In its most sizable deal in over a year, Merck (MRK) - Get Report has agreed to shell out as much as $1.25 billion for Afferent Pharmaceuticals, a clinical-stage biotechnology company focused on drugs that treat various neurogenic conditions including the chronic cough.

Merck will acquire all outstanding shares of the San Mateo, Calif., company for $500 million in cash up front, plus additional consideration of up to $750 million, according to an announcement released after the close of regular trading on Thursday. 

The remaining consideration is contingent on the target reaching certain clinical development and commercial milestones for various indications and candidates, including its lead candidate, AF-219, a drug for treatment of pathologic cough.

Shares of Merck, listed on the New York Stock Exchange, were down 0.1% in after-hours trading to $57.10. The stock fell 45 cents, or 0.8%, to $57.18 on Thursday.

Afferent's clinical candidates are AF-219 and AF-130, drugs under development for the treatment of patients that suffer from chronic respiratory and urologic sensory pathologies, as well as chronic pain and cardiovascular disorders. 

Afferent was founded by pharmacologist Anthony Ford alongside Pappas Ventures, Third Rock Ventures, Domain Associates, New Leaf Venture Partners and Roche Ventures

The deal, which the companies expected would close in the third quarter, remains contingent on expiration under the Hart-Scott-Rodino Antitrust Improvement Act and other customary conditions. 

Merck's last transformative transaction was a play to beef up its antibiotics portfolio and add scale in the hospital acute care arena. The Whitehouse Station, N.J., company in January 2015 completed its acquisition of Cubist Pharmaceuticals for $9.5 billion including debt. 

More recent deals for the company include its January purchase of IOmet Pharma. Regulatory filings show Merck paid $150 million up front, plus a potential $250 million dependent on certain milestones. The company has valued the deal at $227 million.

Thursday's transaction comes after a federal judge earlier this week sided with Gilead Sciences (GILD) - Get Report , reversing an earlier ruling in Merck's favor relating to a drug-patent suit for a Hepatitis C therapy. After determining misconduct by a Merck witness in the trial, U.S. District Judge Beth Labson Freeman's ruling means the company will not collect $200 million from Gilead.