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Arena Pharmaceuticals Enters Into Strategic Agreements for the Manufacture of Pharmaceutical Material, Including Lorcaserin

Press Release

Arena Pharmaceuticals Enters Into Strategic Agreements for the Manufacture of Pharmaceutical Material, Including Lorcaserin

Arena Pharmaceuticals Enters Into Strategic Agreements for the Manufacture of Pharmaceutical Material, Including Lorcaserin

SAN DIEGO, Dec. 18 /PRNewswire-FirstCall/ -- Arena Pharmaceuticals, Inc. (Nasdaq: ARNA) announced today that it entered into strategic cooperation agreements with Siegfried Ltd., an affiliate of Siegfried Holding AG (SWX: SFZN). The agreements primarily relate to the manufacturing of lorcaserin hydrochloride, which is expected to be necessary for Arena's planned New Drug Application (NDA) submission to the U.S. Food and Drug Administration (FDA) and for commercialization of lorcaserin after regulatory marketing approval. Lorcaserin is Arena's Phase 3 oral drug candidate being developed for the treatment of obesity. Arena expects that this transaction will close on January 8, 2008 and believes that it has the potential to:

    -- Reduce manufacturing related risks to the lorcaserin NDA registration
       lots and submission of its planned lorcaserin NDA.
    -- Secure a long-term supply of lorcaserin active pharmaceutical
       ingredient (API).
    -- Reduce the overall manufacturing costs for lorcaserin and other Arena
       product candidates.
    -- Lead to significant future tax benefits, which may result from a
       favorable tax ruling Arena received from Switzerland.

    The agreements with Siegfried include the following:

    -- A long-term supply agreement for Arena's purchase of lorcaserin API at
       competitive rates for a period of 15 years after FDA approval.
    -- An asset purchase agreement for Arena's purchase of certain finishing
       facility assets and technology, including the transfer of certain
       equipment, fixtures and real estate assets used in converting API into
       tablet form, the expected finished drug product (FDP) of lorcaserin.
       Approximately 70 employees that are trained in the operations of the
       purchased assets are expected to be transferred from Siegfried to Arena
       in connection with the transaction.
    -- A contract manufacturing agreement under which Siegfried will pay for a
       significant portion of the costs associated with maintaining the
       facility. Under this agreement, Siegfried will sub-contract from Arena
       services to finish API currently manufactured by Siegfried into final
       commercial tablet forms for Siegfried's customers for at least three
    -- A services agreement under which Siegfried will provide at its cost
       various technical and business services to Arena related to the
       operation of the facility.

"The relationship with Siegfried is an important strategic development that supports our efforts to optimize lorcaserin's economic potential," said Jack Lief, Arena's President and Chief Executive Officer. "It also allows us to better proactively manage manufacturing related risks and costs, and may facilitate commercialization with a partner."

The purchase price of the acquired assets is CHF 32 million in cash and approximately 1.5 million shares of Arena common stock. The cash is payable CHF 22 million at closing and CHF 10 million payable in three equal installments in the third, fourth and fifth years after closing. The stock is subject to a lock-up agreement for a period of three years from closing. The agreements with Siegfried are not expected to increase the total lorcaserin pre-launch manufacturing related cash out-flows when compared to the alternative of outsourcing all manufacturing related activities. Arena estimates that substantially the entire purchase price paid to Siegfried will be recouped through reduced manufacturing related costs within one year post launch of lorcaserin.

The agreements, entered into between Arena's Swiss subsidiary, Arena Pharmaceuticals GmbH, and Siegfried, will replace a significant part of Arena's previous plans to outsource manufacturing related activities for lorcaserin. However, Arena will continue to manage manufacturing related risks by working with multiple suppliers for API and the processing of API into FDP. Arena expects to use the acquired assets for the manufacture of other Arena drug candidates for clinical or commercial use. Further, the acquired facility could be a source of commercial product for any lorcaserin commercialization partner.

"This transaction immediately establishes a key supply chain link in our manufacturing process. Given the high regard of Siegfried as a pharmaceutical supplier, including its professional and highly knowledgeable employees, I'm confident we will be able to realize significant benefits from this transaction," commented Paul W. Maffuid, Ph.D., Arena's Vice President, Pharmaceutical Development.

Siegfried has over 130 years of pharmaceutical and chemical manufacturing experience and its facilities are approved by the United States, Swiss and other European regulatory authorities to produce API and FDP for these markets. The finishing facility assets being acquired by Arena are located in Zofingen, Switzerland and are situated within Siegfried's campus where it also manufactures API. The finishing facility assets are GMP compliant and capable of producing large scale quantities of lorcaserin and other Arena drug candidates for use in clinical trials or commercially if approved for marketing.

About Arena Pharmaceuticals

Arena is a clinical-stage biopharmaceutical company focused on discovering, developing and commercializing oral drugs in four major therapeutic areas: cardiovascular, central nervous system, inflammatory and metabolic diseases. Arena's most advanced drug candidate, lorcaserin, is being investigated in a Phase 3 clinical trial program for the treatment of obesity. Arena's broad pipeline of novel compounds targeting G protein-coupled receptors, an important class of validated drug targets, includes compounds being evaluated independently and with its partners, Merck & Co., Inc. and Ortho-McNeil Pharmaceutical, Inc.

Arena Pharmaceuticals® and Arena® are registered service marks of the company. "APD" is an abbreviation for Arena Pharmaceuticals Development.

About Siegfried

Active in Life Science markets, the Siegfried Group is a global manufacturer of pharmaceutical products. With production facilities located in Switzerland, Germany, Malta and the United States Siegfried currently has approximately 950 employees and achieved annual sales of approximately CHF 300 million in 2006.

Siegfried integrates two pharmaceutical divisions. Siegfried Actives develops and produces both exclusive active pharmaceutical ingredients (API) and cGMP and non cGMP intermediates for the pharmaceutical industry as well as standard APIs. Siegfried Generics produces generic products.

Siegfried Holding AG is listed on the Swiss Exchange in Zurich (SWX: SFZN).

Forward-Looking Statements

Many statements in this press release are forward-looking statements that involve a number of risks and uncertainties. Such forward-looking statements include statements about lorcaserin's development, FDA submission and commercialization; the cost savings, efficiencies, reductions in risk, potential tax and other benefits, and expectations relating to the agreements and relationship with Siegfried, including the anticipated activities thereunder, the transfer of employees, the potential for partnering lorcaserin and the use of the acquired assets in connection with a lorcaserin partnership; use of multiple suppliers; the breadth of Arena's pipeline; Arena's strategy, preclinical and internal and partnered clinical programs; and about Arena's ability to develop compounds and commercialize drugs and other statements that are not historical facts. For such statements, Arena claims the protection of the Private Securities Litigation Reform Act of 1995. Actual events or results may differ materially from Arena's expectations. Factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to, Arena's ability to operate the acquired assets, Arena's planned clinical trials and studies may not proceed at the time or in the manner Arena expects or at all, the results of preclinical studies or clinical trials may not be predictive of future results, Arena's ability to partner lorcaserin, APD125, APD791 or other of its compounds or programs, the timing, success and cost of Arena's research, out-licensing endeavors and clinical trials, Arena's ability to obtain additional financing, Arena's ability to obtain and defend its patents, and the timing and receipt of payments and fees, if any, from Arena's collaborators. Additional factors that could cause actual results to differ materially from those stated or implied by Arena's forward-looking statements are disclosed in Arena's filings with the Securities and Exchange Commission. These forward-looking statements represent Arena's judgment as of the time of this release. Arena disclaims any intent or obligation to update these forward-looking statements, other than as may be required under applicable law.

SOURCE Arena Pharmaceuticals, Inc.

CONTACT: Jack Lief, President and CEO, or David Walsey, Director,
Corporate Communications, both of Arena Pharmaceuticals, Inc.,
+1-858-453-7200, ext. 1682; or Mary Claire Duch of WeissComm Partners, Media
Relations, +1-212-301-7228