Arena Pharmaceuticals, Inc. (ARNA) to Receive $100 Million from Deerfield Management
PRNewswire -- Arena Pharmaceuticals, Inc. announced today that it has entered into an agreement with Deerfield Management, a leading healthcare investment organization and significant Arena stockholder, to provide Arena with $100 million in funding through a credit facility.
"We are pleased that Deerfield, a leader in healthcare investing, sees the potential of our business and that we have the opportunity to expand our relationship through this funding commitment," stated Jack Lief, Arena's President and Chief Executive Officer. "This funding will put us in a stronger financial position as we complete the lorcaserin Phase 3 pivotal program and prepare its NDA submission while advancing our various partnering discussions for lorcaserin and our earlier-stage drug candidates."
Under the terms of the credit facility, Deerfield will provide Arena with $100 million within fifteen business days of signing. The closing is subject to customary closing conditions. Arena has agreed to pay Deerfield a transaction fee of 2.25% at the time of funding. The outstanding principal accrues interest until maturity in June 2013 at a rate of 7.75% per annum, payable quarterly, unless repaid earlier. The principal is required to be repaid as follows: 10% at the end of the first year, 20% at the end of the second year, 30% at the end of the third year and the remainder at the end of the fourth year. At any time Arena may, at its option, redeem any or all of the notes at par and apply such redemption amount against this repayment schedule.
At the closing of the $100 million funding, Arena will issue Deerfield warrants for 28 million shares of its common stock with an exercise price of $5.42 per share.
During the next two years, Deerfield may elect to provide Arena with up to an additional $20 million under the same terms, with the additional funding also maturing in June 2013. For each additional $1 million in funding, Arena will issue Deerfield additional warrants for 280,000 shares of its common stock with an exercise price of $5.42 per share. All of the warrants issued pursuant to the credit facility expire on the facility's maturity date.
"We believe that safety is the single most important variable in the approval and broad usage of drugs for the diverse and growing overweight population. With thousands of patients studied chronically, lorcaserin appears unrivaled in this respect. The value of Arena, however, goes beyond this important drug candidate to the company's niacin receptor program with Merck, its diabetes program with Johnson & Johnson and its ability to discover, develop and partner additional compounds," commented Howard Furst, M.D., Partner, Deerfield Management.
Piper Jaffray & Co. served as the private placement agent to Arena on this transaction. Arena expects to file a Current Report on Form 8-K with the Securities and Exchange Commission that will contain a more detailed disclosure concerning this financing.
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 weight management. Arena's broad pipeline of novel compounds target G protein-coupled receptors, an important class of validated drug targets, and includes compounds being evaluated independently and with partners, including Merck & Co., Inc., and Ortho-McNeil-Janssen Pharmaceuticals, Inc., a Johnson & Johnson company.
Arena Pharmaceuticals® and Arena® are registered service marks of the company. "APD" is an abbreviation for Arena Pharmaceuticals Development.
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 funding arrangement, credit facility and other agreements with Deerfield, the expected funding and related actions thereunder; the anticipated completion of the lorcaserin Phase 3 pivotal program and its NDA submission; Arena's financial position; plans for partnering discussions for lorcaserin and earlier-stage drug candidates; the safety and other potential of lorcaserin; and about Arena's strategy, potential, value, internal and partnered 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 risk that the funding may not be completed when expected, or at all; Arena's ability to obtain additional funds; the timing, success and cost of Arena's lorcaserin program and other of its research and development programs; results of clinical trials or preclinical studies may not be predictive of future results; the risk that lorcaserin may not be deemed adequately safe; clinical trials and studies may not proceed at the time or in the manner Arena expects or at all; Arena's ability to partner lorcaserin or other of its compounds or programs; the timing and ability of Arena to receive regulatory approval for its drug candidates; 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.