Germany’s Merck KGaA has entered into an out-licensing agreement with Novartis for the development of an osteoarthritis clinical-stage programme.

The agreement covers includes the phase II ready M6495, an anti-ADAMTS5 nanobody, which is a potential disease modifying osteoarthritis drug.

It is being developed with the aim to be self-administered via subcutaneous injections to maintain structural integrity of the knee joints and reduce pain.

Under the terms of the deal, Merck will out-license M6495 to Novartis for further evaluation in osteoarthritis patients.

In return, Merck will receive an upfront payment of €50m with the potential of receiving a further €400m related to certain development and commercial milestones and royalties on any future net sales.

“With this deal we have found the right solution for this asset designed to present an innovative mechanism of action for the potential treatment of osteoarthritis, as we prioritise our pipeline to deliver the greatest impact for patients across our internal areas of expertise,” said Luciano Rossetti, head of global research & development for the biopharma business of Merck.

Merck has already completed two phase I studies of M6495 – one in healthy volunteers demonstrated safety and tolerability as well as a meaningful reduction of ARGS (a neoepitope found in the synovial fluid and serum of osteoarthritis patients).

A second study targeted inhibition of ARGS with dosing every other week in osteoarthritis patients.

The clinical-stage candidate was jointly developed by Merck and Ablynx as part of a joint discovery and development agreement in 2011, and then was solely developed by Merck up until the out-licensing agreement with Novartis.