Arena Pharmaceuticals, Inc.
Feb 22, 2006

Arena Pharmaceuticals Announces Fourth Quarter and Full Year 2005 Financial Results

SAN DIEGO, Feb 22, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- Arena Pharmaceuticals, Inc. (Nasdaq: ARNA) today reported financial results for the fourth quarter and full year ended December 31, 2005.

Total revenues in the fourth quarter of 2005 were $5.9 million, compared to $2.1 million in the fourth quarter of 2004. Total revenues in the full year ended December 31, 2005, were $23.2 million, compared to $13.7 million in the full year ended December 31, 2004. Arena reported a net loss allocable to common stockholders in the fourth quarter and the full year ended December 31, 2005, of $19.6 million, or $0.55 per share, and $77.1 million, or $2.24 per share, respectively. This compares with a net loss allocable to common stockholders in the fourth quarter and the full year ended December 31, 2004, of $18.2 million, or $0.70 per share, and $61.3 million, or $2.40 per share, respectively.

"Last year's achievements demonstrate that Arena's strength is the diversity of our drug candidate pipeline, our ability to advance the pipeline, and the sustainability of the pipeline using our GPCR focus, expertise and technologies," commented Jack Lief, Arena's President and Chief Executive Officer. "In 2006, we expect to continue to build value for our stockholders by moving our obesity, insomnia and thrombosis programs into Phase 3, Phase 2 and Phase 1 clinical trials, respectively, and working with our partners to move our cardiovascular and diabetes collaborations towards Phase 2 clinical trials."

Research and development expenses totaled $20.8 million in the fourth quarter of 2005, compared to $15.7 million in the fourth quarter of 2004. Research and development expenses totaled $79.5 million in the full year ended December 31, 2005, compared to $57.7 million in the full year ended December 31, 2004. The increase in 2005 research and development expenses as compared to 2004 is primarily attributable to the clinical trials for Arena's most advanced drug candidates, APD356 for obesity and APD125 for insomnia, as well as moving its research and preclinical pipeline forward for a number of additional compounds. General and administrative expenses totaled $4.7 million in the fourth quarter of 2005, compared to $2.8 million in the fourth quarter of 2004. General and administrative expenses totaled $12.9 million in the full year ended December 31, 2005, compared to $10.4 million in the full year ended December 31, 2004. The increase in 2005 general and administrative expenses as compared to 2004 is primarily attributable to costs related to the company's growing and maturing patent portfolio. Arena's patent costs include costs related to its partnered programs. To the extent Arena's collaborators are obligated to reimburse Arena for such costs, the reimbursements are classified as revenues. Arena recorded $1.1 million in patent reimbursement costs from its collaborators in 2005.

Cash, cash equivalents and short-term investments totaled $127.9 million at December 31, 2005, and does not include net proceeds to the company of approximately $169.0 million from a follow-on stock offering completed in February 2006.

Arena's 2005 Highlights

Arena's 2006 Highlights to Date

Outlook for 2006

Arena expects that revenues from existing collaborations will total approximately $34 to $38 million for 2006, which would be approximately 55% higher than 2005 revenues.

Arena expects to use cash, cash equivalents and short-term investments of approximately $89 to $93 million for its operating activities in 2006 and approximately $9 to $13 million for capital expenditures. This assumes that Arena, and not a collaborator, will continue to advance and fund its planned clinical trials for both APD356 and APD125 in 2006. It also assumes continued progress with Arena's earlier stage programs, including moving APD791 into clinical trials. Arena's year-end 2005 cash, cash equivalents and short-term investments totaled $127.9 million. Accordingly, after taking into account net proceeds of approximately $169 million from its recent follow-on stock offering, Arena expects to end 2006 with approximately $192 to $202 million in cash, cash equivalents and short-term investments. If Arena partners either APD356 or APD125, it would expect that its cash, cash equivalents and short-term investments would be higher.

Scheduled Earnings Call

Arena will host both a conference call and webcast to discuss the fourth quarter and full year 2005 financial results and to provide 2006 guidance and a corporate update today, Wednesday, February 22, 2006, at 5:00 p.m. ET (2:00 p.m. PT). Jack Lief, President and Chief Executive Officer, and Robert E. Hoffman, Vice President, Finance and Chief Financial Officer, will host the conference call.

The conference call may be accessed by dialing 866.271.6130 for domestic callers and 617.213.8894 for international callers. Please specify to the operator that you would like to join the "Arena Fourth Quarter and Full Year Earnings Call." The conference call will be webcast live under the investor relations section of Arena's website at www.arenapharm.com, and will be archived there for 30 days following the call. Please connect to Arena's website several minutes prior to the start of the broadcast to ensure adequate time for any software download that may be necessary.

Upcoming Corporate Presentations

Arena is currently scheduled to present at the following investment and industry conferences through June 2006:

  • SG Cowen 26th Annual Healthcare Conference, March 6-9, 2006, Boston, Massachusetts
  • BioCentury Future Leaders in the Biotech Industry, March 30, 2006, New York, New York
  • CIBC World Markets Annual Biotechnology and Specialty Pharmaceuticals Conference, April 4-5, 2006, New York, New York
  • Biotechnology Industry Organization 2006 Annual International Convention, April 9-12, 2006, Chicago, Illinois
  • Bank of America 2006 Annual Healthcare Conference, May 16-18, 2006, Las Vegas, Nevada
  • Pacific Growth Equities 2006 Life Sciences Growth Conference, June 12-14, 2006, San Francisco, California
  • Needham & Company 5th Annual Biotechnology Conference, June 14-15, 2006, New York, New York
  • About Arena Pharmaceuticals

    Arena is a clinical-stage biopharmaceutical company focusing on the discovery, development and commercialization of small molecule drugs in four major therapeutic areas: metabolic, central nervous system, cardiovascular and inflammatory diseases. Arena is developing a broad pipeline of compounds targeting an important class of drug targets called G protein-coupled receptors, or GPCRs, using its knowledge of GPCRs and its technologies, including CART (Constitutively Activated Receptor Technology) and Melanophore. Arena has four internally discovered, clinical-stage drug candidates for major diseases. The most advanced is APD356, a selective 5-HT2C serotonin receptor agonist that is under investigation for the treatment of obesity and is expected to enter Phase 3 clinical development in the second half of 2006. Arena's lead drug candidate for the treatment of insomnia, APD125, is a compound with a novel mechanism of action (a selective 5-HT2A receptor inverse agonist) that is expected to enter Phase 2 clinical development in the first quarter of 2006. Arena also has two clinical-stage collaborations with major pharmaceutical companies: Merck & Co., Inc., began a Phase 1 clinical trial of an Arena-discovered drug candidate for the treatment of atherosclerosis and related disorders in the third quarter of 2005; and Ortho-McNeil, Inc., a Johnson & Johnson company, began a Phase 1 clinical trial of APD668, an Arena-discovered drug candidate for the treatment of type 2 diabetes in February 2006.

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

    Forward-Looking Statements

    Certain statements in this press release are forward-looking statements that involve a number of risks and uncertainties. Such forward-looking statements include statements about the timing of the expected clinical trials of APD125, APD356 and APD791, potential mechanisms of action and therapeutic benefits of compounds, outlook and guidance for 2006, and other statements about Arena's strategy, technologies, preclinical and internal and partnered clinical programs, and ability to develop compounds and commercialize drugs. 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, the FDA may not allow the Phase 2 clinical trial of APD125 to proceed at the time 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 APD356, APD125 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.

    Contacts:
          Jack Lief                                Carin Canale
          President and CEO                        Porter Novelli Life Sciences
                                                   Media & Investor Relations
          David Walsey                             858.527.3498
          Director, Corporate Communications
    
          Arena Pharmaceuticals, Inc.
          858.453.7200, ext. 1682
    
    
    
                               Arena Pharmaceuticals, Inc.
                     Condensed Consolidated Statements of Operations
    
                               Three months ended              Year ended
                                  December 31,                December 31,
                               2005          2004          2005          2004
                                  (unaudited)                   (Note)
        Revenues
           Total revenues  $5,876,467    $2,120,822   $23,233,346   $13,685,822
    
        Expenses
        Research and
         development       20,753,150    15,674,128    79,514,020    57,729,138
        General and
         administrative     4,669,407     2,839,056    12,879,578    10,449,281
        Amortization of
         non-cash deferred
         compensation          87,515       298,867       438,339     1,466,245
        Amortization of
         acquired
         technology           384,249       608,846     1,536,996     1,824,761
           Total expenses  25,894,321    19,420,897    94,368,933    71,469,425
    
        Interest and other
         income (expense),
         net                  947,526       (64,359)    3,234,542     (208,167)
        Net loss          (19,070,328)  (17,364,434)  (67,901,045) (57,991,770)
        Dividends on
         redeemable
         convertible
         preferred stock     (499,301)     (365,772)   (1,812,629)  (1,437,384)
        Accretion of
         discount related
         to redeemable
         convertible
         preferred  stock          --      (462,971)   (7,372,014)  (1,851,883)
        Net loss
         allocable to
         common
         stockholders    $(19,569,629) $(18,193,177) $(77,085,688) $(61,281,037)
    
        Net loss per
         share, basic
         and diluted           $(0.55)       $(0.70)       $(2.24)       $(2.40)
    
        Shares used in
         calculating
         net loss per
         share, basic
         and diluted       35,321,263    26,137,926    34,377,693    25,527,617
    
    
        Note: The Condensed Consolidated Statements of Operations has been derived
              from the audited financial statements for the period indicated.
    
    
    
                        Condensed Consolidated Balance Sheet Data
    
                                                    December 31,   December 31,
                                                        2005          2004
                                                              (Note)
        Assets
          Cash, cash equivalents and short-term
           investments                              $127,938,979   $113,313,839
          Accounts receivable                            848,095     22,590,323
          Other current assets                         5,720,970      5,331,799
          Land, property and equipment, net           49,639,322     52,994,209
          Acquired technology, investments and
           other assets                               13,981,908     12,134,825
             Total assets                           $198,129,274   $206,364,995
        Liabilities and Stockholders' Equity
          Deferred revenues                          $24,143,585    $30,070,188
          Other liabilities                           24,668,478     20,479,593
          Redeemable convertible preferred stock      49,776,871     29,092,228
          Stockholders' equity                        99,540,340    126,722,986
             Total liabilities and stockholders'
              equity                                $198,129,274   $206,364,995
    
    
        Note: The Condensed Consolidated Balance Sheet Data has been derived from
              the audited financial statements as of that date.
    

    SOURCE Arena Pharmaceuticals, Inc.