National Editor

Arena Pharmaceuticals Inc. added yet another deal focused on G protein-coupled receptors - this one with Merck & Co., which has paid "$4 million up front, and will pay us significant money, including another $10 million in the next 12 months, if we achieve some milestones," said Jack Lief, Arena's president and CEO.

"There are some very significant royalties," he added, noting that Arena tends to emphasize that aspect of its agreements.

With Merck, Arena will be collaborating on validating three orphan GPCRs of interest. Arena will deploy its receptor technologies known as CART and Melanophore, which allow direct, ligand-independent identification of modulators of GPCRs, along with medicinal chemistry to come up with initial molecules.

Areas of disease focus are undisclosed. As for length of the deal, "three years is a good bet," Lief told BioWorld Today. "Obviously, it depends on how the research goes," he said. "If we're able to pop a preclinical candidate out quicker [than expected], the focus will move toward development rather than research."

In recent decades, development has begun on hundreds of drugs that modulate more than 20 GPCRs, on which many existing treatments act, and Arena has been working on partnerships to push the work along.

Last year, the company signed a GPCR-based deal with start-up TaiGen Biotechnology Co. in Taiwan, which gave Arena about $7 million up front. (See BioWorld Today, August 21, 2001.)

"Each deal is different," Lief said. "With Merck, we've provided a small family of targets we've validated. With TaiGen, these were unvalidated receptors that TaiGen had an interest in and still does."

Arena - which went public two years ago, raising $108 million, and pulled down another $110 million in June of last year - also has a GPCR deal with Taisho Pharmaceutical Ltd., focused on GPCRs. (See BioWorld Today, July 31, 2000; Feb. 1, 2001; and June 6, 2001.)

Another GPCR agreement is with Eli Lilly and Co., of Indianapolis, which Lief said is "moving along very nicely," despite a clouded horizon.

"We've given guidance that Lilly has some difficulty with revenue and earnings this year and next, and they're under some stress to renegotiate," Lief said. "We're talking with them."

Trying to measure the potentially largest of the GPCR deals is not easy, Lief said.

"Certainly near term, Merck looks pretty good," he said. "Longer term, all of our deals have big royalties. Most of our value is generated from back-end royalties, something that pharma doesn't like to give up. But with the strong position Arena has, there's no reason to sell the future for a couple of dollars today."

Some firms, he said, take up-front money as part of low-royalty deals, disclosing few details and operating under the philosophy that "nobody knows and nobody cares," Lief said.

"I care," he added. "A lot of these companies are going to pay the price in the future."

Arena's stock (NASDAQ:ARNA) closed Thursday at $6.34, up 45 cents.