Computer-aided Compugen crashes cancer immunotherapy party with Bayer deal

It's the rise of the machines in cancer immunotherapy. Compugen ($CGEN), which emphasizes computational approaches in drug discovery, has landed a deal with German pharma giant Bayer HealthCare to pursue antibody therapies that unleash the body's natural immune defenses on tumors.

Tel Aviv, Israel-based Compugen said that the license agreement with Bayer centers on its discovery of two so-called checkpoint regulators, which serve as targets for antibody drugs. Cancer drug aficionados might recall that checkpoint regulators serve as targets for the promising immunotherapies nivolumab from Bristol-Myers Squibb ($BMY) and Merck's ($MRK) lambrolizumab. These two therapies lead a new class of drugs in clinical trials expected to generate tens of billions of dollars in annual revenue.

Compugen was thin on details of the exact checkpoint targets in its press release, yet the company revealed that Bayer has agreed to pony up $10 million upfront for global rights to the programs, which are now in preclinical development, making them years behind the drugs from Bristol-Myers and Merck. Yet the deal is loaded with potential payments for Compugen, including $30 million in preclinical milestone fees and more than $500 million related to further development of the two programs. Compugen is also eligible for double-digit royalties.

Professor Andreas Busch--Courtesy of Bayer HealthCare

"Immunotherapy is one of our focus areas in oncology research," Professor Andreas Busch, who is a member of the Bayer HealthCare executive committee and head of global drug discovery, said in a statement. "We are looking forward to expanding our portfolio in this area through partnering with Compugen."

Many drug companies are racing for a piece of the action, as immunotherapies have the potential to become powerful new ways to kill cancer. Tumors have mechanisms to stifle immune responses that threaten their survival, and new immunotherapies promise to knock down those barriers and allow the immune system to destroy cancer cells.

Compugen employs predictive and machine learning algorithms to aid drug discovery. It aims to use computational methods to streamline the discovery process, which is notoriously tedious and expensive. Yet at some point it needs to validate the computer-based discoveries in lab experiments and eventual clinical trials.

The Israeli biotech group relies heavily on partnerships to advance its R&D programs. Last year the company announced that it set up shop in South San Francisco, putting it in close to the talent and strong industry presence in the Bay Area. Bayer also happens to have a strong foothold in the Bay Area's biotech cluster.

- here's the release