Ranbaxy Laboratories Ltd. and Merck & Co., Inc have signed a strategic Product Development Agreement for a drug discovery and clinical development collaboration for new products, in the anti-infective field.

Ranbaxy and Merck will work together to develop clinically validated anti-bacterial and anti-fungal drug candidates. Ranbaxy will carry-out drug discovery and clinical development through phase IIa clinical trials, with Merck conducting development and commercialization of drug candidates thereafter.

The agreement provides that the collaboration will begin this year with an initial term of five years and can be extended mutually thereafter by the parties. Under the terms of the Agreement, Ranbaxy will be paid an undisclosed upfront sum, with the potential to receive payments totaling more than US $100 million associated with the achievement of various research, development and regulatory approval milestones for each target included in the collaboration. Ranbaxy is also eligible to receive significant royalties on worldwide net sales of any products commercialized under the agreement.

Commenting on this agreement with Merck, Malvinder Mohan Singh, CEO and MD, Ranbaxy, said, "We believe that our philosophy of partnering with big pharma will continue to gather momentum as companies continue to recognize the strength and breadth of our R&D expertise and resources. This collaboration with Merck positions Ranbaxy to extend its capability set and moves up the value chain for drug discovery and development".

"Collaborations with external partners, wherever in the world, are an integral and essential part of Merck's long-term strategy to build and expand its pipeline," said Dr Mervyn Turner, senior vice president of worldwide Licensing and external research at Merck. "By combining each other's strengths and resources both Merck and Ranbaxy are able to decrease development risk while sharing the potential reward".