Days after Pfizer pulled out of a rheumatoid arthritis pact, Belgium's Ablynx has signed another deal with existing partner Merck KGaA in osteoarthritis.

Specifically, the German company's Merck Serono unit has signed a third agreement with Ablynx, this time to co-discover and co-develop nanobodies against two targets in osteoarthritis. Under the terms of the deal, the Ghent-based group will receive an upfront payment of 20 million euros payable in two tranches over the next three months.

In return, Ablynx will be fully responsible for all activities and costs for each programme, excluding manufacturing, up to the delivery of the pre-clinical package that will form the basis of an Investigational New Drug filing or equivalent. If Merck likes the look of these packages,  Ablynx will get a further 15 million euros for each programme and have the option to continue on a 50:50 co-development basis and share the profits, or take the traditional licensing route.

The companies have worked together since September 2008 when they signed an oncology and immunology pact. In October last year, the companies entered into a second agreement to co-discover and co-develop nanobodies against an inflammatory disease target.

Bernhard Kirschbaum, head of global discovery and early development at Merck Serono, said "we are impressed by the speed with which Ablynx has progressed in our ongoing programmes and we believe they could become a valuable source of new drug candidates". He added that "we believe that the specific features of the nanobodies have the potential to address key challenges in the treatment of osteoarthritis".

Ablynx chief executive Edwin Moses said "the innovative and creative deal structure that we have put in place represents a 'win-win' for both parties". It is a boost for the firm coming days after Pfizer returned worldwide rights to Ablynx’s TNF-alpha targeting nanobodies, including those for ATN-103 (ozoralizumab) for rheumatoid arthritis, following a portfolio review.