Merck & Co. Inc. said Tuesday it has reached an agreement to acquire Peloton Therapeutics Inc. for an upfront payment of $1.05 billion in cash. Peloton, a clinical-stage biotech focused on cancer treatments, was expected to price an initial public offering on Wednesday. The biotech's business hinges instead on two drugs that are designed to block a transcription factor called hypoxia-inducible factor-2 alphaαthat - among other things - regulates how the body responds to low oxygen levels. Under the terms of the deal, Peloton shareholders will be entitled to a further $1.15 billion in milestone payments based on the achievement of certain future regulatory and sales goals. "This acquisition exemplifies Merck's strategy to pursue novel therapeutic candidates based on exceptionally promising and innovative research," said Dr. Roger M. Perlmutter, president of Merck Research Laboratories. "Peloton scientists have applied their unique expertise in HIF-2α biology to develop PT2977, which has already shown intriguing activity in the treatment of renal cell carcinoma. We look forward to advancing this late-stage asset as part of our broad oncology R&D program." The deal is expected to close in the third quarter. Merck shares were not active premarket, bu have gained 34.7% in the last 12 months, while the S&P 500 has gained 3.9%.