Metabasis Therapeutics ( MBRX) and Merck ( MRK) agreed to work together to research, develop and commercialize novel small molecule therapeutics with the potential to treat several diseases, including type II diabetes and obesity.

Both companies will offer drug candidates to the collaboration. Merck will make a payment of $5 million and provide Metabasis with funding for its research contribution to the program.

Additionally, Merck will assume the primary responsibility, including financial responsibility, for clinical development and will have the right to market products worldwide.

Metabasis could get added payments throughout the course of the pact. Shares of Metabasis, a biopharmaceutical company, were down 15 cents to $3.04.