We use strategic alliances and collaborative partnerships with pharmaceutical and biotechnology companies to augment our internal drug discovery and development capabilities, and to assist in the efficient commercialization of our products globally. The revenue from license fees, milestone payments and research funding associated with these arrangements, combined with clinical development expenses assumed by our partners, have allowed us to better manage our resources. We have generally structured our alliances and partnerships to license specific products, rather than technology, or to apply our technology to a partner's product, and we intend to continue this practice in the future. In addition, we have retained the right to commercialize our core metabolic disease products, either directly or through a co-promotion arrangement. In contrast, we plan to license all commercialization rights to our non-core liver disease programs.

AMPK Project - Merck & Co., Inc.

In June 2005, we established a three-year research, development and commercialization collaboration with Merck to discover, develop and commercialize activators of AMP-activated Protein Kinase (AMPK) for the treatment of diseases that may include hyperlipidemia, diabetes, obesity and non-alcoholic steatohepatitis (NASH). In April 2008, we announced that the research term of this collaboration was extended by one year, through June 2009. Merck has exclusive, worldwide commercialization rights to products discovered during this collaboration and is responsible for conducting and funding clinical development of these compounds. As part of the collaboration, Merck paid Metabasis an upfront fee and will provide sponsored research during the discovery term. Merck is obligated to make several payments should certain preclinical, clinical and regulatory milestones be achieved. In addition, Metabasis is entitled to receive royalties from Merck on the sale of any products resulting from this partnership and Metabasis has an option to co-promote products in North America.

HCV - Merck & Co., Inc.

In December 2003, Metabasis established a collaboration agreement with Merck to discover new treatments for hepatitis C. Under this collaboration, we created liver-targeted versions of certain compounds supplied to us by Merck. These compounds target the hepatitis C virus residing in the liver. As part of this collaboration, Merck paid Metabasis an upfront fee and funded all research at Metabasis associated with this agreement. Merck is also obligated to pay preclinical and clinical milestone payments if a compound is selected for development and certain specified development and regulatory events occur. Merck has exclusive rights to commercialize compounds resulting from this collaboration and sole responsibility for conducting and funding all development. Metabasis will also be entitled to receive royalties from Merck on the sale of any product resulting from this partnership. The research term for this collaboration was initially one year, but Merck chose to extend it for a second year. The discovery portion of the collaboration was completed in December 2005, and Merck is currently evaluating potential product candidates discovered during the research.

HCV - Idenix Pharmaceuticals, Inc.

In October 2006, Metabasis established a collaboration and license agreement with Idenix, under which we applied Metabasis' HepDirect liver-targeting technology to proprietary Idenix compounds to develop second-generation nucleoside analog drug candidates for the treatment of hepatitis C. As part of this collaboration, Idenix paid Metabasis an upfront fee and funded all research at Metabasis associated with this agreement. Idenix is also obligated to pay preclinical and clinical milestone payments if a compound is selected for development and certain specified development and regulatory events occur. Idenix has exclusive rights to commercialize compounds resulting from this collaboration and sole responsibility for conducting and funding all development. Metabasis will also be entitled to receive royalties from Idenix on the sale of any product resulting from this partnership. The discovery portion of the collaboration was completed in October 2007 and Idenix has the right to evaluate potential product candidates discovered during the research program.