Drug Design Engines

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The biotech industry has truly, at last, sprung back to life…

Isomorphic Labs was founded in 2021 as a startup of sorts within a subsidiary of Alphabet (GOOGL) called DeepMind.

DeepMind gained widespread fame in life sciences in 2020 with its breakthrough release of AlphaFold2 – an artificial intelligence (AI) that could predict the structure of 200 million proteins based only on their amino acid sequences. And it did so with remarkable accuracy, solving one of the grand challenges of life sciences.

DeepMind founder Demis Hassabis was awarded the Nobel Prize in Chemistry in 2024 for his work with AlphaFold2.

AlphaFold2’s release was the catalyst for forming Isomorphic Labs, which was established to commercialize DeepMind’s scientific breakthroughs in protein structure prediction.

And it laid the foundation for the future of drug design and development…

When AI and Biotechnology Collide

Isomorphic Labs was also created to provide an economic incentive for the team that developed AlphaFold2 to stick around and keep building upon their work with the potential of an even larger exit via an acquisition or IPO – something we’ll certainly be looking for.

After DeepMind established Isomorphic Labs, it continued to work on its AI model to make something even more capable for the purpose of drug discovery. The result was AlphaFold3, which was released in the spring of 2024.

AlphaFold3 is an even more remarkable breakthrough in that it can accurately predict both the structure of, and interactions of not just proteins, but DNA, RNA, and ligands.

Ligands are small molecules that bind to other molecules and are what many drugs are made of. And understanding how a drug molecule binds to a target protein is one of the most critical factors in drug development.

Source: Isomorphic Labs

It was therefore inevitable that Isomorphic Labs would end up partnering with pharmaceutical companies for the purpose of leveraging AlphaFold3 for commercial purposes and accelerating drug development.

That’s exactly what happened in January 2024 when Isomorphic announced partnerships with two of the largest pharmaceutical companies in the world

• Isomorphic announced a deal with Eli Lilly (LLY) to receive $45 million up front with the potential to receive as much as $1.7 billion in milestone payments. The goal is to accelerate the discovery of small-molecule therapeutics against multiple targets.
• Announced on the same day was a deal with Novartis (NVS) whereby Isomorphic received $37.5 million upfront, which is also targeting small molecule therapeutics against three undisclosed targets. Isomorphic also has the potential to receive as much as $1.2 billion in milestone payments as part of the deal.

These were massive deals with almost $3 billion worth of potential economic value to Isomorphic and its largest shareholders – Alphabet and Google Ventures. But the size of the deals is actually far larger…

Both the Eli Lilly deal and the Novartis deal have provisions for Isomorphic to earn “up to low double digits on net sales” of any drugs that are commercialized by either company. Said another way, there are likely billions more coming to Isomorphic in the years ahead.

Understanding how novel small molecules bind to proteins will increase efficacy and reduce the likelihood of moving drugs with toxicity through either therapeutic pipeline. And it goes without saying that Isomorphic’s AI models are capable of research and analysis in days for tasks that have historically taken years.

Drug development costs will plummet, and time to market will accelerate.

Isomorphic handles the high-probability discovery process with AI, and then Eli Lilly and Novartis take the best candidates through the pre-clinical and clinical trials process (i.e., the wet work).

And this week, almost exactly two years from the Eli Lilly and Novartis announcements, Isomorphic announced an even larger deal…

The Future of Drug Design

Isomorphic will be teaming up with Johnson & Johnson (JNJ). While the terms of the deal were not disclosed, the breadth of the partnership is wider than the previous two deals.

The partnership is both multi-target and cross-modality in scope. The modalities will include small molecules, antibodies, peptides, and molecular glues, which is a technique that uses small molecules to force two proteins to bind together in order to get rid of unwanted proteins in the body.

Isomorphic’s Chief Research Officer had an interesting quote about the deal:

This collaboration is about more than speed; it is about unlocking uncharted frontiers in biology. By accessing Isomorphic’s planet-scale computing power and unified AI-driven drug design engine, the partnership will tackle targets that have historically been difficult to drug.

The language used in the partnership was even clearer than past announcements. Isomorphic Labs will be responsible for “in silico predictions and design,” while J&J will be responsible for “conducting experimental assays and assume responsibility for advancing programs.”

Said another way, Isomorphic powers the digital design of drugs with high probabilities of being effective, and J&J performs the wet work and the clinical trials to bring the drugs to market.

I can be certain that Isomorphic’s deal with J&J includes similar terms for “low double digits on net sales” of any commercialized drugs.

“Drug design engines.”

This is the future of drug design.

And once an accurate AI model has been developed, its only constraint is how much computer processing power it has access to in order to discover breakthrough therapies for diseases that have no known cure.

And fortunately for the human race, there is an abundance of both computational resources and capital resources to do precisely that.

And this is precisely why the biotech industry has finally sprung back to life.

Jeff