Tuesday May 5, 02:10 PM

Jubilant, AstraZeneca in drug research deal, shares soar

MUMBAI (Reuters) - Indian drugmaker Jubilant Organosys Ltd on Tuesday said its unit had signed a research deal with Anglo-Swedish AstraZeneca for neuroscience-related drugs, lifting the local firm's shares over 15 percent.

Under the deal, AstraZeneca will fund research for the initial five years and will own the drugs, developed under the tie-up with Jubilant Biosys Ltd, besides getting global development and commercialisation rights to these, Jubilant said in a note.

The Indian drug firm will also receive milestone payments and royalties from AstraZeneca on successful sale of any drug, it added in the statement.

"This collaboration complements our internal capabilities and increases the capacity of our pre-clinical programs," Jan Lundberg, AstraZeneca's executive vice-president, global discovery, said in the statement.

Jubilant shares, which rose to 135 rupees on the news, have eased a little to trade 10.8 percent higher at 130 rupees in a weak Mumbai market at 12:28 p.m.

The deal is beneficial in the long-term for Jubilant, when the milestone payments start coming in, said Bino Pathiparampil, pharma anlayst with IIFL Capital, adding that in the short-term the revenue addition may not be significant.

"It is a high-end, high tech research deal," Pathiparampil said. "It is a proof of the capabilities of the company, which means they can get more such deals."

Global drug firms, reeling under the onslaught of generic competition and a thin new-drug pipeline, continue to outsource new drug development to low-cost destinations such as India to help reduce the long timeline and high costs of drug development.

Last year Jubilant stuck a similar deal with Amgen Inc and also formed an equal joint venture with another U.S. firm, Eli Lilly, for providing drug development services to the companies' partnered molecules.

The Noida-based firm last week said robust revenue from drug discovery business and drug launches in the radiopharmaceutical segment would help drive revenue growth, forecast at more than 15 percent in the year to March 2010.

On Monday, Jubilant said it secured the U.S. Food and Drug Administration approval to launch its generic sestamibi drug, used for diagnostic cardiac imaging, in the United States.