Merck bolsters oncology pipeline with Peloton buy

Aiming to bolster its late-stage oncology pipeline, Merck & Co. will pay up to $2.2 billion to acquire privately held Peloton Therapeutics. The Dallas-based biotech firm gives Merck a series of small molecules that block a difficult-to-drug target called hypoxia-inducible factor-2 (HIF-2α).

The centerpiece of the deal, worth $1.05 billion in cash and another $1.15 billion contingent on certain commercialization goals, is PT2977, an HIF-2α inhibitor in Phase II clinical trials to treat a form of kidney cancer.

HIF-2α, a transcription factor that cells respond to low oxygen levels, can be aberrant in some diseases. But because they lack easy pockets for small molecules to slip into, transcription factors are notoriously difficult to harness. Peloton was able to overcome those challenges with PT2977, which binds to HIF-2α, thereby preventing it from binding to its partner inside the cell.

The compound is Peloton’s second stab at the transcription factor. Peloton tested an earlier HIF-2α inhibitor, PT2385, in several clinical studies, but the drug had poor distribution and had to be given in high doses. The company went back to work and struck upon PT2977, which is safer and 10 times as potent as PT2385, it says.

Founded in 2010, Peloton has raised more than $300 million to support the development of HIF-2α inhibitors and other research programs. The deal comes just weeks after Peloton set the terms for a proposed initial public stock offering, a move that the biotech hoped would bring in another $150 million.

For Merck, the purchase expands an oncology pipeline that has grown in recent years through other bolt-on acquisitions. Similar bite-sized buys include the immunotherapy-focused firms Viralytics and Immune Design.