Under the terms of the agreement, DSM would develop undisclosed "non infringing novel processes" to produce APIs, which would be based on technology developed by the Netherland-based company using its technology portfolio in biocatalysis, fermentation and chemical conversion.
DSM would then transfer these molecules to Arch for commercial development at its manufacturing facilities in Guargon, New Delhi.
"Building on our strengths as an innovation driven global generic API supplier, DSM Anti-Infectives is now diversifying its portfolio of APIs to new molecules which are used in a wide range of therapeutic areas," DSM Anti-Infectives vice president Hans Van Nistelrooij said.
"To make this diversification quicker and to be close to the fastest growing generic drug markets in the world, DSM has adopted the partnership route for commercialisation of its new venture into generic APIs.
The manufacturing agreement with Arch Pharmalabs will enable us to further strengthen our innovative focus in India."
While the APIs in question were not disclosed, DSM spokeswoman Nelleke Barning told in-PharmaTechnologist.com the APIs covered the areas of cardiovascular, immunosuppressant and ACE inhibitors.
"Some of these APIs will become off-patent in the next five to seven years.
Others are already off patent," she said.
The agreement reflects a push by DSM further into the Indian market which is part of the company's Vision 2010 and the desire for an increased presence in emerging economies.
"DSM Anti-Infectives has a long standing experience in Indian production.
Our people and competences in India together with the advantage of lower cost, highly educated resources in our partner companies will give us a competitive advantage in the production of APIs," Barning said.
Arch Pharmalabs chairman and managing director Ajit Kamath said in a statement: "We are very pleased that DSM has placed its faith in Arch as a manufacturing partner for its non-traditional product range employing proprietary and path breaking technology.
We expect the alliance to deliver a range of products in varied therapeutic segments and take a leadership position based on cost and market reach."
The generics portfolio of innovation molecules will contribute to the $1bn innovation products sales target of DSM by 2010.
The company said it will keep on adding new molecules to its generic portfolio and will adopt the technology sharing route with its Indian partners for commercialisation.
In June, DSM announced plans to carve out the anti-infectives business with the possibility of a potential sale and has since sold its generic API manufacturing facility in Michigan to Albemarle Corporation.
Financial details of the manufacturing contract were not disclosed.