Compugen Ltd (CGEN) 2008 Q3 法說會逐字稿

Welcome to the Compugen Limited third quarter 2008 financial results conference call. All participants are at 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 November 13, 2008. With us online today, are Mr. Martin Gerstel, Chairman of the Board, Mr. Alex Kotzer, CEO and Ms. Dikla Czaczkes Axselbrad, CFO. I would like to remind everyone that the Safe Harbor language contained in today's press release also pertains to all content of this conference call. If you have not received a copy of today's release and would like to do so, please contact Dikla Czaczkes Axselbrad at telephone number 972-3765-8595.

Mr. Kotzer, would you like to begin?

Yes, thank you. Greetings and thank you all for joining our third quarter 2008 conference call today. With me are Martin Gerstel, Chairman of the Board and Dikla Czaczkes Axselbrad, our CFO. Earlier this week, we announced from January 1 Martin will replace me as the CEO of the Company. Naturally, in my talk today I will speak about this change. Dikla will then highlight the financial results of the third quarter and the Company's 2009 plans, followed by Martin who will give the Company overview. After Martin's talk, all of us will be available to answer any questions you may have.

Early in 2005, I decided to move back to Israel after six years of living in Europe and working for Serono, the largest European Biotech Company. Before my return back to Israel, I decided amongst several options to join Compugen. I was amazed by the talented people and the scientific understanding of biological phenomena at the molecular level that Compugen was able to achieve with its in-silico tools. I used to say that Compugen was able to teach its computer biology at the higher level than is currently taught at the universities. I also saw the huge commercial potential that this unique opportunity holds for the Company, and its potential contribution to the world healthcare. After three-and-a -half years with the Company, I'm now even more convinced of these unique possibilities and their potential impact.

Before turning the call over to Dikla, I would like to take a few more minutes to remind all of us of the advancements and progress that the Company has achieved in the last few years. It was only 2004, when the Company's business model evolved to its next stage, by discontinuing the sale of its discovery capabilities in the form of the tools and services, and instead focusing on using these capabilities internally to build discovery platforms that would be the basis for various comprehensive collaborations and the source for the discovery of hundreds of potential drugs and [their diverse] candidates. Immediately following, the Company started to use its world leadership in understanding and predicting the [alternative] splicing phenomena, building our first two discovery platforms for [hematopoietims] and the immuno-assay diagnostics.

It was only 2006 when the Company started its activities in the peptides area, building on its predictive Peptidome. The first discovery platform that was built in this area was the Peptide Ligands for GPCRs, which only a year later was successfully validated with eight peptides that demonstrated their predicted activity in the lab. A few months later, and less than two years from the initiation of these activities of Compugen, we signed the collaboration with Merck. It was at about the same time, that we started our antibodies target activities, which led to our collaboration with Medarex signed in early 2007.

Within the same relatively short timeframe, we also went from initiation to our collaboration with Roche on the genetic marker and [genomic] toxicity marker. Our history clearly demonstrates that it takes us less than two years from initiation of a discovery platform through the validation of some predictive candidates to a collaboration agreement. Looking at all the new discovery platforms and product candidates that have been announced during this year should help you understand why we have great expectation for the near future.

Today is the last time I will participate in quarterly calls with our shareholders in my current position. And I would hike to take this opportunity to thank all of you, new and old shareholders, for the confidence you are showing and for the support you are giving. And now I will turn the call to Dikla.

Thank you, Alex. I would like to focus my remarks today on the financial aspect of our Company, as well as our plan for 2009. As previously projected, revenues at this stage continue to be insignificant. with $327,000 for the nine months ending September 30, 2008, compared to $90,000 for the same period in 2007. The other aspects of our financial results that I would like to emphasize, again consistent with our business model, is that research and development expenses are by far our largest expense, and representing approximately 70% of our total operating expense.

Research and development totaled $6.6 million for the first nine months of the year compared with $6.9 million for the same period in 2007. These amounts include non-cash items. We ended the third quarter with $10.3 million in cash and cash-related accounts, a usage of $6.9 million for the first nine months of this year, consistent with our expectation. With respect to the Company's plan for 2009, Compugen intends to focus its internal R&D activities primarily on our [hematopoietic] peptides and monoclonal antibody drug targets. In its biomarkers and other programs, particularly in the view of the current financial situation, the Company intends to give priority to those activities pursued in collaborations with other companies.

In addition, Compugen intends to outsource certain non-strategic and generally evaluable activities. And it's implementing farther across the board -- measures that do not negatively impact any of Company's discovery capabilities or its ability to develop new platforms. As announced yesterday, the net impact of these and related decisions has been a staff reduction, and an approximately 30% reduction in expenditures. For calendar year 2009, Compugen is anticipating a net cash usage of approximately $8 million. Not included in our cash and cash-related account, is the market value of the 2,150,000 share -- Evogene shares held by the Company.

As previously disclosed, Evogene is utilizing aspects of Compugen's predictive biology knowledge in the ag biofields, and during the past quarter entered into a strategic agreement with Monsanto, which included substantial front-end payments and equity, multi-year research payment, plus farther milestones and royalties. We do not include these shares as cash-like, securities since we have no current intention of selling them. And we believe Evogene shares are an excellent long-term investment. However, it presents a potential source of cash if needed.

To conclude, looking at the first half of 2009 Compugen intends to focus on and continue to achieve progress within its current agreement as well as to begin commercialization of its toxicity markets. In addition, the Company will pursue additional products over the collaboration and explore strategical lines. We will also continue to evaluate financial statutes and alternatives. And with this, I will turn the call over to Martin.

Thank you, Dikla. First, on behalf of the Board and our employees, I would like to publicly thank Alex for all his contributions during the past three-and-a-half years. We are highly appreciative of his efforts and accomplishments as President and CEO, including his successful leadership in focusing our unique and broadly applicable predictive biology capabilities to develop a series of product discovery platforms in important fields such as peptide therapeutics. As demonstrated by our recent public disclosures, these platforms are now providing the basis for a wide range of product candidate discoveries and a growing list of collaborative arrangements.

Looking to the future, these accomplishments and the Management team that was developed under Alex's guidance and leadership, will serve the Company well as we progress towards achieving important medical contributions and substantial commercial success. And I am very pleased that we will continue to benefit from his knowledge and experience in his ongoing role as a director. As mentioned in our quarterly press release today, yesterday I presented an overview of our Company and our plans for 2009 at a healthcare conference in New York City.

A key message in that presentation, was that a paradigm shift is now occurring as product discovery in all areas of life science begins to move from high through-put enhanced serendipity to science-based prediction and selection. This paradigm shift is essential for industry survival, since the current experimental methods of discovery, no matter how much they are enhanced with high through-put technologies, have clearly hit a roadblock. This should not be surprising, since by definition with experimental-based discovery, discovery over time must get harder and harder. This paradigm shift to predictive discovery will happen, actually must happen with or without Compugen.

However, I am confident that based on our decade-long research efforts, we now have both an exceptional, proprietary leadership position, and also have reached the stage where our core capabilities in the form of predictive models of life processes, computational biology platforms and especially, an experienced and exceptionally talented R&D team, can be used to systematically make product discoveries in field after field of interest to the biopharmaceutical and diagnostic industries. The remaining obstacle for us is clearly recognition. And recognition, I believe, will largely be a function of proving that we can, in fact, do what we say we can do. For that reason, in my talk yesterday I went through one example of predictive biology at Compugen.

First, describing how we do it and then showing the enormous potential commercial that this capability provides us. The example I used was in the field of Peptide Ligands for GPCRs. As mentioned earlier, peptide therapeutics have been, for the past few years, a primary focus of our discovery efforts. And GPCRs represent an enormous opportunity, since they are by far the largest family of known drug targets, with at least 40% of all drugs currently available believed to act on them. Furthermore, newly discovered GPCR modulating peptides have in the past shown a high probability of being successfully developed into new drugs. However, discovery of novel GPCR Peptide Ligands has proven to be difficult by traditional experiment-based discovery methods.

As more fully explained in yesterday's release regarding my presentation, more than 10 years ago Compugen, using its world leading understanding of the -- at the molecular level of alternative splicing which is the phenomena by which a number of different proteins can ultimately result from a single gene, our team created an in-silico human transcription. That is a computer prediction of all the transcripts that could be expressed by the human genome. Further research on understanding how transcripts become proteins, then allowed our researchers to create a predicted model of the human [proteomes]. Peptides are formed through the cleavage, that is cutting of proteins. And so the next step was to develop machine-learning algorithms that would predict unknown cleavage sites, and combine these novel cleavage sites with our in-silico and other available proteomes. This was accomplished, resulting in a predicted Peptidome.

Finally, our research has created additional machine-learning algorithms to select from the large number of peptides in our predicted Peptidome, a much smaller number that were predicted to be the most likely ligands for GPCR receptors. It is important to note that all of these steps, with each individual step modeling an extremely complicated biological phenomenon, were done in-silico without a single laboratory experiment, other than to validate the results from the various steps. The peptides selected at the end of this process were thus the result of a prediction based on a prediction based on a prediction, etcetera.

A subset of the resulting predicted novel peptides was then synthesized and screened in functional assays against a group of GPCRs. In these experiments, more than 15 of the predicted novel peptides demonstrated modulation of various GPCRs of clinical interest, including some for which there are no known inogenous ligands. Those familiar with the expected results from currently available discovery methodologies for GPCR ligands, will recognize this as an important achievement with tremendous medical and commercial potential. And based on these very impressive results, as mentioned by Alex, we entered into a collaboration with Merck&Co., and are currently in discussions with other potential partners.

As previously mentioned, I believe that the last remaining obstacle for us is recognition. And therefore, of much greater importance to us, is that these GPCR results, along with results in a growing number of other areas of great interest to the industry, are now gaining the industry's increasing attention. As we pursue our interactions with these pharmaceutical, biopharmaceutical and diagnostic companies and they learn more about us, specifically about the results we are achieving, I am confident that we will be able to demonstrate beyond any doubt that we can, in fact, now use predictive biologies to systematically and efficiently accomplish product candidate discovery. And that this capability, which already is providing state-of-the-art results and beyond, can only improve with time.

After more than a decade of research and understanding life at the molecular level, it is, of course, very gratifying to me personally to see how these past efforts are now allowing Compugen to pioneer on a very broad front this paradigm shift in drug and diagnostic research. And enact bioresearch through our daughter company Evogene from experimentally-based product candidate discovery to in-silico prediction and selection, followed by experimental validation, and to begin to see the enormous commercial potential that these capabilities will provide us. With that, we'll be very glad -- we'll now open up the session to questions.

Thank you. Ladies and gentlemen, at this time we'll begin the question-and-answer session. (OPERATOR INSTRUCTIONS). The first question is from Jeffrey Grossman of Berenberg. Please go ahead.

Hi, all. First thing I'd like to do is to also express my sincere profound gratitude to Alex for his contributions to the Company,and my appreciation of the fact that he'll continue to serve on the board. Alex, I look forward to talking with you and being a [noodnik] for many, many years to come.

Thank you.

Okay. In yesterday's press release concerning Martin's presence at Rodman & Renshaw, and again in Martin's comments today, it stated that in various experiments more than 15 of the predicted novel peptides -- we're talking about GPCR peptides -- demonstrated modulation of various GPCRs of clinical interest,,t including some for which there are no known [endogenous] ligands. Am I correct, that prior to yesterday's presentation and Martin's comments today, shareholders had only been aware of eight such peptides demonstrating modulation?

This is Martin. Let me first explain that I'm still in New York, so we're in different locations, so I'll try to coordinate the answering of the questions since Alex and Dikla are at our offices in Tel Aviv. When -- the eight that we initially announced were from the pilot -- from the validation run of that engine and of the platform. And if you remember, what we said was that we had taken a sample of 33 of the literally hundreds of GPCR peptides that were predicted. I think it was something -- maybe 100 is an overstatement. I think it was 140, 150 maybe -- Alex can correct me afterwards if I'm way off. But in any event, the 30 -- we put the sample of 33, and out of those 33, eight proved to be correct, valid ligands. Since that time, we have taken additional -- we have synthesized additional peptides, and are finding additional successful ligands. And we expect that to continue, both with this -- with the first run and with additional runs of the platform.

Okay. I would only suggest that this uptake that we now have concerning more than 15 peptides demonstrating modulation, got lost in the press release owing to its length. And I believe this is also a critical piece of information concerning a very valuable corporate asset, given the relatively high likelihood of such GPCR peptide ligands becoming drugs. My thought is that the Company is making enormous scientific progress, and yet this progress is not always being presented to the financial community or to investors in a timely, easily accessible manner. I'm just wondering if you have any thoughts on how this could be improved?

Let's see. I guess I should stop beating my wife. First, we -- on the one hand -- First, I agree with you that a lot of things happening in our Company, particularly at the stage of discovery, that are not being disclosed. I'm not sure that that's wrong for us to do because we -- I mean we are a discovery Company. The discoveries that we are making are, first of all, they're very, very early stages and yes, it's true, that here there's a higher likelihood that discoveries will ultimately end up as a product. But still, it's very early, and I personally believe that the most important thing for our shareholders to understand now is not necessarily that we have product candidate A or B or C. But the most important thing for our shareholders to understand, is that we have the capability to create these discovery engines, and these product candidates that now exist should only be looked at as -- well, two things.

One, the primary thing being validation that the platform works. The reason that is so important is that once a predictive platform works, it can only get better and better with time. That's the power of the scientific method versus the experimental methods. Because all of our discoveries are made through computer predictions, meaning that when we find that something -- when we predict something and it's predicted wrong, we then go back and attempt to correct, improve the model so that we don't make the same mistake again.

And so really, the value of these initial product candidates, the biggest value of them, is that they are proving that we have this capability and in a field after field we're creating these discovery platforms that are valid. They give you answers. And although the answers that we're getting now really aren't what I call state-of-the-art, I mean these are the types of product discoveries that everyone is looking for, unlike the traditional experimental way. You can count on the fact that over time, our discoveries will get better and better. And that's why I believe we ultimately will be a primary source of product candidates for the entire industry, both domestic and -- both diagnostic and therapeutic.

Martin, I just very delicately would suggest that you might have to distinguish between your current shareholders and the financial community at-large. Meaning your current shareholders, many of your current shareholders, are very, very much aware of the value and what's going on at the Company. But on the other hand, we've gone through a relatively dry period without very much in the way of press releases, and this particular matter of having essentially doubled the number of GPCR peptide ligands in your portfolio, I think is of critical importance. And I think it would have behooved the Company to have perhaps issued another press release, a separate press release, allowing people to appreciate what has been done with this particular platform, but again this is at the Company's discretion.

Well, I guess the other alternative assumes what happened last week in the stock market. We can call our -- I think we have four shareholders now, or maybe it's five. We can just call them personally and tell them.

Let's carry on a bit. In the Rodman presentation under operating guidelines for 2009, you speak of one or more strategic collaborations. And I understand that you're hoping to see one of them, as you put it, one of them will happen in 2009 you hope. How many of these collaborations are currently being negotiated? I'm not asking for a specific number. Are we talking more than two, less than five? And how might this affect cash flow? Are your expectations in accordance with the Evogene Monsanto model?

Well, the answer is easy because you used the word being negotiated. And as of now, I will tell you none are being -- we are not negotiating any at the present time, negotiating. We're discussing, and the pipes are being kicked and some initial testing is being done, but we're not at the stage of negotiating. I will not answer that question -- this question in future quarterly calls. The only reason I'm doing it now, is I don't want to mislead anyone that as of now, you know, this -- We felt that up until now, that our major emphasis on collaboration should be product-oriented. We should convince people that the products that we have are worthwhile for them to consider to put into their pipelines.

As we have -- as we're successful in doing that, we're now kind of moving it back to this sort of saying well, look, these products didn't come out of the traditional "eureka, we got lucky. It came out of a platform. And not just a platform, but we have 10 of these platforms. And with that in hand, we feel that now is the appropriate time to start talking about much broader relationships, and we have -- a couple of companies came to us on their own. A couple of companies were -- we initiated, whatever. But again, there are no ongoing negotiations, but if you ask me to update that in future calls, I will not. I will not because it just can get very awkward.

Okay. Nevertheless in the Rodman presentation, you state multiple new therapeutic collaborations are anticipated for 2009. Here I would presume that we are talking about negotiations.

Yes, yes. Yes answer clearly. But those are essentially product-oriented and not what I would call strategic, but product licensing type deals.

Okay. In the Rodman presentation you also referred to opportunities for additional cash receipts in 2009 from existing collaborations and products. Is there some estimate for the Company's toxicity markers?

Well, given the financial reality in the world today, for financial planning purposes we're assuming zero. We're putting nothing in our projections for milestones -- for significant milestones or for anything significant revenues or new arrangements, even though there is the opportunity to -- We can see opportunity to have at least in the low millions, the opportunity. But this is not something in today's financial world that we will count on.

Okay. There is also --

How many questions could you have?

I have two more questions, but I'll certainly -- let me allow someone else to ask some questions and I'll get on the line a bit later.

Okay. Thanks.

Thank you very much. The next question is from Bill Chapman of Morgan Stanley. Please go ahead.

Yes. Good morning, everyone. First let me state, Alex, I'd like to say that I'm very saddened that you're leaving, but I wish you the best and you're definitely a true professional. And we, as shareholders, have benefited from your organizational skills and leadership. So I thank you.

Thank you.

And I'd like to talk about the toxicity marker as Mr. Grossman had mentioned. Last conference call we discussed that there's, over 200 companies could use this. You've made it more powerful. There's no competition alternatives, and it's low cost and saves money. Is that all still true, Alex or Martin?

Alex, can you take that?

Sure, I can take it. First of all, it's all true. We are continuing to work with fervor and to make the test itself more robust. We hope they will start using it by themselves soon, and we have talks with companies, as we mentioned last time, on how they can benefit from it as well.

Okay. This seems like this is -- if there's not really -- I think I asked -- is a reason why a company would at least try it, I'm amazed we -- This seems like this could be a big money generator for us and, of course, you can't predict how quick it can be embraced. But this many companies could -- a huge vast quantity could use this. And does this have potential to be a $10 million, $20 million revenue generator if it is embraced theoretically speaking?

Well, theoretically it's easy to put big numbers on it. I would just say that it is a new concept, whatever, you're right. Potentially there are a lot of people out there, companies out there that could use it. I think the key thing to remember here is that we're talking about a Company with an $8 million burn rate. So from that perspective, there's no question that this can be a meaningful revenue base for -- at least for people who are concerned about looking -- wanting our Company to get to break-even. But we really at this point want to stay away from predicting revenues.

Well, I guess I'm still confused why the Company continues to understate this. There's a need for this, and the market's just looking for successful commercialization of something you guys have come up with through your predictive models. And this is exciting to me, but I just don't get that from you, and I'm just confused by it.

I wish there's -- no, don't misinterpret. We're very enthusiastic, excited about this. But I've been in the industry long enough to know that predicting levels of revenues and even more difficultly timing, is extremely difficult. And in my guess, and this is just a guess, my guess is that companies will not immediately use this by itself. What they will do, is they'll probably, I guess, run this in parallel with whatever other kind of things or whatever -- They'll want to test the validity of this in their own shop, I would guess, before at least know that others have tested it before, because it's likely that they'll be making some very important product discontinuation or continuation decisions based on it. So it's not something that they will just take off the shelves, use and make their decisions. They're going to -- I believe that at least the majors will want to do some of their own validation work.

Yes, that makes sense. That's what I would do, too. I would run a side-by-side. I surely wouldn't abandon the testing mechanisms they're using now to pick up the toxicity, and if you --

Bill, I would like to ask you a few more words, and as Martin said and we also mentioned in the last conference call --

Yes.

it will take time for any company to decide to use only this tool, which means it is not a magic solution at this time. It will be difficult to make the first agreement. It will be easier to make the second.

Yes.

While we were able -- once we will be able to make more of these, then it can go further.

In several times in the past or I guess early part of the year, you were thinking about hiring salesmen to market this yourself. You're not going do that now, so you're going to be relying on a testing service, I presume.

No. As we mentioned, we still look both ways. One way is to license it directly to the big pharmas because they have the capability to use it in-house. We also say that we will see if we can make it [in the game] as allowed it to provide it as a service.

If a big pharma embraced this, could this -- again, this is all theoretical, but could this be a $500,000 of revenues, $1 million of revenues if they went under a mass -- they embraced it on a mass, large scale?

It will be a mistake to answer you now because we are negotiating it, and any number I will give will either say we are asking too much or too low.

Okay. That's fair enough and let's see. Just one question on the Evogene. Approximately how much in value does the Evogene shares at the current stock price? Do you have a figure off the top of your head in US dollars what the value would be of your two million-plus shares?

It's in the range of $4 million. Evogene also has gotten hammered along with everyone else in this market. So I believe it's -- it's on the Tel Aviv Exchange, and I believe it's a little under $2 a share. Keep in mind, that the Monsanto purchase was at an average price of $6 a share. But that was a strategic purchase. I'm not suggesting that that's --

Today, should run closer to $3.5 million or even less, the total value. But the markets went down all over the world.

It went down again today.

Yes.

I didn't check it. All right. Well, okay. Let's say --

It's -- over the last number of months I guess it's been in the range of like $3 million to $5 million, our holding, something in that range.

Okay. One last question on the new indication, and where do you guys stand on getting some -- one or two tests started? Clinical tests?

Alex, you want to respond?

I can respond. Mentioning, the [cut], of course, we will definitely have to look again if it makes makes sense or if it should get the priority to run these tests, keeping in mind that they might be long. [And I think maybe] the decision is not taking it, but this is one of the considerations we will have. We mentioned that we will put priority on peptides and antibody targets and we will -- may feel more confident to one other project once we have a partner. And what we are doing at the moment in this area, is putting efforts to find partners, which will make it easier. It is not only easier because of financing the studies, but also easier for the commercializations of the product. For the partner -- typical partners for this new indication, are big pharmas that have their own candidates [already in] the market or under development, that have the manufacturing capacity that already having the sales force and have product, let's say this way, which makes it much more visible for them to go into this area.

Okay. How many new indications do we have that we could possibly collaborate with other people with at this moment?

Again, I think when we describe this new indication tool, we found hundreds of new indications for molecules' use in-silico. We took two and tested the molecules in this way in vitro and in vivo assays, and we have the nice result. Actually to be honest, to be truthful, we have two out of some that we took to the lab, so it's not every prediction that is successful. But we have at the moment two molecules that were validated, and theoretically are ready to go to the next step, which in the new indication keeping in mind that they are well-used molecules, there is no need for safety, and next step will be proof of [concept] in humans.

Okay.

I think our shareholders should understand that when you look at the whole process of -- from discovery, through getting something to the -- kind of to the marketplace, the -- our issue is -- we've "solved the discovery problem." We have more product candidates than we can really deal with. What we are now thinking about, are ways in which we can get more of them, like the new indications, get more of them through the next stage, through more of the validation to increase the through-put there. Because that's the bottleneck for us now is the -- it's not the discovery. It's the validation step, and that's an issue that we have to deal with.

Okay. Martin, does Porter Novelli have you on any road shows, making visits on one-on-ones scheduled?

We haven't done that yet. Keep in mind that the changes that are going on, are changes that had been discussed internally for some time and so and -- As you watch us over the last few year, you see us getting kind of more and more focused. I don't want that to mean in one or two platforms. But I mean the way we do our work and the way we handle projects, the kinds of collaborations, it's becoming more "routine," and I think that we're now at the point where we probably -- And we also now have enough results that we can meet with people and show them real results.

Keep in mind, the story that we have given about predictive biology and changing the world of discovery, this story has been around for a long time with many companies with resources far beyond what we have, and they all failed. And this is perhaps our biggest problem with the pharmaceutical industry, is that they will not listen to stories anymore. They listened in the past. They spent billions of dollars, got nothing out of it. They need to see that these things actually work, that the predictions are valid. And so that's why we feel so much more comfortable now with the number of validated predictions that we can show and from different platforms, that I think anyone looking into it would have a very difficult time coming to the conclusion that our predictive biology isn't,working. I mean it is working.

I'd say one other comment, I'm also, as you know, well, maybe you don't know -- I'm also the Chairman at Evogene. And the fact is, that at Evogene, we had more of a problem getting the attention of the big ag bio-companies than we are having at Compugen in getting the attention of the big pharmaceutical and the biotech, whatever companies. At Evogene, the ag bio-companies had wasted so much money with other companies in the past that claim to be able to do these sorts of things, that they essentially had just written all of this off and just wouldn't even meet with companies. What changed it was the fact that Evogene can go directly from in-silico to the final plant. Evogene doesn't have to worry about damaging the plants, no testing, toxicology. I mean they do -- essentially they reach the same stage we do with the predictive biology.

They end up with 20, 30, 40 interesting leads that then need to be validated. In our shop we then have to prioritize and one at a time test these things and, hopefully in a few years you might be approaching your first human. When they come up with their 30 or 40 interesting product candidates to change a trait in either an input or an output trait in a plant, they just immediately throw them into the plant and then they see the results. And it was showing the results to these large ag bio-companies, where suddenly they turned on a dime from not answering the phone, just about every one of them sent a team of 10 people to Israel to evaluate the Company.

Well, that's interesting.

There is no doubt that will happen with us. The question is when and how much proof are we going to have to provide. Because if we have to -- I don't think we will, but -- and keep in mind the proof that they provided was absolutely the product candidates worked in the final product, in the plant. If we're going to be held to that standard, I'm afraid we're still quite a number of years away. Because it will be a number of years before we actually -- any of our products actually cure any human of any disease. I can't believe that that's going to be the case, though. I'm thoroughly confident that given the level of interest that we're now seeing by big pharma, and the kinds of results that we have, that they'll start getting in line. And once they start getting in line, I believe the financial world will follow and then hopefully it will be the same as it's been with other kinds of things like this. It should take off very quickly. But it's not a question of this, it's definitely the question of when. And I'm getting older, as all of you know, at least the three of you who know me.

Okay. Thank you very much.

Thank you. (OPERATOR INSTRUCTIONS). The next question is from Brett Rice of Janney Montgomery Scott. Please go ahead.

Yes, good afternoon. Because of the stock price in recent years, any stock options you awarded to keep employees probably have not worked out. Has that caused any challenges for you in retaining and/or attracting key employees?

Alex, I'm not aware of any, but, Alex, you would have a better answer to that.

We didn't have a problem of keeping our employees in the last several months. Let's say it this way, although the phenomena that you mention or describe is there. I can't predict for the future. But maybe, Martin, maybe you would like to recite what we are -- in general having in mind or what --

That is a point that the questioner is raising is a very legitimate one, because our Company really rests on a relatively small number of very experienced and exceptional scientists. To date, the issue that you're raising hasn't been a problem and given the current situation in the world, it probably isn't one that immediately will be a problem. But when things turn, that could very well be an issue. And we are discussing this at the Board level as to make sure that our key people are appropriately incentivized.

All right. Thank you and also I echo the other callers. My best to Alex.

Thank you.

All right.

There are no further questions at this time. Before I ask Mr. Gerstel 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 US, please call 1-888-295-2634. In Israel, please call 03-925-5901. Internationally, call 9723-925-5901. Mr. Gerstel, would you like to make your concluding statement?

Thank you. In concluding I'd ask, particularly kind of our long-term, shareholders to try and remember back a little bit to the human genome projects. And when the human genome project a decade ago was underway, and particularly when it was completed, there were two kinds of stories or discussions, conclusions that were going on based on that. One group of people were saying everything's going to be different now with the understanding of life at the molecular level. We're finally going to be able to cure diseases and all of our drugs, the current drugs, are going to be obsoleted. You're going to see such better therapies, etcetera, et etcetera.

Another group of people were saying whoa, the human genome is interesting, but it's only the alphabet. You can do almost nothing with the alphabet with the letters. That's just a beginning. It's a beginning that you must have, but it is only the beginning. And I think in large part, first both of those conclusions were correct. That understanding life at the molecular level, having an understanding of the human genome, allows you to begin down the pathway to have a totally different type of discovery capability, type of products, both therapeutic and diagnostic. But you're not -- but it's not going to be done just with the understanding of the alphabet, that it's -- the process has -- you have to understand more how do those letters become words? How do those words become sentences? How do those sentences become paragraphs, et cetera, et cetera?

Essentially, that is what we have been doing over the last decade. Whereas essentially, almost everyone else was approaching life from the standpoint of pretty much reverse-engineering or a high through-put types of things, where you were trying to understand or get to the core of things by ripping pieces apart and studying them. We were starting at the base. We were -- All of our publications, how do genes express transcripts? How do transcripts become proteins? This was done with kind of the understanding that this is the electricity of life, genes, transcripts, proteins, peptides. And that if we can be the people that understand that better, faster than anyone else, there will be unbelievable product opportunities for us. And I think we are now seeing that,. That what we have done, is we've created all of these predictive capabilities that now have given us this very impressive tool kit, a predictive Peptidome, a predictive Transcriptome, a machine-learning system that tells us where cleavage sites are, sort of -- these things go on and on.

We have this wonderful tool kit of predictors, of models of -- predictive models of life at the molecular level. So that now we're in a position that we can try and make a radio or a television or whatever, because we have the components and now it's a question putting them together. And it's interesting, like I described this GPCR Ligand Platform, which is amazingly productive, valuable, whatever. The day we started working on that platform, it was probably 70% finished the day we started working on it because we -- it used three of our major predictive components that were already in our tool kit. And we took them out and we put them in our tool -- we put them in this new platform, and then we built the other predictive methodology specifically for the GPCRs on top of that. This is the power of what we have now created here and, the issue is one of us -- recognition, recognition within the industry. And it's an industry that has been burned by so many companies with much larger resources than us, that have said they could do the same thing and they failed. That's why I focus on this issue of actually showing prediction on top of prediction on top of prediction.

If you went to pretty much any scientist, molecular biologist in the world, and you told them you've heard of something -- and they don't know about us, and you said there's this Company that's got a biological prediction on top of a prediction on top of a prediction on top of prediction on top of a prediction. What are the odds that the end result is anything other than garbage, I think pretty much every scientist will look at you and say it's got to be garbage. Those, each one of those steps are immensely complex biological phenomenon that people don't know how to predict, don't know how to model. Well, we do. It's taken us a decade, but now we're showing that it works. And I really want to thank our loyal shareholders. It's been a tough ride, and it's not that it's over now. I mean this last week was one of the toughest we've had, but I want to assure you that what we're doing is we really are building value in the Company. Hopefully, that value is going to be recognized very, very shortly. I think we have the pieces now that can make that happen. So just thank you and look forward to our next call.

Mr. Gerstel, we actually have one more question on line. Would you be willing to take it?

Sure.

Okay. The next question is from Bill Chapman of Morgan Stanley. Please go ahead, sir.

Oh, yes, thank you. I'm sorry to -- you have this conclusion going -- I just want to reiterate that, you know, you've got Porter Novelli being hired, and the message is still not clear and concise. You're really -- I mean it's amazing all that intellectual property you've come up with, and it's just not getting out to the market somehow. And I just encourage you to listen to Porter Novelli. I guess they're giving advice about how to present this. You're working on PowerPoints or whatever. But I encourage you to change your presentation into a more concise, powerful overview about the amazing accomplishments you've come up with. Yes, we don't know when it'g gong to be on commercial. You're going to have plenty of failures, as you've mentioned. But a market value -- this crumb market value we're getting is reflection on extreme lack of -- well, too much caution about talking about your accomplishments. It's really -- I'm just outraged by it as a shareholder frankly, but let's just keep going forward.

I understand that, and we are struggling with it. But the problem that we have is, as I said, other people have claimed in the past that they were going to change the way drugs were discovered, and they're going to do all these kinds of things. And so the only thing that separates us from them, is the fact that we actually can do it. And up until recently, the only way that we could try to convince people was with all the scientific papers. And then after all the scientific papers, we could try and convince people with the initial discovery engines.

Now, I believe that we have the ammunition to hopefully convince. Because I think in the end, the only real convincing argument is to look at the final product and say yes, that product works. The question is how much proof do we have to have that it "works?" Again, that takes you back to kind of the Evogene comparison. And so we're moving, and if you have any specific ideas about a different way we can present or give the world an idea as to what we're doing here and what we've accomplished, I'd -- I'm all ears.

Well, that's why you hired Porter Novelli, I assume, to help you make a more condensed, powerful presentation. I'm sure you're working with them. I don't know that for a fact, but I'm sure that's why you hired them.

I hope that all of our shareholders actually take the time to go through the presentation that was given yesterday. I'm not saying it's a great presentation, but I am saying that it will give you an understanding of how we do things and why -- how we are different. So if you haven't gone through that presentation that's on our website, I'd suggest you do it.

Okay. Thank you.

Thank you. I think we did it. Thanks again to everybody.

Thank you very much. This concludes the Compugen Limited third quarter 2008 financial results conference call. Thank you for your participation. You may go ahead and disconnect.