UPDATE 2-Ranbaxy to develop anti-infective drugs for Merck

(Adds Ranbaxy CEO interview, latest shares, background)

By Ben Hirschler and Devidutta Tripathy

LONDON/MUMBAI, May 12 (Reuters) - India's Ranbaxy Laboratories Ltd (RANB.BO: Quote, Profile, Research) is to develop new anti-infective drugs for Merck & Co Inc (MRK.N: Quote, Profile, Research), underlining the growing use of Indian pharmaceutical research by multinational companies.

Ranbaxy will carry out drug discovery and clinical development through Phase IIa clinical trials, with the U.S. drugmaker responsible for later development and commercialisation, the companies said in a statement on Monday.

The Indian group will get an undisclosed upfront sum and could receive more than $100 million for each drug target, depending on successful development and regulatory approval. It will also be entitled to royalties under the five-year deal.

Shares in India's biggest drugmaker rose 5.4 percent to 495 rupees by 1000 GMT in a Mumbai market .BSESN that had gained 0.8 percent.

Ranbaxy Chief Executive Malvinder Singh told Reuters his scientists would work on more than one target.

"We are doing at least two. So (that means) $200 million for the time being," he said, adding the upfront payment should be booked this quarter.

The tie-up highlights how international companies, pressured by patent expiries and disappointing new drug pipelines, are out-sourcing more research to Asian countries like India and China.  Continued...