PURCHASE AND EXCHANGE AGREEMENT

Exhibit 10.1

PURCHASE AND EXCHANGE AGREEMENT

PURCHASE AND EXCHANGE AGREEMENT (this “ Agreement ”), dated as of June 2, 2010, between Arena Pharmaceuticals, Inc., a Delaware corporation (the “ Company ”) and the parties identified on the Schedule of Purchasers attached hereto (each individually, a “ Purchaser ” and together, the “ Purchasers ” and, together with the Company, the “ Parties ”). Capitalized terms used but not defined herein shall have the meanings given to them in the Facility Agreement (as defined below).

W I T N E S S E T H

WHEREAS, the Company and each Purchaser is executing and delivering this Agreement in reliance upon the exemption from registration afforded by Section 4(2) of the Securities Act, and Rule 506 of Regulation D (“ Regulation D ”) as promulgated by the SEC under the Securities Act;

WHEREAS, each Purchaser, severally and not jointly, wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, the number of shares of the Common Stock, par value $0.0001 per share, of the Company (the “ Common Stock ”), set forth opposite such Purchaser’s name under “Common Shares” on the Schedule of Purchasers attached hereto (which aggregate amount for all Purchasers together shall be 11,000,000 shares of Common Stock and shall collectively be referred to herein as the “ Common Shares ”);

WHEREAS, the Company previously issued to the Purchasers warrants to purchase an aggregate of 28,000,000 shares of Common Stock (the “ Prior Warrants ”) in connection with that certain Facility Agreement, dated June 17, 2009, between the Parties (the “ Facility Agreement ”); and

WHEREAS, as an inducement for the Purchasers to purchase the Common Shares pursuant to this Agreement, the Company is willing to exchange a portion of the Prior Warrants held by each Purchaser for new warrants in the form attached hereto as Exhibit A (the “ New Warrants ” and together with the Common Shares, the “ Securities ”).

NOW, THEREFORE, in consideration of the mutual agreements set forth herein, the Purchasers and the Company agree as follows:

ARTICLE I

PURCHASE AND SALE OF COMMON SHARES

Section 1.1 Purchase of Common Shares . Subject to the satisfaction (or waiver) of the conditions set forth in Sections 4.1 and 4.2 below, the Company shall issue and sell to each Purchaser, and each Purchaser severally, but not jointly, shall purchase from the Company on the Closing Date (as defined below), that number of Common Shares as is set forth opposite such Purchaser’s name under “Common Shares” on the Schedule of Purchasers (the “ Closing ”).

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Section 1.2 Closing . The date and time of the Closing (the “ Closing Date ”) shall be the Business Day next following the satisfaction (or waiver) of the conditions to the Closing set forth in Sections 4.1 and 4.2 below and shall take place at the offices of Cooley LLP, 4401 Eastgate Mall, Suite 400, San Diego, CA 92121, or at such other date, time and place as the Parties may mutually agree. The Parties agree to use reasonable best effort to satisfy their respective conditions to the Closing set forth in Sections 4.1 and 4.2 as soon as possible after the date hereof.

Section 1.3 Purchase Price . The aggregate purchase price for the Common Shares to be purchased by each such Purchaser at the Closing (each, a “ Purchase Price ”) shall be the amount set forth opposite each Purchaser’s name under “Purchase Price” on the Schedule of Purchasers, which shall be equal to the amount of $3.23 per Common Share times the number of Common Shares purchased.

Section 1.4 Form of Payment . On the Closing Date, (i) each Purchaser shall pay its respective Purchase Price to the Company for the Common Shares to be issued and sold to such Purchaser at the Closing, by wire transfer of immediately available funds in accordance with the Company’s written wire instructions and (ii) the Company shall instruct its transfer agent to deliver to each Purchaser a certificate or certificates representing the Common Shares which such Purchaser is then purchasing hereunder, in each case duly executed on behalf of the Company and registered in the name of such Purchaser or its designee.

ARTICLE II

ISSUANCE OF NEW WARRANTS

Section 2.1 Delivery and Cancellation of Prior Warrants . On the Closing Date, the Company shall have received from each Purchaser for cancellation a portion of such Purchaser’s Prior Warrants covering a number of shares of Common Stock equal to the number of shares of Common Stock covered by the New Warrants to be issued to such Purchaser as set forth opposite such Purchaser’s name on the Schedule of Purchasers (such portion, the “ Canceled Prior Warrants ”), and in connection therewith each such Purchaser shall deliver to the Company on or prior to the Closing Date the certificates representing all of the Prior Warrants held by such Purchaser. On the Closing Date, the certificates representing all of the Prior Warrants shall be void and of no further force or effect.

Section 2.2 Issuance of New Warrants. On the Closing Date, the Company shall issue to each Purchaser a New Warrant to purchase the number of shares of Common Stock set forth opposite such Purchaser’s name under “New Warrants” on the Schedule of Purchasers. The New Warrants shall have an initial exercise price of $3.45 per share of Common Stock. On the Closing Date, the Company shall deliver to each Purchaser a new certificate, identical in form to the Prior Warrants, representing the number of remaining Prior Warrants set forth opposite such Purchaser’s name under “Remaining Prior Warrants” on the Schedule of Purchasers (“Remaining Prior Warrants”).

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Section 2.3 The Company and the Purchasers agree that the exchange of the portion of the Prior Warrants for New Warrants made pursuant to this Agreement represents an isolated transaction that is not part of a plan to periodically increase any Purchaser’s proportionate interest in the assets or earnings and profits of the Company. Therefore, the Company shall not report dividend income for federal, and any applicable state and local, income tax purposes to the Purchasers except to the extent that cash, stock or property dividends are paid on the Shares (as defined below) owned by the Purchasers. Notwithstanding the foregoing, neither the Purchasers nor the Company shall be required to take any action pursuant to this Section 2.3 if doing so would be reasonably likely, based upon the advice of the Company’s tax advisers after consulting with the Purchasers and their tax advisers, to be unfounded, unlawful or potentially subject the Purchasers or the Company to a material penalty.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Section 3.1 Representations and Warranties of the Company . The Company represents and warrants as of the date hereof and as of the Closing Date as follows:

(a) The Company is a corporation duly organized and validly existing under the laws of the State of Delaware.

(b) The Company is conducting its business in compliance with its Organizational Documents. The Organizational Documents of the Company (including all amendments thereto) as currently in effect have been made available to the Purchasers and remain in full force and effect with no defaults outstanding thereunder.

(c) The Company has full power and authority to enter into this Agreement and the Registration Rights Agreement in the form attached hereto as Exhibit B (the “ Registration Rights Agreement ” and together with this Agreement, the “ Transaction Documents ”) and to issue the Securities in accordance with the terms hereof. The execution and delivery of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated thereby, including, without limitation, the issuance of the Common Shares and the New Warrants have been duly authorized by the Company’s Board of Directors or a duly authorized committee thereof and no further consent or authorization is required by the Company, its Board of Directors or its stockholders. This Agreement has been and, on the Closing Date, the Registration Rights Agreement and the New Warrants shall be, duly executed and delivered by the Company, and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

(d) All authorizations, consents, approvals, registrations, exemptions and licenses that are necessary for the issuance of the Securities hereunder, the execution and delivery of the Transaction Documents and the performance by the Company of its obligations thereunder, have been obtained and are in full force and effect, except for registrations and filings in connection with the issuance of the Common Shares and New Warrants and shares of Common Stock issuable upon exercise of the New Warrants, and filings necessary to comply with laws, rules, regulations and orders required in the ordinary course of business.

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(e) All authorizations, consents, approvals, registrations, exemptions and licenses with or from Government Authorities that are necessary for the conduct of its business as currently conducted have been obtained and are in full force and effect, except to the extent any failure to so obtain would not reasonably be expected to have a Material Adverse Effect. For purposes of this Agreement, “ Material Adverse Effect ” means a material adverse effect on (a) the business, operations or financial condition of the Company and its Subsidiaries taken as a whole, (b) the validity or enforceability of any provision of any Transaction Document, (c) the ability of the Company to timely perform its obligations under the Transaction Documents or (d) the rights and remedies of the Purchasers under any Transaction Document; provided, however, that none of the following shall be deemed either alone or in combination to constitute, and none of the following shall be taken into account in determining whether there has been or would be, a Material Adverse Effect: (A) any adverse effect that results directly or indirectly from general economic, business, financial or market conditions; and (B) any adverse effect arising directly or indirectly from or otherwise relating to any of the industries or industry sectors in which the Company operates.

(f) The Common Shares are duly authorized and, upon issuance in accordance with the terms hereof, shall be validly issued and free from all preemptive or similar rights, taxes, liens and charges with respect to the issue thereof and the Common Shares shall be fully paid and nonassessable with the holders being entitled to all rights accorded to a holder of Common Stock. Assuming the accuracy of each of the representations and warranties set forth in Section 3.3 of this Agreement, the offer and issuance by the Company of the Securities is exempt from registration under the 1933 Act.

(g) Neither the entering into any of the Transaction Documents nor the compliance with any of the terms therein conflicts with, violates or results in a breach of any of the terms of, or constitutes a default or event of default (however described) or requires any consent under, to the extent applicable, (i) any agreement to which the Company is a party or by which it is bound, (ii) any of the terms of the Organizational Documents or (iii) any judgment, decree, resolution, award or order or any statute, rule or regulation applicable to the Company or its assets, except where such conflicts, violations, breaches or defaults, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

(h) The Company is not engaged in or the subject of any litigation, arbitration, or administrative regulatory compliance proceeding, nor are there any litigation, arbitration, administrative, regulatory, compliance proceedings or investigations pending or, to the knowledge of the Company, threatened before any court or arbitrator or before or by any Government Authority against the Company, that would reasonably be expected to result in a Material Adverse Effect and the Company is not aware of any facts reasonably likely to give rise to any such proceeding.

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(i) The Company (i) is capable of paying its debts as they fall due and is not unable and has not admitted its inability to pay debts as they fall due, (ii) is not bankrupt or insolvent and (iii) has not taken action, and no such action has been taken by a third party, for the Company’s winding up, dissolution, or liquidation or similar executory or judicial proceeding or for the appointment of a liquidator, custodian, receiver, trustee, administrator or other similar officer for the Company or any or all of its assets or revenues.

(j) Neither the Company nor any of its Subsidiaries, or to the Company’s knowledge, any of its or their Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Securities. Neither the Company nor any of its Subsidiaries has engaged any placement agent, finder or broker in connection with the sale of the Securities.

(k) During the one year prior to the date hereof, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Exchange Act (all of the foregoing filed during the one year prior to the date hereof or prior to the date of the Closing and all financial statements, notes and schedules thereto being hereinafter referred to as the “ SEC Documents ”). As of their respective filing dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of their respective filing dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments and to the extent that such unaudited statements do not include footnotes).

(l) Neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any director, officer, agent, employee or other Person acting on behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on behalf of, the Company or any of its Subsidiaries (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

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(m) The Company is in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof.

(n) The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except pursuant to the Securities Agreement or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and any of its Subsidiaries. Any real property and facilities held under lease by the Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries.

(o) The Company or one or more of its Subsidiaries owns or possesses adequate rights to use the patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names, trade dress, logos, copyrights and other intellectual property, including, without limitation, all of the intellectual property described in the SEC Documents as being owned or licensed by the Company (collectively, “ Intellectual Property ”), necessary to carry on the business now operated by it, except where failure to own, license or have such rights would not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth in the SEC Documents, there are no actions, suits or judicial proceedings pending, or to the Company’s knowledge threatened in writing, relating to patents or proprietary information to which the Company or any of its Subsidiaries is a party or of which any property of the Company or any of its Subsidiaries is subject, and neither the Company nor any of its Subsidiaries has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances which would render any Intellectual Property invalid or inadequate to protect the interest of the Company and its Subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, individually or in the aggregate, would have a Material Adverse Effect.

(p) The Company is not, and upon consummation of the sale of the Securities will not be, an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.

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(q) The Company is eligible to register the Common Shares and the shares of Common Stock issuable upon exercise of the New Warrants for resale by the Purchasers using Form S-3 promulgated under the Securities Act. To the Company’s knowledge, there exist no facts or circumstances (including without limitation any required approvals or waivers or any circumstances that may delay or prevent the obtaining of accountant’s consents) that reasonably could be expected to prohibit the preparation and filing of a registration statement on Form S-3 that will be available for the resale of the Common Shares and the shares of Common Stock issuable upon exercise of the New Warrants by the Purchasers.

Section 3.2 Company Acknowledgment . The Company acknowledges that it has made the representations and warranties referred to in Section 3.1 with the intention of persuading the Purchasers to enter into the Transaction Documents and that the Purchasers have entered or will enter into the Transaction Documents on the basis of, and in full reliance on, each of such representations and warranties.

Section 3.3 Representations and Warranties of the Purchasers . Each of the Purchasers represents and warrants to the Company as of the date hereof and as of the Closing Date, and agrees that:

(a) It is acquiring the Common Shares, the New Warrants and the shares of Common Stock issued pursuant to the New Warrants, whether upon exercise or otherwise (the “ Warrant Shares ” and together with the Common Shares, the “ Shares ”), solely for its account for investment and not with a view to or for sale or distribution of the New Warrants or Shares or any part thereof. Each of the Purchasers also represents that the entire legal and beneficial interests of the Shares and New Warrants such Purchaser is acquiring is being acquired for, and will be held for, its account only.

(b) The Shares and New Warrants have not been registered under the Securities Act on the basis that no distribution or public offering of the stock of the Company is to be effected. Each of the Purchasers realizes that the basis for the exemptions may not be present, if notwithstanding its representations such Purchaser has a present intention of acquiring the securities for a fixed or determinable period in the future, selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the Shares or New Warrants. None of the Purchasers has such present intention. Each of the Purchasers understands (i) that the Shares and New Warrants are not registered under the Securities Act or qualified under applicable state securities laws on the ground that the issuance thereof will be exempt from the registration and qualifications requirements thereof and (ii) that the Company’s reliance on such exemptions is predicated on the representations set forth in this Section 3.3.

(c) It has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment and has the ability to bear the economic risks of its investment.

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(d) The Shares and New Warrants must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption for such registration is available.

(e)