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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 by 2025

By Tova Cohen

TEL AVIV, Nov 25 (Reuters) - Israel's Compugen, which is trying to develop commercial drugs using computer models, says it could turn a profit if it can secure two or three 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 known as immune checkpoint inhibitors to the German drug firm for antibody-based cancer immunotherapies.

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

If the products reach the market, Compugen will receive royalties from sales.

Chief Executive Anat Cohen-Dayag said the deal was proof that 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 three deals like the one with Bayer we will be profitable," she told Reuters.

Compugen's revenue jumped to $1.6 million in the third quarter 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, had been run more like a research institute but now needs to bring in revenue and make a profit, Cohen-Dayag said.

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

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

U.S. investment bank Leerink Swann predicts the market for immuno-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 as possible and selectively license them to pharma companies under revenue-sharing arrangements," Cohen-Dayag said.


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

To date, Bristol-Myers Squibb's melanoma treatment Yervoy is the only drug on the market based on immune checkpoints. Additional programmes are in clinical development at Bristol-Myers, Merck, Roche and others.

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