Chief executive Richard Dixey said details of the collaboration were largely confidential, but any products resulting from the link would bring "substantial" royalty income to Phytopharm.

"We are very pleased to be in a position to announce a partner like Heska... because we see this as one way in which we will see early revenue streams coming to Phytopharm," Dixey told Reuters in a telephone interview.

Heska, which produces drugs primarily for cats, dogs and horses as well as equipment for vets, is to evaluate one unnamed Phytopharm compound with a view to taking a development and marketing option. It will also evaluate the potential of other Phytopharm compounds, which are all derived from natural sources such as plants, for use in animals.

Shares in the UK company have been buoyant in recent weeks despite problems in thebiotechnology sector and doubts over regulatory problems with botanical drugs. Pfizer Inc's decision in August to license the group's P57 Obesity drug was major factor behind the improvement in sentiment.

The stock closed down eight pence at 145 1/2 on Tuesday, but remained close to its highest levels for 18 months.

"I think Phytopharm will surprise everyone with its deal flow because there are so many segments where we are active," Dixey said. "Our know-how remains unmatched and people are prepared to pay for it."

Although he declined to detail the therapeutic area of the main compound Heska is examining, Dixey said the group's four key target categories of inflammation, neurological disorders, dermatology and metabolic disease all had potential in animal as well as human health.

"We are excited by the possibilities of Phytopharm's pipeline of botanical compounds for animal health, and are eager to begin evaluating the first of these opportunities," Heska chief executive officer Fred Schwarzer addedin a statement.