UPDATE 2-Idera, Merck KGaA forge cancer drug deal

(Adds share prices, byline)

By Ransdell Pierson

NEW YORK, Dec 19 (Reuters) - Idera Pharmaceuticals Inc (IDRA.O) said on Wednesday it agreed to a partnership under which it will license technology to German drugmaker Merck KGaA (MRCG.DE) for cancer treatments.

Idera said Merck KGaA agreed to pay the biotechnology company an upfront fee of $40 million, plus as much as $381 million in milestone payments if Idera achieves a number of development goals, as well as royalties on sales of drugs that make it to market.

Idera said Merck KGaA was exclusively licensing its two most advanced Toll-like Receptor 9 (TLR9) agonists for treatment of cancer -- compounds called IMO-2055 and IMO-2125 -- with the exception of their use as cancer vaccines.

Toll-like receptors are proteins in human cells that are on alert for bacteria, viruses and parasites, and detect them by telltale chemical substances present in the pathogens. The immune system cells are increasingly being studied as potential treatments for a number of diseases, including cancers as well as infectious, respiratory and autoimmune disorders.

Idera, whose shares rose 3 percent on Wednesday, said IMO-2055 has been studied in early-stage trials for treatment of solid tumors that have not responded to standard drugs. In an ongoing Phase 1 trial involving patients with the most common form of lung cancer, it is being studied in combination with OSI Pharmaceuticals Inc's (OSIP.O) Tarceva and Genentech Inc's DNA.N Avastin. In a mid-stage trial, IMO-2055 is being tested against kidney cancer.

Idera is conducting an early-stage trial of its other lead compound, IMO-2125, among patients infected with hepatitis C virus who have not responded to standard treatment. But that use of the drug is not included in the deal with Merck KGaA, Idera said.

"In addition, Idera and Merck KGaA have agreed to engage in a research collaboration to identify a specified number of novel, follow-on TLR9 agonists, which will be derived using Idera's chemistry-based approach and for which Merck will have the exclusive right to use in oncology applications other than cancer vaccines," Idera said.

Shares of Idera were up 36 cents to $11.65 on the Nasdaq, while Merck KGaA slipped 0.2 percent in Germany. (Reporting by Ransdell Pierson; editing by Mark Porter/Dave Zimmerman)