Lilly inks $425M biobuck drug discovery pact with Schrödinger

Eli Lilly has joined Schrödinger’s growing stable of drug development partners, putting up $425 million in milestones to access small-molecule candidates against an undisclosed target.  

Schrödinger has landed deals with companies including Bristol Myers Squibb and Sanofi on the strength of its physics-based computational platform. Using the machine-learning-enabled platform, Schrödinger can test billions of molecules in computational assays and, it claims, half the time taken to deliver a drug development candidate while improving on the properties achieved using traditional design processes. 

Lilly has tasked Schrödinger with turning the technology on a target of interest. Under the terms of the deal, Schrödinger will discover and optimize small-molecule compounds against the target before handing off to Lilly for the completion of preclinical development and all subsequent work. 

Schrödinger will pocket an upfront fee of undisclosed size and put itself in line to receive up to $425 million in payments tied to discovery, development and commercial milestones. The upfront fee is likely to be small, judging by the fact that Schrödinger has historically “not received significant initial cash consideration” in return for drug discovery collaborations, according to its financial filings.   

When Schrödinger did land a sizable upfront fee, $55 million, from BMS, it disclosed the sum and had to give up rights to two early-stage programs. The Lilly agreement appears to more closely resemble the drug discovery pacts that have featured small initial cash considerations. 

Schrödinger disclosed the Lilly deal in conjunction with an investor day at which it will share a look at some of its internal programs and discuss opportunities to improve its platform. The biotech is looking at increasing the number and type of discovery targets it can advance through hit identification and at expanding the platform to cover new modalities. 

The company, which generates revenues from its software and drug discovery work, has fared better than many pure-play biotechs in the bear market of 2022. The stock is down 26% so far this year and, with $513 million to its name, Schrödinger has the cash to execute its plans.