Arena Pharma Raising Cash, Again?

Arena Pharmaceuticals(ARNA Quote) borrowed $100 million from hedge fund Deerfield Capital Management last month. In explaining the reason for taking on the new debt, Arena management told investors that the deal provided the company with the cash it needed to negotiate with any and all Big Pharma partners seeking a piece of its experimental obesity drug.

But, if that's true, why does Arena find it necessary to raise even more money -- and dilute existing shareholders in the process?

The San Diego-based drugmaker announced Tuesday another public offering of common stock, this time from an existing shelf registration statement covering the sale of 25 million shares.

Arena did not disclose the number of shares to be sold in the offering being handled by investment bank Piper Jaffray, but the company is believed to be seeking to offload about 12 million shares at $4.17, according to institutional buyers who've been approached by Piper Jaffray salespeople.

The offering, at that size and price, would raise about $50 million for Arena.

Robert Hoffman, Arena's chief financial officer, wouldn't confirm the size of the deal but said the company wants to raise additional money now to hedge against a market downturn later this year.

In September, Arena will be releasing results from the second phase III study of its obesity drug candidate, known as lorcaserin.

Data from the first phase III study -- known as Bloom -- were released in March. The company said the study successfully met all its predefined efficacy and safety endpoints, but the placebo-adjusted weight loss of 3.6% for lorcaserin was below Street expectations and caused Arena's stock price to fall.