Arena Pharmaceuticals Enters Into Strategic Agreements For The Manufacture Of Pharmaceutical Material, Including Lorcaserin

Arena Pharmaceuticals, Inc. announced recently that it entered into strategic cooperation agreements with Siegfried Ltd., an affiliate of Siegfried Holding AG . 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 years.
• 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.

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 .

SOURCE: Arena Pharmaceuticals, Inc.