Dear Shareholders,

Idera’s progress and achievements for the year 2009 derive from our expertise and experience in the application of nucleic acid chemistry to drug discovery. This year we reported new results from clinical trials in cancer and chronic hepatitis C virus infection and initiated a new clinical development program in autoimmune and inflammatory diseases. Our efforts are focused on drug candidates targeted to toll-like receptors, or TLRs, a class of proteins that mediate immune responses.

Business Strategy

Our business strategy is to pursue internal and collaborative programs simultaneously, to take full advantage of our productive research capability. At present, we have internal or collaborative research programs for the treatment of chronic hepatitis C virus infection, cancer, autoimmune and inflammatory diseases, respiratory diseases, and for the development of vaccine adjuvants.

Hepatitis C Virus

We recently presented encouraging interim safety and efficacy data from the first-in-human Phase 1 trial of IMO-2125, a TLR9 agonist, at the European Association for the Study of the Liver 2010 annual meeting. IMO-2125 is our lead drug candidate for the treatment of hepatitis C virus (HCV) infection. The clinical trial is being conducted in patients who show no benefit when treated with the standard of care therapy, which is 48 weeks of recombinant pegylated interferon plus ribavirin. These patients are referred to as null responders, and there is currently no approved therapy for these patients who have a high medical need. Our Phase 1 clinical data showed a reduction in HCV viral load, which correlated well with the levels of natural interferon alpha and with other anti-viral proteins induced by IMO-2125 treatment. Based on these results, we believe that IMO-2125, which induces natural interferon-alpha and other anti-viral proteins, may offer an alternative to using recombinant pegylated interferon-alpha in HCV therapy. Our next goal is to optimize the IMO-2125 treatment regimen and initiate a Phase 2 clinical trial of IMO-2125 in combination with ribavirin in null responder HCV patients. In addition, we expect the data from an ongoing study in treatment naïve HCV patients to be available by the end of 2010.

Autoimmune Diseases

We recently initiated clinical development of IMO-3100, a TLR antagonist designed to block immune responses mediated through TLR7 or TLR9. Independent researchers have shown that TLR7 and TLR9 are involved in disease progression in patients who have autoimmune diseases such as lupus, rheumatoid arthritis, and psoriasis. Drugs approved to treat these disorders include antibodies, which block the activity of pro-inflammatory proteins produced by the immune system such as tumor necrosis factor (TNF) and interleukins 6 and 12. In contrast, the mechanism of action of IMO-3100 is to inhibit pro-inflammatory immune responses, including pro-inflammatory proteins, by blocking TLR7 and TLR9 activity. We have reported encouraging results in animal models of lupus, rheumatoid arthritis, psoriasis, and other autoimmune diseases. We are currently conducting a Phase 1 clinical study in healthy volunteers to evaluate the safety, tolerability, and mechanism of action (MoA) of IMO-3100. Results from this trial will be used to prioritize one or more autoimmune disease indications for further development.

Respiratory Diseases

IMO-2134, also known as QAX935, is a TLR9 agonist designed by Idera that was selected by Novartis during our collaboration and was advanced into Phase 1 clinical development for the treatment of asthma and allergy. In February 2010, Idera regained the rights to IMO-2134. We are appreciative of the contributions Novartis made toward selection of IMO-2134 as a lead drug candidate. We are in the process of defining a strategy for further development of IMO-2134.

Cancer Treatment

A collaborative program with our partner Merck KGaA is focused on the development of TLR9 agonists for cancer therapy. We are very pleased with the progress Merck KGaA has made with the lead drug candidate IMO-2055, also known as EMD 1201081, in a broad range of cancer therapy indications including a recently initiated randomized Phase 2 clinical study in head and neck cancer and ongoing clinical studies in non-small cell lung cancer and colorectal cancer. We look forward to reporting the data from these studies as they become available.

Vaccine Adjuvants

We are collaborating with Merck & Co. on the potential use of TLR agonists as vaccine adjuvants. Scientists from Merck & Co. and Idera have reported promising results from preclinical studies at various scientific meetings and in peer-reviewed scientific publications.

Our business strategy to advance certain applications of our research and development through collaborations has enabled us to receive $84 million in upfront and milestone payments over the past five years. These payments have allowed us to maintain a strong financial position and to advance our internal programs. We ended 2009 with $40.2 million in cash and investments, which enables us to address our key objectives for the coming year.

We are committed to the rapid advancement of our promising drug candidates toward the goal of providing better treatment options in areas of unmet medical need.

A summation of the significant events at Idera during the past 12 months would not be complete without expressing our heartfelt sadness on the passing of Paul C. Zamecnik, M.D., in October 2009. Paul was a founder of our company and he continued to have a presence at Idera as Director Emeritus. We are grateful to Paul for his contributions to science, medicine, and our company.

We recognize and express our appreciation for the ongoing support of our shareholders. We look forward to providing continued updates on our progress.

Sincerely,

Sudhir Agrawal, D. Phil.
President, Chief Executive Officer and Chief Scientific Officer

James. B. Wyngaarden, M.D.
Chairman of the Board of Directors