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Indian pharmaceutical company Jubilant Organosys Ltd. (530019.BY) Tuesday said a unit has signed a drug research agreement with the U.K.'s AstraZeneca PLC (AZN), a deal that can potentially bring it $150 million-$250 million in milestone and royalty payments.

Jubilant Organosys said the pact will focus initially on neuroscience drugs, and that the agreement calls for unit Jubilant Biosys Ltd. to come up with experimental drugs, which AstraZeneca will develop further.

Jubilant Organosys Executive Director For Finance R. Sankaraiah said the company will start working on four to six drug candidates, which AstraZeneca will look to take forward to pre-clinical, or animal, trials.

Sankaraiah said apart from milestone payments and royalties, Jubilant will be eligible to receive research funding of about $15 million-$25 million for an initial five-year period.

The stock was buoyed by the news, closing 13% higher at INR132.95 on the Bombay Stock Exchange, whereas the benchmark 30-share Sensex ended the day flat.

AstraZeneca will own worldwide development and sales rights of the drugs developed under the pact.

Multinational pharmaceutical companies are increasingly looking at collaborating in drug research with Indian companies because of India's large pool of scientists, lower manufacturing costs and the presence of a large number of manufacturing facilities approved by the U.S. Food and Drug Administration.

Indian pharmaceutical companies develop experimental drugs for multinational drug makers, in exchange for which they get payments based on the drugs meeting various targets and royalties on sales when successfully launched.

"Through this partnership, Jubilant is confident of contributing to AstraZeneca's pre-clinical portfolio and anticipates significant rewards from successful downstream milestones," Jubilant said.

"It is a concrete example of the innovative approaches we are taking to deliver a sustainable (drug) discovery pipeline with a lean and agile organization," said Jan Lundberg, executive vice president for global discovery at AstraZeneca.

Last year, Jubilant Organosys had signed a pact with U.S.-based Eli Lilly & Co. (LLY) to establish a joint venture in India to develop drugs for oncology, diabetes, metabolic and cardiovascular diseases.

The company also has similar drug discovery and development pacts with Amgen Inc. (AMGN) and Forrest Laboratories Inc. (FRX).

Sankaraiah said the company had earned INR2.50 billion in revenue from providing drug discovery and development services in the last financial year, representing about 7% of overall revenue. The company expects this to grow about 25% on-year in the current financial year, he added.

 
   -By Rumman Ahmed, Dow Jones Newswires; 91-9845104173; rumman.ahmed@dowjones.com