Novartis is ending an R&D collaboration with Idera Pharmaceuticals which has sent shares in the US company south.

The pact, which started in 2005, had been evaluating toll-like receptor (TLR) 9 agonists as potential treatments for asthma and allergies. Under the terms of the agreement, Novartis paid a $4 million upfront fee and a $1 million payment associated with the extension of the collaboration in 2007.

Idera received another $1 million as the result of the initiation of a Phase I study of QAX935, selected by Novartis as a lead candidate and evaluated by intranasal delivery. Now the Cambridge, Massachusetts-based firm has regained all the rights to the compound.

Idera’s shares ended the day down 2.2% at $4.89 each, but the decline was softened by the company’s announcement that Merck & Co has extended its research collaboration for a fourth year. The firms teamed up in December 2006 to develop vaccines targeting TLRs 7, 8 and 9 in the areas of oncology, infectious diseases and Alzheimer's.

The extension will mark the end of the contract between Idera and Merck, as the companies originally agreed to collaborate for two years with two one-year options.