Avalon Pharmaceuticals ( AVRX) soared 30% late Tuesday after agreeing to a cancer drug development pact with Merck ( MRK).

The Germantown, Md., company said the companies intend to identify and develop inhibitors for an undisclosed target that is important in the development of cancer. Avalon will screen a select set of compounds from Merck's proprietary compound library and identify hits against this target that is generally regarded as "intractable" based on the difficulty in identifying inhibitors.

Avalon may receive discovery, development, regulatory and commercial milestones payments exceeding $200 million, as well as royalties on any potential future marketed products.

Shares rose $1.37 to $6.

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