UPDATE 2-Glaxo, Isis in drug development deal of up to $1.5 bln

* Glaxo to develop drugs using Isis's antisense technology

* Isis to receive $35 mln as upfront payment

* Isis shares up 11 percent (Adds analyst comment, updates share movement)

By Shailesh Kuber

BANGALORE, March 31 (Reuters) - Isis Pharmaceuticals Inc (ISIS.O) said it entered into an agreement worth up to $1.5 billion with GlaxoSmithKline (GSK.N) (GSK.L) to develop treatments for infectious diseases, using its antisense drug discovery platform.

Shares of Isis rose as much as 11 percent to $11.43 Wednesday on Nasdaq. They later pared some gains and were trading up 9 percent at $11.20.

"The deal with GlaxoSmithKline shall validate Isis' antisense platform and helps provide visibility to what is a very deep pipeline," Barclays Capital analyst Jim Birchenough said.

"It provides further funding to bring antisense opportunities to fruition," added Birchenough, who maintained his "overweight" rating and price target of $17 on Isis stock.

Under the deal, Isis will receive an upfront payment of $35 million from Glaxo and is eligible to receive on average up to $20 million per program up to mid-stage proof of concept (PoC) as milestone payments.

Also, Isis will be eligible to receive license fees and milestone payments of about $1.5 billion.

Glaxo will have the option to license compounds, and will be responsible for further development and marketing, while Isis will receive up to double-digit royalties on sales from any product that is successfully commercialized, the company said.

RNA-targeted therapeutics, or antisense therapies, aim to interfere at the genetic level to prevent rogue proteins from being formed. (Reporting by Anand Basu and Shailesh Kuber in Bangalore; Editing by Vinu Pilakkott, Anne Pallivathuckal)