Promising Leads at Compugen

The gene-discovery technology of tiny biotech outfit Compugen (CGEN ) has attracted a couple of major drugmakers. Pfizer has been using its so-called LEADS platform for gene discovery since 1998. And on Aug. 2, Switzerland's Novartis said it would use Compugen's LEADS program and DNA chip-design services to expedite its identification of drug targets. Some think Compugen will announce another partnership deal for its products in a few months.

LEADS is designed to help drugmakers extract information from genomic and protein data to accelerate development of biological products. Edward Tenthoff of Robertson Stephens says Compugen provides analysis tools and software to select novel genes and proteins that will make the best drug targets.

Like most other small biotechs, Compugen has yet to make money. Its stock rose from 3 a share in March to nearly 6 in May in anticipation of the Novartis deal. But it has since eased to 3.95. Even so, some pros think the dip provides another chance to buy in--before it doubles again. Some insiders have been buying, including Chairman Martin Gerstel, who picked up $3.5 million worth recently, for a total stake of 5.8%. Gerstel, CEO of Alza from 1987 to 1993, is credited with building up Alza, which Johnson & Johnson has bought. Some think Gerstel aims to build Compugen into another Alza.

By Gene G. Marcial

    Before it's here, it's on the Bloomberg Terminal.