Merck will pay Ariad Pharmaceuticals about $69 million plus milestones for exclusive rights to the Cambridge, Massachusetts-based company’s late-stage soft tissue cancer drug ridaforolimus, replenishing Ariad's waning cash reserves as it revs up a new trial on its next experimental drug, AP24534, a therapy for chronic myeloid leukemia and other cancers.

“With Merck assuming all costs associated with the development, manufacture and commercialization of ridaforolimus and providing Ariad with near-term cash payments,” says Harvey Berger, CEO and chairman of Ariad, “ ... we have greatly strengthened our balance sheet.”

Ariad estimates it'll have $44 million to $46 million in cash and cash equivalents at year's end and says that the new agreement gives it enough capital to fund its operations into the second half of 2011.

The companies' original deal, struck in July 2007, split the costs of ridaforolimus development, manufacturing and commercialization 50-50. Merck provided Ariad with a $75 million upfront payment that year and has shelled out $53.5 million in milestone payments since.

In the revised deal, Merck will fund all future ridaforolimus development, manufacturing and commercialization costs and Ariad will be eligible to receive as much as to $514 million in regulatory and sales milestone payments, including $65 million for goals associated with the sarcoma indication. Other payments are attached to events such as acceptance of the ridaforolimus new drug application by the U.S. Food and Drug Administration, marketing approvals in the United States, European Union, and Japan and the achievement of significant sales thresholds.

Terms for development and commercialization of ridaforolimus in non-cancer indications aren't covered by the current agreement.