Metabasis Therapeutics, Inc. and Merck & Co., Inc. have formed collaboration to research, develop and commercialize novel small molecule therapeutics with potential to treat several diseases, including type II diabetes, hyperlipidemia and obesity, by activation of an enzyme in the liver called AMP-activated Protein Kinase (AMPK).

Under the terms of the agreement, both Metabasis and Merck will conduct discovery efforts and contribute drug candidates to the collaboration. Merck will make a payment of $5 million on signature of the agreement and will provide Metabasis with funding for its research contribution to the programme. Merck assumes primary responsibility, including financial responsibility, for clinical development of any resulting product candidates and will have the right to market such products worldwide.

Metabasis will be eligible to receive payments upon achievement of certain milestones during development of a product candidate. Metabasis will receive a royalty on net sales and have the option to co-promote the product in the United States. In the event that a product is developed and marketed for use in patients for a single indication, the total cash payments to Metabasis, excluding royalties, would be approximately $54 million. If a product is approved for additional indications Merck would make additional milestone payments, which could bring the total cash payments to Metabasis to $74 million, according to a Metabasis release.

Dr. Mervyn Turner, Senior Vice President of Worldwide Licensing and External Research for Merck says, "All of the currently marketed therapies have shortcomings that can be improved upon in next-generation agents. Our strategy is to deliver medicines that address key pathogenic defects and are safe and effective across the spectrum of pre-diabetes and diabetes. This latest collaboration with Metabasis underscores Merck's significant ongoing research and commitment to diabetes and metabolic diseases by targeting what we hope will be an important new class of drugs. We look forward to a fruitful collaboration."

Metabasis has used its proprietary NuMimetic technology to discover potent and highly selective compounds that activate a protein kinase in the liver known to regulate cholesterol and fat levels.