CGEN - Compugen

[king888]

This is drug discovery company from Israel . It has been on my watch list since 2009 . I bought a small position and sold it all in 2011 because I feel that it was beyond my circle of competent and I felt skeptic for some announcement by company.  The recent development looks interesting so I decided to open some thread to gain some knowledge for you guys who might has better knowledge in this industry more than me.

 

Compugen is not ordinary biotech company. It was listed in 1999 in the wave of dot com boom. The IPO price was $10.  Compugen tried to sell an online drug research platform to the world of biotech companies. But that business model flopped.And company has changed the direction for 6-7 years ago.  Compugen uses its knowledge to create a predictive discovery platform.  This platform can provide a new product candidate to a pharma firm.Because the diminishing number of the new drug discovery. The managements believe that Cgen's Platform can provide a number of quality product candidates to the pipelines of leading pharmaceutical worldwide.

 

2012 Presentation  -  http://cgen.com/Data/Uploads/Pdf/Company%20Presentation%20Jan%202012_1.pdf

 

Chairman talks about the potential of Cgen from 2009  http://www.pharmatelevision.com/Video/230-Compugen-Martin-Gerstel.aspx  (Subscription Required) - This a good one to watch.

Chairman on Bloomberg -Nov 2011 

 

The Chairman claimed that the opportunity of Cgen is very big. The predictive platform of Cgen has been developed for more than 10 years. And it is getting better by time.

 

Martin Gerstel is a chairman of Cgen and he also own 5% of total share. He was a CEO of ALZA corp which  was acquired by Johnson & Johnson in May 2001 for $10 billion. And most his interest has been on Cgen since then. 

 

I was drawn to this stock in 2009 when it announced a collaboration with Pfizer.  http://www.news-medical.net/news/20091223/Compugen-Pfizer-enter-into-multi-target-collaboration.aspx

 

The announcement said that they would collaboration on drugs discovery for at least 3 drugs. And the share price jumped more than 100% on the announcement news. On the conference call, Chairman said they expected to announce further progress within 12 months. But I have never heard the progress report or whatever related to Pfizer again since  that date.  Cgen has announced several collaborations with big pharmas but most of the announcement did not provide a detail on the collaboration and did not have followup announcement.  I send an email to ask IR about this and no one answer my concern so I decided to sell in early 2011 because it looked very skeptical that Cgen did not provide an update on Pfizer after 12 month.

 

But recent development looks interesting.  Cgen has established US operation lab and hired Dr.Mary Haak-Frendscho who was CSO at Takeda to be excutive Chairman of its US sub.

http://www.news-medical.net/news/20091223/Compugen-Pfizer-enter-into-multi-target-collaboration.aspx

 

Cgen has almost zero revenue because it still cannot find any company interested to license Cgen's substance for drug pipeline.  The current burn rate is $10 million per year. But the open of US sub will increase the burn rate in 2012 . Martin Gerstel must be pretty sure about the impact of this US operation otherwise he might not establish it to burn more cash from company's limited cash pile.

 

I remember he said that the share price could reach $20 easily if Cgen can license out its first candidate to another pharma firm. And he does not have a plan to sell this company early because it has a lot of potential.

 

The problem is as an outside investor we never know if the pitches is viable or not. But I saw that Cgen has a habit to raise cash very conservatively.  The recent dip from share price from $6 to $5 might because of the recent sale of new shares in open market to raise some cash .It was only 500k shares , they can sell more to raise more cash if they want. But they tried not to dilute much current shareholder.  The insider ownership remains low. If Cgen holds a lot of potential as the insider claims ,they should snap more share.  At current cash , Maybe Cgen can survive another two years or 1 and 1/2 year .

 

Anyway, I think this is an interesting company to watch. The Yahoo board of Cgen is also a good source to read.The quality of that board is better than average yahoo stock board. Some posters are a big believer who hold the share for many years and some visited company's HQ in Tel Aviv .  But some are just a firm believer in management and far too optimistic.  I hope someone here  can share a knowledge on this company to help expanding my circle of competence.

 

Disclosure: No position.