UPDATE 1-Glaxo signs up to $700 mln drug deal with Santaris

(Adds further details on products, background on Santaris)

LONDON, Dec 19 (Reuters) - GlaxoSmithKline Plc (GSK.L) signed a deal with Danish biotech firm Santaris Pharma potentially worth more than $700 million to develop novel antiviral medicines.

The tie-up is the latest a string of alliances with small biotech companies struck by Europe's biggest drugmaker, which is keen to increase its exposure to promising technologies developed outside its own laboratories.

Glaxo said on Wednesday privately owned Santaris would receive an upfront fee for the first antiviral programme of $3 million and an equity investment of $5 million.

Overall, Santaris could be entitled to more than $700 million in upfront fees and development and regulatory milestones payments, depending on the success of the early-stage research in RNA antagonist compounds.

It will also get high single- to double-digit percentage royalties on worldwide sales of marketed products. Glaxo will have options to develop drug candidates in up to four different viral disease programmes. It also has an option to include as an additional programme Santaris Pharma's pre-clinical hepatitis C compound SPC3649.

The deal with Glaxo is a coup for Santaris Chief Executive Keith McCullagh, the former head of troubled UK group British Biotech, who joined the Danish concern in 2003.

(Reporting by Ben Hirschler; Editing by David Holmes)

((ben.hirschler@reuters.com; +44 20 7542 5082; Reuters Messaging: ben.hirschler.reuters.com@reuters.net))

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