Merck to Team With NGM to Develop Diabetes Treatment

By Angela Chen 

Merck & Co. Inc. said Monday that it has entered a five-year collaboration with NGM Biopharmaceuticals Inc. to research and develop drugs that treat diabetes and obesity, in the drug company's latest bid to introduce new products.

Merck will pay NGM $95 million and buy a 15% equity stake for $106 million. This price per share represents a 20% premium to the privately-held NGM's most recent financing. Merck will then commit up to $250 million to fund NGM, with potential for additional funding.

The collaboration includes NGM drug candidates that are in preclinical development. NGM will lead the research, while Merck will license the resulting programs and lead global product development and commercialization.

Roger Perlmutter, president of Merck Research Laboratories, said that the collaboration would apply Merck's "well-established translation capabilities" to NGM's research into drugs treating diabetes, metabolic dysregulation and malignancy.

NGM can receive either milestone or royalty payments, or choose to cofound development and share up to 50% of revenue.

Merck been becoming more active on the deal-making front to bring in new products and exit from less desirable businesses, especially as its drug portfolio ages. In January, it closed its acquisition of antibiotics specialist Cubist Pharmaceuticals for $8.4 billion, and last year acquired hepatitis C drug developer Idenix Pharmaceuticals for $3.9 billion.

Earlier this month, Merck reported that its fourth-quarter sales declined on a stronger U.S. dollar and patent expirations for top drugs, while a weaker-than-expected 2015 outlook and new concerns over prospects for an experimental hepatitis C treatment weighed on Merck shares.

Shares of Merck, inactive premarket, have been up about 3% this year through Friday's close.

Write to Angela Chen at [e-mail]

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