AI drug discovery firm Insilico Medicine signs deal with Korea’s SK Biopharmaceuticals worth $2.5B

Inscilico will use its Pharma.AI platform to help design new candidates for neuroimmune treatments, while SK Biopharmaceuticals will then steer the late-stage development and commercialization of discovered treatments. While Insilico is expected to get $18 million in payments in the near-term, the deal could bring in up to $2.5 billion if the firm reaches certain development and commercial milestones, in addition to royalties. 

The agreement marks Insilico’s largest tie‑up to date with an Asia‑Pacific partner; it’s also the second deal of this size that Insilico has agreed to with Big Pharma. In late March, Insilico signed a deal valued at $2.75 billion with U.S. drug giant Eli Lilly to target the “best-in-class, novel oral therapeutics in preclinical development.” (Andrew Adams, Eli Lilly’s group vice president of molecular discovery, also serves as the chair of Insilico’s new “Longevity Board”).

“We want to be the SpaceX of the pharmaceutical industry,” Alex Zhavoronkov, co-CEO of Insilico Medicine told Fortune. “The more I scale, the better my AI gets. I want to get to this escape velocity where nobody can even compete.”

Insilico Medicine’s shares rose 5.6% in Hong Kong trading on Monday, surging after the deal was announced at midday local time. The firm’s shares have risen by 35% since its IPO in late December. SK Biopharmaceuticals’s shares dropped 1.7% on Monday, building on a 30% decline for the year thus far.

“By combining Insilico’s AI-powered drug discovery platform with SK Biopharmaceuticals’ clinical development and U.S. commercialization capabilities, we believe we can accelerate the discovery of innovative CNS [central nervous systems] therapies for patients,” Donghoon Lee, president and CEO of SK Biopharmaceuticals, said in a statement. “We see this collaboration as a scalable and repeatable growth platform that can be leveraged for future target discovery and development opportunities.”

SK Biopharmaceuticals is part of Korea’s SK Group. The chaebol has risen in prominence over the past year due to its ownership of SK Hynix, one of the world’s most important producers of memory chips and a major supplier to Nvidia. On Monday, SK Hynix became South Korea’s most valuable company, overtaking longtime No. 1 company Samsung Electronics.

“Korea now has substantial resources driven by the boom in AI. Now that innovation is flowing into pharmaceuticals.” Zhavoronkov says. “More Korean companies will try to play a bigger role in pharmaceutical research and development, clinical trials, manufacturing and sales.”

“Korean companies are a bit more adventurous,” Zhavaronkov adds. “They’re willing to take a little bit more risk to get ultra-high novelty,” particularly in neuroimmunology, which he projects could become a “trillion dollar opportunity.”

Insilico’s model is to use AI to more rapidly discover and develop new drug candidates, screening vast numbers of molecules before moving to clinical trials. The company, which was founded in Boston, Mass. and maintains offices in mainland China, Hong Kong, and Abu Dhabi, has multiple drugs in trials, including one targeting idiopathic pulmonary fibrosis, a condition where scar tissue forms in the lungs, that’s currently in the Phase II stage.

Insilico is also riding a broader boom in Asian, and particularly Chinese, biotech. China now accounts for roughly a third of the innovative molecules in global drug pipelines and attracts about three‑quarters of Asia’s biotech venture funding, according to a report from ING released last week.

“If you use China as a platform, you’re going to gain two years of speed at the pre-clinical level,” Zhavoronkov explains.