Merck KGaA seeks partner for immuno-oncology drug by year-end

* Competitive process to find partner for anti-PD-L1 drug

* Experimental drug in hot new area for cancer research

* Merck (Other OTC: MKGAF - news) plans increased investment in biosimilar drugs

* Pharma head Oschmann appointed deputy CEO (Adds details on drug, wraps in management changes)

FRANKFURT, Sept 18 (Reuters) - German drugs and chemicals maker Merck KGaA is in advanced talks with potential partners interested in its experimental cancer immunotherapy drug and expects to clinch a partnership deal before the end of the year.

Its medicine is a so-called anti-PD-L1 agent, one of a number of new drugs from rival companies within the hot research area of immuno-oncology that are designed to make tumour cells more vulnerable to attack by the body's immune system.

U.S.-based Merck & Co, Bristol-Myers Squibb, Roche and AstraZeneca (NYSE: AZN - news) are viewed as the main players in this new field, which analysts believe could develop into a market worth tens of billions of dollars in annual sales.

As a mid-sized competitor, Merck KGaA has decided to seek a partner for its product, which has already been given to more than 500 patients in early-stage Phase I tests and is seen as a potential treatment in lung, ovarian and Merkel cell skin cancer.

"We have initiated a competitive process to select the best partner for the global co-development and co-commercialisation of our anti-PD-L1 compound," Stefan Oschmann, the head of its pharma business, said in a statement on Thursday.

"We are currently in advanced discussions with major oncology players and aim to reach an agreement by year-end."

Merck added that it planned to invest an additional 130 to 150 million euros ($168 to $192 million) next year in its unit developing cheaper copies of biotech drugs, known as biosimilars, on top of 100 million euros this year, depending on the outcome of ongoing clinical studies.

It said it would expand existing partnerships with India's Dr Reddy's and Brazil's Bionovis with another, as yet undisclosed in-licensing agreement for a late-stage biosimilar, initially for smaller emerging markets.

The Darmstadt-based company also announced it had appointed the head of its pharma business, Stefan Oschmann, as deputy chief executive.

Oschmann, 57, will share strategic management functions and representation of the company with CEO Karl-Ludwig Kley as of Jan. 1, 2015, putting him in the frame to possibly succeed Kley, whose contract runs until September 2016.

Belen Garijo, 54, will take over leadership of the entire pharma business. Garijo is already CEO of Merck's biopharmaceutical division, Merck Serono, to which she will add consumer health, allergy treatments and biosimilars. (1 US dollar = 0.7759 euro) (Reporting by Georgina Prodhan and Ben Hirschler; Editing by David Holmes)