Merck & Co. Inc. agreed to acquire Peloton Therapeutics Inc. for an up front cash payment of $1.05 billion to bolster its cancer drug pipeline.

Earlier in May, the Dallas-based biotechnology company Peloton, which develops therapies to treat cancer and other life-threatening conditions, priced its IPO in an effort to raise up to raise about $137 million in net proceeds.

Peloton's lead product candidate is PT2977, which is being evaluated in a phase 2 trial to treat a type of kidney cancer. The drug works by inhibiting the hypoxia-inducible factor-2 alpha proteins, which play a part in cancer growth.

Under the agreement, Kenilworth, N.J.-based Merck will acquire all outstanding shares of Peloton in exchange for an upfront payment of $1.05 billion. Peloton shareholders will also be eligible to receive an additional $1.15 billion contingent upon successful achievement of future regulatory and sales milestones for certain product candidates.

The closing of the transaction, which is expected in the third quarter, will be subject to conditions, including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and other customary conditions.

Covington & Burling LLP is serving as legal adviser, while Credit Suisse is serving as financial adviser to Merck.

Wilson Sonsini Goodrich & Rosati is acting as legal adviser while Centerview Partners is serving as financial adviser to Peloton.