Merck Preempts Peloton Therapeutics IPO With $1B Acquisition Deal

Xconomy New York — 

Merck has reached a deal to acquire Peloton Therapeutics, and its Phase 3-ready kidney cancer drug, for $1.05 billion.

Under the agreement announced Tuesday, Merck (NYSE: MRK) will pay the sum in cash up front. If Peloton’s drug candidates reach the market and hit sales targets, shareholders of privately held Pelton could gain up to $1.15 billion in milestone payments.

The acquisition agreement comes one day before Dallas-based Peloton was expected to go public. Under IPO terms the company set last week, Peloton could have raised as much as $183 million to fund Phase 3 tests of its lead cancer drug and advance its other programs.

The Peloton acquisition brings to Merck a pipeline of drugs that hit a molecular target thought to be “undruggable” with small molecules. Peloton develops drugs that target hypoxia-inducible factor 2a, or HIF-2a, a protein that regulates the body’s response to hypoxia, or low oxygen levels in tissues. But in some cases, this protein can drive certain diseases, including cancer.

Lead Peloton drug PT977 is a small molecule developed to block HIF-2a. The company is testing it in a number of diseases. A Phase 3 study in patients with advanced renal cell carcinoma, the most common form of kidney cancer, is expected to start in the second half of this year. The drug is also being tested in Phase 2 studies as a treatment for the kidney tumors associated with von Hippel-Lindau disease, a rare inherited disorder that leads to the growth of benign and cancerous tumors and cysts in the body.

Additional tests include a Phase 2 study testing PT2977 in combination with cancer drug cabozantinib in patients with advanced renal cell carcinoma. Peloton is also evaluating the drug in other types of cancer. A Phase 1/2 study is underway in glioblastoma multiforme, a type of brain cancer.

According to Peloton’s IPO documents, the company had raised a total of approximately $304 million, including a $150 million Series E round of financing in February. Its investors include The Column Group, Remeditex Ventures, and Topspin Partners.

Merck and Peloton expect to close the acquisition in the third quarter of this year.

Public domain image of renal cell carcinoma by the CDC