India’s big generic drugmaker is expected to form an alliance with the beleaguered drug giant that could generate up to $100 million in revenue for Ranbaxy, according to LiveMint, which cites an unnamed senior exec. [UPDATE: This deal was confirmed on Monday, May 12 and described as a $100 million deal].

The agreement would come nearly a month after Malvinder Singh, Ranbaxy’s managing director, indicated that such a deal was in the making, without naming the partner. Singh couldn’t be immediately reached for comment and a Ranbaxy spokesman declined to say anything to LiveMint. A Merck spokesman tells Pharmalot that the drugmaker won’t comment on “speculation.”

“The tie-up will be on the lines of what we have with GSK (Glaxo) and it will start from early-stage development to as far as phase II trials. It will span a range of therapeutic categories, though the focus will be on anti-infectives,” the unnamed senior exec tells LiveMint.

Merck will identify the potential molecules that can be developed into new drugs and Ranbaxy will develop the drug all the way to the second-to-last stage of human trials. The Indian drugmaker would receive royalties and payments as the drug crosses important development milestones.

Ranbaxy had signed a deal with Glaxo in February 2007 to work on new drugs in areas such as anti-infectives, metabolic disorders, respiratory diseases and cancer. A molecule for treating respiratory inflammation is already under development, LiveMint writes.

Merck is not new to such deals - the drugmaker has similar deals with Ranbaxy’s local rivals, Nicholas Piramal India and Advinus Therapeutics, LiveMint continues.

“Faced with declining research productivity and drying pipelines internally, global drug makers have begun looking at ways to speed up drug research in cost-efficient ways” and these risk-hedged agreements provided just that, Sarabjit Kour Nangra, an analyst with Angel Broking House, tells LiveMint.

Another analyst from a global equity firm said this “exploratory arrangement” made no material difference for the global companies as there would not be any upfront payment. “With big patents expiring and burning a big hole in the revenues of the big drug makers, their investment appetite for new drug research is also being hit. They are now wondering if they could focus on 60 molecules down from 100 before and ask others to develop the other 40,” explained the analyst.