Arena Pharmaceuticals, Inc.
Oct 20, 2004

Arena Pharmaceuticals Announces Third Quarter 2004 Financial Results

SAN DIEGO, Oct. 20 /PRNewswire-FirstCall/ -- Arena Pharmaceuticals, Inc. (Nasdaq: ARNA) today reported financial results for the third quarter and nine months ended September 30, 2004.

Total revenues in the third quarter of 2004 were $4.4 million, compared to $2.9 million in the third quarter of 2003. Total revenues for the nine months ended September 30, 2004 were $11.6 million, compared to $11.2 million for the nine months ended September 30, 2003. Arena reported a net loss allocable to common stockholders for the third quarter and the first nine months of 2004 of $13.6 million, or $0.54 per share, and $43.1 million, or $1.70 per share, respectively. This compares with a net loss allocable to common stockholders for the third quarter and the first nine months of 2003 of $11.9 million, or $0.43 per share, and $32.4 million, or $1.17 per share, respectively.

Research and development expenses totaled $13.9 million in the third quarter of 2004, compared to $12.6 million in the third quarter of 2003. Research and development expenses totaled $42.1 million in the first nine months of 2004, compared to $37.8 million in the first nine months of 2003. The increase in 2004 research and development expenses as compared to 2003 is primarily attributable to the Phase 1a and 1b clinical trials for our lead obesity compound, APD356, as well as moving our preclinical pipeline forward for a number of additional compounds. General and administrative expenses totaled $2.6 million in the third quarter of 2004, compared to $2.1 million in the third quarter of 2003. General and administrative expenses totaled $7.6 million in the first nine months of 2004, compared to $6.0 million in the first nine months of 2003.

Cash, cash equivalents and short-term investments totaled $118.6 million at September 30, 2004.

"We made significant progress in each of our three lead programs in the third quarter, continued to advance our earlier stage programs in each of our four areas of therapeutic focus, and achieved an important milestone in our Merck collaboration," stated Jack Lief, President and CEO of Arena. "We also strengthened our board by adding two seasoned biotechnology chief executive officers, Drs. Harry Hixson and Tina Nova. For the remainder of the year, we look forward to delivering on a number of additional milestones in our three lead programs for obesity, insomnia and diabetes, and to meeting other key objectives that will allow us to execute on our goals in 2005."

    Arena's Third Quarter Highlights:

     *  Achieved a $3 million research milestone in the Merck cardiovascular
        collaboration

     *  Started dosing healthy overweight participants in a Phase 1b multiple-
        dose, 14-day safety study of its lead obesity compound, APD356, in
        expectation of the initiation of a 28-day Phase 2a study in the fourth
        quarter of 2004

     *  Successfully completed IND-enabling toxicity studies for its insomnia
        compound, APD125, in anticipation of the start of a Phase 1 study in
        the fourth quarter of 2004

     *  Initiated 10-day animal toxicity studies of its two lead 19AJ diabetes
        compounds (a Phase 1 study of one of these compounds is anticipated to
        begin in the second half of 2005)

     *  Appointed Drs. Hixson and Nova to the board of directors

Arena will be hosting both a conference call and webcast to discuss third quarter 2004 financial results and guidance and to provide a corporate update on Wednesday, October 20, 2004, at 5:00 PM Eastern Time (2:00 PM Pacific Time). Jack Lief, President and CEO and Robert Hoffman, Vice President, Finance and Chief Accounting Officer will be present on the conference call.

The conference call can be accessed by dialing (888) 273-9887 for domestic callers and (612) 332-0634 for international callers. Please specify to the operator that you would like to join the "Arena Pharmaceuticals Third Quarter Earnings Conference Call." Additionally, the conference call will be webcast live on Arena's website at http://www.arenapharm.com, under the investor relations section, 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 biopharmaceutical company focusing on the discovery, development and commercialization of 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, and that are being developed using Arena's proprietary technologies, including CART (Constitutively Activated Receptor Technology) and Melanophore. Arena also has research collaborations with Merck, Fujisawa, Taisho and TaiGen for products in a number of different indications. For additional information about Arena, visit their website at http://www.arenapharm.com.

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 when and whether Arena expects to continue developing its pipeline of compounds, including APD356, APD125 and 19AJ, and Arena's strategy, technologies, preclinical and clinical programs, ability to identify and develop drugs, future achievements, goals and expectations, as well as other statements that are not historical facts, including statements that are preceded by the word "will," "plan," "hope" or similar words. 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 from collaborators or investors, 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 SEC reports, including Arena's most recent quarterly report on Form 10-Q. These forward-looking statements represent Arena's judgment as of the date of this release. Arena disclaims any intent or obligation to update these forward-looking statements.

     Contacts:   Jack Lief                       Susan Neath
                 President and CEO               Media & Investor Relations
                 Arena Pharmaceuticals           Atkins + Associates
                 (858) 453-7200, extension 223   (858) 527-3486


                         Arena Pharmaceuticals, Inc.
               Condensed Consolidated Statements of Operations

                               Three months ended        Nine months ended
                                 September 30,             September 30,
                               2004         2003        2004        2003
                                  (unaudited)               (unaudited)

    Revenues
     Total revenues         $4,383,332   $2,868,675  $11,565,000 $11,217,885

    Expenses
    Research and
     development            13,874,772   12,565,001   42,055,010  37,762,310
    General and
     administrative          2,639,117    2,059,818    7,610,225   6,026,989
    Amortization of
     non-cash deferred
     compensation              283,079      692,141    1,167,378   2,554,791
    Amortization of
     acquired technology       405,305      405,305    1,215,915   1,215,915
      Total expenses        17,202,273   15,722,265   52,048,528  47,560,005
    Interest and other
     income, net                19,561      977,955     (143,808)  3,892,735

    Net loss               (12,799,380) (11,875,635) (40,627,336)(32,449,385)
    Dividends on
     redeemable convertible
     preferred stock          (362,104)          --   (1,071,612)         --
    Accretion of discount
     related to redeemable
     convertible preferred
     stock                    (462,970)          --   (1,388,912)         --
    Net loss allocable
     to common
     stockholders         $(13,624,454)$(11,875,635)$(43,087,860)$(32,449,385)

    Net loss per share,
     basic and diluted          $(0.54)      $(0.43)      $(1.70)     $(1.17)

    Shares used in
     calculating net
     loss per share,
     basic and diluted      25,362,644   27,764,676   25,313,716  27,725,907


                    Condensed Consolidated Balance Sheet Data

                                               September 30,    December 31,
                                                   2004             2003
                                                (unaudited)        (Note)

    Assets
      Cash, cash equivalents and
       short-term investments                  $118,579,684    $154,016,883
      Other current assets                        4,649,495       4,758,673
      Land, property and equipment, net          53,632,788      55,729,472
      Acquired technology, investments
       and other assets                          13,602,297      15,393,081
         Total assets                          $190,464,264    $229,898,109
    Liabilities and Stockholders' Equity
      Liabilities                               $21,204,477     $20,973,873
      Redeemable convertible preferred stock     28,263,485      25,776,104
      Stockholders' equity                      140,996,302     183,148,132
      Total liabilities and
       stockholders' equity                    $190,464,264    $229,898,109

     Note: The Condensed Consolidated Balance Sheet Data has been derived from
     the audited financial statements as of that date.

SOURCE Arena Pharmaceuticals, Inc.
10/20/2004
Web site: http://www.arenapharm.com