Compugen CEO Discusses Q2 2013 Results - Earnings Call Transcript

| About: Compugen Ltd. (CGEN)
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Compugen Ltd. (NYSE:USA) (NASDAQ:CGEN) Q2 2013 Earnings Call August 7, 2013 9:45 AM ET


Martin Gerstl - Chairman

Dikla Czaczkes - CFO

Anat Cohen-Dayag - President and CEO


Brett Reiss - Janney Montgomery Scott

Abigail Leichman - ISRAEL21c

Ling Wang - Chardan Capital


Ladies and gentleman, thank you for standing by. Welcome to the Compugen Ltd Second Quarter 2013 Financial Results Conference Call. All participants are present in a listen only mode. Following managements’ final presentation instructions will be given for the question and answer session. (Operator instructions). As a reminder, this conference is being recorded on August 7, 2013. With us online today are Mr. Martin Gerstl, Chairman of the Board; Dr. Anat Cohen-Dayag, President and CEO’ and Ms. Dikla Czaczkes Axselbrad, CFO.

I would like to remind everyone that the Safe Harbor language contained in Company’s corporate presentation also pertains to all consents of this conference call. Compugen’s financial statements for the six months ended June 30th 2013 has been filed on Form 6K with the Securities and Exchange Commission and are available at both Edgar and on Compugen’s website.

In addition, if you contact Compugen now by email, copies of second quarter financial statements and the press release issued this past Monday regarding the collaboration with Bayer HealthCare will be sent to you immediately by a return email. To receive copies of the financial statements and Monday’s press release, please address you request to Compugen at

Mr. Gerstl, would you like to begin.

Martin Gerstl

Yes, thank you. On behalf of Compugen’s management all of its employees, welcome to our second quarter 2013 conference call. We are pleased that you are able to join us today. I am not surprised that once again we have a record number of participants of our call but I am very surprised by the amount of the increase in number. So thank you very much for joining us.

Our agenda for today’s call is a little different than usual. In view of expectation that we would have a number of new participants on the call I decided to limit my introductory remarks to a short list of seven facts about Compugen, not opinions, not objection, projections, just facts. Since we do not believe there are any surprises or new financial issues in our financial reports for the second quarter, Dikla will focus on our current financial situation specifically with respect for our operating cash requirements and overall cash status.

The prepared remarks portion of our call will conclude with Anat providing some perceptive with respect to how we see the Bayer collaboration in terms of the continuing implementation of our long term strategy and our current overall corporate situation. We will not cover the specific terms of the agreement, since we believe they are adequately described in the release and unlike the situation with most small biotech companies, we believe the specific terms, although in our opinion are favorable are not the significant aspect of the announcement.

During the Q&A session that will follow Anat's remarks we encourage you to ask any question that you may have regarding either our second quarter financial statements or the recently announced collaboration or any other questions that you have with respect to the company. After the Q&A section, you will be stuck with me again since I asked Anat if I could provide the closing remarks for today’s call.

And for the seven facts that I would like to mention about Compugen. As I previously mentioned these are not opinions or projections, just facts. One, until we actually demonstrated the results from our first focused discovery program, the vast majority of life sciences, including most heads of pharmaceutical companies had and for good reasons significant doubts about the usefulness of in silico predictive discovery in general and specifically with respect to the possibility of creating such a capability that would be broadly applicable

Two, Compugen’s outstanding multidisciplinary scientific team invested more than a decade in focused research to obtain deeper predictive understandings of key biological phenomena. Along the way a constant flow of peer reviewed scientific papers in key journals documented in part the success of this effort.

Three, the predictive nature and the broad applicability of our evolving discovery infrastructure were demonstrated by a wide range of discoveries in fields such as GPCR Peptide Ligands, alternative splice variants, biomarkers, drug targets, protein therapeutics, among others, with a number of these discoveries now being further developed by others but with Compugen sharing in any future success. The wide applicability of this approach has been further demonstrated by the continuing success of Evogene, our spin off company pursuing opportunities in the Ag bio world, building on our initial scientific understandings and basic infrastructure.

Four, less than four years ago, we selected the therapeutic areas of oncology and immunology for our primary focus. Within these fields we selected a class of proteins known as immune checkpoints to be the subject of our first focus discovery program.

Five, within less than six months from the selection of immune checkpoints as a focus of our first program and with very modest direct expenditures, our powerful discovery infrastructure had predicted a substantial number of novel immune checkpoint candidates when compared to the total number then previously known worldwide. This was an amazing accomplishment, assuming of course that these predictive results would prove correct, since the number then known resulted from substantial research worldwide over the past two decades.

Six, Compugen as then demonstrated the accuracy of its computer predictions as five of the first six predicted immune checkpoints to be evaluated demonstrated in experimental systems efficacious results in autoimmune disease animal models. These and additional molecules are now moving forward in our pipeline program.

Seven, as a result from our first focused discovery program move forward with additional research and commercialization discussions, we recently announced our second focused discovery program.

And with that, I will turn the call over to Dikla, but as were warned, I will be back after the Q&A session.

Dikla Czaczkes

Thank you, Martin. As mentioned in both the press releases issued on Monday morning, we filed the Form 6-Ks with our financial results for the second quarter and first six months of 2013 last Friday. This report is available on both the SEC via Edgar and on our website.

As Martin stated, since our reported results were largely as anticipated, I would like, in my prepared remarks today to focus more generally on our short term financial debt situation. Instead of reviewing these financial statements, specifically, I would like to address our operating cash requirement and overall cash status. If you have any question about our second quarter report, please do not hesitate to ask them during the Q&A session.

First, with respect to operating cash requirements, our budget for 2015 called for gross cash utilization of approximately $16 million and tax utilization was about $7 million during the first half of this year. Research and development cost remained and are expected to remain our largest cash use, representing close to 70% of gross cash used during the first six months of this year.

As previously stated, we anticipate that the major future growth of revenues and responses will be from milestone payments and royalties, while for the immediate future, it will likely be from upfront fees and research revenues. With respect to research revenues, although due to reported requirements, we may, in specific quarters, report a negative gross margin such as is in the case this time, in general, these activities are subject to results and a positive gross margin contribution over time.

I would now like to make a few comments with respect to the immediate impact on our cash situation from the $10 million upfront payment from the Bayer collaboration. We have been asked whether the targets that are the subject of the Bayer collaboration are included in the today's agreement, and the answer is yes. Other required deductions from these cash payment are with tax in Germany, ongoing third party advisory fees and repayment to the Israeli Office of the Chief Science.

We are not disclosing the individual amount but after all deductions we will net approximately $8.5 million in cash. Under the required accounting rules the $8.5 million will be recognized during the period of the pre-clinical research program, which is concurrent with the timeframe for the potential listed of the $30 million of pre-clinical milestone. With respect to any milestone payments, we expect they will be recognized immediately at the time of receipt.

Moving now to our overall cash status; we ended 2012 with approximately $20 million in cash related accounts. As previously mentioned, our gross cash usage for operating was approximately $7 million, during the first six months, during which time we received approximately $15 million from the final payment of the Bayer investment and sales of shares under our ATM program, and to lesser degree from exercise of stock options and the sale of small fraction of our Evogene shares.

This resulted in approximately $28 million in cash and cash related accounts. As of June 30, 2013, this $28 million does not include the market value of our remaining Evogene shares, nor of course the net amount of approximately $8.5 million from the collaboration announced on Monday. Adding this amount to the June 30 balance results in total of over $40 million in cash and cash related accounts.

In addition Compugen continues to have no long term debts other than the book labiality associated with the research and development funding arrangements. The increase in the book liability during the first six months of 2013 mostly reflects the final $5 million received from Bayer.

And with that I would like to turn the call over Anat.

Anat Cohen-Dayag

As Martin mentioned, in today's call I would like to provide some perspective as to how we see the collaboration with Bayer in terms of the continuing implementation of our long term strategy and our current overall corporate situation.

When I became the CEO of Compugen in 2010, the most critical decision I had to make was to select the initial areas on which to focus our predictive capabilities. The problem was not finding an area to work on, rather the problem was that there were too many potential areas.

As Martin pointed out, our predictive capabilities had already demonstrated at least to us that they were broadly applicable for discovery in various areas of human therapeutics and diagnostics and we could choose to apply them to many different fields of medicine.

At that time I had a strong belief that if for any reason the product candidate resulting from our initial efforts were not publically recognized by the industry as exciting opportunity, it would be highly unlikely that we would be given a second chance, since our capabilities were still seen as largely unproven by both the financial world and the Pharma industry.

Therefore this selection of our initial area of focus had to address three goals. First to eliminate doubt that our unique predictive capabilities can discover novel drug candidates of significant interest; second, to generate substantial interest in the industry, in our products and underlying capability; and third, to provide substantial early revenues for the company.

Compugen have invested substantially and for an extended period in establishing its unique capability. With respect to me personally, having been a member of the research team since 2002 and later having management responsibility for these activities as head of R&D, I was well aware and had no doubt that our exceptional team had created a unique and powerful integrated discovery infrastructure.

But as previously stated, it was also clear to me that this could not be convincingly demonstrated to others without substantial third party validation of its potential therapeutic value and potential profitability. Thus collecting our first therapeutic fields of focus and our first focus discovery program were of critical importance.

During past conference calls, I provided our reasoning for the selection of immunology and oncology as our first areas of focus and immune checkpoints is our first focused discovery efforts within those therapeutic areas.

Today, I will not repeat the rationale. I will only state the these now appears to have been excellent strategic decisions, although I have to admit that in addition to our choosing well and our very successful subsequent R&D efforts, we were also fortunate that during the period since these decisions were made, the specific area of immune checkpoints as target for cancer immunotherapy has been further recognized by the medical community and by the industry to revolutionize patient treatment. In fact certain knowledgeable commentators are now even suggesting that this approach could possibly provide cure for many cancer patients.

Key to these rapidly increasing industry interest in the use of immune checkpoint as oncology targets for monoclonal antibody has been the exceptional clinical reports that are now being disclosed by others.

At the time these reports began to appear, the oncology portion of our pipeline program was designed to only support antibody target validation, which could result in target based early stage agreements and not in the more valid antibody based commercial deals. This was in contrast to our ability to come up with a drug molecule itself, in the case of Fc fusion proteins for immunology, the second arm of our pipeline.

Based on these encouraging immune checkpoint clinical reports, and on the initial research results we obtained for our novel immune checkpoints we made a further critical decision to significantly accelerate our efforts in the oncology area and we swiftly and successfully established in March 2012, our wholly owned subsidiary in South San Francisco with experts in antibody discovery and development for therapeutics antibody.

This required an increase in our cash balance, which was met with the second base agreement, without which we would probably not have been able to move forward that quickly. The rapid application of our U.S. subsidiaries expertise in discovery of potential therapeutic antibodies to the promising candidates identified by our predictive target discovery effort as a parent company was essentially allowing us to make a significant progress with respect to our immune checkpoint oncology target candidates in a short period of time.

The initial experimental validation result for the first few of our predicted candidates were sufficient to gain the attention of major pharmaceutical companies. These introductory meetings then led to a more serious set of meetings and serious scientific evaluation by a smaller set of companies and then to negotiations with a selected few that culminated in the signing on Monday of the agreement with Bayer.

During these discussions and negotiations, ultimately leading up to our collaboration agreement with Bayer, it was again clear to me that especially for early stage licensing, selecting the right first area of focus was the most critical decision, but thereafter even with the exceptional R&D success that we achieved, this was not sufficient to ink a deal.

As a new entrant to the field we also had to quickly assemble a team with great expertise in both the scientific and commercial aspect of this specific field to enable presenting the data in a manner that addressed the key issues and opportunities and in a product oriented manner. Overall two major corporate assets resulted from this process in addition to the agreement itself.

Third, strengthening our excellent relationship with key opinion leaders, initiated as a result of presenting our results in key conferences and through various scientific collaboration as well as with pharma executives. And second an effective negotiating and legal team for future collaboration.

With respect to the agreements itself, we are of course very pleased and enthusiastic that our first major collaboration in this field is with Bayer, which is a leading global life science company with a broadening oncology franchise. Immunotherapy is one of their focused areas in oncology research and we believe that Bayer's expertise is very well matched with Compugen's capability.

Also an excellent working relationship has already been established through the preparation of joint work plans for the two companies. I assume some of our longer term shareholders may be surprised by Monday's announced collaboration involving certain of our oncology target program.

As per my earlier remarks today, when we began to experimentally evaluate our in silico predictions, most of our disclosures related to the potential of fusion protein such as Fusion 15-001 to treat various immunological diseases, such as rheumatoid arthritis and multiple sclerosis. We actually stated that we expected that these would be our first collaboration and that oncology target deals would follow a year or so later.

It is correct that certain of our fusion protein candidates such as Fusion 15-001, are currently more advanced with respect to the lead product candidate than the product candidates that are the subject of Monday's announcement. These fusion protein candidates are continuing to progress in our pipeline program. The immunology pipeline program candidates now include multiple immune checkpoint proteins from our initial service discovery efforts and additional in immunomodulatory proteins from undisclosed discovery platforms developed in the last two years. We believe that we would be providing further information about some of these pipeline programs later this year or by early 2014.

As we continue to develop and pursue commercialization arrangements for other attractive candidates in both oncology and immunology, resulting from our first focus discovery program, we are also moving forward with our second focus discovery program which we disclosed earlier this year.

In the press release of last April we stated that the second program was aimed at identification of novel targets for antibody drug conjugates, ADC cancer therapy, focusing on clinical situations with poor survival rates and/or recurring cancers.

Underlying this selection was our decision to select an area, where in addition to our predictive capabilities we could leverage the expertise in oncology that we established at Compugen and the program that would again combine the target discovery expertise of the parent company with the antibody discovery and development expertise of our San Francisco subsidiary.

Earlier I mentioned that an important asset that was created for our major pipeline candidate was the excellent relationship we have built with key opinion leaders in the academia. This relationship is not only continuing but accelerating as we obtain their expert advice including, the choice of the right disease models to exemplify the therapeutic potential and differentiation of our product candidate. This exposure is leading to the provisioning of our Company as an important player in this field.

As Martin discussed in his opening remarks, Monday's announcement demonstrated that predictive in-silico discovery of novel molecules through the use of a proprietary computational infrastructure built on integrated deeper understandings of key biological functions is indeed possible.

Moreover, using this infrastructure, discovery efforts can be successfully focused upon area of high industry interest and unmet medical need. We enthusiastically look forward to the remainder of this year and future years as further evidence of the value of this unique capability is demonstrated.

And now we will be pleased to answer any questions that you might have.

Questions & Answer Session


Ladies and gentlemen. At this time we will begin the question & answer session. (Operator instructions). The first question is from Brett Reiss of Janney Montgomery Scott. Please go ahead.

Brett Reiss - Janney Montgomery Scott

I have a couple of questions. But just very quickly, I've asked very tough questions on timing of deals in the past and I just want to publicly acknowledge and tip my hat and salute Marty and the management team on the deal and I sincerely appreciate your efforts. I know number of clients' shareholders do as well. The questions; how many additional immune checkpoint regulators you have in the pipeline?

Anat Cohen-Dayag

So, we have couple of additional immune checkpoints that we’re discovering in the first public discovery program that we have generated, but I also want to mention, and I repeated in detail in the call now, we will also incorporate into the pipeline additional immunomodulatory proteins that were the result of additional discovery platforms that we have developed in the last two years and we also expect to incorporate additional further candidates that has to do with the ADC targets. So I must say that I wouldn’t like to focus only immune checkpoints as we look forward to the future of this company.

Martin Gerstl

I think also let me to add that. In the past we have mentioned certain numbers, we’ve got three of these nine whatever. I would like to make two comments about that. One, the number we have now has not gone down. In this particular at least its more as in we’ve ever discussed in the past and secondly these two represent a small fraction of the number of immune checkpoints that we have discovered to date that are in our pipeline.

But I think we really are going to back off of this, giving a specific number because obviously things change. We have additional discovery runs, we introduced new platforms, and it just can be confusing. But as I said, the two represent a very small fraction of the immune checkpoints that we have and that whatever numbers we gave you in the past we have more now than what we said before.

Brett Reiss - Janney Montgomery Scott

Okay and just one another question and I will drop back in queue. One of my shareholders was curious as to the timeline of the first monoclonal antibody deal might happen. Is there any color you can give us on that?

Martin Gerstl

I’m not sure that I fully understand the question. They Bayer deal was monoclonal antibodies. So, I understand your confusion. What we’ve talked about all the time at the targets that we discover and so these are immune checkpoints that we discover but the actual product that will be marketed, the actual pharmaceutical product will be a monoclonal antibody against these targets, and that’s what we’ve been developing at our California subsidiary, and looking back on it that was another great decision of the management team here to move forward so rapidly with creating that subsidiary with world class capabilities.


The next question is from Abigail Leichman of ISRAEL21c. Please go ahead.

Abigail Leichman - ISRAEL21c

I want to ask you, is the first major collaboration between an Israeli company in Bayer?

Martin Gerstl

No, I am also the Chairman at Evogene and Evogene has a significant arrangement with them. I'm not aware, there may be others. But, I don’t know whether this is the pharmaceutical arrangement that Bayer has in Israel. Do you know? I don’t know.

Abigail Leichman - ISRAEL21c

Okay, what is the Evogene arrangement is there?

Martin Gerstl

I’d be glad to answer that offline. This is a Compugen call and since I wear both hats. As long as the name Evogene come up, I had a somewhat awkward question asked to me offline, some of these who actually and I think that maybe some other people on the line, somebody who actually owns both Evogene shares and Compugen shares and I am the Chairman of both companies. And as Dikla mentioned and as we’ve said in the past, we have sold the company. Compugen has sold some Evogene shares and this individual said to me that they see that as a sign that there must be some reason for that sale. Since I am the Chairman there I must know exactly what’s going on.

I just want to make it absolutely clear that I had nothing to do with it. I have nothing to do with the decisions here with respect to Evogene shares. There is a committee of the Chairman of our Audit Committee. Dikla and Anat make those decisions. I don’t discuss it with them in any way. I find out that at the same time that you do. So if anybody is jumping to conclusions about our sales, please it’s erroneous.

Abigail Leichman - ISRAEL21c

I also just had a quick follow up question about even though the California subsidiary that is mostly involved in this project, will this collaboration with Bayer mean any kind of increase in employees at Compugen’s Israeli headquarters?

Anat Cohen-Dayag

So in general an update that in the joint work plans, both the Israeli and the U.S. teams of Compugen will be involved. Under the activities that we are expected to do at the U.S. side and in Israel, we feel that we are fully equipped to do it. We may need to hire very few people but this is really not something that's really worth mentioning.


The next question is from Ling Wang of Chardan Capital. Please go ahead.

Ling Wang - Chardan Capital

So with regard to the milestone payment, I was wondering whether you can comment on what kind of events that might trigger the milestone payment, especially in the near term, preclinical stage and also on the left timeline on that. And then could you also comment on the timeline for advancing your leading compounds to clinical stage development.

Anat Cohen-Dayag

In general we cannot disclose more than what is written in the press release. I would repeat that we have stated that there are milestone payments that are associated with pre-clinical activities, in the range of up to $30 million. I can't say more than this but in general if you look at industry standards, there are some industry standards that relate to pre-clinical activities and timelines as to how long does it take to reach to the clinical trials. So this is the only thing that we can say with respect to this.

Martin Gerstl

With respect to your second question, second question had to do with when do you think we will reach. Yes, as Anat said, that you really need to look at industry standards and please with respect to any questions that you are asking with respect to this collaboration, keep in mind that in situations like this, since there are two companies involved and this is an important agreement for both of us; as those of you saw our announcement may wonder why it wasn't a joint announcement. Well actually Bayer wanted to put out their own announcement. So Bayer put out an announcement about this arrangement.

But in situations like this, the companies have to agree that they do not give out information beyond what is publically available because it could become a very awkward situation if one company gives more information than the other and then it starts going back and forth.

So anything that you ask us pretty much about this collaboration, we're going to have to respond with what is in the Press Release or if it's misunderstood or if there is clarification that you need about what's in the Press Release, we'll try to do that. But sorry, our hands are little tied with respect to giving additional information.

Ling Wang - Chardan Capital

I understand. My second with regard to the timeline for your own compound.

Martin Gerstl

Are you talking about like fusion proteins and others?

Ling Wang - Chardan Capital


Anat Cohen-Dayag

Yes, so in general we are now with the most advanced program. We’re now at the stage close to the end of lead selection and indication selection. And we will share more information towards the year end with our decision as to how we move forward with this market.


The next question is a follow up question from Brett Reiss of Janney Montgomery Scott. Please go ahead.

Brett Reiss - Janney Montgomery Scott

I had a question on who negotiated the Bayer deal and future deals but you alluded to a negotiating team. Who is on the team and what's the composition of that is?

Anat Cohen-Dayag

So in general these are the team from Compugen, but we also got advices from a consulting firm that we hired named Torreya Partners. They were helping us in the last couple of months in order to make sure that we are moving ahead in the right direction, getting some industry standard support. And we have also had some consultants that are in the field of antibody therapeutics and business development in antibody therapeutics. So we could move forward. We feel very confident with the team that we currently have, in order to be able to continue forward with additional arrangements.

Martin Gerstl

Two comments on that. One the arrangement with Torreya was not specifically for this agreement. We have had their assistance now for a couple of years. It’s very talented group of people and we have gained a lot from it.

Anat made a very important decision at the beginning of this process of trying to entering into these agreements and the decision was made not to rely on; If we thought this was going to be the only agreement we would ever do, or we would do one a year or something like that, then maybe the decision would have been to, okay let’s not build up an internal capability. Let’s rely on the many organizations out there that will do this for you.

However, in view of the fact that this is going to be or expected to be a continuing process here and that we will essentially always be in various negotiation, discussions whatever, she felt that it was essential that we build up an internal capability and I actually say that somebody who has been in the BD related fields, making deals in the industry, who have certainly worked probably for more time than most of you have been alive, who are on this call, I am really impressed. I thought I was really going to show them what a real pro can do in this and I had a hard time keeping up with the group. We've got a very, very good group here.

Brett Reiss - Janney Montgomery Scott

All right, that’s good to hear. I know especially you are coming from me who's hammered you on when's the next deal, you don’t want to….

Martin Gerstl

Yes, with regard to that, I am glad that you apologized. I want to make certain that, you’re going to get a box in the mail. Please don’t open it. Put it in a cup of water, don’t open it. And we appreciate what you’ve said. Okay, so go ahead.

Brett Reiss - Janney Montgomery Scott

So because you’ve cultivated these relationships with key opinion makers and it sounds like this negotiating team is not an ad hoc resource, it’s an ongoing thing, can we expect other similar material type deals within the next year to 18 months? Is that?

Martin Gerstl

Well I am glad, since you said a year to 18 months, I will say yes. But we won’t go beyond. We have a very active pipeline program. Based on our initial discussions, we now have a bunch of major pharmaceutical companies that understand us, appreciate our capabilities. Some of them had expressed interest not only in the products but actually in working with us on a discovery basis which obviously makes sense, but not disclosed, we’ve discussed many times in the past. There is nothing specifically related to immune checkpoints about our infrastructure in general. The infrastructure is broadly applicable. It was focused, in this case on this field. We can focus it on other fields as we already have announced the second one.

Brett Reiss - Janney Montgomery Scott

Just one parting thought. Before you sent me the box just remember, I hope.

Martin Gerstl

It’s sent. It’s already in the mail, sorry.

Brett Reiss - Janney Montgomery Scott

Well remember to err is human, to forgive divine.

Martin Gerstl

Okay that means what you’re saying is you forgive me for sending the box.


There are no further questions at this time. Before I ask Mr. Gerstl to go ahead with his closing statement I would like to remind participants that a replay of this call is scheduled to begin in two hours for a period of 72 hours. In the U.S. please call 1888-295-2634. In Israel please call 03-925-5939. Internationally please call 972-3925-5939. Mr. Gerstl would you like to make your concluding statement.

Martin Gerstl

Yes, thank you very much. Looking at the list of participants for today’s call, I could a see a number of today's call, I could see a number of names of investors and friends who've been with us for many years, actually including a few that go all the way back to my Alza days.

Two comments, more specifically to these individuals. First many thanks for your long term belief and support and second I assume you can appreciate how positive I feel toady. It was almost exactly 15 years ago that I first visited Compugen, which was then a computer company specializing in analyzing biological data.

For most of the following 15 year period the good news was observing the breakthroughs and understandings of life science being achieved by our incredibly talented and dedicated scientific team. The bad news was that the often repeated criticism we received that either one, what we were trying to do cannot be done, at last on a broadly applicable basis, or two, this should be done in a university not a public company, or three, how do you expect to ever make any money out of this effort.

However it is my strong belief that unlike in the high tech world where a leadership position can be lost in a period of months, since everyone shares the same scientific understandings and leadership is based on understanding your potential customers' needs and being creative in meeting those needs better than others, in the pharmaceutical world as with other life science industry, the timelines are much longer and the state of the underlying science is at least relative to physics literally in its infancy.

In this situation there is the fantastic opportunity to create unique capabilities, such as what we have accomplished at Compugen; not based on understanding our customers' needs or being creative in meeting these needs but on deeper and predictive understandings of the underlying science.

From a society standpoint it is a shame that the short term results required by most investors and the mistaken general belief that companies must be product oriented from day one creates substantial barriers to approaching major areas of need, such as drug discovery, more generally and with a more basic and pre-product focus.

Staying with the comparison to high tech, in my judgment there is no way that today's financial community would have supported an independent Bell Labs, since no one could have foreseen the incredible discoveries that could be made by a deeper and predictive understanding, in their case of electricity.

Although a problem for society in general and not just in this field, this situation created a fantastic opportunity for Compugen. When after more than a decade and an investment of more than a $100 million in pursuing this opportunity by building the required capabilities, we embarked on our first focus discovery program. Fortunately we selected a field where our discoveries have been received with a very high level with industry interest, actually enough interest to overcome the inherent bias against in silico methodologies.

As Anat described, it was absolutely critical that we chose well the specific area for this program, not because we were concerned that we would be unsuccessful at discovery, since as was previously stated, based on the discoveries made as we validated our capabilities, we were confident that the program would yield novel molecules, but by a concern that these discoveries would not meet with sufficient industry interest. And although this is would really say nothing about the power of our predictive discovery process, we both felt it would be highly unlikely that we would be given a second chance.

Now with recognition of the potential value of our predictive infrastructure both scientifically and commercially beginning to be seen, as Anat stated, we enthusiastically look forward to the remainder of this year and future years as further evidence of this value is demonstrated. Thanks to all of you for your support and assistance during this journey allowing us to reach this important inflection point and I hope you will be joining us for our future calls. Thank you.


Thank you. This concludes the Compugen Ltd. Second Quarter 2013 financial results conference call. Thank you for your participation. You may go ahead and disconnect.

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