Compugen's (CGEN) CEO Anat Cohen-Dayag on Q4 2015 Results - Earnings Call Transcript

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Compugen Ltd. (NASDAQ:CGEN) Q4 2015 Earnings Conference Call February 9, 2016 10:00 AM ET


Hannah Deresiewicz - Stern, Investor Relations

Martin Gerstel - Chairman of the Board

Anat Cohen-Dayag - President and Chief Executive Officer

Ari Krashin - Chief Financial Officer


Mike King - JMP Securities

Vernon Bernardino - FBR & Co

Thomas Yip - FBR & Co

Douglas Altabef - RP Advisors

Brett Rice - Janney Montgomery Scott


Ladies and gentlemen, thank you for standing by. Welcome to the Compugen's Fourth Quarter and Year End 2015 Financial Earnings Conference Call. At this time, all participants are in a listen-only mode. An audio webcast of this call is available on the Investor section of Compugen's website at As a reminder, today's call is being recorded.

I would now like to introduce Hannah Deresiewicz of Stern Investor Relations. Please go ahead.

Hannah Deresiewicz

Good morning and thank you for joining us today. With us today from Compugen are, Mr. Martin Gerstel, Chairman of the Board; Dr. Anat Cohen-Dayag, President and Chief Executive Officer and Mr. Ari Krashin, Chief Financial Officer.

Before we begin, I would like to read the following regarding forward-looking statements. During the course of this conference call, the company may make projections or other forward-looking statements regarding future events or future business outlook, including anticipated progress on Compugen's pipeline program as well as commercialization efforts. We wish to caution you that such statements reflect only the Company's current expectations and that actual events or results may different materially. You are kindly referred to the risk factors and cautionary language contained in the documents the Company filed with Securities and Exchange Commission, including the Company's annual report on Form 20-F, filed March 12, 2015. The Company undertakes no obligation to update any projections or forward-looking statements in the future.

I will now turn the call over to Martin Gerstel, Chairman of the Board of Compugen.

Martin Gerstel

Thank you. On behalf of all of us, the Compugen welcomes to our year end 2015 conference call and we appreciate you joining us today. We begin 2016 with a great sense of achievement with respect to the unique and very promising position, we have successfully created within the biopharma industry in terms of both target discovery capabilities and initial product candidates.

On the other hand, we also are fully aware of the disappointment felt by many of our shareholders, with respect to the current market value for our company's shares. It is reasonable to believe that the recent steep decline in biotech's shares in general. With many of these companies now trading at 52-week lows is partially responsible for Compugen's market situation.

However, comments from our shareholders make it clear, that there is also a Compugen specific concern with respect to the period of time that is passed, without us announcing, our next collaboration. Compugen's uniqueness and potential value in the drug industry derives almost entirely from our ability to systematically discover multiple novel targets that potentially can lead to the development of first-in-class drugs.

However, this focus on novel targets also gives rise to agreement issue that are inherent to target based as opposed to the more common product based collaborations. For example, target based agreements are not limited to a specific set of products include multiple therapeutic opportunities and modalities and require more complicated terms and conditions regarding use and ownership of intellectual property.

Furthermore, the earlier the target is at the time of the agreement, the more these issues require addressing. Of course it's important to note, that these issues largely disappear or at least become much less important as the target and its product candidates are further advanced.

Moreover, we have established at Compugen the capability and capacity to advanced novel targets forward toward therapeutic monoclonal antibody development. And as will be further discussed by Anat, we are now both demonstrating our success in doing so and significantly expanding our program throughput capacity.

However, in view of the large number of novel targets we already have based on just the initial uses of our discovery capabilities. Both early stage target and more advanced product candidate collaborations are and will remain key components of our business strategy. Such collaborations will be entered into by Compugen, but only on terms and conditions and at times consistent with our efforts to maximize the substantial long-term value that we see for our novel target discoveries and product candidates.

I began these remarks by stating that we have great sense of achievement, with respect to Compugen's accomplishments to-date and enthusiasm regarding the future for our company. These conclusions are based in large part on our successful establishment of our broadly applicable systematic predictive discovery infrastructure, which to our knowledge is unique in the industry.

During its long-term development, the wide applicability of its capability was demonstrated by discoveries in a number of different therapeutic and diagnostic areas. And its effectiveness has been confirmed by the impressive results from our initial two-focused programs for target discovered.

First, in the discovery of multiple immune checkpoint target candidates for immuno-oncology and second in the discovery of multiple target candidates for ADC therapy. In this regard, recently we announced that one of the two immuno-oncology programs in our Bayer collaboration had achieved its third milestone by demonstrating preclinical therapeutic [indiscernible] for a monoclonal antibody targeting the novel collaboration protein that has been predicted, totally in silico by Compugen.

Therefore, this key milestone in addition to validating, a compelling antibody drug program. Clearly provides an important evidence of the predictive power of Compugen's platform based discovery capabilities and the resulting potential for future contributions to medicine and substantial commercial success for our company.

However, I also previously stated that we are aware of the disappointment by many of our shareholders regarding the current market value of our company shares. Therefore, in her prepared remarks today. Anat will focus solely on the current status and outlook for our very promising early stage pipeline. Primarily in immuno-oncology, which is totally based on Compugen discovered novel targets.

Before Anat, Ari will follow me with some brief comments on today's reported financial reports in our financial strength. Following Anat, the call will be opened for questions. Before turning the call over to Ari, I would like to address a more personal matter for which I have recently been receiving questions from some of our shareholders.

In 2014, I voluntarily disclosed there was no legal requirement to do so, that it was my intention to consider in 2016 that is to say this year, selling subject to market conditions a portion of my Compugen's shares. I also stated, that this intention related solely to reducing my equity ownership in certain publicly traded companies including Compugen pursuant on a state planning program.

As background, during my long period as Chairman of Compugen. I acquired approximately 1.8 million shares of Compugen stock out of total cash investment cost to me [ph] of over $5 million. Furthermore, approximately two thirds of this $5 million investment was for open market purchases at prices per share higher than our current price. I've never sold any Compugen securities.

Now with respect to this past disclosure. First when I made it in 2014, it was meant to signal that the earliest I would consider selling any of my Compugen shares with 2016 and at that time, it would be subject to market conditions. Furthermore, since any sales would be solely for state planning there should at least hopefully, be no rush.

At the time of the disclosure, CGEN's stock price was approximately $8 per share and from my public statement at that time. I was obviously very positive about the future of the company. Without any doubt, based on our significant progress and achievement since then. I'm more positive now about Compugen's future than I was at that time or essentially at any time in our history.

Since, I do not want to say anything at this time that might suggest that I will continually update this 2014 disclosure regarding this very personal matter. I will not comment further. However, if this is of interest to you. I think you would be able to reach your own conclusions based on these facts. Ari?

Ari Krashin

Thank you, Martin. Our financial results for the fourth quarter and year end 2015 within to-date are in line with our expectations. In general, the continuous reflect increased activities in R&D. Primarily, at our South San Francisco site where we added substantial resources and expertise to our leading program, as well as preclinical capabilities.

As previously forecasted, our total cash expenditures during 2015 amounted to approximately $26.5 million. For 2016, we continue to add resources and expertise mainly to our development activities. We expect the total cash expenditures will be in the range of $31 million to $33 million. We expect R&D expenses to represent approximately 80% of our overall budget in 2016.

And the level [ph] of expenses for our development activities in South San Francisco will equal the level [ph] of expenses of the recent and validation activities in Israel. As it relates to the activities in our South San Francisco site. It's interesting to point out, that since 2014 we have more than doubled our expenses allocated to the development activities, at that location.

For approximately 25% of our total corporate expenses during 2014 to 35% during 2015 and we have budgeted a further increase to approximately 40% of the total corporate expenses to 2016. What this means is, that we have strongly committed to the progress of our high priority immuno-oncology program. Focusing on the development for the candidates.

Now turning to our 2016 financial results. During 2015 and 2014, most of our revenues derived from the cancer immunotherapy collaboration with Bayer Healthcare and announced in August 2013. Revenues for the fourth quarter of 2015 were approximately $8.3 million compared with $6.6 million in the comparable quarter of 2014.

The revenues reflect primarily, the achievement of the third and second preclinical milestone in the amount of $7.8 million and $6 respectively. Revenues for the year ended 2015 and 2014 were $9.3 million and $12.4 million respectively. The decrease in revenues is attributed to the amortization of the $10 million upfront payment received in 2013 from that collaboration.

To-date, we've recognized approximately $9.7 million of this upfront payment. The remaining amount of $0.3 million will be recognized over the next few quarters. R&D expenses during 2015 increased by 40% in total $21.2 million from compared with $15.1 million in 2014.

For the fourth quarter of 2015, R&D expenses were $5.8 million compared with $4.8 million in 2014. The increase in both cases as mentioned earlier, primarily reflects a substantial increase in the activities involving our pipeline program candidate. These include, the hiring of additional professional employees and advisor to support preclinical activities, as well as the full impact of the move to the new facilities in South San Francisco, which occurred in mid-2014.

Net loss for 2015 was $20.2 million or $0.40 per diluted share compared with a net loss of $11.1 million or $0.26 per diluted share. For 2014, net loss for the fourth quarter of 2015 was $0.5 million or $0.01 per diluted share compared with a net loss of $1.5 million or $0.3 per diluted share for the comparable quarter of 2014.

As of December 31, 2015 we had approximately $81.4 million in cash and cash related account including short-term and long-term cash deposit compared with $108.4 million at the beginning of the year. The $81.4 million as of December 31, 2015 does not include payment of the third milestone from Bayer and the amount of $7.8 million, which is expected to be received during the third quarter of 2016. The company has no debt.

And with that, I'll turn the call over to Anat. Anat?

Anat Cohen-Dayag

Thank you, Ari. In his opening remarks, Martin briefly described Compugen's unique broadly applicable predictive discovery capabilities. These in silica discovery capabilities clearly are the most important assets of the company and are expected to provide substantial long-term value for our company.

However, we're aware of the disappointment felt by many of our shareholders concerning the current market value for company's shares. Therefore, my prepared remarks today will not focus on our core capabilities, but instead on some of the reasons for great enthusiasm and positive expectations for Compugen.

I will begin with [indiscernible] immuno-oncology programs and their collaboration with Bayer. With the achievement of the third milestone, the CGEN-15001T antibody program, the more advance of these two programs has now made the transition from computer prediction to demonstrated activity in preclinical models.

As previously mentioned, this important milestone in addition to validating a compelling antibody drug program. Clearly provides important evidence of the predictive power of Compugen's discovery capabilities. More specifically, the CGEN-15001T program having demonstrated encouraging functional activity in preclinical models of cancer immunotherapy has now completed final lead antibody selection and is currently progressing for further preclinical and clinical development activities, under the full control of Bayer.

Importantly, we have been granted both US and EU patents for CGEN-15001T exemplifying the target discovery innovation we bring and the competitive it provides to the program. CGEN-15022, the second program under the Bayer collaboration is currently at an earlier stage and continues to be jointly pursued by both parties.

It is currently being further characterized regarding its role in anti-cancer immune responses with respect to a novel mechanism of action, which has been reviewed. The recent transfer of CGEN-15001T to the full control of Bayer for development and commercialization along with substantial expansion and additional staffing expose our South San Francisco and Israeli facilities are allowing us to allocate additional resources to our other leading internal therapeutic programs and to advance earlier stage programs compare validation into our therapeutic pipeline.

Over the last year, Compugen has established the infrastructure to take our inventory of novel target into therapeutic programs and we have begun to achieve notable success as I will briefly discuss, with a number of them. In this regard, it is interesting to note as already pointed by Ari, that the R&D expense level of our South San Francisco site is now approximately equal to that of our Israeli R&D operations, representing a carefully planned [indiscernible] to the aggressive advancement of selected programs into preclinical developments, while at the same time moving multiple additional I-O and ADC programs through target validation.

In addition, we have established a network of preclinical, clinical and regulatory consultant signed an agreement with a saline [ph] development company for manufacture of therapeutic antibodies and are in the process of closing an agreement with a contract antibody manufacturer to enable production of our clinical candidate.

Stated otherwise, we're currently well-positioned to produce antibodies against our target as required for R&D enabling studies and future clinical trials. In addition to the two programs, licensed to Bayer among the lead programs in our immuno-oncology pipeline, which is the core focus of our company. Our CGEN-15029, our most advanced internal program. An additional and disclosed target candidates such as the two [indiscernible] targets identified within the tumor microenvironment of multiple cancer, representing an unexplored frontier of cancer immunotherapy.

In addition, CGEN-15027 originally an immunotherapy candidate is now our lead ADC candidate. Our oncology target pipeline also completes of additional undisclosed candidate from our I-O and ADC program that are at the validation stage, for which we hope to provide additional data later this year.

Beyond our oncology pipeline, our activities include the CGEN-1501 F diffusion program for autoimmune diseases and [indiscernible] our joint venture with Merck Serono for the early detection of chronic drug-induced liver toxicity.

Concerning CGEN-15029, it is our most advance internal immune checkpoint program. For this our predict program, which was initiated only 10 months ago, we've already completed the antibody discovery process and identified a number of functional antibodies from which we will select our therapeutic clinical candidate.

This rapid progress, with extremely aggressively timelines from target discovery and validation to therapeutic antibody discovery and development, was made possible in large part, by our discovery of CGEN-15029 binding partner and the firm commitment by the company to move it as quickly as possible towards the clinic.

Identification of binding partner is also an important part of our research effort involving our other leading program. As part of our expansion last year, we built a dedicated research team to de-orphanize our high priority target to allow us to get additional insight of the biology and to cast timelines for these programs as well.

We are now at the stage of selecting the clinical therapeutic antibody candidate to advance CGEN-15029 to IND enabling studies and over the coming months. We will be finalizing our work plans for such advancements on various fronts including manufacturing, preclinical and regulatory.

We expect to disclose new data for this very promising therapeutic opportunity in the coming number of months including a more specific timeline concerning our expected R&D filings. With respect to our ADC activities, our leading program in CGEN-15027 which was originally discovered by us as immune checkpoint target, but later was repurposed by our discovery capability to serve as a target for ADC therapy.

With already demonstrated experimentally, the cancer cell killing ability of antibodies targeting CGEN-15027 when coupled to different toxins, this activity and further validation effort in the very favorable expression patterns for this target, are confirming our prediction. This is a good example of how the use of multiple predictive discovery approaches, allows us to match the best predict modality with the target.

Of course, not all of our targets that we discover will be successful. Some, will even be eliminated based on validation work or de-prioritize without progressing to preclinical stage. For example, we de-prioritize the CGEN-15049 therapeutic program to further assess its therapeutic potential for additional results with [indiscernible] any collaborator.

In other program with attractive preclinical data, CGEN-15001 for autoimmune diseases. This program has progressed from computer prediction to product candidate with very impressive preclinical data in disease models and a compelling mechanism of action. With our current focus on immuno-oncology, we continue to explore the biology for CGEN-15001 largely through our academic collaboration with key opinion leaders in the autoimmune field.

As these efforts continue, we're also exploring various business opportunities to advance this very attractive product candidate into the clinic without destruction Compugen's from its core focus in immuno-oncology. From a collaborative data, we've generated to-date, suggest that CGEN-15001 has several unique differentiating properties from currently on the market for autoimmune diseases.

With respect to our pipeline activities, during 2016 our R&D focus will be on the advancement of our internal preclinical stage candidate externally and internally, with a strong emphasis on CGEN-15029. In addition, we expect to broaden our pipelines with the additional of immuno-oncology programs based on targets now undergoing validation and further target discovery effort.

In closing, I would like to comment on our ongoing business development activities. We continue to pursue our business development strategy to part in certain assets at an early target stage, while advancing our other programs such as CGEN-15029 in our internal antibody drug development pipelines before partnering.

Obviously, this approach balances the risk and the higher evaluation that one sees with later stage clinical assets. The achievement of the CGEN-15001T key milestone under the Bayer collaboration validates the compelling opportunities that our in silico predicted targets provide, along with Compugen's [indiscernible] ability to generate [indiscernible] antibodies against these novel discoveries.

Our early stage target programs clearly represent compelling, an uncommon opportunities. On the other hand, many pharma companies prefer to pay more and take less rate [ph] by entering into collaboration at a later stage, where the lead antibody or product candidate under development is the subject of the arrangement.

Like you, we are aware of the multiple high profile immuno-oncology deal and a number of these deals, involve well-known publicly available target such as PD1 or PD-L1. These are typically later stage collaborations often with substantial payments and comprise the vast majority of deals being signed by biopharma.

As previously stated, Compugen has the infrastructure require to translate its novel target into therapeutic antibody programs and to advance them towards human testing. This allows us to act on our building strategy and consider partnering both early and late stage assets and to balance our portfolio program.

Based on these considerations, I would like to repeat what Martin said in his opening remarks to-date. Both early stage target and more advance product candidate based collaboration are a key components of our business strategy and will be entered into, but only on terms and conditions and at times consistent with our efforts to maximize the substantial long-term value that we see for our target discovery.

We will now open the call for Q&A.

Question-and-Answer Session


[Operator Instructions] the first question is from Mike King of JMP Securities.

Mike King

Anat, I was hoping to ask you about the ADC platform because I - we spend a lot of time on the immuno-oncology side of your business and rightly so, but I guess wonder what since, we're talking in so much here today about the value creation aspects of the Compugen technology platform. And maybe this is a bit of naive question, but it would seem like given that you probably have lots of reasonable targets in the database that are tractable for antibody development that, a broader ADC approach might be a way to generate business development activity without sacrificing the efforts that you're putting into immuno-oncology. I hope that, question makes sense.

Anat Cohen-Dayag

Yes, very much and maybe I'd share some more insights into these. By no means, the major focus of the company and most of the resources of the company are allocated to our immuno-oncology program. So less resources are invested in ADC although, we have compelling opportunities there. We were advancing in a more slower pace on the ADC.

Nevertheless, CGEN-15027 is serving as a flag [ph] program in the ADC and we use these in two manners. One, this is another proof that our discovery capabilities can work not only in the I-O field but also in other fields like the ADC. But second, as you stated, as the viable commercial opportunity, which represents a totally different opportunity than I-O, it is targeting a different set of companies sometimes, big pharma companies have interesting both sometimes there are pharma and biotech companies that are interested only in one of these.

And ADC definitely represents a commercial opportunity. We are proud of the data that we generated for - that we already disclosed for CGEN-15027. With different type of toxins that are available commercially. Of course, we don't have the access to payload, so we're testing the therapeutic antibodies that we generated with commercial toxins, but would validate them in a way that we can show that the antibodies are applicable to different type of toxin technology.

So to broaden our opportunities and yes, this could serve as another commercial opportunity. One more thing that I'd like to share and this is with respect to requirements for ADC programs. More or less similar, it's not identical but it's similar to a Car T target. So in general, if we are able to show that we can discover tumor specific antigens. So tumor specific antigens in general could also serve for Car T technologies and also for Bispecific.

We're not dealing now in our validation efforts on Car T and Bispecific, but nevertheless our ability to show data for one or two ADC programs and of course the rest of the ADC programs are also progressing in our pipelines, but this is also a way to prove, that we also have the ability to discover target for, a Car T and Bispecific technology.

Mike King

I guess, well what I'm guess I'm asking, your earlier comment and answer to my question was about sort of the bandwidth and the emphasis of the time, commitment by the organization. Maybe you could talk a little bit about that and I'm also interested in the relative interest, inbound business development inquiries from pharma, are they 80-20 for I-O versus ADC. Are they 90-10, are they evenly split? Maybe you can give us a little bit of color on that? I don't know if that's possible.

Anat Cohen-Dayag

So, with effect to your first question. Our business development efforts are focused on both. I-O and ADC, so this is not and of course I'm not getting to the percentage of focus, of our business development efforts. With respect to interest, no doubt that immuno-oncology and immune checkpoint specifically are of high interest in the pharma and biotech industry.

I think that, this is a clear consensus everywhere. With respect to ADC, clearly there are pharma and biotech companies that developing technologies towards it, that are looking for good target, ideal target. Good targets for ADC technologies on these things. So there is a need. I don't know to give, discourage or to divide it by percentage, how much it is of interest to the pharma with respect to I-O. I will just say, that there is also a need for good target for ADC technologies as well.

Mike King

Thank you.


The next question is from Vernon Bernardino of FBR. Please go ahead.

Vernon Bernardino

Congratulations on the results so far. Just had a question regarding CGEN-15001. So you mentioned that you're or if you could confirm that you're close to narrowing down the most attractive autoimmune disease to target for development. And you also mentioned seeing some things that could differentiate CGEN-15001. Could you provide some details what you've seen and can you elaborate on perhaps what targets you may be thinking of?

Anat Cohen-Dayag

So you're talking about CGEN-15001 for autoimmune diseases and yes, the uniqueness of this program first lies with the effective targeting a novel T-cell pathways for autoimmune diseases. This is a pathway that is affecting multiple inflammatory downstream pathways and pathways that are consistent of TNF-alpha and IL-17, so we're very encouraged with this.

More than that, the data that we've generated is showing that it is potentially restoring the immune balance. It is, the inhibiting deploying inflammatory type of occurrence and promoting the anti-inflammatory type of occurrence. And it is actually, we believe that it can induce tolerance for the long-term maintenance of the disease. So, if there are treatment for few stage of the disease causing this for remission, we believe the CGEN-15001 could further ensure that the remission will stay, so it will induce the tolerance and induce remission.

So this is why, we're enthusiastic with this program. Clearly, the long-term effect versus the short-term treatment, the fact that it is, that is letting global immunosuppression. This is something that is very encouraging for this program. And we clearly intent to find the opportunity to take it to clinical trial, though not alone.

Vernon Bernardino

Okay and do you - can you provide let's say, a timeline where you might make your first announcement?

Anat Cohen-Dayag

No, but clearly when we will do some advancements on these fronts, we will update our shareholders.

Vernon Bernardino

Okay, I'll get back in the queue. Thank you for taking my question.


The next question is from Thomas Yip of FBR. Please go ahead.

Thomas Yip

I'll just echo Vernon, congrats on a very great quarter on - progress in all your assets. I actually have a question about 15027 as with seen in the World ADC Summit in San Diego very recently. We see that, 15027 can have potential in several [indiscernible] medications. Have you also looked in to perhaps [indiscernible] indications of other liquid tumor potential?

Anat Cohen-Dayag

No, this is still open and we're still exploring - pretty potential of the antibodies and only when we'll finalize this, we'll select the indication. But this target could fit both type of methodological and [indiscernible] solid, so and we'll share more information when will select the indication for the specific antibodies.

Thomas Yip

Sure, maybe I'll ask follow-up also regarding 15027. How do you see any potential drug approvals because it help in any way to develop 15027, you seek to find a suitable antibody drug combination to develop.

Anat Cohen-Dayag

As of today and this is not an answer specifically for 15027. I think that it is, as of today there are no clear combinations with ADC and other therapies and it's not necessarily that it can be done, but I'm not, I must say that I'm not aware such combinations of ADC therapies with other therapies.

This is currently not on the table for Compugen's do combinations with the ADC program. But if this trend will prove to be successful in the clinic for others then we will definitely consider doing so.

Thomas Yip

Okay, fully understood. Thank you for taking my questions and looking forward to another great quarter.


The next question is from Douglas Altabef of RP Advisors. Please go ahead.

Douglas Altabef

I appreciate the recognition of the very difficult shareholder environment that we're in, and at [indiscernible] of that. I noticed that, both Martin and Anat, both made reference to a commitment not surprisingly to bring commercialization's along that would ultimately lead to the benefit of shareholders. But in that regard, you didn't have neither of you referenced anything over the short-term. And I wanted to update something that Martin had said in the first quarter of 2015 earnings call, where he specifically referenced that with the expanded business development staff that it would be 'providing in the short-term meaningful external commercial validation of the type typically required by investors'.

And so I'm wondering, since there was no reference to anything over the short-term. Does that mean, that we shareholders and others should discount a commitment to doing something over the short-term or is there are a short-term focus that is being revised. How, should we take that?

Martin Gerstel

First, you're correct that we didn't focus on specifically on the short-term nor did we focus on the long-term. I mean, I think what we're saying is that. what we are finding in our negotiations is that, there's a lot of interest, there are a lot of complications, there are ramifications of one potential program with a possible other program or collaboration.

So this needs to be sorted out very carefully, in order to make sure that we're doing what's best for the long-term interest of the company. We're not going to do anything in the short-term, it would or to or sort of feed the - impress the shareholders. We will be doing either short-term or long-term, the agreements will be signed in collaborations entered, when we're confident that they are the best that we can do for the specifics at - that we're dealing with.

We don't believe that, providing any estimated timing is useful. Mainly because we don't know really when you're going to sign. I've been in this business for long, long time and there are situations where you expect something to be done in six months and as they change the other company and it gets done in two months or one month and vice-versa, you can have a situation where you believe that's quote 90% done and issues come up and then dragged on for another year.

So if we were to provide any type of specific estimate or for wanted more collaborations. It's almost the certainty that our estimate would be wrong, it would be either be too optimistic or too pessimistic. And so we really don't want to find ourselves in a position that, we've encouraged shareholders to make investment decisions based on estimates that we have very little confidence in, not because we don't think we're going to sign the deal but because of the timing issue.

We will sign deals collaborations for short-term, I mean both early stage and longer more advanced. It's an integral part of our business strategy. We have, clearly have the assets to allow that to happen and we have enough interest in the industry to assure as that will happen fortunately, we also have the financial resources to not be under the gun, to have to sign up something quickly.

Douglas Altabef

As you both alluded to the performance of the stock has been very poor. In fact, that you look at any time metrics for Compugen and I'm not talking about just recently but one, three, five, 10, 15 even, it's been very, very poor. But onetime, where there was some equilibrium in the stock and was in the year 2013, when you set for annual objectives which included a commercialization to be done in that year, in fact you made very, very good on that objective which was a Bayer collaboration which is beginning to feel more and more like ancient history in terms of what has followed it, notwithstanding the milestones.

So what I think puzzles a lot of us Martin is that, given what you just said which is there are more and more assets, there is more and more to choose from, why is there not the ability to saying we will make an objective as we did four years ago, we will set a corporate objectives to do a collaboration because we have, as you're saying embarrassment of which of possibilities and it is the fulfilment of those validations that really is what the investment community pays attention, not every one of them has to be in and out of the park, home run but the fact that they can be done and that they are done with some degree of frequency, not every two and half or three and half years, but some degree of frequency would allow for I think both the short, mid and longer terms success of Compugen to grow. Do you see it differently obvious?

Martin Gerstel

Yes, and as you're aware as I mentioned I've invested a lot in the company more than the money I've invested than off of 20 years. I'm in from the very beginning of moving this company into the biotech world. And we absolutely fully recognize that, as we said that the period of the time [indiscernible] has created a negative impact almost certainly on our stock. And I'm not happy to see that, on other hand I'm fully aware of the progress that we're making, the opportunities that we have ahead of us and I think our shareholders need to understand that we've discussed this over and over internally and at the board and we have made a very firm decision that we will not damage the long-term potential of the company in order to attempt to improve on this apparent concern of our shareholders.

I think we are, we've spent much more than a decade creating an incredible capability. We've our first inventory of early stage product candidates. We've got the interest of the industry, types of collaborations that we're talking about are very complex and it's not a question of, can we do them? Of course we could sign a collaboration and but we want to make sure that we saw in the collaborations that we can and in view of the fact, that we also have now the capability to advance our product candidates.

It's another option for us. I can only assure our shareholders that the value is here, we're enhancing the value and our decisions are being made solely in the best interest of the shareholders. Including me as I think, I'm the single largest shareholder in the company and may very well have invested the most money in the company - shareholders. So can we, I guess you had your question and follow-up, so unless you maybe get, if you have more, you sort of get back in line and we'll see who else has questions.

Douglas Altabef



The next question is from Brett Rice of Janney Montgomery Scott. Please go ahead

Brett Rice

I've a question or two. The molecule that's been taken in-house by Bayer. Do we now become just a kind of passive observer and cheerleader of their progress? Do we still have input and can shepherd the thing, along to a clinical trial?

Anat Cohen-Dayag

It is currently under the full control of Bayer.

Brett Rice

Okay, with respect to the complicated nature of these agreements because they're target based. Is there a particular law firm, that's best in the world in handling these type of unique agreements, have we retained them or do we plan to retain them?

Martin Gerstel

I assure you, that we're working with the best lawyers. But for, I mean these, they've been because of the fact that novel targets are essentially unique. I mean, from an industrial sense. I mean almost historically novel targets have come out of academia and by the time the industry picks them up, there's been - first they're generic, I mean by that I mean they're not patented or they're patented by university who is licensing and out to many companies.

And there's usually a fairly significant amount of data and information about it. That, lost track, what was it? So I'm sorry, what's specifically, what is the question?

Brett Rice

Well, you mentioned in your introductory remark that the agreement issues, when you're negotiating agreement on a target based molecule or drug is different than specific products.

Martin Gerstel

Right, we in the company myself and others in the company that have a lot of experience in this area and we're working the best law firms in the area of - I mean amongst and not all of the best. But I mean, we clearly at fit leading law firm and people with great experience in this area. But it's not a question that you need somebody very, very smart. There are very legitimate concerns on the both our side and the other, and our potential partner side, with respect to how to deal with some of these, to how to deal with some of these issues with respect to new IP that comes up or unexpected opportunities for the target, that maybe they're not interested in, as you've seen.

We already have one of our checkpoints, which now is our leading candidate for ADC. I'm glad that we didn't partner that to somebody who was solely interested in the I-O world. So that's and again, I just want to clarify that these are solvable problems and or I should say, they're not really even problems, they're complications that will get solved. I think behind it, there's also that we need to make sure that we continue to move forward with the overall strategy of the company and have to look at the whole portfolio of our targets with respect, how we're going to commercialize them.

Brett Rice

All right and just one final one. It's probably for Ari. What's the expected burn rate over 2016 and do we have enough cash in the coffer to handle that, the runway maybe a year or two beyond that.

Ari Krashin

Sure, as I mentioned earlier I mean for 2016, we're currently budgeting approximately between $31 million to $33 million of cash expenditure, which 'is kind of worst case scenario because this basically assume no new cash payment from new collaboration or existing collaboration.'

So currently the focus is between $31 million to $33 million is up from $26.5 million in 2015. I mean at the current balance that we have which is approximately $81 million not including the payment from Bayer off the amount of $7.8 million, we're feeling quite comfortable with the current cash position.

Brett Rice

Great, thank you for answering my questions.


There are no further questions at this time. Before I ask, Dr. Cohen-Dayag to go ahead with her closing statement. I would like to remind participants that a replay of this call is schedule to begin in two hours for a period of 72 hours. In the US please call 1-888-326-9310. In Israel, please call 03-925-5925. Internationally, please call 972-3-925-5925.

Dr. Cohen-Dayag, would you like to make a concluding statement?

Anat Cohen-Dayag

Thank you. I wish to thank, all of our investors for their continued confidence in and support of Compugen. I wish to assure you that we’re committed to the success of our company and look forward to sharing with you our future accomplishments over the course of 2016. Thank you.


Thank you. This concludes the Compugen Ltd, fourth quarter 2015 financial results conference call. Thank you for your participation. You may go ahead and disconnect.

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