------------------------|--------|--------|---------|--------|--------|---------|--------|
| Expected                tax benefit at 34%              |   | $      | (18,728 | )      | $      | (12,754 | )      | $ | (6,427 | ) |
| State                tax benefit net of federal benefit |   |   | (3,879  | )      |   | (2,580  | )      |   | (707 | ) |
| R                & D credit                         |   |   | (833    | )      |   | (1,438  | )      |   | (1,258 | ) |
| Stock                options and restricted stock       |   |   | 2,055   |   |   | -       |   |   | - |   |
| Other                                                   |   |   | 25      |   |   | 14      |   |   | 137 |   |
| Change                in valuation allowance            |   |   | 20,055  |   |   | 16,365  |   |   | 7,947 |   |
| Tax                benefit                              |   | $      | (1,305  | )      | $      | (393    | )      | $ | (308 | ) |

|                                                           |   | 2006   |     | 2005   |   |
|----------------------------------------------------------------|--------|--------|----------|--------|--------|
| DEFERRED                TAX ASSETS:                            |   |   |     |   |   |   |   |
| Federal                tax operating loss carryforwards        |   | $      | 71,491   |   | $      | 65,202 |   |
| State                tax operating loss carryforwards          |   |   | 8,573    |   |   | 7,663 |   |
| Research                & development credit carryforwards |   |   | 16,568   |   |   | 15,070 |   |
| Alternative                minimum tax credit carryforwards    |   |   | 233      |   |   | 233 |   |
| Capitalized                R&D                             |   |   | 11,993   |   |   | - |   |
| Deferred                revenue                                |   |   | 5,565    |   |   | 5,468 |   |
| Deferred                compensation                           |   |   | 1,353    |   |   | 2,114 |   |
| Unrealized                loss (gain) on investments           |   |   | 334      |   |   | 640 |   |
| Other                                                          |   |   | 318      |   |   | 270 |   |
| Gross                deferred asset                            |   |   | 116,428  |   |   | 96,660 |   |
| Valuation                allowance                             |   |   | (115,680 | )      |   | (95,932 | ) |
|                                                           |   |   |     |   |   |   |   |
| Net                deferred asset                              |   |   | 748      |   |   | 728 |   |
| DEFERRED                TAX LIABILITY:                         |   |   |     |   |   |   |   |
| Depreciation                                                   |   |   | (748     | )      |   | (728 | ) |
| Net                asset/liability                             |   | $      | -        |   | $      | - |   |

----

|                                      |   |  2006 |    |  2005 |   |
|-------------------------------------------|--------|------------|---------|------------|--------|
| Income                tax provision       |   | $          | 104,011 |       | $      | 84,274 |   |
| Additional                paid-in capital |   |       | 11,669  |       |   | 11,658 |   |
|                                      |   | $          | 115,680 |       | $      | 95,932 |   |

*Neurogen      Corporation v. Pam Law, Commissioner of Revenue Services of the State of*

----

*Connecticut*

**8.      COMMITMENTS AND CONTINGENCIES **

**9.      BENEFIT PLANS **

**10.      RELATED PARTIES **

**11.      SUPPLEMENTAL CASH FLOW INFORMATION **

----

**12.      QUARTERLY FINANCIAL DATA (UNAUDITED)**

**(in      thousands except per share data) **

|                                                |   | FirstQuarter |    | SecondQuarter |   | ThirdQuarter |   | FourthQuarter |    |
|-----------------------------------------------------|--------|--------------|---------|---------------|--------|--------------|--------|---------------|---------|
| **2006**                                            |   |         |    |          |   |         |   |          |    |   |   |   |   |
|                                                |   |         |    |          |   |         |   |          |    |   |   |   |   |
| Total                revenue                        |   | $            | 3,815   |          | $      | 1,815        |   | $             | 2,077   |   | $ | 2,106 |   |
| Total                expenses                       |   |         | 18,847  |          |   | 14,970       |   |          | 14,238  |   |   | 19,358 |   |
| Other                income, net                    |   |         | 689     |          |   | 626          |   |          | 596     |   |   | 608 |   |
| Income                tax benefit                   |   |         | -       |          |   | -            |   |          | 670     |   |   | 635 |   |
| Net                loss                             |   |         | (14,343 | )             |   | (12,529      | )      |          | (10,895 | ) |   | (16,009 | ) |
| Basic                and diluted earnings per share |   |         | (0.42   | )             |   | (0.36        | )      |          | (0.31   | ) |   | (0.45 | ) |
|                                                |   |         |    |          |   |         |   |          |    |   |   |   |   |
| **2005**                                            |   |         |    |          |   |         |   |          |    |   |   |   |   |
|                                                |   |         |    |          |   |         |   |          |    |   |   |   |   |
| Total                revenue                        |   | $            | 1,956   |          | $      | 1,956        |   | $             | 1,956   |   | $ | 1,690 |   |
| Total                expenses                       |   |         | 10,816  |          |   | 11,644       |   |          | 12,665  |   |   | 12,990 |   |
| Other                income, net                    |   |         | 794     |          |   | 817          |   |          | 769     |   |   | 664 |   |
| Income                tax benefit                   |   |         | -       |          |   | -            |   |          | 393     |   |   | - |   |
| Net                loss                             |   |         | (8,066  | )             |   | (8,871       | )      |          | (9,547  | ) |   | (10,636 | ) |
| Basic                and diluted earnings per share |   |         | (0.24   | )             |   | (0.26        | )      |          | (0.28   | ) |   | (0.31 | ) |

----

**REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING      FIRM**

*Internal      Control - Integrated Framework*
*Internal      Control - Integrated Framework*

----

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

**ITEM      9A. CONTROLS AND PROCEDURES**

**Disclosure      Controls and Procedures. **

** **

**Management's      Annual Report on Internal Control over Financial Reporting.**

----

**Changes      in Internal Control over Financial Reporting. **

**ITEM      9B. OTHER INFORMATION**

----

**PART      III **

**ITEM      10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**

**Code      of Ethics **

**ITEM      11. EXECUTIVE COMPENSATION**

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

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

**ITEM      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**

----

**PART      IV**

**ITEM      15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES**

**SIGNATURES**

|                                                                                                                                                                                                                                                                      |   | NEUROGEN                CORPORATION                                                                              |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------|
| Date:                March 13, 2007                                                                                                                                                                                                                                       |   |                                                                                                             |
|                                                                                                                                                                                                                                                                      |   | By:                /s/ STEPHEN R. DAVIS                                                                          |
|                                                                                                                                                                                                                                                                      |   |                                                                                                             |
| Pursuant                to the requirements of the Securities Exchange Act of 1934, this                report                has been signed below by the following persons on behalf of the registrant                and in the capacities and on the dates indicated: |   | Stephen                R. DavisExecutive                Vice President andChief                Operating Officer |

| SIGNATURE                                      |   | TITLE                                                            |   | DATE                            |
|------------------------------------------------|--------|------------------------------------------------------------------|--------|---------------------------------|
|                                           |   |                                                             |   |                            |
|                                           |   |                                                             |   |                            |
| *                                              |   |                                                             |   |                            |
|                                           |   |                                                             |   |                            |
| Craig                  Saxton                  |   | Chairman                  of the Board and Director              |   | March                  13, 2007 |
|                                           |   |                                                             |   |                            |
|                                           |   |                                                             |   |                            |
| /s/                  WILLIAM H. KOSTER         |   |                                                             |   |                            |
|                                           |   |                                                             |   |                            |
| William                  H. Koster             |   | President,                  Chief Executive Officer and Director |   | March                  13, 2007 |
| (Principal                  Executive Officer) |   |                                                             |   |                            |

----

|                                                                                        |   |                                                                            |   |                            |
|---------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|--------|---------------------------------|
|                                                                                        |   |                                                                            |   |                            |
| /s/                  STEPHEN R. DAVIS                                                       |   |                                                                            |   |                            |
|                                                                                        |   |                                                                            |   |                            |
| Stephen                  R. Davis                                                           |   | Executive                  Vice President, Chief Operating Officer and Director |   | March                  13, 2007 |
| (Principal                  Financial and Accounting Officer)                               |   |                                                                            |   |                            |
|                                                                                        |   |                                                                            |   |                            |
|                                                                                        |   |                                                                            |   |                            |
| *                                                                                           |   |                                                                            |   |                            |
|                                                                                        |   |                                                                            |   |                            |
| Felix                  J. Baker                                                             |   | Director                                                                        |   | March                  13, 2007 |
|                                                                                        |   |                                                                            |   |                            |
| *                                                                                           |   |                                                                            |   |                            |
|                                                                                        |   |                                                                            |   |                            |
| Julian                  C. Baker                                                            |   | Director                                                                        |   | March                  13, 2007 |
|                                                                                        |   |                                                                            |   |                            |
| *                                                                                           |   |                                                                            |   |                            |
|                                                                                        |   |                                                                            |   |                            |
| Eran                  Broshy                                                                |   | Director                                                                        |   | March                  13, 2007 |
|                                                                                        |   |                                                                            |   |                            |
| *                                                                                           |   |                                                                            |   |                            |
|                                                                                        |   |                                                                            |   |                            |
| Stewart                  Hen                                                                |   | Director                                                                        |   | March                  13, 2007 |
|                                                                                        |   |                                                                            |   |                            |
| *                                                                                           |   |                                                                            |   |                            |
|                                                                                        |   |                                                                            |   |                            |
| Jonathan                  S. Leff                                                           |   | Director                                                                        |   | March                  13, 2007 |
|                                                                                        |   |                                                                            |   |                            |
| *                                                                                           |   |                                                                            |   |                            |
|                                                                                        |   |                                                                            |   |                            |
| John                  Simon                                                                 |   | Director                                                                        |   | March                  13, 2007 |
|                                                                                        |   |                                                                            |   |                            |
|                                                                                        |   |                                                                            |   |                            |
| By:                  * /s/ WILLIAM H. KOSTER and STEPHEN R. DAVIS                           |
|                                                                                        |   |                                                                            |   |                            |
| William                  H. Koster and Stephen R. Davis,                  Attorneys-in-Fact |

----

| **EXHIBIT                  INDEX** |   |                                                                                                                                                                                                                                                                                                                                                                                                         |
|------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **EXHIBIT****NUMBER**              |   | **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).                                                                                                                                                                                                                    |
|                               |   |                                                                                                                                                                                                                                                                                                                                                                                                         |
| 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  |   | Employment                Contract between the Company and Alan J. Hutchison, dated as of December                1, 1997 (incorporated by reference to Exhibit 10.28 to the Company's                Form                10-K for the fiscal year ended December 31, 1999).                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.16  |   | Employment                Contract between the Company and Stephen R. Davis, dated as of December                1,                1997 (incorporated by reference to Exhibit 10.29 to the Company's                Form                10-K for the fiscal year ended December 31, 1999).                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.17  |   | 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).                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.18  |   | 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).                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.19  |   | 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).                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.20  |   | 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).                                                                                 |

| 10.21  |   | 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). |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.22  |   | 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).          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.23  |   | 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).                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.24  |   | Employment                  Agreement between the Company and William H. Koster, dated as of                  September                  4, 2001 (incorporated by reference to Exhibit 10.33 to the Company's                  Form                  10-Q for the quarterly period ended September 30,                  2001).                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                          |

----

| 10.25  |   | 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).                    |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                       |
| 10.26  |   | 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).                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                       |
| 10.27  |   | 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).                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                       |
| 10.28  |   | 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).                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                       |
| 10.29  |   | 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).                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                       |
| 10.30  |   | 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).                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                       |
| 10.31  |   | 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).                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                       |
| 10.32  |   | 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).                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                       |
| 10.33  |   | 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). |

| 10.34  |   | 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 of the Company's Form 8-K dated March 26,                2004).                                                                                                     |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.35  |   | 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 of the Company's Form 8-K dated March 26,                2004). |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

| 10.36  |   | 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).                                                                                               |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                              |
| 10.37  |   | Neurogen                Corporation 2000 Non-Employee Directors Stock Option Program, as                amended                (incorporated by reference to Appendix B of the Registrant's Definitive                Proxy Statement on Schedule 14A (File No. 000-18311) filed on July                12,                2004). |
|   |   |                                                                                                                                                                                                                                                                                                                              |
| 10.38  |   | Amended                and Restated Neurogen Corporation 2001 Stock Option Plan, as amended                (incorporated by reference to Appendix D of the Registrant's Definitive                Proxy Statement on Schedule 14A (File No. 000-18311) filed on July                12,                2004).                     |

----

|   |   |                                                                                                                                                                                                                                                                                                                                      |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.39  |   | Neurogen                Corporation Audit Committee Charter (May 19, 2004) (incorporated                by                reference to Appendix E of the Company's Form DEF 14A dated July                12,                2004).                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                      |
| 10.40  |   | 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 of the Company's Form 8-K dated December 20,                2004).                       |
|   |   |                                                                                                                                                                                                                                                                                                                                      |
| 10.41  |   | Form                of Incentive Stock Option Agreement for the Amended and Restated                Neurogen                Corporation 2001 Stock Option Plan (incorporated by reference to                Exhibit                10.2 of the Company's Form 8-K dated December 20,                2004).                                |
|   |   |                                                                                                                                                                                                                                                                                                                                      |
| 10.42  |   | 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 of the Company's Form 8-K dated December 20,                2004).                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                      |
| 10.43  |   | Form                of Restricted Share Award Agreement for the Amended and Restated                Neurogen                Corporation 2001 Stock Option Plan (incorporated by reference to                Exhibit                10.4 of the Company's Form 8-K dated December 20,                2004).                                |
|   |   |                                                                                                                                                                                                                                                                                                                                      |
| 10.44  |   | Amended                and Restated Neurogen Corporation 2001 Stock Option Plan (as amended                and                restated) (incorporated by reference to Appendix B of the Registrant's                Definitive Proxy Statement on Schedule 14A (File No. 000-18311) filed                on                May 19, 2005). |
|   |   |                                                                                                                                                                                                                                                                                                                                      |
| 10.45  |   | Neurogen                Corporation Audit Committee Charter (As Amended on July 20, 2004)                (incorporated by reference to Appendix C of the Company's Form DEF                14A                dated May 19, 2005).                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                      |
| 10.46  |   | Employment                Agreement between Neurogen Corporation and Stephen Uden dated as                of June                27, 2005 (incorporated by reference to Exhibit 10.1 of the Company's                Form                8-K dated June 30, 2005).                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                      |
| 10.47  |   | License                Agreement between Neurogen Corporation and                Wyeth Pharmaceuticals dated as of November 22, 2006 (CONFIDENTIAL                TREATMENT REQUESTED).                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                      |
| 10.48  |   | Separation                Agreement and General Release between                Neurogen Corporation and Charlie Ritrovato dated as of December 29,                2006.                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                      |
| 10.49  |   | Neurogen                Corporation 2000 Non-Employee Directors Stock Option Program, 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                1,                2006).           |
|   |   |                                                                                                                                                                                                                                                                                                                                      |
| 10.50  |   | Amended                and Restated Neurogen Corporation 2001 Stock Option Plan, as amended                (incorporated by reference to Appendix D of the Registrant's Definitive                Proxy Statement on Schedule A14A (File No. 000-18311) filed on May                26,                2006).                             |
|   |   |                                                                                                                                                                                                                                                                                                                                      |
| 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.                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                      |
| 24.1   |   | Powers                of Attorney of Felix J. Baker, Julian C. Baker,                Eran Broshy, Stewart Hen, Jonathan S. Leff, Craig Saxton, and John                Simon.                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                      |

----

| 31.1   |   | Certification                  Pursuant to Section 302 of the                  Sarbanes-Oxley Act of 2002. |
|--------|--------|------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                       |
| 31.2   |   | Certification                  Pursuant to Section 302 of the                  Sarbanes-Oxley Act of 2002. |
|   |   |                                                                                                       |
| 32.1   |   | Certification                  Pursuant to Section 906 of the                  Sarbanes-Oxley Act of 2002. |
|   |   |                                                                                                       |
| 32.2   |   | Certification                  Pursuant to Section 906 of the                  Sarbanes-Oxley Act of 2002. |