Vikas Dandekar, CNBC-TV18

Ranbaxy Laboratories and Merck have decided to sign a broadbased collaborative research agreement, reports CNBC-TV18, quoting sources. The agreement is for a new drug discovery.

Sources say the deal has a staggered payment clause for research. Merck will pass on leads to be jointly developed by Ranbaxy. Ranbaxy is expected to gain significant revenues from the alliance.

This is similar kind of deal that Ranbaxy had signed with Glaxo on lead identification, which then gets carried forward into the lab and into late stage clinical trials. Merck has already signed a similar deal with Nicholas Piramal for oncology drugs and with Tata controlled Advinus for metabolic disorders and this will be mostly for antibiotics. That is something that is emerging as a fast growing market.

The value of the deal is not know yet, but around USD 75-100 million is something that is going to be brought into Ranbaxy, in terms of upfront milestones and royalties.

So Merck is supposed to sign the deal in the coming days and this particular entity will be part of the new R&A division of Ranbaxy, which is Ranbaxy Life Sciences.

Ranbaxy and Merck, though, have declined to comment on the news. Ranbaxy had signed a similar deal with GSK Pharma a few years ago.

Drug discovery research is moving eastwards, and to further drive home that point, USD 24 billion drug maker Merck is signing up with Ranbaxy. Both the companies will collaborate on novel compounds that can be taken into the market jointly.

Merck, the makers of the recently launched blockbuster anti-diabetes drug Januvia, is shortly striking a broad-based research deal with Ranbaxy. The deal between the two companies will be to work on new targets from the lead identification stages right up to the human trials.

While Merck will pass on the leads, primarily involving antibiotic compounds, Ranbaxy will use its cost efficient scientific pool to take the research further into clinical trials and generate data for faster marketing approvals.

Experts say the extent of the deal may range between USD 75-100 million, as antibiotics is gradually becoming an important drug segment. In the last few years, there has been a rise in drug-resistant infections and the two companies intend to launch drugs in that segment.

Merck had signed a similar deal in 2006 with the Tata controlled Advinus Therapeutics for metabolic disorders and in 2007, Merck partnered with Piramal Healthcare for new leads in cancer drugs.

So, according to Indian scientists, many more such linkages may be forged with multinationals reeling under pressures of escalating research costs.