Lior Ma’ayan, vice president of commercial operations at Compugen, calls it an evolution, and although it may not be as complex as the evolution of human genes and proteins that it studies, the pioneering company has undergone many significant transformations in the last eight years.

Compugen, a NASDAQ-traded company, was initially involved in developing computational hardware that could accelerate the genomic data mining process. It sells its two main products, the Bioccelerator and Leads, to high-profile customers such as Parke-Davis (now a research division of Pfizer), Eli Lilly, Bayer, Merck, Monsanto and Smithkline Beecham.

Next it began using its own technology to discover and commercialize genes, proteins and drug targets. Today, after much speculation, the Tel Aviv-based company is finally beginning to move into the high-risk, and extremely high-profit, drug discovery sector.

The idea behind Compugen came in 1991, when company co-founder Eli Mintz was in France with his wife, a biologist who was working with a founder of the French human genome project. Mintz, a physicist and mathematician, realized that the human genome project – an international effort to sequence human DNA – would generate huge quantities of data that scientists would be unable to decipher or turn into relevant information. Biology, he realized, was rapidly turning into a computational science, and scientists needed to be able to crunch numbers quickly.

In 1993 Mintz formed Compugen with Simchon Faigler and Amir Natan at the Sde Boker incubator in the Negev. The company’s first product was the Bioccelerator, a special-purpose computer that accelerates homology analysis and allows users to run full biological database searches at high speed. The Bioccelerator became an industry standard in 1996, and since 1998 the U.S. Patent and Trademark Office has relied on it to examine patent submissions of DNA sequences.

Compugen’s real breakthrough came in 1997 when the company introduced its first version of the Leads discovery platform, a data mining tool that enhances the ability of pharmaceutical, biotech and other life-science companies to discover putative genes, predict their biological functions and their pharmaceutical potential. By enabling Compugen and its partners to extract useful information from genomic and protein data, the Leads platform helps accelerate the discovery of new drugs and other products.

In November 1998 the company signed a three-year, multi-million dollar collaboration agreement for the Leads platform with Parke-Davis. By this time Compugen also had started to build a huge pool of intellectual property, having discovered thousands of new genes and proteins using the Leads platform. The company’s plan was to commercialize these genes and proteins and sell the intellectual property to drug manufacturers and pharmaceutical companies interested in developing new drugs.

Compugen’s goal was to make money from its hardware and software, and from royalties on the intellectual property. Over the next couple of years Compugen focused its sales efforts on selling the Leads platform. In 1998 Parke-Davis became a corporate partner for Leads and by 1999 sales had reached $3.2 million, though most of this figure came from Parke-Davis alone.

At the start of 2000, Compugen realized that it needed more money if it was to seriously expand its sales division. Over the previous six years it had received some $24.5 million in funding from private investors, but this was not enough.

Initially the company planned an initial public offering, but the timing wasn’t right. It held another private offering in July 2000 and went public just over two weeks later.

“It was a superb financial move,” Ma’ayan said. “Two to three months later the market window closed again and from October 2000 until now, there have been no genomic offerings on NASDAQ. That has turned us into one of the strongest players in the field.”

The growing company faces two options: continue to sell its platforms and tools and at the same time sell intellectual property to pharmaceutical giants, or do both of these things and move rapidly into the sector of drug discovery in collaboration with other partners. This will mean enormous research and development expenses and a lengthy delay in profitability.

Though Ma’ayan won’t say it outright, it is clear that Compugen already has chosen the latter.

One of the biggest boosts for the company in this sector came earlier this year, ironically from research the company had carried out four years earlier.

In 1997 Compugen discovered that 30 to 40 percent of genes are being translated into more than one protein. Until then scientists had assumed that one gene created one protein. The significance of this discovery only became apparent earlier this year when scientists working on the human genome project came up with similar results after years of research. Since then the world has come to acknowledge this phenomenon as critical since proteins help control health.

For Compugen, this was real proof that important discoveries could be made on the computer, rather than in the lab, and that these discoveries could be made on a much quicker time scale.

“It was the first time that computationally based technology had created new knowledge about biology,” Ma’ayan said. “The discovery transformed us from a state-of-the-art bioinformatics company into a form of drug discovery company.” The finding also gave Compugen an important four-year lead in which it had built up intellectual property and secured collaboration.

Competitors who had developed technology models based on the old assumption of one gene creates one protein, were suddenly out of date. Compugen is now exploring three major fields of drug discovery – genomics, functional genomics and proteomics. Though initially the company plans to work with other large pharmaceutical companies, it doesn’t reject the possibility that one day it might go it alone.

Drug discovery is, however, a very lengthy and highly expensive business. Drugs can take between six and 12 years to develop.

Ma’ayan admits it will be difficult, but he remains confident.

“The world of diseases and drug targets is so big that there’s room for everyone,” he said.