Otsuka Pharmaceutical Co and Lundbeck have signed a deal to develop and sell psychiatric and neuroscience drugs which could be worth up to $1.8 billion to the Japanese company.

The agreement covers five products, includes two late-stage Otsuka drugs. First up is a depot formulation of the schizophrenia blockbuster Abilify (aripiprazole) developed to "enhance the convenience of medication with a once-monthly dosing". The New Drug Application for aripiprazole depot formulation is expected soon to be submitted to the US Food and Drug Administration and will be filed in Europe during 2013.

The other late-stage drug, OPC-34712, is in Phase III trials for schizophrenia and adjunctive treatment of major depressive disorder. The alliance also includes three of Lundbeck's earlier-stage psychiatric disorder portfolio.

Under the agreement, Lundbeck will make an upfront payment of $200 million to Otsuka will also  receive up to $1.4 billion development and regulatory milestones. Including sales milestones, Otsuka could pocket $1.8 billion.

In return, the Danish drugmaker will receive 50% of sales in Europe and 20% in the USA for aripiprazole depot formulation. For OPC-34712, Lundbeck will obtain 50% of sales in Europe  and Canada and 45% in the USA.

Lundbeck chief executive Ulf Wiinberg said the collaboration "further strengthens our US platform and allows us to be introduced with the US psychiatry community already in 2013." His counterpart at Otsuka, Taro Iwamoto, added that the partnership "will enable us to establish a strong platform to deliver these compounds to patients who need them in Europe, South America, Oceania, the BRIC countries and others".

News of the deal had pushed Lundbeck's shares up 5.8% at 10.45am (UK time) as investors feel it could help the firm overcome the patent expirations for the antidepressant blockbuster Cipralex/Lexapro (escitalopram) that are coming in 2012 through 2014.