When predictive drug discovery company Compugen Ltd. (Nasdaq: CGEN; TASE:CGEN) went public on the Nasdaq in August 2000, the Twin Towers were still standing, and the initial draft of the human genome sequence had just been released.
Compugen was a pioneer in bioinformatics, which combined genomic data with computational capabilities, but enthusiasm for the discipline quickly faded when the “genome bubble” burst almost immediately after its IPO, quickly followed by the bursting of the dot.com bubble.
Compugen not only survived the era, but is also one of the only bioinformatics companies to have survived since then. It currently has a market capitalization of $128 million, down 90% from a 2020 high of $1.5 billion.
Only a biotechnology company could survive 30 years since its inception without generating revenue. Compugen has burned $440 million in losses since its inception (perhaps more than any other Israeli life sciences company). And yet, it is seen as a company with potential.
Last week, Compugen announced a change in direction, which includes the end of its collaboration agreement with Bristol Myers Squibb (BMS). The company has twice made such unexpected shifts in focus, not because of failed clinical trials, but as a result of upheavals to refine its business model in computational biology. Israeli company Evogene (TASE: EVGN; Nasdaq: EVGN), formerly a subsidiary of Compugen, has faced similar challenges in the agritech space.
Compugen first changed its model in 2004. Previously, the company provided IT services to pharmaceutical companies and even made initial revenue, but understood that was not where the big bucks were, as it was considered as a service company. Compugen decided that to demonstrate the value of its systems and to receive more of the value it created, it needed to develop its own drugs. So many Compugen mathematicians have been replaced by biologists. The company currently has 70 employees at its headquarters in Holon.
The plan was not to bring the products to market independently, but to bring the finalized products to pharmaceutical companies, which would put them through clinical trials. In 2009, Compugen President Martin Gerstel speculated that if the company could discover dozens of drugs and put them into the development pipeline of big pharma, at least a few of them would move on to steps that would produce significant returns. In 2010, the company had announced scientific discoveries and even signed initial agreements with pharmaceutical companies, but progress was extremely slow.
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At that time, Compugen made sure not to participate in any independent clinical trials, so the $58 million it raised in 2000 lasted through 2009, along with small amounts from sponsorship deals. collaboration and the sale of Evogene shares, which were then at a peak. .
In 2010 Dr. Anat Cohen-Dayag was promoted to CEO and in 2011 the company announced another change in its business model: a focus on immunotherapy, i.e. drugs that use the immune system of the patient to fight cancer, and in particular immune checkpoint inhibitors, drugs that prevent the cancer from “hiding” in the immune system or stop the immune system’s attack on the tumor. This turned out to be the biggest possible opportunity for a computational biology company, and it was clear that if the company had good products in this area, pharmaceutical companies could not ignore it. To put it into perspective, Merck’s Keytruda, a cancer drug in this sector, has annual sales of $14 billion.
The market rewarded Compugen for this decision and the stock price began to rise. In 2013, the company’s approach was ostensibly vindicated when pharmaceutical giant Bayer took over two of Compugen’s cancer treatment drugs and immediately invested $10 million in the company, and made subsequent payments as well. The company’s market cap jumped to $500 million.
In 2014, the company announced the discovery of a new immune checkpoint inhibitor called COM701, which had the greatest potential on the market at the time. Compugen later announced the discovery of two more TIGIT-like immune checkpoint inhibitors, while a company called Genentech engineered them by other methods. TIGIT has become one of the most exciting areas of the cancer market, with all the big companies trying to develop drugs that would work in this way.
TIGIT’s two discoveries put Compugen on the map in scientific terms and demonstrated that its system knew what it was doing. But there was still a long way to go to commercialize its know-how. Compugen needed to show that these actions actually changed the cancer process and that the drug it had developed to intervene in the mechanism could actually fight cancer.
In this way, Compugen has reached the stage where drug development burns a lot of money. But it was in the hottest area of the industry, so he was able to raise more money. The public pumped $150 million into the company’s coffers in a secondary offering and $32 million came from the deal with BMS, which just ended.
A new approach with dangers
So Compugen now has its unique product COM701, the TIGIT product that it discovered along with other companies and it also strongly believes in the powerful effectiveness of their combination to treat other types of cancers.
The agreement signed with BMS aims to verify this three-way treatment of COM701, and the TIGIT further developed by BMS and another product of BMS, for which it contributed to the agreement with Compugen, while the company was responsible funding for trials.
The craze for TIGIT products in particular and biotechnology in general has seen Compugen’s share price soar in 2029, fueled by investment guru Cathie Wood’s Ark Invest, which held a 10% stake in the company. company, which made it the main shareholder.
But another bubble burst and the TIGIT sector went out of style after a trial by pharmaceutical giant Roche failed.
So, after spending $440 million since its inception, mostly through clinical trials and quality employees, the company has $100 million in its coffers. Compugen has now ended its deal with BMS to save money during a time it expects to be difficult financially, but also for strategic reasons. Due to declining interest in their drugs including TIGIT, while believing that their product is in a good category and better than other companies, they want to promote their products themselves in categories that , according to her, can still prove the most important value.
This approach carries risks and takes the company one step back in its clinical trial program. But if he succeeds, the rights to the product will be in Compugen’s hands and Compugen can move forward as it sees fit, not depending on the pace of a big pharma company and its priorities.
Additionally, Compugen has other products in the preclinical stage and the Bayer collaboration product in Phase I trials. “The pace at which Bayer is moving forward with Compugen’s product is slow compared to what is happening in the cancer , but not slow compared to the period in which it started,” said a source close to the field.
Given the developments in big data and computational biology in recent years, does Compugen’s system still have a competitive edge? According to an industry source, “Compugen will struggle to invest what is needed for its system, in addition to significant investments in clinical trials during times of cuts.” Another source said: ‘He has experienced computational biology specialists and anyone in the market would be happy to take them on if there were any cuts.’
On the other hand, in the biotech sector, as Compugen has proven in the past, even without commercial product and revenue, all it takes is “there are signs of oil” in the right area. The past and the present are not interesting, only the future.
Published by Globes, Israel business news – en.globes.co.il – on August 14, 2022.
© Copyright Globes Publisher Itonut (1983) Ltd., 2022.
