TRENTON, N.J. — Could squirting a little medicine up the nose before mealtime be the Holy Grail for people trying to shed pounds? Pharmaceutical giant Merck & Co. appears to be betting on it, with a multimillion-dollar partnership with a company that last year began small-scale testing of a nasal spray drug designed to make the stomach feel full faster.

Nastech Pharmaceutical Company Inc. of Bothell, Wash., said Monday its compound, known as PYY for short, could help address not only the nation's obesity epidemic but related health problems such as diabetes, high blood pressure, heart disease, arthritis and cancer.

The other possible applications are part of the company's overall program.

"They're the dessert, not the entree," said Dr. Steven C. Quay, Nastech's chairman, president and chief executive officer.

In an interview with The Associated Press, Quay said that if further testing of the drug goes well, he thinks it could reduce patients' daily calorie intake by 30 percent. That would translate into an approximate 50-pound weight loss over a year, based on the 2,800 calories a day the average American eats, he said.

Nastech's stock skyrocketed 70 percent, or $5.41, to $13.15, then rose another 60 cents in after-hours trading on the Nasdaq Stock Market. Shares of Whitehouse Station-based Merck edged up 36 cents to $44.46 on the NYSE.

Under the deal between the two companies, Nastech will receive only $5 million upfront from Merck. But Nastech will be eligible to receive up to $131 million if it achieves milestones for continued testing and regulatory approval, and could receive up to $210 million more for reaching milestones related to eventual sales of the drug. It also would receive royalties on sales of the medicine.

"This is a very big deal for the company," Quynh Pham, biotech analyst at Delafield Hambrecht, said of Nastech. "Most of their drugs are unpartnered, and this is a premier company."

Nastech does not have any of its own drugs on the market, but manufactures one for anemia and Crohn's disease for another company.

An estimated 127 million American adults are considered overweight and 60 million of those are obese, Quay noted. Approximately 400,000 U.S. deaths annually can be attributed to poor diet and insufficient exercise.

PYY, whose full name is Peptide YY 3-36 Nasal Spray, is a synthetic version of a hormone made by the intestines that travels through the blood to the brain, telling it the body is full about 30 to 45 minutes after a person starts eating.

That mechanism kept our grain-eating ancestors from consuming too much, but it doesn't kick in fast enough for people eating lots of today's high-calorie, high-fat foods.

Nastech's compound, sprayed into the nose, would allow the drug to quickly move through the nasal lining and into the bloodstream, telling the brain the body is full within 20 to 35 minutes of taking a dose.

Depending on how further testing goes, the eventual drug likely would be taken either daily or shortly before each meal to suppress appetite. PYY has undergone preliminary testing on a total of 60 people. Quay said tests showed the nasal spray was well tolerated and quickly produced levels of the PYY hormone in the blood as high or greater than what the body normally produces.

Under the development deal, Merck would be in charge of all mid-stage and late-stage testing on people and would bear the costs for that, as well as costs for Nastech to manufacture the compound.

The two companies have obtained joint licenses for approved and pending patents on various parts of the technology involved. Quay said his company began trying to make a nasal spray after British researchers published a report showing intravenous infusion of the PYY hormone brought significant weight loss.

"No matter how bad obesity is, no one's going to take a 90-minute infusion before they sit down to dinner," Quay said.

If the drug is successful, the two companies will reach a goal that has eluded giants in the pharmaceutical industry.

Along the trail of unsuccessful products with unpleasant side effects, Pham said, are the stimulants of earlier decades and Roche's Xenical, which has sold poorly because it causes loose stools. And heart-valve damage linked to Wyeth's Pondimin and Redux, pulled from the market in 1997, have led to lawsuits and settlements costing the company more than $16 billion.

"I think there's probably going to be a number of obesity drugs out there" eventually because of the size of the market, she said, noting recent excitement over the Sanofi-Aventis "wonder-pill" rimonabant, which in testing has helped smokers quit and lose weight.

"I don't think there's a magic bullet," because a healthy diet and exercise are still needed, she added.