Arena Pharmaceuticals ( ARNA) 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.

"Taking money off the table now in advance of the Blossom data removes a financing risk," said Hoffman. (Blossom is the name of the second phase III lorcaserin study.) "We were afraid that the market wouldn't respond to good Blossom data."

Arena ended the first quarter with $70 million in cash, enough to last about nine months at the company's current burn rate. That cash reserve is padded by the Deerfield loan and Tuesday's stock offering.

Arena is counting on a Big Pharma partner for lorcaserin but acknowledges that a deal probably won't be signed until after the Blossom data are released. Still, if the company is so confident about the Blossom data being positive and strong enough to bring in partner willing to fork over big bucks, why sell stock now and dilute shareholders even further?

Hoffman says Tuesday's offering has nothing to do with the company's confidence in landing a lucrative lorcaserin partnership.

Arena shares were down 12% to $4.12 in Tuesday's after-hours trading, indicating investors may not share Hoffman's confidence.

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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