(Reuters) - U.S. drugmaker Merck & Co Inc on Tuesday agreed to buy Peloton Therapeutics Inc for $1.05 billion in cash, gaining access to the privately held company’s lead kidney cancer drug candidate.

FILE PHOTO: The Merck logo is seen at a gate to the Merck & Co campus in Linden, New Jersey, U.S., July 12, 2018. REUTERS/Brendan McDermid/File Photo

The acquisition can strengthen Merck’s presence in the field of renal cell carcinoma and bolster its cancer drug portfolio.

Merck’s blockbuster immunotherapy Keytruda was approved last month in the United States for treating renal cell cancer.

“This is a classic bolt-on deal. Peloton has a drug that looks promising in renal cell carcinoma, and there’s actually been a lot of success in the field in recent years,” said Brad Loncar, who runs the Loncar Cancer Immunotherapy ETF.

Peloton expects to start studying its lead drug, a kidney cancer treatment code named as “PT2977”, in a late-stage trial in the second half of this year.

In an older mid-stage trial testing patients whose cancer had spread even after treatment with at least one therapy, 24% of patients treated with Peloton’s drug showed an at least 30% shrinkage of targeted lesions.

Confident of its pipeline, Peloton was earlier looking to go public and had given a pricing range of $15 to $17 per share for its initial public offering last week.

At the upper limit of that range, the company would have been valued at $903.6 million, including underwriters’ option and other outstanding shares.

With the Merck deal now in place, Peloton shareholders would be eligible to receive a further $1.15 billion on achieving certain sales and regulatory milestones.

“The deal announced today should also underscore the opportunity for other small and mid cap biotech names in the cancer biology space,” said Cantor Fitzgerald analyst Louise Chen.

Credit Suisse was financial adviser for Merck and Centerview Partners was to Peloton.

(This refiled story corrects spelling in paragraph 3 to “bolt-on”, from “blot-on”)