bbott Laboratories and Millennium Pharmaceuticals said yesterday that they would pool their efforts to develop drugs and diagnostic tests for diabetes and obesity.

The agreement, in which Abbott agreed to buy $250 million of Millennium's stock, is the latest alliance between a big pharmaceutical company and a genomics company.

The two companies planned to share equally in the costs of developing drugs for those two medical conditions, both of which represent major health problems. The companies also planned to share equally in sales, marketing and profits in the United States, with Millennium having the right to help market the drugs in five major European countries.

The companies said that by pooling their efforts, they would create a bigger, more efficient research program with 35 projects and 225 scientists at the outset.

"The combined scale of this alliance is as large as any in the industry in these two areas," Dr. Jeffrey M. Leiden, Abbott's chief scientific officer, said in a conference call with securities analysts. Dr. Leiden said the aim was to begin clinical trials of two to three drugs a year starting next year and to bring four to five drugs to market in 7 to 10 years.

The agreement would give Abbott potentially promising new leads for drugs, since Millennium has been unraveling the genetic mechanisms underlying obesity. Abbott, which is a leader in diagnostic tests, has been trying to strengthen its pharmaceutical business, recently paying $6.9 billion to buy Knoll Pharmaceutical, a division of BASF A.G. of Germany.

Millennium hopes to gain expertise in the clinical testing and marketing of drugs, to help it move from a gene research specialist to a full- fledged pharmaceutical company.

"It helps us to continue to move downstream," said Alan L. Crane, senior vice president for corporate development at Millennium, which is based in Cambridge, Mass.

But investors reacted negatively, knocking Millennium's stock down $3.88, or 13.3 percent, to close at $25.19, on a day when stocks in general tumbled sharply. Abbott shares dipped 57 cents, to $47.19.

Matthew Geller, biotechnology analyst at CIBC World Markets, said the agreement was "fundamentally a very good deal."

But Mr. Geller said some investors questioned why Millennium, which had about $1.4 billion in cash, needed the equity investment from Abbott, which would dilute the holdings of existing shareholders.

Abbott will buy $50 million of Millennium stock when the deal closes and the rest over two years at essentially market prices. If all the shares were bought at Friday's closing price, Abbott would own slightly more than 3 percent of Millennium.

In the past, biotechnology companies would usually license products or technology to drug companies in exchange for cash and royalties. But some companies are now seeking to be equal partners.

In January, the CuraGen Corporation , a genomics company, and Bayer A.G. agreed to collaborate nearly equally in developing drugs for diabetes and obesity, the same two conditions involved in the Abbott-Millennium alliance. Millennium last year agreed to cooperate with Aventis S.A. on a nearly equal basis to develop drugs for inflammatory diseases like rheumatoid arthritis.

Millennium is a pioneer in genomics and has become known for what its chief executive, Mark Levin, calls "over the top" deals with drug companies. It has yet to begin clinical trials of any drugs developed using genomics technology.

Categories: 52. Genetic Banks and Databases, 55. Pharmaceutical and Genomic Efforts/Developments