By Matthew Willett

Taisho Pharmaceutical Ltd. and Arena Pharmaceuticals Inc. agreed to an expansion of their G protein-coupled receptor (GPCR) research agreement, an expansion that licenses rights to a target that may produce metabolic disorder therapeutics.

The arrangement calls for Arena to license rights to its GPCR 18F, a receptor Arena has evaluated in early animal studies, in return for an up-front payment, potential future milestone payments and full-time equivalent payments and royalties.

Arena's work centers on its proprietary CART, or constitutively activated receptor technology, which allows for ligand-independent identification of small-molecule regulators of GPCRs. It focuses on collaborations with other biotech or pharma companies to apply that technology in addition to drug discovery programs.

Payment amounts were undisclosed. Arena's chief financial officer, Joseph Mooney, said the deal fits into Arena's business model, a plan that aims to maintain cash flow with GPCR research collaborations to avoid instigating share dilution.

"Unlike other biotechs, our business model allows us to have significant cash flow as we are in the process of discovering drugs either for ourselves or for our collaborators," Mooney told BioWorld Today. "That means we very likely do not have to go back to the equity market to sell stock to fund our research process, and for that there's likely to be significantly less dilution to shareholders as the company goes forward. In that sense this provides beneficial near-term shareholder value as well."

The new deal expands the companies' May 2000 deal for research on three GPCRs named by Taisho, of Tokyo. That collaboration already has produced one GPCR accepted by Taisho, and the milestone triggered an undisclosed payment to Arena.

Mooney said the 18F receptor is one that Arena has done a significant amount of work on.

"This GPCR, based on where it appears to be expressed in the body and on work done on it in animal testing and in small-molecule development around it, suggests a potential for use in the area of obesity," Mooney said. "Based on their interest in drugs that are beneficial for obesity, Taisho became interested in this receptor."

Mooney said the agreement is similar to deals Arena signed in the past, such as its April 2000 collaboration with Eli Lilly & Co., of Indianapolis, a deal for Arena to apply its technology to 59 GPCRs.

Arena's stock (NASDAQ:ARNA) dropped 6.25 cents Wednesday to close at $23.937.

Meanwhile, Mooney said his company continues to work hard as it pursues further, similar collaborations.

"The company reported a profit in the fourth quarter of 2000, and it only went public in July 2000," he said. "We're pleased to be one of the profitable biotechs around, and our other collaborations and programs are on schedule and satisfactory. We're continuing to discuss with other companies potential future collaborations, and we're looking hopefully toward the signing of at least two more collaborations such as the collaboration with Lilly or Taisho over the balance of 2001. We continue to add staff and expand our laboratory facilities and we expect a profit in 2001."