Company will use roughly $17.7 million to prepay outstanding debt.

Arena Pharmaceuticals expects to receive gross proceeds of approximately $35.5 million through a registered direct public offering with entities affiliated with Deerfield Management. With this offering the companies also amended various terms related to a previous share and warrant purchase agreement.

About two months ago Arena reported that it would decrease its U.S. workforce by 66 employees, or 25%. The decision came after FDA issued the company and its U.S. partner Eisai a complete response letter in relation to its anti-obesity drug, lorcaserin. The agency, which sent the letter in October 2010, requires additional clinical and nonclinical information.

According to today’s offering, Arena is selling 12,150,000 shares of its common stock at $1.46 per share and 12,150 shares of its Series C convertible preferred stock at $1,460 per share in a registered direct public offering to entities affiliated with Deerfield Management. The preferred stock is convertible into an aggregate of 12,150,000 shares of Arena common stock.

Arena will use approximately $17.7 million of the proceeds to prepay a portion of the loan principal that otherwise would have to be repaid in June 2013 under the existing facility agreement between Arena and Deerfield.

Concurrently Arena agreed to reduce the exercise price and extend the exercise term of approximately 14.4 million of the 16.2 million outstanding warrants to purchase common stock that Deerfield received in connection with a June 2010 investment in Arena. These 14.4 million warrants will have an exercise price of $1.68, down from $3.45, and will be exercisable beginning six months after closing of the offering and until June 17, 2015 (extended from June 17, 2013).

In addition, Arena and Deerfield agreed to terminate Deerfield’s right to loan Arena up to an additional $20 million and to receive additional warrants for up to 5,600,000 shares of Arena’s common stock with an exercise price of $5.42 per share.

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