Drugs giant Pfizer is to press ahead with the development of a plant-based appetite suppressant for the treatment of obesity after reaffirming its commitment to a licensing deal with botanical pharmaceuticals firm Phytopharm.

The confirmation provided a major boost to the UK company yesterday amid market fears that Pfizer might lose interest in the development after its recently announced $60bn merger with Pharmacia.

Phytopharm linked up with the US group four years ago to develop a therapy based on the cactus-like Hoodia plant found in Namibia. The plant is used by the region's Xhonia bushmen to ward off hunger during lengthy hunting trips.

Under the agreement announced yesterday, Pfizer will continue with the planned development of a botanical prescription drug to treat obesity and metabolic syndrome while Phytopharm will be free to develop semi-synthetic versions of the active molecules discovered in the so-called P57 programme.

The UK firm said it would be free to seek other partners to commercialise any semi-synthetics developed and would receive royalties on sales of P57 by Pfizer along with previously agreed "milestone" payments of up to $32m. As part of the deal it will receive an additional funding of $2.8m from the US group.

"This is a very positive development for Phytopharm, with substantial potential upside," chief executive Richard Dixey said yesterday. "It allows us to have our cake and eat it and be paid almost $3m for our trouble as well." Phytopharm sees a potentially huge market for the plant-based treatment. Globally, obesity is said to affect more than 100m people seriously enough to warrant medical intervention. It is said to exacerbate or be among the causes of strokes, heart disease, diabetes and cancer.

Phytopharm shares rose 12.5p to 280p on the news, recovering some of the ground lost on concerns about the impact of a Pfizer-Pharmacia tie-up.