Arena in deal with Eisai for US weight drug rights

* To get $50 mln upfront, up to $90 mln in milestone pay

* Arena to manufacture drug, sell to Eisai

* Eisai to pay Arena 31.5 pct of annual net sales

* FDA expected to make approval decision by Oct 22

By Bill Berkrot

NEW YORK, July 1 (Reuters) - Arena Pharmaceuticals Inc(ARNA.O) said on Thursday it signed a partnership deal with Japan's Eisai Co (4523.T) to sell its closely watched obesity drug lorcaserin in the United States once it gains approval.

Under terms of the deal, Arena will manufacture the drug at its plant in Switzerland and sell the finished product to Eisai, which will have exclusive U.S. marketing rights.

San Diego-based Arena will receive an upfront payment of $50 million from Eisai and up to another $90 million in milestone payments for U.S. approval and delivery of the product for sale, the company said.

The U.S. Food and Drug Administration is expected to make its approval decision on the drug by Oct. 22.

Arena Chief Executive Jack Lief said earlier this year that the company was prepared to begin selling lorcaserin within 12 weeks of U.S. approval, with or without a partner.

But Wall Street has been anxiously awaiting a partnership announcement. In March, BMO Capital Markets analyst Jason Zhang said he was "becoming increasingly concerned that Arena has yet to secure a commercial partner."

While FDA approval is far from guaranteed, at least the partnership concern has been laid to rest.

Once the drug is approved, Arena will sell it to Eisai for 31.5 percent of Eisai's annual net sales of lorcaserin. Under the agreement, the price Arena receives will increase to as high as 36.5 percent on the portion of Eisai annual net sales that exceed $750 million, Arena said.

"This arrangement for the marketing of lorcaserin will enable Eisai to establish a strong presence in the United States for the medical management of obesity," Eisai Chief Executive Lonnel Coats said in a statement.

Arena and rivals Vivus Inc (VVUS.O) and Orexigen Therapeutics Inc (OREX.O) are each working to develop what would be the first new prescription weight loss drug to hit the U.S. market in a decade.

Obesity has become an epidemic in the United States, leading to a huge increase in diabetes and a host of other related health problems. But many potential weight loss drugs have either failed or been abandoned due to safety issues, such as Sanofi-Aventis' (SASY.PA) much touted Acomplia that failed to gain U.S. approval due to psychiatric side effects.

Lorcaserin works in a way similar to fenfluramine, which was part of Wyeth's fen-phen diet cocktail that was withdrawn in 1997 after being linked to heart valve damage. Wyeth is now part of Pfizer (PFE.N).

Arena's drug is designed to block appetite signals in the brain, but is more selective than fenfluramine and has not been linked to heart valve problems in clinical trials.

In a yearlong trial, patients who took lorcaserin lost an average of 5.9 percent of their weight.

"With Eisai, we have the right company to market lorcaserin in the United States, the right type of agreement to optimize lorcaserin's medical and commercial potential and the shared recognition that it is the right time to enter into this agreement to prepare for launch following FDA approval," Lief said in a statement. (Reporting by Bill Berkrot, editing by Leslie Gevirtz)