As its lead drug for obesity prepares to enter a Phase III trial this year, Arena Pharmaceuticals Inc. priced a public offering at $164.8 million.

The San Diego-based company agreed to offer 9.75 million shares of common stock at $16.90 apiece - a slight discount to the closing stock price Thursday of $16.97.

Shares (NASDAQ:ARNA) climbed 36 cents Friday to $17.33.

CIBC World Markets Corp. and UBS Investment Bank, both of New York, are acting as joint book-running managers, while co-managers are New York-based firms Needham & Co. LLC, SG Cowen & Co. LLC and Morgan Joseph & Co. Inc., as well as Santa Monica, Calif.-based Montgomery & Co. LLC and Minneapolis-based Piper Jaffray & Co. The underwriters have an overallotment option to purchase 1.5 million shares.

Arena officials declined to comment due to SEC quiet-period rules. But according to the company's prospectus, Arena will use net proceeds of about $154.9 million (not including the overallotment option) for preclinical and clinical development of its internally discovered product candidates, to discover new product candidates and for general corporate purposes and working capital.

As of Dec. 31, the company reported cash, cash equivalents and short-term investments of $127.9 million. By adding the latest financing, Arena should have enough money to cover operating expenses for the next three years, if costs remain level.

Arena's products target G protein-coupled receptors and are designed to treat metabolic, central nervous system, cardiovascular and inflammatory diseases.

Its lead drug for obesity, APD356, demonstrated highly statistically significant (p<0.001) Phase IIb data in December, showing overweight patients dropped an average of 4, 5.7 and 7.9 pounds at daily doses of 10, 15 and 20 mg, respectively. Patients on placebo lost an average of 0.7 pounds. The trial enrolled 469 patients. (See BioWorld Today, Dec. 15, 2005.)

APD356 is a selective 5-HT2C serotonin receptor agonist. The product was generally well tolerated at all doses in the Phase IIb trial, and there appeared to be no effects on heart valves or pulmonary artery pressures. APD356's would-be competitor, Meridia (sibutramine hydrochloride monohydrate), from Knoll Pharmaceutical Co., of Mt. Olive, N.J., carries a warning for hypertension. Arena expects to begin Phase III development of APD356 in the second half of 2006.

The company's second-in-line product, APD125, is a selective 5-HT2A serotonin receptor inverse agonist that should enter a Phase II trial for insomnia by the end of the first quarter. Phase I data indicated the compound was well tolerated and demonstrated a statistically significant increase in the amount of deep, or slow wave, sleep in volunteers with normal sleep/wake patterns.

Arena is testing APD791 at the preclinical stage for arterial thrombosis, with a goal of starting a Phase I trial by the end of 2006.

Arena intends to commercialize some of its products itself, but it also has partnered products with Merck & Co. Inc., of Whitehouse Station, N.J., and with Ortho-McNeil Inc., a unit of New Brunswick, N.J.-based Johnson & Johnson. Merck began in the third quarter a Phase I trial with an Arena compound that targets the niacin receptor to treat atherosclerosis and related disorders, and Ortho-McNeil has two of Arena's candidates in preclinical development for Type II diabetes.

In early research, Arena is working on cytokine modulators and T- and B-cell modulators for inflammation, cardiovascular and diabetes agents and a compound to promote wakefulness.

The company, which was incorporated in April 1997, has 314 employees. It raised $108 million in its initial public offering conducted in July 2000 and last raised $48.3 million in a February 2005 public offering.

Following the latest offering, Arena has 45.2 million shares outstanding.

In other financing news:

• Biomira Inc., of Edmonton, Alberta, is raising $16.1 million through an exclusive private placement with New York-based Rodman & Renshaw LLC. The financing is expected to close within the next few days. Biomira will offer up to 10.6 million units, each consisting of one common share and 0.25 of a warrant, at an issue price of $1.52. Each warrant will entitle the holder to purchase one common share at $2.50 over a 42-month period from the date the financing closes, with a no-exercise period of six months. Last week, the company renegotiated its licensing agreement with Merck KGaA, of Darmstadt, Germany, for its lead cancer vaccine L-BLP25, freeing up Biomira to focus on advancing its follow-on vaccine BGLP40 and on acquiring new products. The company's stock (NASDAQ:BIOM) fell 30 cents Friday, or 16.8 percent, to close at $1.49.

• Tercica Inc., of Brisbane, Calif., said New York-based Lehman Brothers Inc. exercised in full its option to purchase 750,000 shares of common stock to cover overallotments. Earlier this month, Tercica announced a discounted public stock sale of 5 million shares at $6.40 apiece to raise $30 million in net proceeds to fund efforts related to its lead product Increlex, which is approved for the long-term treatment of growth failure due to severe primary IGFD (insulin-like growth factor-1 deficiency). Tercica's stock (NASDAQ:TRCA) rose 8 cents to close at $6.50 Friday. (See BioWorld Today, Jan. 25, 2006.)

• Vical Inc., of San Diego, filed a shelf registration statement that would allow the company to issue from time to time up to $70 million of common stock, preferred stock or a combination of the securities. Specific terms of any offering will be established at the time of the sale. Vical focuses on its patented DNA delivery technologies to find products to prevent and treat cancer, infectious diseases and cardiovascular diseases.

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