Metabasis Therapeutics and Merck Announce Collaboration to Develop New Treatment for Diabetes, Hyperlipidemia and Obesity.

SAN DIEGO & WHITEHOUSE STATION, N.J. -- Metabasis Therapeutics, Inc. and Merck & Co., Inc. announced today that they have formed a collaboration to research, develop and commercialize novel small molecule therapeutics with potential to treat several diseases, including type 2 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 program. 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. Should a product be commercialized, 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.

"We are very excited to embark on our second collaboration with Merck, given Merck's world-class R&D and commercialization capabilities." said Dr. Paul Laikind, chairman, president and CEO of Metabasis. "We have been very impressed with the expertise and professionalism that we have experienced during the joint hepatitis C project we began with Merck in 2004. Combining efforts with Merck scientists on the AMPK project will give us the greatest chance of developing a new drug to treat a devastating group of diseases."

"Merck's continued and serious commitment to being a leader in the area of diabetes and metabolic diseases is driven by the magnitude of the unmet medical need," said Dr. Mervyn Turner, senior vice president of Worldwide Licensing and External Research for Merck. "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."

"AMPK has received considerable attention over the past several years based on its potential as a drug target for metabolic diseases," said Dr. Mark Erion, Metabasis' executive vice president of Research and Development. "Our interest in AMPK stems not only from its therapeutic potential but also from our experience on enzymes that, like AMPK, use nucleotide binding sites to regulate their activity. Historically it has been difficult to find molecules that bind to these sites with high affinity and specificity. Using our NuMimetic technology and the compound libraries made specifically for these sites, we have had success in the past in finding drug candidates. We look forward to working with Merck and their talented team of scientists on this attractive drug target for metabolic diseases."

Metabasis has used its proprietary NuMimetic(TM) technology to discover potent and highly selective compounds that activate a protein kinase in the liver known to regulate cholesterol and fat levels. These small molecule compounds, known as AMP mimetics, mimic the natural regulator of this enzyme, which is known as adenosine mono-phosphate (AMP). Metabasis' NuMimetic technology was developed to help identify this class of compounds. The company has discovered lead compounds in the program that appear to inhibit cholesterol and fat synthesis in preclinical models. The data support the premise that these or related compounds may be useful for the treatment of patients with type 2 diabetes, hyperlipidemia, or non-alcoholic steatohepatitis. These compounds are designed to target type 2 diabetes by a different mechanism than Metabasis' gluconeogenesis inhibitors, CS-917 and MB07803.

About Metabasis (www.mbasis.com)

Metabasis Therapeutics is a biopharmaceutical company focused on the discovery, development and commercialization of novel small molecule drugs principally to treat metabolic diseases, cancer and certain other diseases linked to pathways in the liver. The Company has established a pipeline that includes clinical stage and preclinical product candidates targeting large markets with significant unmet medical needs. Metabasis has developed several proprietary technologies for use in discovering and optimizing drugs, including the NuMimetic and HepDirect(TM) technologies. Metabasis is continuing to identify and develop new product candidates using its proprietary technologies and expertise.

Metabasis Forward-looking Statement 

Statements in this press release that are not strictly historical in nature constitute "forward-looking statements." Such statements include, but are not limited to, the dollar amount of potential payments to Metabasis under the Merck Agreement, references to progress on its strategic goals and pursuit of Metabasis' corporate objectives, the initiation, progress and completion of preclinical and clinical trials for Metabasis' and its collaborators' product candidates, the expansion of Metabasis' product pipeline through the designation of additional product candidates from Metabasis' advanced research programs and through Metabasis' collaboration with Merck, and the reinforcement of Metabasis' proprietary position, as well as other statements about Metabasis' proprietary technologies, product candidates, research programs and collaborations. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause Metabasis' actual results to be materially different from historical results or from any results expressed or implied by such forward-looking statements as discussed in the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 2005. All forward-looking statements are qualified in their entirety by this cautionary statement. Metabasis is providing this information as of this date of this release and does not undertake any obligation to update any forward-looking statements contained in this release as a result of new information, future events or otherwise.

About Merck

Merck & Co., Inc. is a global research-driven pharmaceutical company dedicated to putting patients first. Established in 1891, Merck discovers, develops, manufactures and markets vaccines and medicines in more than 20 therapeutic categories. The company devotes extensive efforts to increase access to medicines through far-reaching programs that not only donate Merck medicines but help deliver them to the people who need them. Merck also publishes unbiased health information as a not-for-profit service. For more information, visit www.merck.com.

Merck Forward-Looking Statement

This press release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties, which may cause results to differ materially from those set forth in the statements. The forward-looking statements may include statements regarding product development, product potential or financial performance. No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. Merck undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements in this press release should be evaluated together with the many uncertainties that affect Merck's business, particularly those mentioned in the cautionary statements in Item 1 of Merck's Form 10-K for the year ended Dec. 31, 2004, and in its periodic reports on Form 10-Q and Form 8-K, which the company incorporates by reference.