Avalon Pharmaceuticals says it has entered into a collaboration deal with drugs giant Merck & Co for the discovery and development of potential cancer treatments.

Under the terms of the agreement, Avalon may receive discovery, development, regulatory and commercial milestone payments exceeding $200 million as well as royalties on any potential future marketed products.

The deal involves the use of the AvalonRx platform technology to screen Merck's compound library in an effort to identify “hits against this target that is generally regarded as ‘intractable’ based on the difficulty in identifying inhibitors.”

Avalon will select compound families and optimise them to a preclinical candidate selection stage. Merck will be responsible for the clinical development, regulatory approval and commercialisation of any potential product candidates.