According to the agreement, Merck has exclusive global rights to nanobodies against the chosen target, with an opportunity for similar rights for a second target, while Ablynx will earn a €6.5m upfront payment and €2m in research funding.
Ablynx will be responsible for discovering nanobody candidates, while Merck will be responsible for their research, development, manufacturing and commercialisation.
Ablynx chairman and CEO Dr Edwin Moses said the collaboration is in the area of ion channels, where to date monoclonal antibodies have demonstrated little success.
"Due to the formatting flexibility of nanobodies, we are able to combine antibody-like selectivity and multi-specificity in one molecule, making them ideal candidates for ion channel modulators," Dr Moses said.
"This agreement reflects the potential power of the nanobody platform and the considerable success we have had to date with seven nanobody programmes at the clinical development stage."
Ablynx is also eligible to earn up to €448m in research, regulatory and commercial milestone payments upon the advancement of multiple candidates, and will receive tiered royalties from any products derived from the collaboration.
Merck neuroscience discovery research head and vice president Dr Richard Hargreaves said; "We are excited to be working with Ablynx to evaluate the potential of the Nanobody technology directed towards this challenging ion channel target."