Sale Of Two Drug Development Firms Is A Blow To State Biotech Industry

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Neurogen Corp. and Curagen Corp., homegrown drug development firms, now have one more thing in common — both are selling themselves to companies that will shutter all, or virtually all, Connecticut operations.

Three months after Curagen said it would sell itself to a Massachusetts firm for $95 million, Branford-based Neurogen announced Monday that it has agreed to merge with a San Diego company for $11 million, or 16 cents a share, and shut down what remains of its Connecticut operations.

Neurogen and Curagen were early, prominent members of the state's biotech industry, raising high hopes along with hundreds of millions of dollars in investment capital. But neither was able to bring a drug to market, despite years of effort.

At their peaks, the firms together employed 400 people — 150 at Neurogen, which now has seven, and 250 at Curagen, which has 15.

Ligand Pharmaceuticals Inc. will acquire Neurogen in an $11 million stock deal that is expected to close in the fourth quarter, the companies said in a joint statement Monday. In addition, Neurogen will have the opportunity to try to sell some of its assets, including real estate in Branford and aplindore, a drug in development, before the deal closes. Proceeds would be distributed among shareholders.

Curagen, formerly of Branford, now in New Haven, announced its sale to Celldex Therapeutics Inc. of Needham, Mass., in May. That deal is pending.

Ligand, a publicly traded firm working on treatments for various diseases including muscle wasting, asthma and psoriasis, stands to gain Neurogen's partnership with Merck; its drug development programs; real estate; and cash amounting to $7 million after debts and transaction fees are paid.

As of June 30, Neurogen had $22 million in cash and $10.8 million in debt and payable expenses.

Neurogen stockholders will get about 4 million shares of Ligand stock, or about 3 percent of the combined company. Neurogen closed flat Monday at 20 cents a share. Ligand closed at $2.54, down 8 percent.

Like many biotech companies, which often operate solely on investment capital as they try to bring a product to market, Neurogen found itself with few options at a time when credit is still hard to come by.

"I think that we were very efficient at discovering drug candidates," said Stephen Davis, Neurogen's chief executive, who will not join Ligand. "But it is very much a numbers game. We and many other biotech companies are in a similar position, and that is at a point where we are not close enough to getting sustainable revenues on our own in an environment were other sources of capital are dried up or in gridlock. We've done what we think is the best thing for our shareholders."

Founded in 1987, Neurogen at first intended to develop drugs for major pharmaceutical companies in exchange for royalties. Eventually it began developing its own drugs.

But it hadn't brought a drug to market and, still dependent on investment, Neurogen ran into serious trouble last year, as investors held back. In May, the company said it had hired an adviser to explore a sale.

The sale of Curagen, founded in 1991 and once the biggest biotech employer in Connecticut, is expected to close by the end of next month. Sean Cassidy, Curagen's chief financial officer, said Monday that it has not yet been decided whether Celldex would keep any operations in Connecticut.

"It's a similar circumstance for both of them," said Paul Pescatello, president of CURE, the state's bioscience advocacy group. "They have interesting products that are arousing interest in potential buyers. But investors are looking at it and saying, 'We're taking a break unless we have a lot more certainty over the path to a marketed product.'"

Copyright © 2014, Los Angeles Times
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