1080709--3/5/2008--ARENA_PHARMACEUTICALS

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Risks Relating to Our Business We will need additional funds to conduct our planned research and development efforts, and we may not be able to obtain such funds. Our stock price could decline significantly based on the results and timing of clinical trials and preclinical studies of, and decisions affecting, our lead drug candidates. Our development of lorcaserin may be adversely impacted by cardiovascular side effects previously associated with fenfluramine and dexfenfluramine. The development programs for our drug candidates are expensive, time consuming, uncertain and susceptible to change, interruption, delay or termination. Our drug candidates are subject to extensive regulation, and we may not receive required regulatory approvals for any of our drug candidates. The results of preclinical studies and completed clinical trials are not necessarily predictive of future results, and our current drug candidates may not have favorable results in later studies or trials. Many of our research and development programs are in early stages of development, and may not result in the commencement of clinical trials. Drug discovery and development is intensely competitive in the therapeutic areas on which we focus. If our competitors develop treatments that are approved faster, marketed better or demonstrated to be more effective or safer than our drug candidates, our commercial opportunities will be reduced or eliminated. If we do not partner one or more unpartnered programs or raise additional funds, we may have to curtail some of our activities. Our revenues depend upon the actions of our existing and potential collaborators. Collaborative relationships may lead to delays in drug development and commercialization and disputes. Setbacks and consolidation in the pharmaceutical and biotechnology industries, and our or our collaborators' inability to obtain third-party coverage and adequate reimbursement, could make partnering more difficult and diminish our revenues. We rely on third parties to conduct our clinical trials and many of our preclinical studies. If those parties do not successfully carry out their contractual duties or meet expected deadlines, our drug candidates may not advance in a timely manner or at all. We rely on third-party manufacturers and we or such third parties may encounter failures or difficulties that could delay the clinical development or regulatory approval of our drug candidates, or their ultimate commercial production if approved. We may not be able to effectively integrate or manage our international operations and such difficulty could adversely affect our stock price, business operations, financial condition and results from operations. We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management. Our efforts will be seriously jeopardized if we are unable to retain and attract key employees. We use biological materials, hazardous materials, chemicals and radioactive compounds. We may incur substantial liabilities from any product liability claims if our insurance coverage for those claims is inadequate. Our operations might be interrupted by the occurrence of a natural disaster or other catastrophic event. Even if any of our drug candidates receives regulatory approval, our drug candidates will still be subject to extensive post-marketing regulation. Even if we receive regulatory approval to market our drug candidates, our ability to generate revenues from any resulting products will be subject to a variety of risks, many of which are out of our control. Currency fluctuations may negatively affect our financial condition. Laws, rules and regulations relating to public companies may be costly and impact our ability to attract and retain directors and executive officers. The technologies on which we rely may not result in the discovery or development of commercially viable drugs or could become obsolete. Risks Relating to Our Intellectual Property Our success is dependent on intellectual property rights held by us and third parties and our interest in these rights is complex and uncertain. A dispute regarding the infringement or misappropriation of our proprietary rights or the proprietary rights of others could be costly and result in delays or termination of our future research, development, manufacturing and sales activities. We cannot protect our intellectual property rights throughout the world. Risks Relating to Our Securities Our stock price will likely be volatile, and your investment in our stock could decline in value. Holders of our Series B Preferred can require us to redeem their Series B Preferred. There are a substantial number of shares of our common stock eligible for future sale in the public market, and the sale of these shares could cause the market price of our common stock to fall. Any future equity or debt issuances by us may have dilutive or adverse effects on our existing stockholders. Our largest stockholders may take actions that are contrary to your interests, including selling their stock. We may have disagreements with our warrant holders. Our rights agreement and certain provisions in our charter documents and Delaware law could delay or prevent a change in management or a takeover attempt that you may consider to be in your best interest.

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1080709--3/5/2008--ARENA_PHARMACEUTICALS_INC