Compugen Ltd (CGEN) 2011 Q4 法說會逐字稿

Welcome to the Compugen Ltd. first-quarter and year-end 2011 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. (Operator Instructions)

As a reminder, this conference is being recorded February 7, 2012. With us online today are Mr. Martin Gerstel, Chairman of the Board; Dr. Anat Cohen-Dayag, President and CEO; and Ms. Dikla Czaczkes Axselbrad, CFO.

I would like to remind everyone that the Safe Harbor language contained in 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 972-376-585-95. Mr. Gerstel, would you like to begin?

Yes, thank you. On behalf of my associates here with me today and for all of the employees of Compugen, welcome to our year-end 2011 conference call. Following some very brief introductory remarks by me, Dikla will discuss the financial results we reported today which, although fully in line with expectations, include a few items that deserve additional explanation. Then, and a major part of today's formal presentations, will be by Anat, who will provide you with some update information regarding our Pipeline Program with a focus on our monoclonal antibody activities, and then conclude her remarks with a few comments regarding how we see the near-term future for our Company. We will then conclude the call with a Q&A session.

The reason for my very brief remarks today is that I would like to encourage all of you who have an interest in our Company to take the time to review the corporate presentation that was prepared for the JPMorgan conference in San Francisco last month and is now posted on our website. However, as I just noticed before the call, it is very hard to find on our website. So, from the home page, go to Investors; and from Investors go to Financial Reports and then to Corporate Presentations. As of now it is the only presentation listed under Corporate Presentations.

I apologize for not making it more obvious on the website, since we believe this is a very good way to gain a fairly deep understanding of our Company and our achievements to date and our expectations for the future. Therefore, for those of you who can find it, I think that even if you have followed us for a number of years, you will find this presentation both interesting and enlightening. There is a lot of information there; and I would encourage you, if you have questions regarding it, to actually to participate in this Q&A session or in future Q&A sessions. And with that, I will turn the call over to Dikla.

Thank you, Martin. As Martin mentioned, our financial results for the quarter were in line with our expectations. However, there are a few items that deserve some further explanation.

First, the net loss of $4.4 million for the fourth quarter of 2011, which as reported was more than double the net loss of $2 million for the fourth quarter of 2010, includes $1.4 million related to the complicated accounting required for the bank's first and second arrangements; certain other non-cash items and as mentioned in the press release, and it includes in R&D expenses net of about 20%.

Second, the increasing R&D expense is next. Both for the most recent quarter and the full year derived largely from external expenses related to our Pipeline Program. This increase resulted primarily from payments to independent investigators and manufacturing companies for evaluating studies of our product candidates and also reflected the impact of lower governmental grants compared with the comparable period of 2010. Compugen presents such grants as deduction from research and development expenses and not as revenues.

Perhaps the most notable amount reported in this was the substantial increase in general and administrative costs, increasing from $2.9 million for 2010 to $4.6 million for 2011. However, here again, there is more to this story.

This increase is largely due to a non-cash charge of $2.2 million related to stock-based compensation, representing an increase of $1.1 million over the amount reported for this item in 2011. Included in this non-cash charge of $2.2 million for calendar-year 2011 was a $1.4 million one-time charge which results totally to an extension of the time to exercise certain previously outstanding invested options.

With respect to our current cash status, after gross cash expenditure of approximately $9 million for calendar-year 2011, we ended 2011 with approximately $22 million in cash and cash-related accounts. This total $22 million does not include $6 million to be received during 2012 under the second Baize research and development funding arrangement signed in late December 2011 or the market value of our Evogene shares.

Including this amount, we ended the year with more than $32 million of available resources to fund our future operations. In addition, Compugen continues to have no long-term debt other than the book liability associated with the research and development funding arrangement. And with that, I will turn the call over to Anat.

Thank you, Dikla. As Martin already mentioned, we strongly urge those who have not already done so to review our most recent Company presentation, which was prepared for the JPMorgan Healthcare Conference.

During prior conference calls, I have attempted to provide investors with a better perspective of our continuing achievements involving the deeper understanding of key life science phenomena underlying our R&D efforts; of the specific proprietary discovery capabilities we have developed to date based on these understandings and know-how; and more recently of our initial therapeutic candidates and their progress in our Pipeline Program. Today I would like to update you with respect to our progress with the Pipeline Program, particularly regarding the monoclonal antibody portion of the program, and then say a few words about our near-term expectations for our Company.

As I noted in the past, Compugen's Pipeline Program, which was initiated in late 2010, consists of more than 30 therapeutic product candidates at various stages of validation ranging from validation to pre-clinical study. In general, the program entails in vitro and in vivo experiments and validation of our discoveries, with selective markers advancing towards pre-IND activities.

Our two areas of focus are therapeutic proteins and antibody therapeutics in the fields of oncology and immunology. With respect to protein therapeutics product candidates, following successful in vitro validation, the molecules are further advanced to in vivo proof-of-concept studies in disease animal models and, in the case of drug targets for monoclonal antibodies, additional target characterization and validation studies confirming the target therapeutic potential are undertaken.

With respect to antibody therapeutics, the most strategic growing drug class in the pharmaceutical industry, one of the key challenges is the identification of appropriate molecular targets. It is here that Compugen has its primary competitive advantage, with our unique predictive capabilities for target discovery based largely on our LEADS and MED infrastructure platform.

These capabilities have the proven ability to facilitate the discovery of very promising novel drug targets in areas of high industry interest, as demonstrated by the recently announced results of CGEN-15001T. CGEN-15001T is one of the nine novel B7/CD28-like proteins discovered by Compugen. The recent press release highlighted some of the experimental results to date demonstrating its potential as a powerful drug target for cancer immunotherapy.

These results indicate that CGEN-15001T is expressed on numerous types of cancer such as carcinomas, sarcomas, melanomas, and hematological cancers, as well as on immune cells. These findings, together with a previous result supporting its active immunomodulatory effect, indicate that an antibody against these novel targets pay provide the opportunity for treating multiple solid hematological cancers through cancer immunotherapy, whereby immune response against the cancer cells is promoted.

During 2011, we invested heavily in the discovery of new monoclonal antibody targets using new, exciting pipeline candidates, most of which have yet to be announced pending further validation. The next and most critical value-adding stage is to move forward with the development of therapeutic monoclonal antibodies against these targets and the in vivo proof-of-concept study by testing the therapeutic effect of these monoclonal antibody product candidates in disease animal models.

A number of these targets are now at the stage where further advancements will require the development of mAbs against them. The additional funding from the agreement with Baize announced at the end of 2011 will allow us to more aggressively advance this large number of targets within our Pipeline Program and to significantly increase the number of mAb candidates being developed against then and advance to preclinical stage prior to outlicensing without negatively impacting our financial situation.

With respect to our second area of focus for our Pipeline Program, which includes therapeutic proteins such as CGEN-15001, 15021, and 15091, we are pleased to report that, as projected when the Pipeline Program was announced in late 2010, the most advanced therapeutic protein candidates are now at the stage where we see significant industry interest in possibly licensing or other forms of collaboration with us. Furthermore, during 2011, in addition to successfully advancing these initial candidates, we established internally and with external experts the required early-stage development capabilities for these activities.

I would like now to make a few comments regarding some of our near-term expectations for our Company. First, with respect to our therapeutic protein activities, for the reasons discussed earlier it is reasonable to expect that our initial product licensing agreements will most likely involve product candidates from this area. Also, with the addition of the early-stage development capabilities that we have added to our R&D infrastructure, the advancement of the next-in-line molecules should be more straightforward.

In the field of monoclonal antibodies, since we already have a significant number of exciting mAb targets and expect to have an ongoing need to create and develop mAbs as we continue discovering new targets, we believe it is in our best interest to enhance our core capabilities in monoclonal antibody development, which we are now actively pursuing.

More specifically, we intend to establish in-house [70] monoclonal antibody preclinical development capabilities that were previously intended to be obtained solely from third parties. Such an in-house capability would provide us with better control of [effect] activities to maximize potential success and also significantly increase potential future profit from licensing and commercialization, since it is clear that a key value inflection point in this area is the demonstration of the therapeutic proof-of-concept of the mAb in these animal models.

With respect to predictive drug discovery in general, as we the industry begins to appreciate the power of (inaudible) systematic and continuously improving discovery capability, we must and we intend to constantly enhance our leadership position in this field. This requires an ongoing focus on building new predictive capabilities and integrating them into our discovery infrastructure, based on our continuing efforts and deeper understandings of biological phenomena at the molecular level.

And as mentioned by us in the past, regarding this form of research Compugen has two key competitive advantages. First, as a time of decreasing productivity from traditional experimental-based drug discovery, Compugen's predictive discovery capabilities are demonstrating unmatched capacity to discover novel product candidates in areas of unmet need with speed, flexibility, low cost, high-class [professional] quality, along with an anticipated growth in strong IP position.

Second, in order to compete with us using predictive computational discovery, others will have to establish the required scientific infrastructure and expertise, which has been carefully constructed by Compugen over the course of a decade. The speed with which Compugen's Protein Family Members Discovery Platform led to the discovery of CGEN-15001T, 15001, 15021, and 15091, and other B7/CD28-like proteins attests to the power of Compugen's predictive discovery science and our ability to develop drug candidates targeting novel biological pathways to address unmet medical needs.

Furthermore, as mentioned earlier, the internal and external capabilities that we have established to support the research and development activities of these initial candidates in our focus areas within oncology and immunology already facilitate the development of additional candidates. Compugen's B7/CD28-like protein family members are predicted to act through the modulation of the immune system. Immunomodulation is a key area for medical research which has led to the development of promising new strategies to treat cancer and autoimmune diseases.

Due to their predictive function, each of our promising B7/CD28-like discoveries can be the basis for two types of product candidates -- both drug targets for mAb therapy and as protein therapeutics for oncology and immunology. Specifically, cancer immunotherapy is focused on enhancing the body's natural immune functions against cancer cells. MAb therapy directed against Compugen's novel B7/CD28 proteins is designed to enhance the body's natural immune response against cancer cells.

For treatment of autoimmune disorders, the respective protein product candidates utilize the natural function of the proteins to modulate the immune system. These product candidates have already demonstrated dramatic therapeutic effect in disease animal model.

The initial successful results of our immunomodulatory candidates and the high industry interest in this class of proteins has led us to expand our discovery in this area to the identification of additional sets of immunomodulatory proteins beyond the B7/CD28-like family. As I disclosed during our prior conference call in 2001, we have developed two as-yet-undisclosed discovery platforms based on new approaches and algorithms to predict such novel immunomodulatory proteins.

These platforms completed their in silico validation stage and have already predicted several novel immunomodulatory proteins which have entered initial validation studies at drug targets in the fields of oncology and/or as protein therapeutics in immunology. Based on all of the above, we see the field of immunomodulatory proteins as a key area of discovery and development for Compugen over the near future.

With respect to the market of our candidates, during 2011 we have seen a continuing trend favoring these for early-stage therapeutics. This is not surprising as pharma pipelines continue to shrink and as the availability of quality clinical-stage drug candidates continues to decline. We believe that these trends will continue to grow, which obviously will be a major advantage for a systematic discovery company such as Compugen.

In closing, as all of us have stated, we see 2012 as the year when Compugen begins to realize in a significant manner the promise of predictive drug discovery and clearly demonstrates the value of our long-term investment in creating this unique capability. Therefore, my comments as we begin this important year would not be complete without expressing our gratitude to our shareholders. Clearly, without their loyal and patient support, none of this would have been possible.

And with that, we will begin the Q&A portion of this conference call.

(Operator Instructions) [Ken Farber].

Yes, hi. I have a question that I've been interested in quite some time, and it's a question that I probably shouldn't ask but I am going to. That is, as I look back at our news releases from 2008 to 2011, I have seen a series of collaborations starting in 2008 with Merck, 2009 with Bayer, 2009 with Pfizer, 2010 with Seattle Genetics, 2011 with the Fibrosis Foundation, DiscoveRx, and BioLineRx. My question is twofold.

First, without going into the details necessarily of those collaborations, how many of those collaborations are still ongoing at this point in time? And, what is different about today and where the Company is relative to those collaborations that have been announced previously, for which we have not seen any revenues as a result of those collaborations?

Well, the answer to the second part of your question is very straightforward. That is, all of the earlier collaborations that you mentioned were based on the discoveries that were made as we were establishing the scientific infrastructure here.

It might be useful just to remind our shareholders that this has been a long process, beginning with assembling the key scientific people with the right backgrounds. You cannot go and find people in the outside world who do what we do. You have to find people with the necessary backgrounds in computer science, mathematics, biology, algorithm research, etc., and then they have to work together and have to actually establish a proprietary science.

And I am not talking about technology now. I am talking about actual proprietary science. When -- a biologist graduating with a Ph. D. from the best universities is not going to know what we know about the specific areas we are interested in, and that is the predictive understanding of essentially life at the molecular level. How the genes express transcripts, how the transcripts become proteins, proteins peptides. And then having the capability of searching in this potential base of molecules for molecules for whatever method that you are looking for.

So after getting these people, and it takes them a number of years to actually start working to get (technical difficulty) working smoothly together; and then, of course, they begin to focus on individual biological phenomena. And if you -- we have published over the years, I don't know, 60, 70, probably more scientific papers as we pioneered the understanding of some very basic and key biological phenomena, again about how life works at this molecular level.

But in addition to understanding these mechanisms, our scientists created individual predictive models for each event. Now, the only way that you can determine that a predictive model is accurate is if it actually predicts what you already know. Of course, if that is all it does, it is not very helpful.

But when it predicts what you already know and it also predicts other things, then you have a sense that your predictive modeling of that specific biological phenomenon, such as alternative splicing or anti-sense or whatever it is, that you are modeling of that specific biological phenomenon is correct.

So in that process, by definition we discovered -- and this is truly science or technology-driven discoveries, having nothing to do with what the market needs or wants or whatever. But we discovered things that -- molecules that exist, because of our deeper understanding of this particular biological phenomenon.

That went on for quite a number of years and along the way we not only dealt with these as individual phenomena but we began to integrate the individual phenomena into an overall view of biology at that level. And at a certain point we felt that we had enough of a general understanding of the different phenomena and enough of integration of the various processes that we could actually take this capability -- this what we call our discovery infrastructure -- and now rather than just seeing what the individual pieces could discover, we would target them at areas of unmet medical need, actually move to a market-driven approach.

Which could not -- I mean you cannot take a -- I mean, you can try to take a market-driven approach after you have an individual biological phenomenon modeled; but most likely -- maybe you will find something of market importance, maybe not. But when you assemble enough of this core that you -- I'm not suggesting that we understand everything; this process continues.

But I think the results of our first attempt at doing this, and that was the family of B7/CD28 molecules, this is the first attempt that we said now we believe we have enough of these individual understandings integrated together to provide us with the capability to target this market need. And the market need was not selected because we thought it was something that we could do; it was targeted because it is a very, very hot area in medical research, a field of great interest within the pharmaceutical industry.

This is a family of molecules that regulates the immune system, meaning that there are all kinds of opportunities if you have a way of modulating -- or molecules that can -- that are key to these pathways, that you can address all sorts of diseases from diabetes to rheumatoid arthritis, all forms of cancer, and the list goes on, multiple sclerosis. The list goes on and on.

And within a well less than a year and with the total expenditure in the -- specifically with respect to after we had decided to focus on this, a total expenditure of much, much less than $1 million, we discovered nine new members of this family. Now, I don't know; I know that's orders of magnitude faster and less expensive than others. But what is more important is that others, spending all that money, did not find these molecules.

And when we gave these molecules to the experts in the field, in general the messages they came back was that -- wow, we had never seen -- and these are the people who test the same type of molecules for the industry. Came back and said -- wow, we have never seen molecules perform this way in these early animal model studies. It has to be early because, as I said, we only began to do this aspect of our research over the last two years.

Now, I apologize for this very long answer to your very clear and specific question. But I think only with this understanding of how we got to where we are and all of the necessary steps that had to be taken in order for us to reach this point, really explain what is going -- what is happening.

Now with respect to the specific agreements, I think the only thing I can say is that some are active, some are not. I would say that in general the majority of those that are not active, the reason they are not active has, as far as we know, has nothing to do with the results that were obtained in the research, but has to do with either changes in corporate structure or mergers or decisions to move in a different direction. The industry has been going through quite a bit of turmoil over the last number of years.

But in any event -- and just recently over the last six months we have signed I guess three agreements for some of the other, these what I call the technology or science-driven discoveries that were made as we were building our capability. I think the real test for us and the test for whether or not we have truly created an absolutely unique capability will be and is now the response for the industry of our first approach at market-driven discovery using this long-term infrastructure, this infrastructure that has built up over many years.

That, you have to rely on us, because there is no outside -- well, I guess other than the academics who have commented on some of our molecules in an extremely positive way, and this stuff is published. But other than that I think you just have to rely on us as we say that these -- this family of molecules is receiving a very positive reaction within the pharmaceutical industry. Maybe Anat, maybe you'd want to be more specific?

Yes. I think that there is a clear difference between the [conversions] who are looking forward or -- and discussions that we are having, there will be (inaudible) to the past. It has to do with what Martin said about the market-driven approach and the fact that we are looking for stuff that is of very high interest to the pharma industry, as opposed to the validation stage of our capabilities where the discoveries were technology-driven.

But it is not only this. The fact that we have initiated the Pipeline Program that allows us to take forward the candidates from initial validation forward makes these candidates more attractive to the pharma companies. Because this is not similar to giving to a pharma company a molecule that was just predicted from the computer, and then when you get into experiments and validation you have to invest in order to prove that it is working.

At the point of time where we are now, at least with the therapeutic proteins that we are having in the pipeline, we have very nice results supporting these predictive discoveries that we have made.

This is something that builds a value into the molecules. So the value is not only, by the way, the value of the deal itself, but the value is also for making them having the right priorities with respect to these molecules that will be incorporated to work together.

And the fact that Compugen wouldn't want to get into collaborations that we just give the molecules and forget them. We are very much believing with what we have discovered and the experimental results that we are having, and we do want to follow up very, very closely of what we are moving forward with.

So the value of what we are discovering today and the stage that it is, is much more important and seen by the pharma companies in a more valued way. And the enthusiasm around these candidates is much better and will have to support this candidates in the pipelines of big pharma companies as we move along. So this is something there is (inaudible) a key difference.

The other thing is that the deals that we are in our area of focus for today that we are looking for are -- there are of two -- actually for three types. Martin described one of them, which is the foundation stage deals that -- sorry, the validation stage discoveries that we have made. We decided to take them forward with third-party funding, but the deals that we are looking for in the core capabilities of Compugen are two types of deals.

One type is what I just mentioned with respect to the actual product candidates that we discover that are in our Pipeline Program; and the other type are deals that are using our discovery capabilities in order to identify product candidates that were not identified yet. Even in this case, this is not the aim of Compugen to give the molecules at the stage where they are out of the computer, so like sequences from the computer.

It is very important for us to be part of the experimental validation and moving forward, in order to make sure that we get the most from the candidates that we have predicted. Not because we think that pharma is not doing a good job; it is because it is a matter of prioritization when it gets to be involved with other projects. So this is something very different.

Not to belabor this point, but just -- I would like to make a very general comment here. And that is, that our biggest problem in the short term as a public company will ultimately turn into our greatest advantage in the long term; and that is that the financial community and even CEOs of major pharmaceutical companies really have very short timelines with respect to the willingness to invest in the future.

That is why you see so much of the -- more and more of the me-too. All of these wonderful new targets are supposedly being discovered all over the place but very few of the pharmaceutical companies are pursuing any of them. Most of them just remain on the shelf.

We live in a time where probably because of high tech, because you can have an Apple or a Sony or whatever that within six months or a year can come up with a great product, that people have been conditioned to the idea that you should measure how well someone is doing in six months, in a year, whatever. Biology, life science today, is at a very, very early stage, and in order -- the really important breakthroughs that are going to be made and are being made in life science are not going to be made by companies that are trying to take one or two products through the clinic and seeing whether in the end they work or not. They are going to be made by companies -- and as of now I am aware of only our company, Compugen -- that is prepared or was prepared, fortunately it is now behind us. But was prepared to take the long-term view.

I mean for those of you who are old enough to remember the analogy, in some ways we think of ourselves as kind of the Bell Labs of the life science industry. We are not here to develop a single product or to use the science as it is understood today to see what we can come up with. We are here in order to advance the science, in order to create products out of an understanding of the science that other people do not have.

Something as I said, doesn't exist in the high-tech world. You can't have proprietary science. You can have proprietary technology, but you cannot have proprietary science in the high-tech world.

We are based on proprietary science, and it continues to improve every day with the top-level scientific team that we have here.

So as I said, as we are going through it, it was our most difficult problem as a public company. Because people want to know -- okay, what did you do last quarter? And in some quarters we were able to have some very specific milestones; but you know what? The things that we announce are probably not the most important things that are going on in the Company.

The most important things that are going on in the Company have to do with the creation of this unique understanding of the underlying science that will give rise to, on a consistent and systematic basis, new products and better products. Every product, every discovery we make, makes it easier for us to make the next discovery, which is the exact opposite of the experimental approach.

I have since -- I would have to admit personally that I never would have taken over the Chairmanship of this Company back in 1997 had I not had a successful career previous to that and had seen the problems in the pharmaceutical industry and the enormous wasted money and research. And it is not wasted because the people are stupid. They are very, very smart people in the pharmaceutical industry.

But they have created an infrastructure for discovery that is based on technology, which worked for a while, but now no matter how good your technology it is getting -- the low-hanging fruit has been found, and life is very complicated, and now we need to go deeper and deeper into the science. That is what we have been doing for the last more than a decade.

As I said, now that it is behind us, largely behind us -- I mean, we are continuing, of course, to move forward. But we didn't by accident choose the title for our -- for this presentation that both Anat and I have really tried to encourage people to look at and to try to get a better understanding of who we are and where we are and where we have come from. Because we are very confident now that we do have -- these are only our initial products, and yet they are superb product candidates.

They are still very early, but when you go to the history of the Company it will be impossible for us to have late-stage products at this point in time out of our market-driven approach. The approach just did not exist and could not have existed.

But so, we have excellent products. We now have the recognition of the pharmaceutical industry, or a very large portion of it. It is very, very hard for them to ignore the types of discoveries that we are now showing them, and we have the resources that we need in order to move forward in our chosen fields.

So, that's why we -- and you can look back at any of our prior presentations and you won't find a title like that on any of them. We are quite confident that we now have reached that point where our shareholders will begin to actually see the value and the promise that this new approach to drug discovery offers.

I think 20 minutes ago somebody asked a short question. and we have been talking ever since, so --

That was my question. I appreciate your answer, and I look forward to a trip to Israel in two years with my high school senior and the rest of my family to celebrate the rewards of your great science. So I thank you for (multiple speakers) that answer.

Please make sure that you visit with us.

Absolutely.

Thank you.

[Dave Roiger].

Yes, congratulations on a very successful 2011. On previous calls, it has been stated or clarified that the real core advantage of Compugen is the ease and rate of discovery of drug candidates, and not so much that an individual drug candidate has any higher likelihood relative to a comparable industry candidate of becoming a successful drug. Has CGEN-15001T or other recent discoveries or new science changed that thinking about the ultimate general success potential of CGEN molecules?

This is a very interesting question that you are asking, and I think that it is a good time for us to relate to it and to further explain. The candidates that we are discovering, you correctly said are not candidates that would have a faster time to clinic, or Compugen is doing the discovery in a way that would create -- would generate a promising discovery that should reach to the clinic and to the market.

But the main point there is meeting -- or actually two main points, are the fact that we select candidates that we believe should fit exactly to the therapeutic unmet need that we have put in front of our discovery team. And the second thing is that we select those that should serve in a superior manner to those that are either in clinical development or in the market.

So this is the focus of what we are discovering. So if we could come up with 10 different molecules, we try to select out of these ten those that should be superior. So it is not a matter of the time that it would take them to be developed, because we can't affect this. We have to do the same experiments like the industry is doing -- the preclinical ones, the Phase 1, the Phase 2, the Phase 3, and we don't know if the attrition rate will be less.

But what we do aim to have is candidates that are having superiority in this indication and also, as we believe [just] in the discovery systems that we are using for these complex diseases that are multifactorial, those that should fit this specific disease. So this is (multiple speakers).

You know, when you think of the problem of new product introduction in the pharmaceutical industry from the discovery standpoint, there are two variables that both are very, very bad. I mean the actual numbers are terrible for the industry.

One is of all of the products that look good during their early stages, how many actually make it to the marketplace? And depending on where you start the process, the numbers are terrible. I mean you go back to lead compounds, you are talking in the one out of thousands that actually end up getting to the marketplace.

With respect to that, we believe that we will improve that statistic. However, there is absolutely no proof whatsoever, just because we don't have the time. It will take time to actually show, but it seems reasonable that if you predict something that it will have a higher probability of actually doing what you think it is going to, than something that you accidentally find.

So -- but again, we have no proof and it will be a long time before there actually is proof, ultimate proof, in the marketplace. We can show that at the early stages we have a much, much higher probability of success from the standpoint of the early discovery, the in vitro testing, and the in vivo testing, those areas. To the degree that there is knowledge available of industry standards, we are quite confident that our record is very good.

The other variable that is not very good, unfortunately, for the industry is -- how good are new products relative to the products that are already out there? Every now and then there is a real contribution made to medical science; but unfortunately if you look at the list of approved drugs each year, you don't find very many. They're actually -- in most years you are lucky if you find one or two that really make a difference in medical practice.

Here, we have some evidence that when you compare our drugs, our product candidates, at a very early stage, and you look at exactly the variables that everyone else is looking at to determine how good these products might be if they succeed in the marketplace, there is some evidence for some of our products that they are -- and I said, they are superior to products that are out there or those that we know of that are in the clinics. But again this is based on very early studies.

Thank you. That sounds encouraging.

It is. I would not be spending my career here if it wasn't.

Does that answer your question?

Yes, thank you.

Geoff Gilbert, Peak Investment Management.

Thanks for the opportunity to ask a question. Just on my historical perspective, I believe that when you got a drug candidate to the validation stage you would then announce a new platform; and you have two undisclosed additional discovery platforms. Do you have any ideas on when you might have announcements or details on those discovery platforms?

Yes. As we disclosed in my script today and also in the press release, these candidates that we have predicted are now at stages of production and should enter in vitro validation studies. It is hard to say exactly when we will have that ready. It depends on the different systems that we will need to check them.

Would it be this year?

Yes, it will be this year. Yes, it will be this year.

Okay, great. Appreciate it.

(Operator Instructions) Brett Reiss, Janney Montgomery Scott.

Great. Thank you. You mentioned in the presentation that some of the therapeutic candidates are going to be kept in-house instead of outsourced. Do you have some sense of how much that is going to add to the G&A expenses?

Maybe I didn't explain myself in a clear way. This is not the intention. So the candidates that we are pursuing forward are candidates that -- all of them are available for discussion.

We do want to build value into these product candidates before they are out of Compugen; but this is in line with what we said previously in the Pipeline Program and the stages that we have described for the Pipeline Program. So nothing that we plan to leave in Compugen for further development beyond the Pipeline Program for now.

Yes, just the aspect of talking about the building additional capabilities for monoclonal antibodies was not meant to -- that we were going to long-term keep these products in-house. But it is clear to us that we will have substantially greater value and opportunity in licensing out the monoclonal antibodies rather than the targets.

Now, I don't want to say that we will not license our targets. We actually are having some discussions now; they are at a very early stage, but there we do have some very, very interesting targets.

But it is difficult for me to imagine that we would get the type of financial rewards for a target that we would get for a successful monoclonal antibody. We are in this very, very unique situation in our industry that -- the shareholders aren't going to like what I'm about to say -- but we can accept failures.

You see so many small life science companies out there, they can't accept failures They are resting on one or two products. As a matter of fact, some of the big pharmaceutical companies are in a difficult position to accept failures, because so much of their future rests on one or two products.

We can accept failures. With the number of targets that we -- how many have we disclosed to date? Or have we disclosed? I don't know, about -- maybe -- well, let me just say it's in double figures. If you want to add to that you can. Okay, not.

In any event, we have got -- and these are targets that look very good and have gone through a series of validation steps, so the -- and the process of going from a target to a monoclonal antibody is largely technical in nature. There are many ways you can do it; different companies can do it; and we are actually going to build that capability ourselves in our Company.

With respect to the aspect of G&A that you raised, we do not expect to increase our G&A.

I assumed what you meant when you said G&A was just our expenditures in general, because whatever we do with --

Well, with our R&D expense and also our G&A, we did not expect any increase in the G&A.

Right.

Right, right. I am just -- when I heard that some people may raise -- just want to make sure you have enough working capital to handle R&D going forward.

I think for -- you know, for those of us -- for those of you who have followed us over the years, I think it is clear that we are both very careful with respect to our expenditures, and we also are very good. And Dikla and her team does an excellent job of projecting what our expenditures will be and then controlling the expenditures in the Company.

Something that people may not be aware of, but I think might surprise some of our shareholders, that if you look over the last what -- four years, five years?

Four years.

If you look over the last four years, each year we have ended with more cash in the bank than we did the year before. And I doubt if you can say -- and this is without any large offerings or any of this kind of stuff. We've been protecting the shareholders' interests, and we have been -- we're a development stage company with almost no revenues.

And yet, as I said, each year for the last four years we have ended the year with more cash than we did the year before. I don't think -- I am fairly certain this year will be no exception.

Well, thank you for taking my question.

Thank you for asking. My big fear in these calls is that no one will ask questions.

We have nothing to hide as a Company. We are who we are. So feel free to ask any type -- don't feel uncomfortable with any type of question.

There are no further questions at this time. Before I ask Mr. Gerstel to go ahead with his closing statements, 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 03-925-5925. Internationally, please call 972-3925-5925.

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

Well, I did prepare some remarks; but in view of my very long answers to a few questions, I think I will conclude this just by thanking all of you for being on the call.

I would like to tell people who happen to be in New York or are on the East Coast that Anat will be speaking at the Bio CEO conference on Monday, February 13; so if you would like to hear her or meet her in person, that would be a good opportunity to do so.

So, again, in closing I thank you. Since I mentioned the fact that I have been the Chairman here since 1997, I think I should also add that I don't think I have ever been prouder of anything that I have done in my professional career than being associated with this Company. It is a marvelous team of people, and I believe we are really going to change the world of pharmaceuticals. It's a real pleasure to be here and to work with these people. So thank you very much.