Drug developer Compugen sees boost from Bayer oncology deal


* Deal with Bayer could bring over $500 mln in revenue

* Two or 3 more deals and Compugen could turn a profit

* Market for immuno-oncology drugs seen reaching $29 bln by2025

By Tova Cohen

TEL AVIV, Nov 25 (Reuters) - Israel's Compugen,which is trying to develop commercial drugs using computermodels, says it could turn a profit if it can secure two orthree more deals like its recent partnership with Bayer in immuno-oncology.

The company, which does not yet have a drug on the market,agreed in August to hand over the rights to two proteins knownas immune checkpoint inhibitors to the German drug firm forantibody-based cancer immunotherapies.

The deal calls for Compugen to receive $10 million up front,$30 million in milestone payments for joint pre-clinical workand more than $500 million for milestones beyond thepre-clinical stage.

If the products reach the market, Compugen will receiveroyalties from sales.

Chief Executive Anat Cohen-Dayag said the deal was proofthat the company's concept of computer modelling can work,noting its share price has doubled to $10 on Nasdaq since the deal was announced.

"With our current expenditure rate, if we sign two to threedeals like the one with Bayer we will be profitable," she toldReuters.

Compugen's revenue jumped to $1.6 million in the thirdquarter from $108,000 a year earlier but its net loss widened to$4.7 million, from $3.5 million a year earlier.

Compugen, set up in 1993 and listed on Nasdaq in 2000, hadbeen run more like a research institute but now needs to bringin revenue and make a profit, Cohen-Dayag said.

It has identified seven other potential immune checkpointsthat present opportunities for licensing deals in oncology aswell as autoimmune diseases, she said.

She declined to comment on whether Compugen was in talkswith other firms on any new deals.

U.S. investment bank Leerink Swann predicts the market forimmuno-oncology drugs, which is now in its infancy, will reach$29 billion by 2025 from an estimated $14 billion in 2020.

"Our business model is to discover as many candidates aspossible and selectively license them to pharma companies underrevenue-sharing arrangements," Cohen-Dayag said.


Compugen focuses on immuno-oncology, or harnessing theimmune system to fight cancer, specifically immune checkpoints.They work by unleashing the body's immune system to enable it torecognise and attack tumour cells.

To date, Bristol-Myers Squibb's melanoma treatmentYervoy is the only drug on the market based on immunecheckpoints. Additional programmes are in clinical developmentat Bristol-Myers, Merck, Roche and others.

Compugen also has a joint venture with Merck KGaA division Merck Serono in the discovery of biomarkers to predictdrug-induced toxicity. The project is funded by Merck Serono andCompugen is entitled to royalties from the end product.

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