Compugen Ltd (CGEN) 2010 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Compugen Ltd. third-quarter 2010 financial results conference call. (Operator Instructions). As a reminder, this conference is being recorded October 26, 2010.

With us on the line today are Martin Gerstel, Chairman of the Board; Dr. Anat Cohen-Dayag, President and CEO; and Mr. 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 press release and would like to do so, please contact Dikla Czaczkes Axselbrad at telephone number 9-723-765-8595.

Mr. Gerstel, would you like to begin?

Yes, thank you. On behalf of my associates and all the employees of Compugen, welcome to our third-quarter 2010 conference call. There is both good news and bad news with respect to building a substantial and profitable company through the utilization of deeper understandings and modeling of key biological phenomena at the molecular level in order to predict and select novel drug and diagnostic product candidates for licensing and other collaborations. And, of course, this is the core of our Company.

The bad news is that at best only a very small fraction of the scientific knowledge necessary to even begin such an effort is available. Meaning that starting down this path first requires a long-term commitment to building the necessary scientific knowledge and R&D infrastructure. The good news is the same, that at best only a very small fraction of the scientific knowledge necessary to even begin such an effort is available, meaning that if you are successful in establishing such a predictive discovery capability, it will be a unique resource in the industry and one that others will find very difficult to match. And no one challenges the fact that the number one problem for the otherwise extremely successful pharmaceutical industry is the lack of a dependable, systematic and constantly improving in terms of both quantity and probability of successful development product candidate discovery capabilities.

As I stated in our last quarterly conference call, from a strategic standpoint, Compugen today is clearly in the best position in its history. This is based primarily on the fact that we are now demonstrating to the pharmaceutical industry that our long-term research efforts have, in fact, led to the creation of a unique capability for predictive discovery in terms of an experienced and outstanding team of scientists and an extensive and interrelating broad base of scientific understandings and related algorithms and other computational biology platforms and tools. And, most importantly, our continuing success in terms of novel product candidates in multiple areas of high industry interest speaks for itself.

With this capability established and constantly improving, during the past year or so, we have made three key decisions that will largely determine how successful a company we will be in terms of both therapeutic contributions and profitability.

In our call today, following these brief remarks by me and then Dikla's highlighting of a few key financial matters, Anat will describe these three decisions and our underlying reasons for making them. It is my belief that knowledge of these decisions will allow our shareholders and others interested in our Company to much more easily follow, understand and measure Compugen's progress over the coming months and years.

And now I will turn the call over to Dikla.

Thank you, Martin. As previously stated, Compugen's current revenue results primarily from fees and milestones. Since these type of revenues do not occur on a routine reoccurring basis, our primary results -- our quarterly results are and will continue to be subject to substantial fluctuation due to the timing of such statements. This is clearly evident in today's press release. Given that revenues for the nine months ended September 30, 2010, were $925,000 compared with $225,000 for the first nine months of 2009, but no revenues were recorded for either the third quarter of 2010 or 2009.

It should be noted that reported revenues for all periods do not include the amounts received from governmental and other grants, which are accounted for as a reduction of research and development expenses and not as revenues.

With respect to other income, the $3.7 million reported for the first nine months of last year reflect net prices of $3.6 million from the sale in the second quarter of 2009 of 1 million ordinary shares of Evogene held by the Company. The sale is also the reason for the lower net loss for the first nine months of last year compared to this year. Following such sales, we continue to hold approximately 1.1 million Evogene shares.

With respect to our current cash status, we ended the third quarter of 2010 with $21.4 million in cash and cash-related accounts. For the full 2010 calendar year, we expect that our net cash usage will not be more than $5 million, which is substantially less than originally projected.

In addition, this amount would be further reduced in the event of additional research revenues, initial fees or milestone payments during the remainder of the year. Compugen's September 30, 2010, cash and cash accounts totaled $21.4 million, which, as I said earlier, does not include the approximately $6 million current market value of our holding of Evogene shares. Compugen continues to have no long-term debt.

And with this, I will turn the call over to Anat.

Thank you, Dikla. Compugen's business model is to utilize our systematic and broadly applicable predictive discovery capabilities to be the world leader in providing product candidates to the drug and diagnostic industries and the licensing and other commercialization arrangements. As those of you who have been shareholders for a while know, our emphasis since 2008 has been on under -- (technical difficulty) although we also have a proven capability in various areas of diagnostics.

As Martin mentioned, during the past year or so, we have made three critical decisions that we expect will largely determine how successful we will be in both the short-term and long-term in achieving our therapeutic and financial goals. In my prepared remarks today, I would like to review for you these three decisions made during the past 12 to 18 months and our reasoning behind each of them.

The first decision, and perhaps the most important, was our shift last year to market-driven R&D rather than science- or technology-driven. It is important to note that during the first 10 years or so of our corporate development we had no choice. A company can only be market-driven if it has the capability to actually create the product candidates needed by the market. In our field that meant developing a unique infrastructure of predictive models, algorithms and other computational biology tools.

From today's vantage point, those of you who have followed our progress over the years will recognize how this required capability was established at Compugen by our exceptional research teams following the science. Beginning with the understanding of key biological phenomena such as alternative splicing, our team-created models of how genes express transcripts, how transcripts then becomes proteins, and how proteins are cleared to form peptides, along with a substantial inventory of computational biology tools.

Our in silico modeling of biological phenomena was then validated through the prediction, synthesis and validation of novel molecules. In this respect we selected for the validation of each platform a set of molecules that had both high and low in silico coring, which is a measurement of how reliable the prediction is or in other words what are the chances of each being correct. This was in order to better understand the predictive threshold of the platform being validated in order to gain insights that would allow us to improve the security for future discovery runs and to allow a selection of discoveries with a high probability of success. These selections were also made in order to demonstrate the applicability of the platform and the relative value of these predictions.

Since all of these validation efforts were mainly technology- or science-driven, we are, of course, very pleased that the markers selected prove to be attractive to the industry and the number of collaboration agreements were signed with the leading Pharma and diagnostic companies based on them.

Last year, after successfully establishing a critical mass of predictive capabilities, we made the decision to begin undertaking new discovery programs in a different manner. Instead of using each individual platform to say what it can discover, we began by identifying a specific market need of pharmaceutical interest either for ourselves or our partners and then focused all of our tools, platforms and algorithms on that objective. In this way, not only is our discovery method more powerful, but also the results can be expected to be of high industry interest. We have been referring to this new approach as Discovery On Demand, which is just another way to describe being market-driven.

In summary, in this process we are harnessing all our capabilities towards a specific unmet operating need with the aim of discovering the best solution pointed out by a combination of our platforms and other tools.

This leads to our second critical decision, one that will probably be more important in the short-term than the long-term. Since we can approach a wide range of therapeutic areas with our existing capabilities, to be efficient and to leverage our efforts, we must set priorities. To do so, we went to the various therapeutic areas based on a combination of two parameters. First, an assessment of the level of unmet medical needs and industry interest, and second, an assessment of the probability that our current capabilities can lead to novel and constructive discoveries.

About a year ago this process led to our decision to initially focus on the fields of oncology and immunology, both of which clearly meet this test, and we're already seeing the benefit of this decision. For example, one of our initial market-driven programs and one relevant to both oncology and immunology was to discover new members of the costimulatory and coinhibitory proteins, among them the B7/CD28 family, an area of high industry interest. Our use of multiple platforms and other proprietary tools resulted not only in the discovery of CGEN-15001, but an additional eight family members. In our last analyst call, I described the discovery animal model validation and potential importance of CGEN-15001. Not surprisingly this molecule has attracted a significant amount of industry attention.

Before moving to the third decision, I would like to update you regarding CGEN-15001.

Since our last conference call, we have further clarified the model faction of CGEN-15001 and have shown the treatment with this protein indeed induces immune tolerance as we have suspected. This tolerance is probably the reason for the long-lasting inhibition of the disease, following short-term treatments with CGEN-15001 and the complete abolishment of relapses in the animal models' multiple sclerosis as was presented in our last call. Induction of immune tolerance is a highly desirable trait of any therapeutic agent treating autoimmune disease, which is caused by tolerance breakdown. The current and novel drug for MS lacks this important capability of inducing immune tolerance.

Furthermore, we have also shown that the dramatic beneficial effects of (inaudible) with CGEN-15001 in the animal model of multiple sclerosis are also accompanied by inhibition of the infiltration of reactive (inaudible) to the central nervous system, a process known to trigger the initial damage to the myelin coat of the nerve in the spinal cord.

The third critical decision I want to discuss was announced today and relates to a program aimed at adding substantial value prior to licensing with respect to selected product candidates. First, a little background.

In view of the many unsuccessful attempts at predictive drug discovery by others in the past, it was critical not only to our prospective partners, but also for ourselves to validate that our efforts were, in fact, not only in the novel molecules, but molecules that did what we predicted they would do and were deemed by experts in the relevant fields to be worthwhile to pursuing development.

Fortunately this validation has been demonstrated during the past few years as very impressive product candidate discoveries were made and validated by us and independent experts in diverse areas of medicines. Of equal importance, potential partners expressed interest in collaborating with us with respect to Compugen candidates at significantly earlier stages of development than typically required by the industry.

With this scientific and industry validation in hand and our growing early-stage pipeline of molecules, we have invested significant efforts during 2010 in planning and initiating a program which we expect will add substantial value to our discoveries and, therefore, our Company. This program, which represents a new area of development activity for us, is to advance selected molecules beyond the animal disease model proof of concept.

For this purpose we are currently selecting the first set of molecules for this program from those that have already achieved animal proof of concept, while additional candidates will be selected from our validation pipeline and future discovery runs. As part of our preparation for these expanded development efforts, this year we have selected approximately 20 novel molecules based on targets and pathways that are known to be of high interest to the Pharma industry to enter our proof of concept pipeline. These newly selected molecules are an addition to the eight molecules that have already successfully completed animal disease model or similar therapeutic proof of concept validation studies.

It is anticipated that the candidates selected for these further product critical activities will be primarily proteins, peptides and monoclonal antibody therapeutics, mainly for use in the fields of oncology and immunology. Included in the molecules selected to date is CGEN-15001, our recently announced product candidate for autoimmune diseases which I discussed earlier.

A further component of this effort is our ongoing but previously undisclosed collaboration with Flamel Technologies, a drug delivery company headquartered in Lyons, France to develop therapeutic products through their investigational new drug stage. Products to be developed under this collaboration will combine selected Compugen discovered molecules and Flamel delivery technology and will be jointly owned by the two companies.

Also, with respect to our other commercialization activities, we are currently in discussions with various companies regarding both licensing of certain existing proof of concept stage candidates and Discovery On Demand collaborations.

I hope this explanation of our three decisions -- one, to shift to market-driven R&D; two, to focus our two platforms and algorithms on a specific market need; and three, to add substantial value to selective product candidates prior to licensing -- helps place in perspective our activities intended to broaden and accelerate the implementation of our business model and to achieve our corporate mission.

In addition, it is also important to note that as the pioneer and world leader in predictive discovery, we continue to invest in new technologies and platforms and expect to be able to announce the development of new technologies during the next year.

We will now open the call for any questions that you may have.

(Operator Instructions). Brett Reiss, Janney Montgomery Scott.

The first one, could you just update us on the Discovery agreement On Demand with Pfizer?

As we have mentioned a number of times in the past, it is our policy not to update with respect to individual agreements. There is a number of reasons for this.

One is I think it will lead to an inaccurate view of the Company, since essentially the whole concept behind our business model is to not be dependent on one or two products or arrangements or whatever, which is typical in the industry. As you know on almost all companies, some quite large companies, their future depends on a relatively small number, in some cases, as I said, one or two products.

The whole concept behind Compugen is to recognize, first, most early-stage products and the candidates in the end are going to fail, and anyone who has invested in the industry knows that it is more likely than not that if you invest in a small company that is trying to develop one or two products, you may have a time when you can get out if it gets into Phase III, but most likely most of them end up failing and going out of business.

Our model is to not rely on any few compounds, agreements, whatever and to have a very, very broad base of arrangements, agreements. And I think what we have demonstrated to date and what we will be showing over the coming months and years is that we, in fact, are doing that. That the industry is recognizing that we are a source for multiple product candidates, and we are quickly establishing a substantial product pipeline, although the pipeline will largely be financed by other parties.

Just one or two others. Thank you for that response. The business about the 20 novel molecules that you are 12 to 18 months past animal proof of concept, when did the clock start to tick on that program? How many months into the 12 to 18 months are we into that initiative?

Okay. So, in general, I would just like to do some separation in this to note that you made in one comment. The 20 new molecules that we were already discovering and selecting in order to be incorporated to our validation pipeline are those molecules that we expect them to undergo now animal proof of concept studies, and in general, this is something that we, as I explained, we have harnessed all our capabilities in order to perform mass discovery analysis and to incorporate a large number of molecules to our pipeline. So this is just to state that we are increasing our productivity and efficiency with time and incorporate many molecules with time.

And relating to your specific question regarding the 12 to 18 months following animal proof of concept, this is what we mean. The eight markers that we are going to initially select from -- and this would be the first wave -- are molecules that have already achieved animal proof of concept, and we have decided that we are not going to just try to out-license them but also to extract value in the form of advancing them forward and being able to license them in a later stage where their value is larger than what we -- than what they are now.

So, in general, this is now when we have taken the decision to -- actually we are taking this decision a few months ago, and we were doing some efforts in the Company to move ahead with. But this is now when we are getting into these arrangements of in the process of selecting the molecules, which a few are already selected. You know, that is including CGEN-15001 and to try and select a service provider that will serve as the infrastructure of doing the work for us. And to start to hire the employees that will be associated with the -- the few employees that will be associated with this effort, and we have to increase the headcount in a few people. And this is something that is ongoing in the Company in the last few months, and this is a process that we have started to take care of during -- from the beginning of the year.

Let me just add one comment. I think it is reasonable to expect that we will begin to see molecules meeting this -- getting to this next stage of development by the end of next year or early 2012 based on the first wave that has entered this development. Well, that is -- and then it will continue. We would also anticipate that by mid-2012 or whatever, the entire pipeline would be -- all of the 20 would have been selected and under development.

In general, I would like to explain a bit more, so I think it will be clear. It is actually we are a discovery company, and we are discovering molecules on an ongoing basis. And what I just described now, the 20, is the wave of our discoveries that are incorporated now to the pipeline and, of course, were intended first to strengthen our discovery capabilities, but also to be able to continue and discover more molecules and incorporate them to the proof of concept validation pipeline as we call it.

But, also, what we are seeing now is that we are also intending to take these molecules that we up until now we have stopped validating them at the stage of the animal proof of concept, and these were available for out-licensing. We have decided now to move a step ahead and add more value to these molecules in the form of additional studies, which are preclinical studies and extract more value of these molecules as we license them out.

Let me apply just some numbers to this, and these are sort of obviously averages. But let's assume that of the molecules that we actually select for this program to take them to 12 to 18 months past animal proof of concept, let's assume that we are successful with 50% of those that we select. Now our success rate to date, I believe, is higher than that.

For the animal -- (multiple speakers)

For the animal studies, much higher. But let's be conservative, and let's assume that it is 50%. It also is by looking at deals that are done in the industry. You can recognize -- what you see is that it is not uncommon to see an order of magnitude difference in pricing from the stage at the animal model versus what this new stage will be if they are successful.

Now almost every other company since it would only have one or two molecules, it would not even be a question. They would automatically do this, and they would either fail or succeed, and they would either license or go on with development.

For us, with the number of molecules that we have and with the continuing increase as Anat mentioned and efficiency and our programs keep getting better and better, it's a very easy decision. I mean the math is very straightforward. If for every 10 molecules you take forward, you can expect at least -- after animal model to this next 12 to 18 months -- you can expect for every 10 at least five of them to reach that next stage successfully. And if you can get a 10-fold increase in value at that stage, it does not take a lot of calculations to realize that this is a very obvious thing to do.

I think the next question that people would ask us is, well, why did you wait to do this? Why did you do this a year ago, two years ago? And their answer is very straightforward. And that is that what we are doing -- it essentially has never been done before, this idea of broadly predicting and selecting compounds totally by computer. As Anat mentioned, all of our initial ones were technology-driven. They were molecules not necessarily selected because they would have great market value. They were selected because they were very good for one reason or another at validating the platforms that they came from.

So the idea of us at that point in time rather -- with limited funds -- the idea of us of taking our money at that point in time and taking -- picking some of these molecules that we really did not have any great -- any reason to have great confidence in them, and taking them further just would not have made any sense.

Over the last couple of years, what we have seen are that the industry has shown a great deal of interest in a number of these "validation molecules." And now what we are seeing with respect to the Discovery On Demand molecules it is much, much greater interest. And we have a number of other "Discovery On Demand" molecules such as the CGEN-15001 that we think are going to do very well as we move them forward into this next stage.

You all did a very good job in answering questions that I should be asking you. Do you want to continue?

Thank you. I appreciate very much your -- (multiple speakers)

I will drop into queue.

Yes, I appreciate you asking them. Let's see if other people have questions.

[John Getson], Scripps Research Institute.

I don't want you to dwell on this a long time, but I just have three quick questions. If you could address them as briefly as possible. Life Science had an article on revenue per employees, and you were the highest on the list. That is number one.

Number two, Arrowhead Research had you at the bottom, ranked the lowest in sales. I'm wondering any comment on that. And I'm just wondering -- I looked at the numbers today -- and I love the Company -- $1.1 million in compensation with no income. I'm wondering what validates that. Your comments.

Yes, let me start with the last one. That is purely an accounting issue. No one here is paid $1.1 million or anywhere near it. As you saw, it was non-cash stock compensation. As a matter of fact, the bulk of it had to do with the cancellation of an option. It is under accounting rules when you issue options you must put -- use Black Scholes method to come up with the estimated future -- the value that that option represents. And you end up having to put that on your books and then write it off over time over the period of the option.

So what this means is that if an option gets canceled, you must then write off all of that in one quarter. So it is meaningless. It is absolutely meaningless.

I understand it. I understand it now. Thank you very much.

Let me -- on the other two, I would assume that at this point in time in our industry, we must be one of the "worst companies in the world" if you are going to measure us based on revenues per employee, current revenues per employee or any of this. Because the fact that we -- what we have been doing is creating value with these platforms, etc., and we are now beginning to reach the stage where we enter into agreements, and hopefully we will start to see some significant fees, milestones and then ultimately royalties.

So these unfortunately are surveys that are done by computer without looking at whether or not it is relevant at all for that Company, and those measurements are totally irrelevant for us.

Ronald Urvater, Capital Partners.

Thank you for the cogent explanation. It is really great to see the progress of the Company.

I have two questions. I want to go back to what Marty and Anat were talking about before, specifically what you call this validation pipeline. I'm not completely clear. I gather this is after or during animal models, but still before going into the clinic. So what does that mean exactly? Because this is fairly unusual. Does that mean that you are going to apply certain biomarkers or other parameters, which perhaps you can shed some light on? And what's going through my mind is one of the big problems in the industry, of course, is the big high failure rate in Phase III. You get all the way through the process and not a week goes by where you do not see some drugs that fail in Phase III.

So is it possible to think about this validation process you are talking about as hopefully by the time you're ready to license out these molecules reducing or increasing the probability of success that these molecules and these peptides rather are going to make it all the way through the FDA process. Is that the hope and the expectation here?

I will start with the beginning of your question, and then I will relate it to what you just asked now. But, in general, the number 20 is related to what is incorporated to our pipeline, and I will explain what is this validation pipeline.

When we are predicting a molecule that would fit a specific unmet need where it is a computer prediction, it is totally done by the computer, the prediction of the sequence of the molecule and the prediction to what is the specific therapeutic area that it is going to affect. Okay? So I will take an example of one of the molecules that we already published, a specific peptide that is going to inhibit inflammatory bowel disease. Okay? So we predicted the sequence, and we predicted that it is going to be affecting, inhibiting the progression of the inflammatory bowel disease.

The validation pipeline that we mean is actually the synthesis. We are synthesizing the molecule. We are creating it in tubes, and I'm not necessarily relating to what is done in the Company and what is done by service providers. It does not matter for the sake of this discussion. But we are creating the molecule, and then we are testing it in animal models that are -- in animal models of the specific disease.

So like if we're talking on inflammatory bowel disease, it would be either in mice or rats that are carrying these diseases and that we ingest the specific molecules to them, and we demonstrate that under experimental conditions that are well accepted in the industries, we succeed to inhibit the progression of the disease. In this respect this is what we call the validation pipeline, which we said -- which we described this by having animal proof of concept. Okay?

At this stage the molecule, we proved that our prediction is real, and the molecule, indeed, inhibiting this specific disease that we were predicting it to inhibit. So this is what we are doing with the eight molecules that we already published, and this is what we aim to do with these 20 molecules that we already discovered and selected to be incorporated to these specific animal studies. Okay? So this is what we call proof of concept validation pipeline. This is the type of --

So this is the classic animal model study. It is not something post-animal model study.

Okay. What we are saying today -- and this is what we are establishing during the last year --

Excuse me, Anat, let me just make clear that that is far as we have gone up until now in our R&D. All of our development activities up until now ended at that stage, successful proof of concept animal model, and then we offered them for licensing. Alright? This new program goes beyond that. It --

But I just want to mention based on what you said, Martin, still there is something that is -- there is something that one should notice here. Because, as I mention, the number 20 is indicating the increase in efficiency and productivity of what we are doing, and this is not a number that we will use to have during the last year.

So it is validating your model?

Right.

Which is exactly what you have been trying to do for years is that hopefully with an increased mass of success, you can increase the probability that your model itself is going to be more successful to leverage the value of that. That is what you are trying to accomplish here, I guess?

Well, I think that has been accomplished. I think now we are really using it, using the platform.

One other quick question, just going through your Flamel agreement for the moment, Flamel, which I gather this is probably using their Medusa technology?

Right.

That Medusa technology is usually for long-acting drugs like when they used to work on these metabolic diseases. So my question is, how do you know at this early stage already? I guess the implication here is that you already do know, in fact, the application of some of these molecules that you are going to codevelop with Flamel because you want to, in fact, already induce a long-acting effect in some of these areas? I mean is that correct? Am I reading this correctly or --?

First, let me say that we really -- both Flamel and we have agreed that we would not make any statements about this unless we mutually agreed with respect to it.

Let me just say that this is not an agreement that was signed last month or two months ago or even six months ago. This is an agreement that has been in place for a while. It was not announced when we signed it for exactly the reason that you are now pointing out. That, at that point in time, there was an interest and a belief that some of our molecules could be very -- make very interesting products when combined with a technology of Flamel. I don't think it is appropriate for us to really even state the specific technology.

But, in any event, since that time we have been working with them. And so we now feel comfortable to make the statement that this is an ongoing effort. There is work going on. We are not going to tell you what the stage of development is, but now there is active work going on with some of our molecules and their technology.

Okay, terrific. That is very exciting. Very exciting. Thank you.

(Operator Instructions). Douglas Altabef, Matrix.

Thank you for the very, very informative update. Martin and Anat, does the announcement today have any implication for your previous announcements or your previously stated goal for being cash flow breakeven by the end of 2011?

The quick answer is no that our target is still to be breakeven by the end of 2011. I should say that we are confident that we have the resources that we need to undertake this program now and not to create any short-term financial issues. I mean clearly what we see under this program and with the resources we have now, we are well into 2013. Plus, that is without any expectation -- without incorporating any additional milestone fees or anything else.

Also, keep in mind (multiple speakers) -- also, keep in mind that in a way I would argue that we by doing this program it significantly increases the probability that we will, in fact -- what we had said was by the end of 2011. I would say that this program significantly increases the probability that in 2012 we will either be cash flow breakeven or even profitable, assuming this program has some success. Because we will be having compounds, products, beginning to be available at this later stage of development beginning in late 2011. And it is not going to take much of a deal for a compound at that stage to give us the type of cash that we need to breakeven. But it is going to be a one at a time kind of thing.

Now this layers on top, of course, of when the comment that we are targeting to break even out of our Discovery On Demand and our regular licensing deals. So I think in combination we are quite comfortable now with respect to the short-term financial situation of the Company moving forward from here.

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 1-888-782-4291. In Israel please call 03-925-5901. Internationally please call 9-723-925-5901.

Mr. Gerstel, would you like to make your concluding statement, sir?

Well, I just want to thank everybody for participating. I want to make sure that it is understood that this new program that we are undertaking is in addition to or an extension of our commercialization activities under our existing business model. I think there has been quite a bit of confusion by people watching our Company who keep thinking, well, they are changing their business model. We're going from this. We are really not. I mean we are adding additional components, first the licensing and then the Discovery On Demand, and now this program to take selected molecules further.

With respect to taking them further, I should make another comment. We have been quite successful with respect to licensing molecules at a stage that is almost unheard of in the industry that -- and the reason being that most molecules are discovered by small companies or by research organizations, whatever, and they discover one molecule. So obviously they take it further, and it either succeeds or fails, and then they offer it to the industry.

I would bet that of the meetings that we have had with companies, if you look at all of those that said no to us, that said no, we don't want to license any of your compounds, I would bet that at least half, probably three quarters of them, then said, but if that molecule -- if you continue with that molecule and it continues to be successful a year from now, please come back and see us. Because we are offering -- and we have said this in -- this is not news. It should not be news to anybody. We have said it in a number of conference calls, that yes, we are offering things at a much earlier stage. And again, it goes back to the evolution of the Company. These are molecules that were created in the validation of the platforms. We had to get a number of them, a portfolio, before we felt confident to pick some and move forward etc., etc., etc.

So moving -- this next -- now adding this new program on top of it is just -- does not take away from any of the other programs. As a matter of fact, it obviously adds significantly to our licensing out program as products will become available at later stages.

I should also mention that from a -- and this is not -- again, I don't want to make this -- because this is a conference call, I don't want to suggest that this is new information. I stated in the past that we are very confident that we will sign additional licensing deals and/or Discovery On Demand deals before the end of the year, and I reconfirm that prior statement.

So I don't want anyone to get the picture that this is somehow a replacement. It is an addition. It is an addition that not only adds a significant value, but what it does is it gives us products to offer to the industry at a stage where they are -- they normally are prepared to license in, and to license in under -- as those of you who follow the industry know, some fairly substantial packages.

So, again, thank you all for listening in. For our longer-term shareholders, we hope you share our excitement as we continue to move forward now with the commercialization from our long-term research efforts, and we look forward to talking with you next quarter.

Thank you. This concludes the Compugen Ltd. third-quarter 2010 financial results conference call. Thank you for your participation. You may go ahead and disconnect.