Arena Pharma Up on J&J Deal

Arena Pharmaceuticals (ARNA Quote) shares jumped early Tuesday after the San Diego-based company announced a global licensing agreement with a unit of Johnson & Johnson (JNJ Quote) to develop treatments for type 2 diabetes and other disorders.

Under terms of the deal, Arena will receive an upfront payment of $17.5 million as well as research funding of $4.8 million over two years. The company could receive up to $295 million in additional payments as well as double-digit royalties if other developmental and sales milestones are achieved.

Arena said it expects the initial focus will be on two Arena-discovered molecules in preclinical development.

For Johnson & Johnson, the Arena transaction follows a mega-deal with Guidant (GDT Quote) in which the Indiana-based device maker agreed to be acquired by the New Jersey health care giant for $76 a share in cash and stock.

Arena also has a collaborative arrangement with Merck(MRK Quote).

Arena shares rose 63 cents, or 11%, to $6.43 in premarket trading.