Ranbaxy has linked up with Merck & Co in a deal which will see the Indian firm develop new anti-infective treatments for the New Jersey-based drugs giant.

Under the terms of the alliance, Ranbaxy will carry out drug discovery and clinical development through Phase IIa clinical trials, while Merck will be responsible for later development and commercialisation of the antibacterials and antifungals that come out of the pact. Cash-wise, Ranbaxy will receive an undisclosed upfront sum and could receive more than $100 million for each drug target, depending on successful development and regulatory approval. It will also be entitled to royalties under the five-year deal.

Commenting on the deal, Ranbaxy’s chief executive Malvinder Singh said that “our philosophy of partnering with big pharma will continue to gather momentum as companies continue to recognise the strength and breadth of our R&D expertise and resources”. He added that the Merck deal “positions Ranbaxy to extend its capability set and move up the value chain for drug discovery and development”.

Mervyn Turner, senior vice president of worldwide licensing and external research at Merck, said that "collaborations with external partners, wherever in the world, are an integral and essential part” of the firm’s long-term strategy to expand its pipeline. He added that by "combining each other's strengths and resources, both Merck and Ranbaxy are able to decrease development risk while sharing the potential reward”.

Ranbaxy is best known for its generics operations but has been expanding its novel drug discovery partnerships of late. Specifically, it has a major R&D alliance in place with GlaxoSmithKline which focuses on a wide range of therapeutics, including anti-infectives as well as metabolic, respiratory and oncology drugs.

That deal was initiated in 2003 and last year it was expanded after the firms identified a promising compound that has the potential to treat respiratory inflammation.

As for Merck, the Ranbaxy link-up comes six months after it signed a drug development deal with another Indian firm, Nicholas Piramal. That alliance, which could be worth over $350 million to the Mumbai-headquartered firm, will focus on the discovery and development of new oncology drugs for two selected targets provided by Merck.