By Randall Osborne

West Coast Editor

Arena Pharmaceuticals Inc. signed a licensing deal with Taiwan-based start-up TaiGen Biotechnology Co. for G protein-coupled receptor research, powered by an outlay of $24 million, the first half of a Series A financing for TaiGen by MPM Capital LP.

¿The two were timed to occur on the same day,¿ said Jack Lief, president and CEO of Arena. ¿The deal activated upon closing of the financing,¿ he said, and would not have gone ahead without it.

¿If they hadn¿t closed their financing, they wouldn¿t have the money to pursue the GPCRs,¿ Lief said, noting that TaiGen ¿represents a significant budding-off of scientists from their local institute of health.¿

The company was formed by Ming-Chu Hsu, formerly research director for oncology and virology at Hoffmann-La Roche AG, of Basel, Switzerland, and more recently director for biotechnology and pharmaceutical research at Taiwan¿s National Health Research Institutes.

San Diego-based Arena gets about $7 million up front from TaiGen, or 15 percent of the total $48 million financing. A Series B financing is expected in 2003, and ¿we get another 15 percent of the total company if they select more receptors,¿ Lief said.

¿We could end up with 30 percent [of TaiGen],¿ Lief said, adding that the firm is expected to be ¿worth over $100 million and ready to do an IPO¿ after the Series B.

¿And we have somebody else spending their money on developing the drugs,¿ he added. Under the terms of the agreement, TaiGen has the right to select up to 30 validated screening assays that include G protein-coupled receptors, over the next three years, using them to develop therapeutics.

¿Initially, there are up to nine,¿ Lief told BioWorld Today. ¿They have the opportunity to select more, in exchange for more equity.¿ Exactly how much equity that will be, for how many receptors, depends on a ¿complex formula¿ related to the price and size of the Series B financing, he said.

¿There¿s no way we could do [the research] all ourselves,¿ Lief said, adding that GPCRs ¿don¿t do us any good sitting in our freezer over here.¿

In the Series A round, the first half of which is completed, Arena gets all of its money from TaiGen up front, he said.

¿They will select all of their receptors and we¿ll provide them with assays, probably within the first 18 months¿ of the three-year arrangement, he said.

¿Beyond that, it¿s up to them to move these forward,¿ Lief said. ¿We get them back after six years if they don¿t advance them, if they haven¿t filed an [investigational new drug application],¿ but would be obligated to share revenues, or payments from the sale of compounds, he added.

Arena, which uses what it calls Constitutively Activated Receptor Technology to identify drug leads when used with GPCRs or other receptors, gets the right of first negotiation for any compound discovered by TaiGen, as well as tiered royalties to the double digits based on sales of any products developed or out-licensed by TaiGen.

¿They¿re primarily interested in cancer, hepatitis and diabetes,¿ Lief said.

MPM, of Cambridge, Mass., led the financing, and is joined by various Chinese investors.

Arena, which went public last year when it raised $108 million, raised another $110 million in June of this year, and already has a deal with Taisho Pharmaceutical Ltd., focused on GPCRs. (See BioWorld Today, July 31, 2000; Feb. 1, 2001; and June 6, 2001.)

The company¿s stock (NASDAQ:ARNA) closed Monday at $19.02, up 70 cents.