Vectura Group plc has agreed a worldwide collaboration, development and licence agreement with the leading German pharmaceutical company, Boehringer Ingelheim. The aim of the collaboration is to develop a dry powder inhaler (DPI) as a Boehringer Ingelheim branded device, to deliver a range of proprietary respiratory products of Boehringer Ingelheim, mainly for the treatment of asthma and chronic obstructive pulmonary disease (COPD).

Under the non-exclusive agreement, Vectura will work with Boehringer Ingelheim on the continued development of the inhaler until the end of 2007, after which Boehringer Ingelheim will be responsible for any further development, manufacturing, clinical trial use with proprietary compounds of Boehringer Ingelheim, and the commercialisation of these products.

Under the terms of the agreement, Vectura will receive an initial payment of €5 million and a €10 million (£6.9 million) equity investment. Following this purchase of 4.9 million ordinary shares at £1.40 per share, Boehringer Ingelheim will hold approximately 3.8 per cent of the enlarged fully diluted share capital of Vectura.

An additional payment and a further equity investment will be made to Vectura upon the achievement of pre-agreed pre-clinical milestones. The option to acquire further equity is under similar terms to the first equity investment. This option expires in late 2007 and is capped at €5 million.

Additional milestones will be payable to Vectura for each Boehringer Ingelheim product developed using the device.

In addition to the above, royalties will be paid on all global sales of Boehringer Ingelheim products delivered with the device.

The majority of treatments for asthma and COPD are delivered by inhalation. Global markets for these treatments are valued in excess of $16 billion today and are forecast to grow to over $32 billion by 2010. Boehringer Ingelheim is one of the world's leading companies developing therapies for the treatment of asthma and COPD. Dry powder inhalers are increasingly the first choice for patients with these diseases and it is expected that DPIs will be used to deliver the majority of the drugs sold in these markets by 2010.

Dr Chris Blackwell, chief executive of Vectura, said: "Boehringer Ingelheim is one of the leading global players in respiratory medicine, as has been demonstrated with products like Spiriva and its commitment to improving the delivery of its inhaled products. The total deal value reflects the strategic importance of Boehringer Ingelheim's respiratory pipeline and makes the company an ideal collaboration partner for Vectura. The non-exclusive nature of this agreement allows us to continue our efforts to deliver further value from our inhaled therapy technologies in the future."