India’s leading drug manufacturer Ranbaxy Laboratories has decided to sign up a significant research deal with US-based drug maker, Merck in order to discover new medicines.

The tie-up may generate substantial revenues for the Indian firm.

The recent deal will be operationalised through Ranbaxy Life Sciences, the new R&D division of Ranbaxy.

Malvinder Mohan Singh, Ranbaxy CMD had dropped a hint regarding a possible research affiliation with an international drug major a few weeks ago.

However, Mr. Singh did not disclose the name of the international partner at that time.

After GlaxoSmithKline, Merck will be the second international drug company to enter a collaborative research deal with Ranbaxy.

According to sources, the collaboration with Merck will be in the area of early drug discovery.

Merck will discover the drug leads - potential molecules, which can be formulated into new drugs, whereas Ranbaxy will develop the drug all the way to the second-last phase of human experimentations.
 
Ranbaxy would receive royalties and payments as the drug crosses important development milestones.

The company signed up the agreement with the UK-based GSK in February 2007 to develop new drugs in different areas including anti-infectives, metabolic disorders, respiratory diseases and cancer.

A molecule for treating respiratory inflammation is already under development.

For Merck, the research deal with Ranbaxy will be a growth of its Indian presence in terms of collaborative R&D arrangements. Merck already has drug discovery pacts with Indian companies such as Advinus Therapeutics and Nicholas Piramal India.

The growing cost of drug development in traditional research bases such as the US and Europe pushed worldwide pharmaceutical companies to consider research tie-ups in low cost destinations.

The shares of the company, on Friday (9 May) declined 0.13%, to settle at Rs 469.45 on the Bombay Stock Exchange (BSE).