Arena Pharmaceuticals, Inc.
Jul 19, 2005

Arena Pharmaceuticals Announces Second Quarter 2005 Financial Results

SAN DIEGO, July 19, 2005 /PRNewswire-FirstCall via COMTEX/ -- Arena Pharmaceuticals, Inc. (Nasdaq: ARNA) today reported financial results for the second quarter and six months ended June 30, 2005.

Total revenues in the second quarter of 2005 were $5.5 million, compared to $1.4 million in the second quarter of 2004. Total revenues in the six months ended June 30, 2005, were $9.9 million, compared to $7.2 million in the six months ended June 30, 2004. Arena reported a net loss allocable to common stockholders in the second quarter and the six months ended June 30, 2005 of $16.3 million, or $0.46 per share, and $41.4 million, or $1.24 per share, respectively. This compares with a net loss allocable to common stockholders in the second quarter and the six months ended June 30, 2004 of $17.0 million, or $0.67 per share, and $29.5 million, or $1.17 per share, respectively.

"This was a very successful half year for Arena with the announcement of exciting top-line clinical trial results from our obesity and insomnia programs, the start of our Phase 2b obesity study, the completion of a public stock offering and the issuance of two important patents," stated Jack Lief, Arena's President and CEO. "I am looking forward to continued progress as we head into the second half of 2005 with data from our Phase 2b obesity trial around year end, the initiation of the Phase 2 insomnia trial, and the advancement of one new Arena program into preclinical development. We are also continuing to advance our collaborations with Merck and Ortho-McNeil, as well as efforts to develop new collaborations with additional partners."

Research and development expenses totaled $19.1 million in the second quarter of 2005, compared to $14.4 million in the second quarter of 2004. Research and development expenses totaled $37.9 million in the six months ended June 30, 2005, compared to $28.2 million in the six months ended June 30, 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 product 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 $2.9 million in the second quarter of 2005, compared to $2.4 million in the second quarter of 2004. General and administrative expenses totaled $5.7 million in the six months ended June 30, 2005, compared to $5.0 million in the six months ended June 30, 2004.

Cash, cash equivalents and short-term investments totaled $162.5 million at June 30, 2005.

Arena's Second Quarter Highlights:

Outlook for 2005

Arena is revising its 2005 revenue guidance from approximately $20.0 million to approximately $22.0 million to reflect reimbursement for additional sponsored research and patent activities performed by Arena in support of its existing collaborations. Correspondingly, Arena expects its research and development expenses to increase by approximately $2.0 million in order to perform such additional sponsored work. Guidance for the company's ending cash, cash equivalents and short-term investments remains unchanged at approximately $122 million.

Arena will host both a conference call and webcast to discuss the second quarter 2005 financial results, guidance for the remainder of the year and to provide a corporate update today, Tuesday, July 19, 2005, at 12:00 p.m. EDT (9:00 a.m. PDT). Jack Lief, President and Chief Executive Officer and Robert Hoffman, Vice President, Finance and Chief Accounting Officer will be present on the conference call.

The conference call may be accessed by dialing 800.798.2884 for domestic callers and 617.614.6207 for international callers. Please specify to the operator that you would like to join the "Arena Second Quarter Earnings Call," or use the passcode: 11969855. The conference call will be webcast live under the investor relations section of Arena's website at http://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 conference call to ensure adequate time for any software download that may be necessary.

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, cardiovascular, inflammatory and central nervous system diseases. Arena is developing a broad pipeline of compounds that act on an important class of drug targets called G protein-coupled receptors, or GPCRs, using its proprietary technologies, including CART (Constitutively Activated Receptor Technology) and Melanophore. Arena's most advanced clinical compound, APD356, a selective 5-HT2C serotonin receptor agonist for the treatment of obesity, is in Phase 2b. Arena's lead product candidate for the treatment of insomnia, APD125, a compound with a novel mechanism of action (a selective 5-HT2A receptor inverse agonist), is scheduled to begin a Phase 2 clinical trial by the end of 2005. Arena has active collaborations with two major pharmaceutical companies, Ortho-McNeil Pharmaceutical, Inc., a Johnson & Johnson company, for the treatment of type 2 diabetes, and Merck & Co., Inc., for the treatment of atherosclerosis and related disorders.

Arena Pharmaceuticals® and Arena® are registered service marks of the company. CART is an unregistered service mark of the company.

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 Arena's clinical trials, including expected results and future trials, the advancement of Arena's internal and partnered programs, and other statements about Arena's financial guidance, strategy, progress, technologies, preclinical and clinical programs, current and possible future collaborations, and ability to develop compounds. 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 timing, success and cost of Arena's research, out-licensing endeavors and clinical studies, Arena's ability to obtain additional financing, and the timing and receipt of payments and fees, if any, from Arena's collaborators, including Ortho-McNeil and Merck. 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.


                         Arena Pharmaceuticals, Inc.
               Condensed Consolidated Statements of Operations

                          Three months ended          Six months ended
                               June 30,                   June 30,
                          2005         2004          2005         2004
                             (unaudited)                (unaudited)
    Revenues
      Total revenues $5,504,767     $1,398,334    $9,924,992   $ 7,181,668

    Expenses
    Research and
     development     19,130,659     14,382,211    37,939,955    28,180,238
    General and
     administrative   2,921,114      2,424,919     5,651,615     4,971,108
    Amortization of
     non-cash deferred
     compensation        88,971        383,671       263,309       884,299
    Amortization of
     acquired
     technology         384,249        405,305       768,498       810,610
      Total expenses 22,524,993     17,596,106    44,623,377    34,846,255

    Interest and other
     income, net      1,128,462         59,408     1,505,085      (163,369)
    Net loss        (15,891,764)   (16,138,364)  (33,193,300)  (27,827,956)
    Dividends on
     redeemable
     convertible
     preferred stock   (457,618)      (354,594)     (819,025)     (709,508)
    Accretion of
     discount related
     to redeemable
     convertible
     preferred stock         --       (462,971)   (7,372,014)     (925,942)
    Net loss allocable
     to common
     stockholders  $(16,349,382)  $(16,955,929) $(41,384,339) $(29,463,406)

    Net loss per share,
     basic and diluted   $(0.46)        $(0.67)       $(1.24)       $(1.17)

    Shares used in
     calculating net
     loss per share,
     basic and
     diluted         35,166,661     25,318,761    33,459,565    25,252,592



                  Condensed Consolidated Balance Sheet Data

                                                   June 30,    December 31,
                                                     2005          2004
                                                  (unaudited)     (note)
    Assets
      Cash, cash equivalents
       and short-term investments               $162,473,962   $113,313,839
      Accounts receivable                          1,073,109     22,590,323
      Other current assets                         4,209,390      5,331,799
      Land, property and equipment, net           51,501,650     52,994,209
      Acquired technology, investments
       and other assets                           10,950,892     12,134,825
        Total assets                            $230,209,003   $206,364,995
    Liabilities and Stockholders' Equity
      Deferred revenues                          $25,283,195    $30,070,188
      Other liabilities                           21,919,863     20,479,593
      Redeemable convertible preferred stock      48,783,268     29,092,228
      Stockholders' equity                       134,222,677    126,722,986
        Total liabilities and
         stockholders' equity                   $230,209,003   $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.

Jack Lief, President and CEO, or David Walsey, Director, Corporate Communications, both of Arena Pharmaceuticals, Inc., +1-858-453-7200, ext. 1682; or Susan Neath, Media & Investor Relations of Atkins + Associates, +1-858-527-3486, for Arena Pharmaceuticals, Inc.