Here's an interesting interview on CGEN:
TMF Interview With Compugen
Chairman and CFO Martin Gerstel
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Compugen
Biotechnology
With Tom Jacobs (TMF Tom9)
December 28, 2000
Bioinformatics has exploded to tackle the mountain of new human genetic information. One company whose software helps perform this task thinks much of the field is temporary -- but that it's well-positioned to survive and prosper. Tom Jacobs talked on Dec. 6 with Compugen (Nasdaq: CGEN) Chairman and CFO Martin Gerstel about his company and the future of bioinformatics. This is an edited transcript of their discussion.
TMF: How would you describe Compugen's mission?
Gerstel: To develop commercialized products and services that really can accelerate genomic, post-genomic research through bringing in advanced mathematics and computer science into molecular biology.
TMF: So you're partly a software company but also partly a molecular biology company?
Gerstel: Compugen is the ultimate multi-disciplinary R&D. We have hardware, software engineers, we actually make some of our own computers and we're the leading supplier of special-purpose computers for accelerating genomic data analysis. We have people who have trained in advanced mathematics of one sort or another -- who have studied cryptology and things like radar. And then we have a full wet lab with molecular biologists. I think it's the bringing together of the advanced mathematics into a molecular biology at a time when molecular biology is becoming really a data-driven, data-intensive science which really makes the company very unique.
TMF: Could you walk us through Compugen's products?
Gerstel: Compugen was very fortunate in that it began its work in this field at a very early stage -- actually in 1993 it began bringing in the quantitative side into the molecular biology. At that time, the key problem was that all of this data, genomic data, was kind of showing up on the scene and molecular biologists really had no way of dealing with it. They started to choose publicly developed algorithms and putting them on general-purpose computers, but as the data increased, it was really impossible to keep up with it.
Recognizing this, Compugen put together an accelerator that really was a special-purpose computer that just increases the speed of analysis of all this genomic data. They rapidly became the world leader in that and they probably still have 70% or 80% of the market share.
TMF: In specialized computers?
Gerstel: Yes, for accelerating analysis. It's a tiny, tiny market, because there aren't that many customers, maybe $5 or $10 million at the most a year if you really pushed it. But from a Compugen standpoint, it got them involved in this industry right from the very beginning and as their customers began to get further into this area, they were right there with them.
So about four or five years ago they brought in a team of molecular biologists to work with the mathematicians to actually create a sort of predictive models algorithm to really try to understand the data and get as much information out of it as possible. And that resulted in the LEADS platform, which is a really an exquisite platform including solutions in predictive models for sort of the biological complexity of the data... and which deal with the 1% error rate in the public data.
I know a number of companies in this field talk about their supercomputers and they are very proud of the fact that they've got the third-largest computer group in the world, bank of computers, etc. We're proud of the fact that we have no supercomputers. We do all of our work on workstations and we're many times faster and many times more accurate than the people who are using the supercomputers.
"We're proud of the fact that we have no supercomputers. We do all of our work on workstations and we're many times faster and many times more accurate than the people who are using the supercomputers."
TMF: What do you sell then, and to whom?
Gerstel: Now when we developed the LEADS platform, we started down that path [of agreements with big drug makers] and signed one agreement with Warner-Lambert, now Pfizer (NYSE: PFE), but we began to realize that the LEADS platform is a very comprehensive platform and really enables you to do many things that you would otherwise not be able to do. So, we're producing now a whole line of platforms, products, and tools. Some of them are software products that are actually shrink-wrapped. Others we are distributing via our Internet site. We have what we call LabOnWeb [to try to reach the] 500,000 molecular biologists out there on the Web with capabilities and data and tools that they really need on an ongoing basis.
[Technical discussion of Compugen's Z3 product, which speeds traditional protein analysis, is omitted. For more information, visit the proteomics products section at their website.]
TMF: What about Compugen's deal with Motorola (NYSE: MOT) for DNA chip [biochip design] analysis?
Gerstel: With our LEADS analysis we can now look and very carefully identify what are the appropriate probes to put on your chip that will represent the proteins that you're interested in and not just give you, like I said, almost meaningless data. For example, we've designed some chips for Pfizer, and Pfizer has had them actually fabricated by Affymetrix (Nasdaq: AFFX) and they have worked extremely well. Now we're venturing into a relationship with Motorola where we will be designing some chips for them.
TMF: You would continue to get money out of the Motorola deal, and not just a one-time kind of thing?
Gerstel: Yes, this initial one we haven't really disclosed the financial terms, but in this case, we're getting a very significant fee for each chip that we design. It's only a very small number of chips that we're actually designing for them now, and this will be sort of a test of us working together and the technology and everything else. And I would anticipate that this will lead to a substantial business opportunity for us with them, and also it's non-exclusive and we're talking with other chip manufacturers.
TMF: Scientific American lumped you in with Lion Biosciences (Nasdaq: LEON), InforMax (Nasdaq: INMX), and [privately-held] NetGenics and DoubleTwist, for example. Is that fair to include you in a group of bioinformatics companies or would you characterize Compugen differently?
"I think the field of bioinformatics... is a name which will probably disappear with time."
Gerstel: Bioinformatics is a name which will probably disappear with time. I think it just fills a gap as the life sciences move to become more quantitative, when molecular biologists by and large aren't trained to deal with this massive amount of data and also the tools and systems don't exist, so what actually is this temporary area called bioinformatics has been created.
TMF: So where do bioinformatics companies find themselves in five years?
Gerstel: I think they will split into two. First are the ones that are largely helping the companies handle the data.... You can't do a lot of real good research until your things are organized. If somebody dumps a whole trainload of books on your lawn, the first thing you've got to do is put them on shelves and figure out what they are. Once that's done, then you read them and get information out of them and whatever. Big pharmas' own IT people could do this internally but why do it? Let's have somebody who's an expert at it do it, but it's largely a one-time deal. [And then] it will be handled internally within the companies.
TMF: And where will that leave you?
Gerstel: Well, we almost do none of that [managing data]. We only really focus on bringing advanced math and combining it with science itself. I mean this part of what's now called bioinformatics -- the bringing in of advanced mathematics into molecular biology -- will disappear because it will just become molecular biology.
I'll say something kind of outrageous, but I honestly believe that if you were to look ahead 10 years at the sort of the core R&D capability of a big pharmaceutical company like a Merck (NYSE: MRK) or a Pfizer or whatever -- I don't mean the clinicals and all the toxicology, but the research group which is really trying to come up with new compounds or whatever -- it will look much more like our current research activity than it will look like Pfizer or Merck's current activity.
TMF: And that's where they will use your products. I see. Thank you very much.
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