Metabasis Therapeutics Inc. entered a potential $74 million partnership deal with Merck & Co. Inc. to develop small-molecule drugs targeting the liver enzyme AMP-activated protein kinase (AMPK).

The companies will work to discover therapeutics that activate AMPK to treat metabolic disorders such as Type II diabetes, hyperlipidemia and obesity.

Terms call for Whitehouse Station, N.J.-based Merck to pay $5 million up front, as well as fund much of the research, including the cost of Metabasis researchers assigned to the program, said John Beck, vice president of finance and chief financial officer for Metabasis.

If a product reaches market in a single indication, Metabasis would receive success-based milestones of $54 million. That figure could increase to $74 million if additional indications were approved. Metabasis also is eligible for royalty payments, Beck said, adding that the company has an option to co-promote approved products in the U.S.

Shares of Metabasis (NASDAQ:MBRX) lost 15 cents Monday to close at $3.04.

The collaboration centers on a class of compounds discovered by Metabasis using its NuMimetic discovery technology. The compounds are believed to activate adenosine monophosphate, a protein kinase in the liver that is known to regulate fat and cholesterol levels, said Mark Erion, executive vice president of research and development.

That enzyme has been thought "to play a role in cholesterol synthesis and fat synthesis, and also play roles in a variety of tissues that are important for glycemic control," Erion told BioWorld Today, adding that it is a promising target for treating diseases such as Type II diabetes.

But, "historically, it has been very challenging for the drug industry to find compounds that interact with [the enzyme] and cause its activation," he said. Using the NuMimetic technology, "we found some lead compounds to further our understanding," and through the deal with Merck "hope to find proper drug candidates."

The deal marks the San Diego-based company's second collaboration with Merck. The first, signed in December 2003 and later extended through the end of 2005, aimed at finding treatments for hepatitis C infections using Merck's small molecules and Metabasis' prodrug technology. Merck paid an execution fee and handles development and commercialization responsibilities while Metabasis could receive milestone and royalty payments from resulting HCV drugs.

Merck "has had a very strong push in the area of metabolic disease," Erion said, adding that the pharmaceutical giant appeared "very interested in our program, and we felt it was the best fit for what we had going on."

The company is in the middle of a 48-week Phase IIb trial of its antiviral drug, pradefovir, a hepatitis B prodrug. Pradefovir, which is partnered with Costa Mesa, Calif.-based Valeant Pharmaceuticals Inc., was developed using Metabasis' HepDirect technology to target adefovir by delivering the antiviral product specifically to the liver. The study completed enrollment last year, and Metabasis expects interim 24-week analysis shortly.

Erion said a Phase I/II study of MB07133 is ongoing in primary liver cancer patients to determine the maximum tolerated dose for further studies. Also developed using the HepDirect technology, MB07133 targets the active form of araC, a marketed cancer drug, to the liver while decreasing levels of the drug in outside tissues. Metabasis retains exclusive worldwide rights to that product.

Earlier this month, Metabasis reported that its investigational diabetes drug, CS-917, remains under review after two serious adverse events involving lactic acidosis were reported in combination studies with metformin. Metabasis and partner Tokyo-based Sankyo Co. Ltd. are expected to make a decision on the product's fate after completing their separate reviews. CS-917 is designed to inhibit a metabolic pathway in the liver responsible for producing glucose and has demonstrated a potential for lowering blood glucose levels in patients with Type II diabetes. (See BioWorld Today, March 17, 2005.)

"We are optimistic that the drug will continue in development, though we are waiting for the final decision from Sankyo," Erion said.

Sankyo holds worldwide commercialization rights to CS-917, though Metabasis retains co-promotion rights in North America.

While awaiting the review on CS-917, Metabasis also is preparing an investigational new drug application for a second-generation gluconeogenesis inhibitor, MB07803, to treat Type II diabetes. The company retains full rights to that compound.

Metabasis reported a net loss of $6.2 million for the first quarter of 2005. As of March 31, the company had $38.2 million in cash, cash equivalents and marketable securities.

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