According to people familiar with the matter, Isomorphic Labs, an AI drug discovery startup spun out of Google parent Alphabet (GOOGL.US)'s Google DeepMind, is in preliminary talks for a new funding round at a target valuation of at least $40 billion.

One of the people said the valuation in this round could reach as high as $50 billion.

The sources said the financing has not been completed and details could still change. Isomorphic did not respond to a request for comment.

Just five months ago, Isomorphic Labs completed a $2.1 billion Series B funding round.

At the time, CEO Demis Hassabis, who also serves as chairman of DeepMind, said Alphabet provided a "very large portion" of the funding but declined to disclose Alphabet's stake or the company's valuation.

Hassabis previously served as head of DeepMind. In August, he announced he would move to the role of chairman and become Alphabet's chief scientist while continuing as CEO of Isomorphic.

London-based Isomorphic Labs was founded in 2021 and emerged from DeepMind, aiming to build on the lab's groundbreaking AlphaFold protein folding model.

It competes with a range of companies trying to apply the latest AI technology to medicine, including OpenAI, which released a life sciences research model this year.

Although AI developers promise to significantly compress the time and cost of drug development, few companies have advanced to clinical trials, and none has brought a drug to market.

Hassabis has said his goal is to shorten the new drug development cycle from years to months.

Isomorphic Labs has announced partnerships with major pharmaceutical companies including Eli Lilly (LLY.US) and Novartis (NVS.US), and said it will focus on treatments for cancer and immune diseases.

In addition to partnering with drugmakers and exporting its AI drug discovery models, Isomorphic also plans to design and develop drugs independently.