Compugen Ltd (CGEN) 2004 Q1 法說會逐字稿

Ladies and gentlemen thank you for standing by. Welcome to the Compugen fourth quarter 2004 financial results conference call. All participants are present in a listen only mode. Following management’s formal presentation, instructions will be given for the question and answer session. As a reminder this conference is being recorded, April 21 2004.

We have with us online today, Martin Gerstel, Chairman, Mor Armiti, President and CEO and Nurit Benjamini, CFO.

I would like to remind everyone that the Safe Harbor language contained into today’s press release also pertains to all content of this conference call. If you have not received the copy of today’s release and would like to do so please contact Nurit Benjamini at telephone number 972-3-765-8525. Mr. Gerstel would you like to begin?

Yes thank you very much. Good morning to those in the US, to those in Israel and Europe good afternoon. Again we thank you for participating in our call today.

Today similar to our call of last quarter we would like in our formal presentations to not be reviewing the reported financial results, which in any event have very little to do with the overall value of the company. However, clearly if you have any questions regarding the information provided in our press release today you are encourage to raise them during the Q&A session following our presentations.

In past conference call we’ve attempted to describe the uniqueness of our multi-disciplinary research team, our proven ability to merge these very different scientific disciplines into an efficient and productive R&D team. The very powerful iterative process of predictive discovery that we’ve developed, a much deeper understanding of important biological phenomena such as alternative splicing and natural anti-sense that is resulting from our efforts. And in our conference call of last quarter the concept of Compugen’s discovery engines, which make use of all of these capabilities in order to identify novel product opportunities.

Compugen’s discovery engines are in a sense production lines for discoveries. And as such we believe are unique in the world of pharmaceutical research. The output from these discovery engines is a very large number of potential therapeutic, diagnostic markers or targets for consideration as development or licensing candidates. This means that the selection process that we follow is an extremely critical component of our activities, particularly true with respect to the therapeutic proteins that we select for our own development pipeline. Therefore in today’s call more Mor Amitai, our president and CEO will provide you with more information regarding the selection process which focuses on creating a development pipeline with a much higher probability of success than that which is typical for our industry.

The probability of success refers to the probable that may newly discovered potential drug will ultimately become commercial product. It is well accepted that this is the number one major concern facing pharmaceutical and biotech companies.

In order to make Mor’s discussion of our selection procedures more specific he’ll be using the Cegen-40 protein that we recently announced as an example. However, please recognize that this particular program – protein is being discussed only because it has been publicly announced as being one of the few therapeutic proteins in our initial pipe line. Thus allowing Mor to be very specific with his comments and not for any other reason.

Before turning the call over to Mor I would like to make one other important – perhaps the most important observation about the unique discovery capability that has been created at Compugen. Unlike the high through put experimental trial end error method relied on by others we believe that the nature of the iterative research process that we follow essentially guarantees that our capabilities, predictive models, and discovering engines will continue to improve as time passes thus allowing us to maintain a leadership position in the exciting new world of life science that has now begun the process of revolutionizing medical research and the pharmaceutical and related industry.

And now I’m pleased to turn the call over to Mor.

Thank you Martin. Martin mentioned we’ll provide you with additional information regarding how we select the therapeutic proteins that we choose for further research and development.

I’ll focus on Cegen 40, our soluble splice variant of CD 40 as one example of the kind of promising discoveries we continue to make. Before going into detail it is very important to me to again emphasize that these type of discoveries are only made possible by the strength of our proprietary discovery engines. These discovery engines are based on our ability to integrate mathematics and biology. Now with specific molecules provides the validation for our unique capability.

We use three criteria to select and prioritize potential therapeutic proteins for further validation and development. First, the chosen protein should be closely related to a drug on the market or one that is in advanced stages of development. In focusing on a splice variant of a known drug we benefit from the novelty of a new protein together with a huge amount biological and medical information, related to the existing protein. This allows our scientists to predict not just the existence of novel molecules, but also the biological function and medical utility. Thereby significantly reducing the risks and cost typically associated with drug discovery and development.

Second we select proteins that have a novel and unlikely to have been discovered without the use of proprietary technologies and discovering efforts.

Finally there should be an indication that our proteins tend to have an advantage over the existing one in terms of either efficacy, stability, toxicity or other pharmacological characteristics.

Our Cegen 40 discovery, which was announced last quarter is one example of the type therapeutic proteins that meet the criteria I just described.

Cegen 40 and its ligand CD154 are involved in a pathway, which leads to maturation and stimulation of cells in the immune system. Blocking this pathway has been shown to effectively prevent rejection in organ trans-facilitation and treat a variety of autoimmune diseases, such as Lupus, Rheumatoid Arthritis and Crohn’s disease. Our therapeutic protein, Cegen protein is a naturally occurring soluble splice variant of CD 40.

In contrast the known CD40, which is used as a drug target is a membrane bound protein. In general, soluble proteins offer substantial advantages for development at Therapeutic.

We are currently validating and characterizing the productivity of Cegen 40. Using binding and activity assays and traditional analytical assays These assays have demonstrated the ability of Cegen 40 block the CD 40, CD 154 interruption and therefore impact the disease related pathway.

Several companies are already conducting research in the area of Cegen 40. Most companies active in this crowded field are developing antibodies. However, our discovery allows us to potentially dominate the particular space, set of soluble splice volumes.

We believe that our discovery may have a substantial advantage over the existing antibodies which are shown to have severe toxicity problems primarily due to thromboembolism. In order to validate our assumption that our novel molecules will not create to thromboembolic complication, we conduct complex tests. However, if these tests yield positive results the value of our discovery will substantially increase.

As you are well aware first clinical and end clinical trials pose a financial challenge.

In addition because we are focusing on therapeutic protein such as Cegen 40 as opposed to small molecules, there are significant expenses associated with protein productions that arrive early in the development. One of the ways we will be managing to shorten financial cost and risks is by initially outsourcing some of the first clinical and end clinical development processes.

As we advance the scientific and technical development Cegen 40, we also are advancing and further developing of our IP position and coverage in this field.

Our CD 40 splice variant is unique aspect which hasn’t been covered in other patents. We have filed several applications relating to our discovery and have recently been granted the first US patent for one of our slight variant of this molecule.

In closing, as Martin mentioned, through the use of our discovery engine, we are in the fortunate position of being able to choose from many candidates, which one to develop and/or license. However in our industry, although the road of success is substantial, the process of transforming discoveries into product is long and challenging.

I hope I have been able to provide you today with some insight as to why we believe that the selection criteria we have established for our own development pipeline capture hand in hand the value inherent in our predictive discovery method, and why this criteria provides us with the pipeline with the higher probability of success of yielding marketable drugs. And now I will turn the call over to Nurit Benjamini, our CFO.

Thank you Mor. As mentioned earlier, other than with respect to our test status, I will not review the financial results for the past quarter. But instead we’ll discuss some of the financial consequences of our continued corporate development.

During the Q&A session following my presentation, I will be glad to answer any questions you may have regarding our reported financial results.

An important aspect of our evolution is the recent initiation and planned growth of our pipeline of therapeutic proteins, to support this effort during the past quarter we extended our research and development team through the recruitment of additional lab scientists, and finalized plans for the further expansion of our molecule ability laboratory.

Mor outlined some of the advantages associated with the type of proteins that we are selecting for our pipeline. The use of the selection criteria Mor reviewed also has financial advantages. In fact, we will typically know what key early validation steps we should focus on to significantly increase the probability of success of the chosen protein. In general, this means that we can develop a high degree of confidence in the potential product with a modest expenditure compared to the amounts typically required for novel protein therapeutic. We estimate that we will spend an average of $2m on developing the therapeutic protein after clinical trials. Of course the cost for those proteins if we choose to move to clinical trial will increase substantially.

Our current strategy is to partner with other organizations at some stage in the development process.

As we have stated numerous times in the past, we manage our company financially on a cash flow basis and all the ongoing activities as discussed are consistent with the previous test guidance of a net decrease of $15-17m for 2004.

We began this year with approximately $60m and therefore anticipate beginning 2005 with approximately $45m in cash and cash related accounts. Our unique discovery capabilities provide us with the potential for substantial intellectual property. This is also critical in supporting the value of our development pipeline. During the past quarter we strengthened this aspect of our operations with hiring of the Vice President of Intellectual Property with extensive commercial and academic experience in both life science and computer related fields. And with that we conclude our formal presentations and open the call to any questions you might have both about the presentations today and our first quarter press release.

Ladies and gentlemen at this time we will begin the question and answer session. If you have a question please press the star followed by the 1 on your touch tone phone. If you wish to decline from the calling process, please press the star followed by 2. Your questions will be called in the order they are received. One moment please. Our first question comes from Bob Stanford of Stanford Capital, please go ahead.

Hi good morning or good evening, whatever ...

It’s evening here Bob. How are you?

Hi Martin. Could you make any general comments about the other products that you have not discussed publicly to give us a sense of what’s behind the curtain.

Let me say--- they are very early stage as all of the proteins in the pipeline are at this point and I think the only thing I can say is that they all meet the criteria that Mor had talked about in that they all are closely related to major products that are already out there in the market place and they are all compounds that we believe would be very difficult to discover without the unique capabilities that we have. And they all have indications that lead us to believe that they could have some advantages over the known drugs.

At this point for, you know, there’re real advantages for doing what we’re doing of course the disadvantages that we -- we’re getting into crowed fields or fields where other people already there, that we really have to be very cautious about when we announce what we are doing and be absolutely certain that we have done everything we can to protect our proprietary position before doing so.

I think when we announce others, my guess is that you are not going to be surprised as you hear them. They are going to fall into sort of as I said the categories that I just was talking about. This also means that we continue to have confidence, I shouldn’t say confidence -- we will be adding six additional therapeutic proteins to the pipeline this year. So we see ourselves continuing to build this asset for the company.

Great, thank you.

Thank you. Our next question is from Jeffery Grossman, a private investor, please go ahead.

Hi, good afternoon Martin, Mor and Nurit. Nuit perhaps you are the one to answer my first questions. The company’s quarterly revenues when annualized slightly exceed the guidance figure that was provided for all of 2004. Also the quarterly decrease in cash when annualized provides an annual decrease lower than the guidance provided for 2004, are you expecting revenues to shrink and cash outlays to increase during the remainder of the year and is it the company’s intention to sell additional shares in the near future at current market prices?

I will start with revenues and cash flow. We currently stand behind the guidance that we provided in the first quarter and when we announced the fourth quarter of last year, year end-results and we cannot break down the revenues and cash over between the quarters, but as we said in the past there maybe fluctuation between the quarters. With regard to sale of shares, currently we do not have plans to sell additional shares but it can change and depends on market conditions.

This is Martin, Jeffery. How are you?

Hi.

You are a sophisticated investor so you know that in general these types of questions essentially can’t be answered as to what we are planning to do, what we are expecting to do. Nurit was totally accurate with respect to what she said and you know that we at the present time have no plans to be raising additional capital now.

I want to make it clear though that from now on we will be probably in answering similar questions we will be saying that we are not in a position to make any comments because we don’t want to get ourselves in a situation where if you ask something and the answer is no we say it’s no, but if you ask something and the answer is yes but we haven’t announced we say no -- that we say that we can’t comment, obviously will put us in a real bind so….

Fair enough. No comment is acceptable. It’s just that hear I see that there are various meetings that you have lined up for the next month or so with investors, and conferences and I just wanted to clarify whether there was any link between these meetings and an intention to sell additional shares?

No, not all. I can say though, you are very astute in noticing that we are beginning to sort of talk to these--- the groups. I think that we have as I said many times, the Compugen story is not the easiest story to buy and unfortunately the investment community is one that does not really want to spend time understanding a complex story and then there are so many investment opportunities out there that you know somebody really needs to spend time to understand one. And it’s as unique as we are, we start with two strikes against us.

So we made a decision that we were not going to talk very much about the company until we felt confident that we had enough proof, tangible proof that the unique capabilities that we were, and discovery of processes that we had to put in place here that they really work. So now we’re getting to that point where we do have the PSA and Vegf and the CD40 and on the scientific side the Anti-sense (ph), the alternative splicing and you know we’re working in other very, very important areas of sort of breakthrough science at this point and we’re going to be adding 6 additional therapeutics to the pipeline this year.

I’m at the point now where I feel very comfortable in approaching people and say look this is what we have done, look around----when you look at the results, basically if you’re familiar with the industry you have to come to the conclusion that there’s something very unusual going on here and hopefully that will be, that will lead enough people to spend some time to really try and understand what it is, cause it is unusual and it isn’t you know , I mean it isn’t easy to, it doesn’t fit into the normal way people look at our industry.

Okay, next question. We’ve witnessed over the past several months several big brother deals between small biotech firms and large pharma companies, is this something that the company might consider entering into with a large pharma company?

Well sure I mean we would, we’ve had discussions in the past and we have had some more modest types of relationships with various companies like Pfizer, Abbott and now Novartis.

We would be interested in exploring larger types of things but here again, the strength that we have as a company is the discovery capability, the enabling technology. The degree to which we want to actually share the enabling tech capability with other companies, you know, is something we have to be very cautious of. Because that’s the goose that lays the golden eggs. I would much prefer that we get ourselves in a situation where we’re selling eggs. And so that’s sort of you know the focus now on the pipeline.

I believe that our, the compounds that we have are too early now to enter into substantial arrangements with other companies. On the other hand I believe that in general they will move forward in development much faster than compounds discovered the traditional experimental way and that in the end we’ll prove that we have a much higher probability of success for the kinds of compounds we enter into development. So I think in, you know I have this, as we continue to prove to ourselves and to others that this is in fact the case, I think hopefully we will start to do arrangements but I’d like them to be more product oriented than enabling technology oriented.

Ok, when you talk about higher probability of success to what extent are you talking higher? I know that company, the industry averages between 1-4%, what are you looking for, what is your hope?

Well first I’d like more but, these numbers you have to be very careful with these numbers because it depends on you know what are you using as your denominator, kind of a thing. I mean it’s clear with a numerator, it’s the product gets out the door. If your denominator is you know, like how many compounds has the company looked at some stage it is probably one out of a thousand or 2 thousand. If you look at how many get there after entering clinical trials is probably like I think 1 out of 10 is sort of the average in the industry, you know something actually gets into human trials -- 9 out of 10 unfortunately still fail.

I don’t think we can put any numbers on our thing, but when you think of it in terms of what happens out there. If 1 out of 10, only 1 out of 10 gets through, so that if you can increase that to 2 out of 10 you’ve doubled the productivity.

You know, I mean you are starting from such a low, a low base that things that in other industries would be very modest improvements, here would be absolute breakthroughs. And we believe that the kinds of things that we are working on here should make very, very substantial changes in the probability development, in the probability of successful development.

Again like everything we’ve been saying here it remains to be proven. I think if you’ve been with us for a while, a lot of the statements that we’re making 3 and 4 years ago we really didn’t have any proof. I think we have proof on those statements. If you ask me do I have a statement now that our, do I have any real proof now that our products are going to have a higher probability of success? I’d say no I have no proof, but we have, I think that we will, this will prove to be the case, just as essentially everything else we’ve been saying about our capabilities has proven out.

Ok so tell me do you believe that you are still on target with respect to your mid term goal of introducing two Compugen Discover Therapeutic proteins into clinical trials each year?

Yes we believe…

Did you hear Mor’s response?

Yes I did, OK…

Jeffery, can we put on hold any….

I have only one more question though.

Okay go ahead.

I just want to know if there has been concerning the company’s computational chemistry project in Ashkelon, either in respect to finding a partner or validating the relevant concepts, also we’ve heard nothing about Evogene and we’re wondering if there’s been any progress there?

Well first I hope there’s been progress in both because there would be... we got … in both areas of that group working, very talented groups working. I guess I can just say offhand yes, there’s been progress but the issue of…. We haven’t made any announcements about the two specific areas or the companies what? That one is the Kensey (ph) project and the other Evogene, our subsidiary. No, I guess no announcements have been made about anything that has been occurring there. We have been … we have disclosed I think, hopefully in the manner that our shareholders can understand the magnitude of this Kensey project that we are undertaking from the standpoint of … I mean it truly can revolutionize drugs. On the other hand we also emphasized there is a very high risk program and that we believe we are going to need a partner to really carry it through in order for us to continue to manage our company financially as we have in the past. And also we have stated that we want to continue to do validation to further validate the concepts and the processes involved in this project.

Can you say that it’s moving along in accordance with your expectations over the past; I know it’s only two months since we last spoke but can you say that?

It’s a difficult question because … with respect to finding partners it really doesn’t matter until you’ve reached final agreement. I’ve been in situations in my prior life at Alza where we had negotiated for a year with some major company and everything was agreed to and whatever and the formality of it going through its Board of Director, all the press releases were written and everything and the formality turned into for what ever reason the Board turned it down, because of some other corporate things that were going on.

So I learned through that experience that with respect to finding partners, it’s not a question of what the stage of the discussions are, how many discussions are going on, or whatever. It is very important to determine whether or not people are interested and on that I can say yes people are interested. I think the people at the pharma companies other people that we talked to recognize the potential here. They also recognize the risk and the early stage. So when/if we’re going to find the appropriate partner, not that I don’t want to tell you I really don’t know.

And what about Evogene?

You know it’s a separate company; actually I’ve now joined the board there so I have some knowledge of what’s going on. We recently had a board meeting and I can just tell you I’m very impressed with the development of the company. It’s a wonderful team they …..

I convinced Martin to join their board, I think it’s…

And considering about how much I know about the world of AgBio I don’t know whether they made a good choice or bad choice. But it’s a very good team. Having the combination they have of access to the world’s best ability computational biology ability which comes out of Compugen while at the same time having really first class breeders and people who really understand the real life of AgBio makes it a very unique situation.

So I’m assuming there’s going to be some real positive steps coming out of there but again this one is very early, I mean the company has only been in operation now for about a year and a half or something like that.

And then I forgive me for extending beyond my time, but how should investors be seeking to validate the company’s progress over the short term? Meaning Compugen?

I think this is the continuation basically of the kinds of things that we’ve been doing that we say that we have the unique capabilities here, if we truly do have unique capabilities then we ought to continue to see to the kinds of publications of products, discoveries that we make and also by the types of people organizations that choose to work and collaborate with us. And I think those are the kinds of things for the next few years. Though of course long term the name of the game is going to be the success of the products that we discover and -- still it’s probably a couple of years away before we can really count on those kinds of announcements to be substantial enough to really prove the ongoing statements that I’m making.

Ok, thank you very much.

Thanks Jeffery.

Thank you the next question is from Ronald Uvacher of Capital Prognosis, go ahead.

Yes good evening everybody.

Hi Ron

Hi Martin, hi Mor. I wanted to go back to Mor’s presentation on CD 40 for a moment and see if I can project into the future what I’m trying to get to. It sounded like a good chunk of your discovery effort if I understood correctly using CD40 as an example, was to take known molecules and to try and improve their efficacy over time using a splice variance and so on. My first question, that in fact that is the case as you hopefully get to a point where you’re going to file an IND. Is it correct for me to understand that this would be basically supplemental NDA’s if you are going to sort of take of existing known molecules? Or would this be novel molecules even though you are trying to emulate the activity of known molecules? That is my first question. I’ll stop there for a moment.

(Multiple Speaker) These are certainly novel molecules. What we are finding are not variance or improvement of existing drugs. No, let me go back to the example of the Cegen 40. Cegen 40 is a fuller dose, flat variant of the well known protein CD40. CD40 is not a drug. There are drugs developed to block CD40 or to block CD154, which is its ligand, and in most cases it is antibody. So, there is a relationship, very strong relationship between the current drug and our novel molecule but we’ve totally given pre-trial.

In this example we are talking about current drugs that are in general, antibodies with severe thromboembolic complications as a side effect, and what we have discovered is a soluble natural protein that is not an antibody …. (Multiple Speakers)

Less toxic…

And that’s validated to block the same reaction that the antibodies are designed to block. So we’ve got very different molecules. It’s a novel molecule. It is a totally different IND.

On the other hand, we benefit from huge amounts of work that was already done and because of the development of these antibodies on this specific interaction and its medical relevance.

So, it is with less toxicity obviously?

This is precisely, what precisely we hope we’ll be able to validate.

Okay. Second question, again coming back to sort of the biggest thesis here that the company is attempting to prove up. My question is, in the end, of course the real success will be demonstrated in the clinic and it is only at that point that everyone will know whether the selection process leads to the kinds of results we hope for.

So, therefore, if I am correct, when you actually start to talk to corporate partners or - - you may already be talking to corporate partners, you are talking about your validation model, prior to actual proven success in the clinic, what do you point to, to substantiate your argument that this is a better predictive model, since you don’t have the clinical results yet to show it?

This a very good question and your description is accurate. We cannot prove that we have higher probability of success of discovery - - of discovering drugs that - - in terms of reaching the market without actually performing clinical trials and succeeding in doing this.

However, there are many stages on the way from initial, very initial discovery to the final point of finishing successful clinical drugs and when we make the discovery - - No, the general overall bottom line prediction is this molecule can be a drug and successfully go through the intervals but it comes with a very large number of traditional, easier to validate predictions that are based on the latest poll. For example, in the CD40 case – the prediction comes with easier to validate predictions while the novel molecule will bind to CD154 and then block the interaction between the ligands CD154 and CD40.

So, you are absolutely correct. We will not have the final validation until - - no - - until it’s not needed anymore, but (Multiple Speakers) with partial information and partial validation that add to our confidence and to partners - - to potential partners confidence.

In addition we’ve found that it’s a ----one of the most important tools in convincing other companies that what we’re doing is unique and valuable is scientific publication. A couple of years ago we started to dedicate some personal resources into taking some of our discoveries and write scientific publications on them and we start seeing now the impact of the self publication people. We’ve been constantly assembling these results, so (inaudible) and in general joint press and it helps to the confidence of them in our capabilities.

You know, it’s your question sort of relate to the issue that I was talking about before about how ---it is, you know, we are more difficult to understand than most companies because we’re not a product story. You know, that almost every company in the pharm- industry or in the biotech industry, you value them based on the compounds that they have, which makes sense because they don’t have any way of, you know, of – with a high probability to discover compounds, it’s really the luck of the draw almost and so basically you value whatever is on their pipeline and you can from that standpoint you don’t care whether they licensed them or they discovered them or however they got them. The name of the game is what drugs do they have.

And that’s the way the whole industry is used to, and the financial community is used to looking at the industry. It makes no sense with respect to our company and that, you know, what makes it difficult because, I mean, we’re building a capability here. And I think for people who have being with us for a while it’s a very interesting history, because when we went public essentially the only thing that we could say is look at this unique team of people that we have brought together and have worked now for few years together. People -- mathematicians, computer science, physicists, chemists, biologists -people that have never worked closely together, you know, as a team before and they are focusing on new world of biology and you’re going to see great stuff coming out of this. And that was all we could say, you know, sort of trust us.

Well, then along comes alternative splicing, you know, the breakthrough there and what we said at that time was look this proves that we have a unique scientific community or group here, because you can’t have all of the world looking at genes, proteins, the entire world of moleculormolecular biology and missing the fact that one ---that great come in for individuals genes who have produced multiple proteins. What could be more fundamental than that? And we predicted it and then proved it to be true.

But our story at that time was look at this great science breakthrough. Because of this we are going to now be able to make specific discoveries, which are really important. But we have no proof but as we said trust us this understanding of biology, a deeper understanding of biology is going to allow us to make very unique discoveries that other people can’t make.

Well now we’ve come up with TSA, CD40, Cegen 40, our Vegf, whatever and I think that ---and further scientific discoveries and I think at this point in time. And so now what people are saying it’s okay you’ve proven that you can make discoveries that no one else can make and I don’t think anybody honestly could look at our activities now and not agree that we can make discoveries that other people cannot. Because we are caught looking specifically in the areas, the high interest areas, that everyone else is looking at and we are making important discoveries that when you look at them they would suggest that our discoveries are better than the stuff that other people have found in these similar areas.

So the questions --- the obvious question that people are asking us now is how can you be certain that your discoveries are better? And that’s the same answer that we have to give them for how are we certain that bringing together biologist and mathematicians and whatever we’re going to be able to make scientific discoveries. And how are we certain that deeper understandings of biology and whatever were going to be able to allow you make specific discoveries? I mean it is process. But keep in mind this is a pyramid that is building and it is something that where when, and I believe that it’s a when not and if, when we prove these kind of discoveries that come out or your processes are as far better and with a higher probability of success and those that comes from traditional industry, people are not going to then be able to say okay that’s the way to do it let’s compete. They’re going to have to start from the beginning. They are going to have to go back and do everything that we’ve done over the last seven years. So we’re building what I believe to be is a really unique capability that’s going give us a real long staying power here.

But this is also true, I wasn’t even so much trying to get to a valuation question but is seems to me that by the nature of the fact that until you go through clinic you don’t really know, at some point you talking to a very narrow, sophisticated group of what I called buyers natural buyers and big pharma, who themselves will have to agree internally based on what you show them that there’s enough data there that they can take into the next step. Because as you said before Compugen is not going to finance internally the clinical even the pre clinical work I suppose of a lot of these compounds. So somebody at some point before all the proof is in, in order for the company to create value has to be persuasive with partial data that the scientific advisory boards of the big pharmaceutical companies are willing to buy into what you have shown them to date.

I agree with you. Now keep in mind though the point that Mor made – I mean the kind of scientific publications, the types of presentations that our scientist make at these scientific meetings and whatever, this adds tremendous credibility to the corporation. And so we are getting to the point where if we make some comments or a scientist makes some predictions about you know what we think is a valuable certain compound, it can’t be lightly dismissed at this point. We are a very solid company now from a scientific technical standpoint.

So they will do their intensive due diligence. Last question, well you just mentioned before Vegf and the TSA, can you talk a little about what in fact is happening there with these compounds in terms – specifically TSA – what the time lines are?

It is our policy here, it is the same policy that I followed at Alza and I think it is the only policy like us can have is that once we license something out to another company we do not comment and you really have to go to the companies that we have licensed it to?

Well what about Vegf? You have licensed that out yet have you?

Well yes, but for science – to an organization – you want to describe the licensing on the Vegf? Because it is a more narrow license…

Yes we licensed it only for gene therapy application.

Largely for, I mean hopefully the organization that we licensed to will end up finding some good commercial opportunities there. From our standpoint the real value of this license is the further understanding and experimentation with respect to our discovery, which we share with them. I mean they do the research and we can utilize it for areas other than gene therapy, which is an area that as of now we are not interested in any way.

You haven’t disclosed the name of that entity?

Oh yes we have. It is a small Israeli…

Okay thank you.

Thank You

If there are any additional questions please press the star followed by the one on your touch tone phone. If you wish to cancel you request please press the star followed by a two. One moment please. There are no further questions at this time. Before I ask Mr. Gerstel to go ahead with his closing statements I would like remind participants that a replay of this call is scheduled to begin in two hours, for a period of 48 hours. In Israel please call 03 925 5901. International call 972-3-925-5901. Mr. Gerstel would you like to make your concluding statements?

Thank you and thanks to everybody for participating today in the phone call and for the excellent questions. The only comments that I want to make is that we will be mailing to our shareholders at the end of this month our annual report and I believe that it is an annual report that anyone interested in, surely any one who has invested in our company and any one thinking about investing really ought to read this report and read it very carefully because we really have attempted to sort of lay out well what we are doing and why are doing it. So as I said it will be mailed out with the proxy material at the end of this month.

Other than that, again for participating…for some of you have a good day, others have a nice evening.

Thank you this concludes the Compugen first quarter 2004 conference call. Thank you for participation you may go ahead and disconnect.