deCODE Genetics announced the formation of a seven-year alliance with Merck & Co., Inc. under which deCODE will conduct information-rich clinical trials on a range of Merck's developmental compounds. deCODE will at any given point over the course of the alliance be conducting concurrent trials on as many as five Merck compounds. The alliance will employ deCODE's population genetics capabilities and expertise in pharmacogenomic analysis to enhance and complement Merck's on-going clinical development process. deCODE's population approach facilitates the selection of optimal trial cohorts and the analysis of patient responsiveness to drugs in relation to a range of phenotypic and genetic data. On the basis of trial results for particular compounds, the companies may also pursue the development of pharmacogenomic tests to identify patients for whom a given drug may be particularly effective.

Under the terms of the agreement, deCODE will receive royalties on sales of drugs and diagnostics developed as part of the alliance. deCODE will also receive a one-time technology access fee, will share research funding for the clinical development of compounds and pharmacogenomic analysis, and will receive milestone payments as compounds or pharmacogenomic tests reach the market. In addition, Merck has purchased $10 million of deCODE common stock at a price of $14.50 per share, and has received a warrant to purchase up to $50 million of additional shares of deCODE stock at $29.00 per share over the next five years.

"This is an exciting opportunity for us to apply our know-how in human genetics to information-rich clinical trials, and to add value to and participate in the next generation of Merck drugs," said Dr Kari Stefansson, CEO of deCODE. "Just as we have done in the design of our own drug development programs, we will be providing Merck the ability to go beyond testing developmental compounds against static endpoints alone. With our ability to integrate into clinical trials detailed data on many other variables - disease subtypes, biomarkers, genotypes and gene expression patterns - it is possible to leverage the clinical development studies to understand not just whether people respond to drugs, but also who responds best and why. We believe this is a crucial means for managing risk in the development process, and for maximizing the patient benefit and market potential of new drugs."

"We are excited about this opportunity to partner with deCode to conduct enhanced clinical trials of compounds in important disease areas," said Dr Stephen Friend, senior vice president for Molecular Profiling and Basic Cancer Research at Merck Research Laboratories. "Our collaboration with deCode complements the molecular profiling technology gained through Merck's acquisition of Rosetta and which we have integrated throughout our drug development efforts."