Another Partnership for Personalized Medicine

The age of personalized medicine is certainly here. Companies left and right are developing companion diagnostic tests to make sure their drugs are used by patients who are most likely to respond to them.

The latest two to hook up are Celera (NYSE: CRA) and Merck (NYSE: MRK). Celera will use its diagnostic expertise to try to find gene expression profiles that will make patients more likely to respond to Merck's drug.

The press release is pretty vague on details, but at least we know that the test will be "for cancer patients" and, because Merck is planning on using the test in clinical trials, the compound that the test will be used in combination with is probably still in pre-clinical studies.

Merck is making an "undisclosed payment" for the service, which I read to be not very much money. Celera could get an additional payment -- which I would guess is larger -- if the information it provides results in Merck developing a test. It seems likely that Merck is hedging its bet, though, and only paying a hefty sum for the service if the data is useful.

Celera may be hoping that it can make additional money if Merck picks it to develop the test, which Celera could then sell through its partnership with Abbott Laboratories (NYSE: ABT), or perhaps directly through the lab it picked up -- certified through the CLIA (Clinical Laboratory Improvement Amendments) -- in its recent acquisition of Berkeley HeartLab.

That said, the announcement makes it sound like Merck could pick any test developer.

As drugmakers continue to develop more targeted therapeutics, I think it's likely we'll see the number of these deals increase.