The drugmaker's offer of $36 per share in cash for Imago represents a nearly 107% premium to the company's last close. Imago's shares more than doubled in premarket trading to $35.65.

With Merck's blockbuster cancer immunotherapy Keytruda expected to lose key patents in 2028, the company has been trying to expand its drug portfolio.

Last year, it bought Acceleron Pharma for about $11.5 billion to gain access to its experimental therapy for treating a type of high blood pressure.

Earlier this year, the Wall Street Journal reported Merck was in advanced talks to buy cancer-focused biotech company Seagen Inc in a deal that could be worth roughly $40 billion or more.

Imago, which develops drugs for the treatment of bone marrow-related diseases, is currently testing its lead drug bomedemstat for treating a chronic cancer known as myeloproliferative neoplasms.

The Imago deal is expected to close in the first quarter of 2023, according to the companies.