Merck & Co. Inc. agreed to acquire Viralytics Ltd for A$1.75 per share to boost its immuno-oncology pipeline.

The cash deal, which will be executed through a scheme of arrangement, values Sydney-based Viralytics at about A$502 million.

Under the deal, New Jersey-based Merck will gain full rights to Viralytics' lead product Cavatak, which is based on a proprietary formulation of a virus that has been shown to kill cancer cells.

Viralytics' board unanimously recommended that its shareholders vote in favor of the scheme. Its largest shareholder, Lepu Medical Group, which holds a 13% stake in Viralytics, plans to vote its shares in favor of the scheme.

The parties expect the deal to be implemented by the second quarter of 2018. The transaction is subject to Viralytics shareholder vote and customary regulatory approvals.

Viralytics, a developer of immunotherapy treatments for certain cancers, will become a subsidiary of Merck following the acquisition.

Cavatak is being evaluated in multiple phase 1 and phase 2 trials, including in combination with Merck's blockbuster cancer drug Keytruda for treating skin, prostate, lung and bladder cancers.