All puns aside, Merck's (NYSE: MRK) acquisition of privately held SmartCells looks like an intelligent move -- assuming it didn't overpay.

Unfortunately, the financial details are fairly scant. There's an undisclosed up-front payment, followed by the potential for clinical and regulatory milestone payments. All told, SmartCells could potentially receive aggregate payments "in excess of $500 million." And on top of that, there are potential undisclosed sales milestone payments once the drug is on the market.

But we're getting a little ahead of ourselves: SmartCells' SmartInsulin is only in preclinical development. We've got a long way to go before it's on the market. Hopefully, Merck was smart enough to put much of the development risk back on the shoulders of the angel investors, by tying a large portion of the $500-million-plus milestones to clinical advancements far in the future.

SmartInsulin is rather risky, since it uses an unproven technology, but it's a potential blockbuster if it works. The drug senses the concentration of glucose, and then releases insulin as the glucose levels fall. Rather than constantly pricking their fingers to get glucose levels, and then injecting insulin from Novo Nordisk (NYSE: NVO), Eli Lilly (NYSE: LLY), sanofi-aventis (NYSE: SNY), and others, diabetics might only have to inject the drug once a day, and let the SmartInsulin release as it's necessary.

Merck already sells Januvia, its blockbuster diabetes drug, so SmartInsulin would be a good fit. The company also has a phase 2 drug candidate, MK-3102, which could potentially be on the market by the time SmartInsulin made it that far.

The Smart technology could even extend beyond insulin. It could be used to sense any molecule and then release a drug. Drugs that have a tight therapeutic window -- too much is bad, and too little doesn't do enough -- would be good candidates.

Clearly, if one or more of these drugs pans out, the acquisition of SmartCells will make Merck look like a downright genius no matter how much it paid upfront to buy the company.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.