What happened?

Schrodinger (NASDAQ:SDGR) is starting the week on a strong note. The company's shares are up by 12.6% as of 11:44 a.m. EST on Monday. Investors are bidding up Schrodinger's stock today following the company's announcement that it has entered into a collaboration agreement with pharma giant Bristol Myers Squibb (NYSE:BMY)

So what

Schrodinger uses physics-based software to discover molecules for drug development. Today, the company announced that it has penned an agreement to discover and develop medicines across several disease areas in collaboration with Bristol Myers. Schrodinger will handle the discovery part; Bristol Myers will develop, manufacture, and commercialize the drug candidates.

Doctor giving a thumbs up.

Image source: Getty Images.

This agreement includes two of Schrodinger's existing pipeline candidates. As part of the deal, Schrodinger will receive an upfront payment of $55 million, and the company will be eligible for up to $2.7 billion based on development and regulatory milestones. While Bristol Myers will hold the rights to market the drugs worldwide, Schrodinger will also be entitled to receive royalty payments.

Now what 

Schrodinger became a publicly traded company earlier this year, and although it has several programs in its pipeline, it currently has no drugs on the market. This multi-year collaboration agreement with Bristol Myers -- one of the largest pharmaceutical companies in the world -- will help Schrodinger bolster its financial position. And given Bristol Myers' proven expertise as a drugmaker, particularly in the field of oncology, this partnership could lead to the development of blockbuster drugs. 

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