Indianapolis-based Eli Lilly and Co. will team with German drugmaker Boehringer Ingelheim to develop diabetes treatments, as the U.S. pharmaceutical company pushes to fill a looming revenue gap created by expiring patents for several key drugs.

Lilly will pay Boehringer Ingelheim $387.4 million as part of a joint bid to develop and sell up to five drugs. The companies will split revenues from any approved drugs, not counting costs for making and selling the product. Each drugmaker also will receive payments based on whether their products reach certain milestones, like submissions for approval.

Lilly could receive more than $1 billion in milestone payments. The collaboration includes two of its potential long-lasting insulins expected to enter late-stage testing this year. Boehringer Ingelheim will also have an option to work with Lilly on a third drug in mid-stage testing that treats diabetes patients with chronic kidney disease.

Boehringer Ingelheim could bank future payments totaling about $807 million from the two drugs it contributes to the deal.

Lilly also will contribute decades of experience in the diabetes market, while one of Boehringer Ingelheim’s potential drugs — a Type 2 diabetes treatment called linagliptin that has been submitted for approval — could be launched as soon as this year. That would provide an important new revenue source for Lilly.

The U.S. drugmaker loses patent protection later this year for its top seller, the anti-psychotic Zyprexa. That will expose the drug, which brings in more than $4 billion annually, to generic competition. It also faces the loss of patents protecting key drugs like the antidepressant Cymbalta, its second-best seller, in the next few years.

Enrique Conterno, president of Lilly Diabetes, said linagliptin plus another Boehringer Ingelheim drug that could be submitted for approval in 2013 can generate a “long revenue stream” for Lilly.

“For us, it is important that we get into a growth mode (after) our patent expirations,” he said.

The company also has touted its pipeline of drugs under development as a key for filling that revenue hole, along with growth opportunities in biotechnology drugs, animal health and emerging international markets.

Diabetes treatments have been a cornerstone of Lilly’s business for decades. The company introduced the world’s first commercial insulin in 1923, and some of its current best sellers treat diabetes.

Boehringer Ingelheim has no diabetes products on the market, and Chairman Andreas Barner said it will benefit from Lilly’s expertise. Its products include the blood thinner Pradaxa, which was approved last year by the Food and Drug Administration.

Conterno said nearly 300 million people worldwide have diabetes, and that total is expected to grow to 430 million in the next 20 years.

“In that context, this is an epidemic,” he said. “We feel that this alliance basically puts together four products that truly have significant potential to benefit patients.”

Lilly expects to take a hit to 2011 earnings ranging from 45 to 50 cents per share for the collaboration, including a charge of 27 cents per share for the upfront payment to Boehringer Ingelheim.

Lilly shares rose 27 cents to $34.76 in late morning trading.