Indian firm Advinus signed its first discovery and development collaboration to develop candidates against metabolic disease targets provided by Merck & Co. Inc.

It's a deal that could result in milestones of up to $74.5 million per target for Advinus, a company founded last year to combine innovative drug discovery with India's cost-effective drug development. Advinus, which stands for "Advantage India and U.S.," has a two-pronged business approach: It provides services to pharma and biotech firms, and it develops targets to the proof-of-concept stage, said Rashmi Barbhaiya, CEO and managing director of the Bangalore, India-based company.

Barbhaiya, who founded Advinus with backing from large Indian business conglomerate the Tata Group, previously spent 21 years at Bristol-Myers Squibb Co., then worked overseeing research and development at generic pharmaceutical giant Ranbaxy Research Laboratories in New Delhi, India.

After leaving Ranbaxy, he was "convinced to stay in India, largely because of the economic advantages."

It's no secret that development work is less expensive in that country - about 40 percent to 60 percent less - yet work can be completed "with the same quality as in the U.S.," Barbhaiya said, and on a similar time frame.

Those cost savings also "increase the possibility of success," he said, by allowing companies to investigate two or three targets for the price of one. That's an important advantage in an industry where nine out of 10 molecules in development fail before they reach market.

For a region that already is home to a number of generic pharmaceutical companies and manufacturing firms, Barbhaiya sees companies like Advinus as a "natural extension of what India has to offer" in terms of a growing knowledge-based industry.

The deal with Merck drives that point home. Under the terms of the collaboration, Whitehouse Station, N.J.-based Merck will provide the targets and the companies will work together to develop drug candidates through proof of concept against metabolic disorders, such as obesity and diabetes.

Merck will retain rights to the compounds for late-stage development and commercialization, with Advinus entitled to milestone payments plus royalties on any product sales.

"We'll start with two [targets]," Barbhaiya told BioWorld Today, "and on mutual consent, we have the opportunity to do more."

For now, Advinus will focus its efforts on the Merck collaboration, but Barbhaiya said it's likely the company will seek additional partners in the future.

Advinus operates primarily as a research and development firm, with no plans to expand into sales and marketing. Instead, it will develop candidates through collaborations and out-licensing deals through its drug discovery unit in Pune, India.

That unit is staffed by about 65 employees, and the focus is on metabolic and inflammatory diseases, as well as "neglected" diseases, such as Leshmaniasis, dengue fever, tuberculosis, leprosy and malaria, which affect populations in developing countries.

Most of the Advinus' work is done at its 265-employee drug development center in Bangalore, which conducts a fee-for-service business to take drug candidates through proof of concept and custom development services to new drug application filings, and includes an integrated service platform for process chemistry, DMPK, clinical pharmacology, safety assessments, analytical R&D, bioanalytical and formulation development.