Merck paid Pfizer an initial $60 million to launch the partnership. The company said it would receive 60% of any revenue from the new drug, while Pfizer would collect 40%. The companies also planned to divide certain drug development costs on a similar basis, the Associated Press noted.
Centered around ertugliflozin, a drug developed by Pfizer, the partnership will examine potential combination treatments with Merck’s diabetes drug, Januvia, as well as other Merck drugs.
Ertugliflozin will begin late-stage clinical trials later this year.
In February, Merck shares tumbled after the company said it would delay efforts to obtain approval from a new osteoporosis drug from the U.S. Food and Drug Administration until 2014.
Shares of Merck sank almost 1% in Tuesday morning trading, while Pfizer fell more than 2%.