Arena Pharmaceuticals

(ARNA) - Get Report

shares jumped early Tuesday after the San Diego-based company announced a global licensing agreement with a unit of

Johnson & Johnson

(JNJ) - Get Report

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)

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) - Get Report

.

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