Eli Lilly has signed a deal to acquire the rights to a diabetes drug that could be worth up to $360 million to its new partner OSI Pharmaceuticals.

Under the terms of the deal, Lilly is making an initial upfront payment of $25 million to get access to OSI’s and its UK-based obesity subsidiary Prosidion’s glucokinase activator programme and in particular, PSN010. The US major may pay up to $360 million if the drug hits certain sales development milestones, plus royalties on revenues of any successfully-developed compounds.

PSN010 rapidly lowers blood sugar levels through a dual mechanism of increasing glucose uptake in the liver and helping insulin secretion from the pancreas. It is currently in Phase I trials.

OSI’s chief executive Colin Goddard said that the deal is “an important validation of our diabetes and obesity research portfolio," while a senior Lilly executive stated that it will help bolster the company’s early-stage pipeline “and will augment one of our core therapeutic areas.”

Prosidion also signed a deal with Bristol-Myers Squibb a month ago which saw the latter firm get access to the Oxford-headquartered unit’s dipeptidyl peptidase IV patent portfolio for the treatment of type 2 diabetes.