Compugen (Nasdaq: CGEN) and Millennium Pharmaceuticals (Nasdaq:MLNM) announced at the Israel Bio-Tech 2002 Conference a cooperation agreement to develop software tools to assist the prediction of protein pathways for use in drug discovery and development. The two companies will share development costs and rights to aspects of the technology developed through the collaboration.
Millennium Pharmaceuticals has a market value of $7 billion. The company develops technologies to discover and develop new drugs.
Compugen has two business models . The first is using platforms that enhance genomics and proteomics research for drug discovery, therapeutic and diagnostic applications. A key platform is gene and protein expression in mRNA (messenger RNA) and genome transcription (transcriptome) responsible for various biological phenomena. This business model is based on Compugen’s expertise in bio-informatics (computational biology) – the analysis of genome data. Compugen was a pioneer in computational genomics and proteomics, combining the disciplines of mathematics and computer science with molecular biology.
The second model is applications. Compugen makes its platforms publicly and privately available, so they can be used as research sources to identify genes. The database is made available for commercial applications through user licenses. More advanced research involves discovering genes and proteins with human medical applications. Compugen announced a major achievement in this field a month ago. Using its key computation biology platform, LEADS, Compugen discovered two novel prostate-specific proteins. These proteins are encoded by alternative mRNA splice variants of the genes for prostate specific antigen (PSA) and its related protein, human kallikrein 2 (hK2). These novel proteins may have important applications in developing additional diagnostic tools for prostate cancer and for understanding the pathology of the disease
Compugen VP commercial operations Lior D. Ma'ayan says the first business model is applicable to the agreement with Millennium Pharmaceuticals. “We are entering a new field with a partner who brings both substantial know-how and human capital.
“Our partnership with Millennium Pharmaceuticals is intended to create a new platform that will allow better observation of biochemical processes of the pathways between genes and proteins. Genes do not only transcribe proteins, they also transcribe the biochemical processes, called transcriptome, or mRNA, that transcribe genes and proteins relationships. Research has discovered that not only proteins have important biological influences; the transcriptions themselves also have effects on cell function. Understanding these transcriptions will allow us to correct problems, and identify and correct side-effects and toxicity caused by the transcriptions.”
Ma’ayan does not guarantee the research will succeed, but believes it has immense potential, because the transcriptome field is brand new. He says Millennium Pharmaceuticals chose Compugen after due diligence at several companies. Compugen’s selection was testimony to the company’s technological excellence.
“We are a public company, and must publish large financial investments in the company,” says Ma’ayan. “The results may only arrive in the long term. If the deal succeeds, we will share the rights to the technology, but we will agree on ownership of the technology’s biological products. In other words, Millennium Pharmaceuticals brings know-how and raw knowledge to the partnership. Together, we will develop a technology platform based on that knowledge. Rights to that [computational] platform will be shared, and we will both be able to use it. Millennium Pharmaceuticals will have exclusive rights to the biological products developed from the platform by them.”
This means that in the long term, Compugen will not benefit from the pharmaceuticals Millennium Pharmaceuticals develops from the joint platform, but will be able to license its use to other companies in the medium and long term.
The biotechnology industry is characterized by cooperation between large companies. Ma’ayan says, “Cooperation is essential, due to the long development times and high risks. The sector is so new there are not yet any winning business models, so companies prefer conceding their competitive assets in favor or cooptation.”
An major example of this spirit is in Alzheimer’s research. While scientists discovered solutions to Alzheimer’s in mice in the 1990s, no similar solution has yet been yet found for humans.
Compugen wants to be one of the key biotechnology players, contracting cooperation agreements to enter as many fields and research programs as possible, thereby spreading the risks and increasing its chances of participating in future successes. Compugen already has cooperation agreements with Novartis AG (NYSE:NVS; LSE:NOV; SWX:NOVN) Pfizer (NYSE:PFE) and Kyowa Hakko Kogyo, as well as with promising start-ups such as Avalon Pharmaceuticals and diaDexus. Compugen invested both cash and options in these start-ups.
“As a company coming from the computation biology field, we want to create a broad network of business opportunities in which something must succeed,” concludes Ma’ayan.
Published by Israel's Business Arena on 25 March 2002