Eli Lilly (NYSE: LLY) has agreed to pay up to US$2.75 billion (A$3.995 billion) for global rights to develop and sell drugs designed by artificial intelligence, striking a licensing and research deal with Hong Kong-listed Insilico Medicine (HK: 3696) that ranks among the largest AI-driven pharma transactions on record.
Insilico will pocket $115 million upfront, with the balance tied to regulatory and commercial milestones, plus tiered royalties on future sales.
Under the agreement, the Indianapolis-based drugmaker receives an exclusive licence to develop, manufacture and commercialise preclinical oral drug candidates from Insilico's pipeline across selected disease areas, according to a regulatory filing by the company.
The Financial Times, which broke the story, reported that among the assets is a GLP-1 drug for diabetes - a category in which Lilly already dominates through its Mounjaro and Zepbound franchises.
Not Lilly's first rodeo
The pact builds on an AI-based software licensing agreement the two companies signed in 2023.
Insilico has expanded its AI-designed pipeline to 28 candidates, with key clinical milestones including promising Phase IIa data for its lead idiopathic pulmonary fibrosis asset.
Insilico CEO Alex Zhavoronkov was characteristically effusive about the partnership, telling STAT News that Lilly is the "absolutely best partner" for the licensed candidates and that nobody is better in these disease areas.
The deal also carries geopolitical subtext.
Lilly announced earlier this month a separate $3 billion investment to build local production capacity in China, focused on manufacturing its experimental oral GLP-1 drug orforglipron, which is under regulatory review there.
CEO David Ricks attended the state-organised China Development Forum in Beijing alongside executives from Apple and Volkswagen, underscoring Lilly's commitment to the market despite ongoing U.S.-China trade friction.
China contributed slightly less than 3% of the drugmaker's revenue last year - a figure the ~$830 billion company clearly intends to grow.
An industry-wide arms race
Lilly is far from alone in reaching for AI-powered discovery.
Sanofi backed AI startup Earendil Labs with part of a $787 million funding round last week, having already signed deals with the firm worth close to $4.5 billion.
Novartis has struck multiple partnerships with Microsoft, Google's Isomorphic Labs and Generate:Biomedicines, while AstraZeneca reports AI has cut target drug design times by more than 50%.
An estimated 200-plus AI-discovered drugs are now in clinical stages, with a first FDA approval forecast for 2026 or 2027 at roughly 60% probability.
The AI drug discovery market itself is projected to balloon from $1.94 billion in 2025 to $16.49 billion by 2034, a compound annual growth rate of 27%.
For Lilly, the Insilico deal is one piece of a broader offensive spanning oral GLP-1 development, China expansion and pipeline diversification through AI.
Whether the $2.75 billion in potential milestone payments ever gets fully triggered depends on regulatory outcomes that remain years away.
But in a sector where traditional drug development still averages 10-15 years and a billion-plus dollars per approved molecule, the willingness to write nine-figure upfront cheques for AI-generated candidates tells you where the smart money thinks the odds are shifting.
