Nicholas Piramal (NPIL) has reportedly signed a research deal potentially worth a maximum revenue of USD 350 million with US pharmaceutical giant Merck & Co to carry out early discovery and development of two new cancer drugs, the two companies said on Monday. Under the deal, Merck has licensed Nicholas to discover the lead candidates for two of its targeted drugs and conduct pre-clinical studies and two phases of human trials. The New Jersey-based company will have the option to carry out the large-scale third phase human trials and take them to the market. This collaboration also will go under the new research entity spun off from NPIL as Nicholas Piramal Research Company. The company already has 13 drugs in various stages of development. Nicholas will receive a milestone payment of USD 175 million for each targeted drug after completing the second phase of clinical trials and upon successful registration of the drug in the global market. It would also be entitled to royalty payments on the sales of these drugs. For Merck, the deal helps cut the cost of research and widen the scope of its discovery and development programme. Merck had done 140 such external research deals in the last two years. And are increasingly looking at India and China given the expanded capabilities in the region and to complement their internal research. An NPIL official said phase-II clinical trials are 50% cheaper in India compared to Western countries. For Indian companies, such collaborations are helpful in cutting the discovery and development cycle. NPIL, itself, has been in very early stages of discovering similar cancer targets, which it will now shelve, he said. Working from the ground up will involve isolating one lead candidate from 10,000 prospects, but the Merck deal will enable NPIL to start from a shortlist of 250, the official added.