A $230.4 million deal has been signed between Belgium based Galapagos and Pharmaceutical major Merck. Galapagos will develop drugs to control diabetes and obesity.

According to the deal, Galapagos will get €1.5 million as upfront payment. The milestone payments would amount to €170 million.

Galapagos will use SilenceSelect target discovery platform to discover small molecules drug candidate. The company would also be responsible for developing the selected molecules.

Thus, Galapagos would be eligible for discovery, development and regulatory milestones. The company has been working on pharmaceutical collaborations during the past few years. It has also secured partnership deals with GlaxoSmithKline and Eli Lily for osteoporosis drug; with Morphosys AG for bone and joint cure and for developing rheumatoid arthritis drugs for Johnson & Johnson.

The company had reported a financial status of about € 75 million mid 2008, saying that it would be sufficient for 18 months. The company has not declared the financial status for end 2008 but it is expected that the company would be able to project revenues anywhere between € 75 million to €80 million.