“Tell me what you want done, and I will try it,
if I have to walk from here to the East of East and fight the wild Were-worms in the Last Desert.”
The Hobbit C1
Were-worms were creatures of an unknown kind, possibly mythical and presumably related to Dragons in some fashion, that were said to dwell in the Last Desert. Perhaps they were created by the hand of Morgoth in the pits of Angband. Cast off monsters, that were never used in his wars against Arda, or maybe they were creatures that came out of the Far East and like other Brazen Beast were used in war.
The Were-worms or Were-wyrms are mentioned only in passing in the Red Book of Westmarch, spoken of briefly by Bilbo in his home in Bag End. However, there are other writings that say these giant worms, who were known to be eaters of rock and stone were used in the Battle of the Five Armies to keep be Goblins of the Misty Mountains and Mound Gundabad hidden, until they reached the Lonely Mountain and attacked the armies of the west at unawares.
Azog’s was said to have called forth these great eaters of the earth, to tunnel underground towards Gates of Erebor and the ruined city of Dale. The armies of Dol Guldur, where said to have used these tunnels to reach the battle without being seen and also under the cover of darkness.
These creatures borrowed under the mountains surrounding the valley of Dale, until they burst forth during the Battle of the Five Armies, where Gandalf identifies them as “were-worms”. Apparently they are only used for tunneling, not fighting, because they did not take part in the ensuing battle.
The great were-worms allowed the armies of Dol Guldur to attack the armies of the Elves, Dwarves and Men through these massive tunnels and stream outward to overwhelm them upon the battlefield. However, Azog also kept a second army led by Bolg from Mount Gundabad in reserve.
These of course are only rumors, because none now live who remember it.