Update: Neurogen CEO Sets Exit

Updated from 12:15 p.m. EDT

Harry Penner Jr., the seven-year chief executive of Neurogen(NRGN Quote), intends to step down as soon as a successor is found, the drug discovery and development company announced Wednesday.

The Branford, Conn.-based company, formed in 1987, did not elaborate on the reasons behind the decision, but Penner said in a statement that he has done "what he came here to do." Penner, who has watched the company's market capitalization increase ten-fold during his tenure, added that he is paving the way for "new and vigorous leadership."

The new chief executive will play a key role in the next several years as human genome research gives rise to a number of drug discovery opportunities, the company said. Neurogen's portfolio includes treatments for psychiatric, metabolic and inflammatory disorders.

Two members of Neurogen's board of directors, Barry Bloom and Julian Baker, will lead the hunt for a new leader, the company said.

Penner, 55, has been instrumental in preparing two treatments, one for anxiety and another for Alzheimer's Disease, for Phase II clinical trials, said Amy Enders, a spokeswoman for Neurogen. Penner, who sits on the board of governors of higher education in Connecticut, now seeks to concentrate on economic development and education initiatives, Enders added.

Penner, the former executive vice president of Novo Nordisk A/S(NVO Quote), earned $449,000 in total compensation in 1999, considerably less than his financial package in previous years, according to the company's proxy statement.

Neurogen board members had determined that the company made significant strides in 1999, highlighting the progress of its lead anxiety and Alzeheimer's Disease drugs. But the board believed that the company had not met important goals, and substantially cut the amount of cash bonuses and stock options awarded to the company's executive officers, the proxy showed.

Operating on the premise that compensation should reflect company performance, board members agreed to slash awards for executive officers and withhold any cash bonuses or stock options from Penner for fiscal 1999, according to the proxy. Base salaries, though, were boosted for executive officers, including Penner.

Penner had agreed to that adjustment, Neurogen's Enders noted. And the reduction in cash bonuses and stock options awarded to executives "was not related in any way to Mr. Penner's decision to play a greater role in public service," Enders added.

Neurogen, which focuses on research and development aimed at generating future earnings, recorded a net loss of $2.6 million in the latest quarter, narrower than a net loss of $3.7 million in the comparable period of 1999. Operating revenue in the quarter ending June 30 rose to $4.5 million from $2.3 million in 1999 as research and development expenses increased 13% to $6.6 million.

Neurogen finished Wednesday regular trading up 1 3/16, or 4%, at 32 13/16.