Japanese pharmaceutical company Ono Pharmaceutical Co Ltd (TYO:4528) announced on Wednesday a drug discovery collaboration and option agreement with US clinical-stage biotechnology company Shattuck Labs Inc (NASDAQ:STTK) to develop bifunctional fusion proteins targeting autoimmune and inflammatory diseases.

Shattuck will leverage its proprietary protein engineering technology to produce fusion proteins for specific targets, providing Ono with potential drug candidates for further optimisation and clinical development. Ono gains exclusive rights to develop and commercialise multiple candidates worldwide.

Financial terms include research funding, an upfront payment, milestone payments tied to research, development and commercialisation progress, totalling up to USD227m, along with tiered royalties based on net sales.

These fusion proteins aim to modulate two targets linked to autoimmune and inflammatory conditions. In pre-clinical studies conducted by Shattuck, the bifunctional fusion proteins demonstrated immunoregulatory effects and may show efficacy on a broad range of immune and inflammatory diseases.