By Colin Kellaher

Eli Lilly & Co. Thursday said it agreed to buy privately-held biotechnology company Disarm Therapeutics for an initial $135 million in a deal that expands its efforts in pain and neurodegeneration.

The Indianapolis drug maker said Disarm's shareholders could receive up to $1.225 billion in additional payments based on the successful development and commercialization of new products resulting from the acquisition.

Eli Lilly said Disarm has discovered a promising approach to combat axonal degeneration, a characteristic event in many neurodegenerative conditions. The company said it will move quickly to develop Disarm's SARM1 inhibitors into potential medicines for peripheral neuropathy and neurological diseases, such as amyotrophic lateral sclerosis and multiple sclerosis.

Disarm, based in Cambridge, Mass., was founded in 2016 and raised $30 million in a Series A financing the following year.

Write to Colin Kellaher at colin.kellaher@wsj.com

(END) Dow Jones Newswires

10-15-20 0949ET