After 20 Years, Compugen Finally Finds Its Mojo

CEO Dr. Anat Cohen-Dayag is confident that, after signing a licensing agreement with Bayer of Germany, Compugen has finally emerged from the doldrums.

The shares of Compugen, a genomics-based drug and diagnostic discovery company, soared by more than 40% on the Tel Aviv Stock Exchange on Monday last week. That dramatic recovery, which raised Compugen’s total share value to more than NIS 1 billion, followed the company’s announcement that it had signed a licensing and collaboration agreement with German pharmaceutical giant Bayer HealthCare.

Until recently, Compugen was a sad story. It had lost $150 million since 2001 and 2012, like previous years, ended with a loss – $12 million. The deal with Bayer signals a dramatic about-face for the Israeli company. Under the agreement, Bayer will use Compugen’s technology to develop antibody-based immunotherapies to fight cancer and will have the right to develop and market any treatments developed with Compugen technology. In addition to an initial payment of $10 million and a maximum payment of more than half a billion dollars if Bayer proceeds with the development of the drugs according to plan, Compugen will receive royalties of 7-8% on net sales revenue for any product resulting from the partnership.

Explaining Compugen’s sudden, phenomenal success, company president and CEO Dr. Anat Cohen-Dayag told The Marker that, after publishing more than 80 articles in leading academic journals, Compugen had been waiting for a breakthrough.

“In 2009 … I found a company in crisis,” she said. “The value of its shares had plummeted and they were worth only half of what they are worth today. Compugen no longer had any money.... I realized we would have to present a scientific and business achievement that would be like a thunderbolt.”

“From our investors’ standpoint,” she explained, “the agreement proves two things. First, the company’s capabilities on which they have been banking are real and there are many more proteins that Compugen can discover – many more than the two molecules concerning which the agreement was signed. Thus, the agreement is only the first in a chain. Second, the agreement signals the beginning of a revenue flow and proves the company’s business model can be translated into revenue.”

Asked why, after targeting several pharmaceutical firms, Compugen decided on a deal with Bayer, Cohen-Dayag said: “When we published our initial results in conferences and learned articles, we realized we had come upon something good. We began receiving phone calls and people stood in line to speak with us. We were in contact with more than one company. It was important for us that we work with a partner that would invest in a drug we could match with our product pipeline – a company that would be ‘hungry’ and would not drop the development work after six months. We also wanted to work with a company that would allow us to be involved in the initial stages of the experiments.”

Regarding Compugen’s next deal, Cohen-Dayag noted: “From the nine proteins we have discovered, it is possible theoretically to manufacture 18 products. We have so far commercialized only two of them in the oncological field and we have more in our pipeline.” The company’s second plan involves the development of an antibody capable of delivering a cytotoxic drug directly and specifically to the cancer cell to induce the direct killing of the cells. This kind of strategy could be used “instead of shooting chemotherapy at the cancer. It is like the difference between heavy artillery shelling of a large area and the use of a sniper’s rifle to fire directly at the cancer.”

The investor behind Compugen

Compugen has no single investor with controlling shares nor any institutional investors holding large chunks of shares. However, one individual has played a major role in the company’s success story - its chairman, American-Jewish businessperson Martin Gerstel, who holds nearly 5% of Compugen’s shares.

In 1997, Compugen’s board of directors invited Gerstel to get to know the company, which, at that point, was in the doldrums. After hearing the company’s scientists claim there were many more proteins to be discovered than commonly thought, he announced that Compugen was an opportunity to begin a second career. If what the scientists informed him was correct, he believed Compugen was on the brink of a revolution; the company could “predict” the performance of new drugs. Cohen-Dayag noted that this was Gerstel’s vision. “Without his vision,” Cohen-Dayag concluded, “we would not be where we are today.” 

Tomer Appelbaum