La Jolla-based Cytel Corp. has signed a...

La Jolla-based Cytel Corp. has signed a five-year joint research agreement with Sandoz AG, a Swiss pharmaceutical firm, the companies said Wednesday. The agreement could generate as much as $30 million to develop drugs against rheumatoid arthritis and diabetes.

In return for the agreement, privately held Cytel agreed to sell less than 20% of its outstanding stock to the Swiss firm.

Sandoz and Cytel hope to develop a new class of immunological drugs, called “auto-immune blockers,” to treat rheumatoid arthritis, insulin-dependent diabetes and other diseases. Auto-immune disease results from the body’s failure to distinguish “self” from “non-self” molecules. The immune system attacks body tissues as if they were foreign molecules.

The two companies also hope to develop drugs to prevent tissue rejection in organ transplant patients.

Cytel was formed in 1987 to apply recent advances in immunology to the development of drugs.