Celldex Therapeutics Inc (CLDX) 2002 Q2 法說會逐字稿

Good morning and welcome ladies and gentlemen to the CuraGen second quarter financial results conference call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open the conference up for questions and answers after the presentation. I will now turn the conference over to Mr. Mark Vincent, Director of Investor Relations. Please go ahead Sir.

Good morning and welcome to CuraGen second quarter 2002 conference call. This morning, we issued our second quarter 2002 financial press release, which forms the basis of this conference call. This conference call is being hosted by executives in CuraGen. Included here today are Jonathan Rothberg, founder, Chairman, and CEO, David Wurzer, Executive Vice President and CFO, and Chris McLeod, Executive Vice President. During the call today, management may be making forward-looking statements that are subject to certain risks and uncertainties. Please refer to our annual report on Form 10-K for the fiscal year ended December 31st, 2001 for a complete discussion of these risks. We are now going to begin the presentation and we are starting on at slide-3. I'm going to be turning the conference call over to Jonathan Rothberg, who is going to begin by discussing CuraGen business strategy.

Thank you Mark and thanks everyone for joining us on the quarterly call. I am on slide 3 of our webcast titled 'CuraGen Business Strategy'. CuraGen started by creating a platform that would allow us to take the genome and turn into drugs. We positioned ourselves at the intersection of two major forces, information technology and modern biology. We have been able to leverage that platform in a number of critical service collaborations with leaders in Bio-tech and the pharmaceutical industries. And of most importance, during the service collaborations, we are able to learn debt practices from these collaborators; debt practices that are now enabling us to make drugs, protein drugs, anabolic drugs, and small molecule drugs with true alliance partners, as well as prioritize these drugs and eventually ensure clinical efficiency to making sure we give the right drug to right patient. We've taken this platform and these debt practices that we have learned and are applying it to our own platform which is our own product portfolio in pipeline, which will form the basis of today's presentation and the focus of the company. We now have strategic partners, both Genentech and Bayer, which allow us to move forward in a broad product portfolio, which includes protein drugs, in which we have the internal expertise to move forward, anti-body drugs, which we are doing in conjunction with Genetech, a leader in fully human monofungal anti-body technology and small molecule drugs with an emphasis on obesity and diabetes, too large on that need with Bayer pharmaceuticals. Together, these companies are putting in approximately billion dollars of commitment to move these products forward and allow CuraGen to share in the upside. I will go through that pipeline as well as specific examples within our pipeline as we make the transition from a discoverer company to a company focused on our pipeline with products that are nearing clinic.

Next slide please.

This slide titled 'Intergrated Drug Development', outlines CuraGen's approach and really clarifies both our technology platform, which extends from the genome to the clinic, as well as makes clear our progress in understanding the genome and our progress in advancing protein and anti-body drugs as well as small molecules. Underlying all of our technology is an information system, which makes CuraGen unique in the industry. CuraGen now has approximately 475 employees, approximately two times our inner facility, which creates information on products and can advance those products. One hundred of them support that facility to advance technologies that allow us to create these products and approximately a 120 of them are now in discovery, development, regulatory, and in clinical departments driving this process, giving us a tremendous efficiency and allowing us to manage a genome, a pharmaceutical tractable genome of 8000 genes, 500 targets which we have identified and 200 projects that we are now working due to a loan over the partners, and again it's the information system that enables us.

Next slide please.

I would like to focus in on this slide titled 'targets by disease area' to make clear CuraGen's progress. As I stated, we first trailed to technology platform. We are now virtually finished in terms of identifying those genes within the genome that are potential to pharmaceutical development and CuraGen has identified 8000 of them, and again lead efforts and CuraGen's expenses for those efforts are virtually complete. Out of these 8000 genes which we firmly believe will form the basis of all future medicines, CuraGen has identified 500 of them shown in this line in terms of their relevance with specific disease including metabolic disorders, oncology, inflammation, and central nervous system disorders. In addition to knowing the disease relevance of these 500 targets, CuraGen also understands how to advance them as potential products and these are either potential protein therapeutic and contains growth factors, which can be injected when met medical needs.

Fully monoclonal antibodies which can reproduce, can be injected and then act meticulous as well as conventional drugs which we are doing the best. Also shown is our partnership strategy on this slide and our partners to date in terms of moving targets downstream. And that is an important stream for today's conference call. As I said, the identification of pharmaceutical capital gene is virtually complete. It is also important to note that with the identification of these 500 targets, CuraGen has well passed the halfway point in identifying targets from the human genome relevant to major unmet need. And we are now making a major transition which we will show you in the proceeding slides, the following slides, towards moving this targets downstream in what we call projects. Currently, we have 57 of these targets that we are working on to turn into potential protein drugs and I am excited to say that 5 of them are now validated as potential protein therapeutics and one is an IND candidate that we will be moving into the clinic over the next four quarters.

Following that, is a 100 antibody projects which were now triaging with organics and CuraGen has in account 19 fully human monoclonal antibodies. Last, with our partnership with Bayer in obesity and diabetes, we have identified 47 targets for an unmet need which now in terms of health care exceeds smoking as a burden on the US Health Care System and we have completed 11 streams for small molecules. Again, our strategy is to maintain the upside, but reduce risk by partnering. So, in both the organics case and the Bayer collaberation case, the partners share the expenses by either producing the antibodies and organics case and/or doing the streams of small molecule development in their states. Next slide please.

The next slide is titled protein therapeutic pipeline and again we want to emphasize while we have one ING candidate we are preparing for multiple indications including mucositis which is a side affect of common cancer therapies and may expand utility of not only existing cancer therapies but allow new cancer therapies to be brought to the market as well as ulcerative colitis which is a devaluating disease of both the young as well as the old. What is important to note in this slide is again our pipeline philosophy and while we have one product now keyed up to go into the clinic, right behind that we have five validated proteins where we understand the proteins in terms of the biological affect right behind that we have another 22 proteins that we understand in terms of the relevant disease. Purify these proteins and behind that we have 57 total projects describing all of our efforts in protein therapeutics. Again emphasizing that we have created a pipeline. And our focus is now on moving that pipeline downstream and any technology advances at CuraGen are now moving away from target discovery to target validation as well as technology that will allow us to progress the pipeline into the clinic and monitor drugs in the clinic and eventually advance them in the market.

Next slide, I would like to go into more detail and a titled Protein Therapeutics on our 6 validated human proteins. These numbers are cumulative and do include CG53135 which is our IND candidate for mucositis and ulcerative colitis.

The majority of these proteins are focused on two on that needs, oncology and inflammation, which does include all immune disorders. I would like to focus in on one of them. The one noted as number 2 in the next slide titled protein therapeutics. This is an exciting slide to CuraGen and it is an important slide because it not only emphasizes the identification of an antiangiogenic factor, which may have relevance to treating a broad range of cancers, but emphasizes what we mean by a portfolio approach. For those of you who follow us closely you will know that earlier this year we published on a separate compound, a protein drug, in cancer research that also showed antiangiogenic affect. Our goal is to create a pipeline. A number of proteins that cover a number of mechanisms including angiogenesis and allow the best compounds in terms of biology and meeting on that medical needs to go forward. Again emphasizing a pipeline.

The next slide is titled 'CuraGen Abgenix Alliance' 101 elected project. As you know, we now have the capabilities to move our proteins along our cells. This slide emphasizes that we also have one of the largest collaborations with Abgenix to create fully human monoclonal antibody. We have been able to go through the genome

with Abgenix a 101 projects which we are moving forward. It is important to note that we do not expect the majority of these projects to become drugs. Quite the contrary, it is the opposite, the majority of the projects will fail, but by understanding that, we are able to create a pipeline of balance and create a pipeline with the number of projects that we know we have the financial resources to move forward, as well as anticipate the failure as we allow, as I like to say, allow to get these molecules out and see if they work in more challenging animal models and ultimately in the clinic. So and more challenging animal model and ultimately in the clinic. So from those 101-elected target, we only expect a handful of drugs and we will be

them as we go. The numbers shown do not reflect the full trializing, the numbers right now reflect the progress we have made, so right now we have 42 antigens that we have delivered to Abgenix to make fully given monoclonal antibodies. Abgenix has done 28 successful immunizations and most exciting of all, the

CuraGen and Abgenix, we have 19 separate fully human monoclonal antibodies against 19 separate genes that we have identified within the genome and correlated and/or validated with major, on med needs and inflammation and cancer and feel this is us our future, moving these antibodies creating additional antibodies and moving these to the clinic.

One other thing that was important in choosing Abgenix as a partner is exemplified in the next slide title CuraGen Abgenix focus on targets that other companies are not pursuing. An important point now, is while CuraGen is Abgenix major partner, Abgenix does have additional partners and we use that as a strength. We use that as strength to ensure that when we are left a project, those 101 projects I talked to you about Abgenix other partners who are using Abgenics technologies and their models to make fully human monoclonal antibodies are not working on the same targets. That is absolutely clinical. Well, we use intellectual property and science and market potential to determine which projects we've moved forward is very powerful to know that you are moving forwards with a project that 28 other companies are not receiving at least with Abgenix's technologies. And as you in our Bayer collaboration, we use those same strategies to ensure we focus on projects to the best of our knowledge that others aren't working on. The next slide is the list of the 19 fully human antibodies.

These antibodies are in the areas of oncology and inflammation, and cover a broad spectrum of mechanisms in both disease areas, that is very important .It is critical to note that CuraGen or Abgenix are not placing all 19 debts on a single number on the roulette wheel, but have spread these projects across types of targets as well as mechanism of disease.

ability to manage transformation system, but what these potential products show is that genomics works. In fact, genomics is molecular biology scaled up and molecular biology works and with this is a historic moment. This is the time where molecular biology is coming together and we now have in this pipeline, products that validate as you will, be a product of genomics. Large-scale biology attacking on that needs in a new profits-oriented way does yield true portfolios and it is now up to us to move these portfolios into the clinic. In the next slide, we show the third part of our strategy. It is clear that biotechnology companies and genomics companies like CuraGen can progress in proteins and antibodies.

It is equally clear to us that the pharmaceutical industry will continue to play an important role in small molecule development. This slide titled small molecule strategy, its CuraGen strategy to take the best of CuraGen, its ability to find targets what others have been unable to unmet needs. Its ability to prioritize drugs, potentially very early in the pipeline and its ability to get markers for the clinic that are either diagnostic or show that your drug is working or not and it also shows how we can combine this to make real partnerships which are example

alliance which goes beyond just finding the first mechanistic based targets for obesity and diabetes but adding our skills and prioritizing the hits we get out to make sure they are not toxic and adding our skill to make sure the right drug is given to the right patients on the right schedule.

Also shown in this slide, zygomatic plate is a picture of our pattern strategy.

This is important while we are systematically going to the genom. It is important that our patterns not only reflected discovery of genes and targets but also reflects the knowledge we have added to them, the knowledge the changes the target into a drug, and it's this knowledge in these pattern which we believe will give us good protection in our proteins, our antibodies, and ultimately form a basis for a small molecule size and again it is done at the process and that is changed. Next slide is titled CuraGen Bear Alliance 47 project on the way. Again, one of the nice things about the genics and bear alliances is they validate that the targets we are giving people are not being worked on by their partners and need the criteria that

scientist a sign before they spend money moving forward. Bear has agreed today to move forward on 47 projects with CuraGen where we have presented information that has convinced them these targets may be intervention points for obesity and diabetes and again covering a broad spectrum of mechanisms to ensure that we have a balanced and hedged approach. This slide goes into the details of the pipeline.

I would just like to highlight it by saying they have accepted 47 targets, which we will be triaging and moving forward but what is most important is CuraGen, a very focused company is able now to have completed 11 streams and we are able to have the upside from the small molecules because we will bear the first 375 million dollars potentially to turn these targets in the small molecules. We will be able to coup as molecules progress and show potential. I would also like to point out in yellow and with an astrix that we have because of our technology excited bear in this collaberation to expand it and include a molecule which is in the pipeline shown here as a proof of principle pack and CuraGen can come in as we discussed with the technology beyond the target, technologies that allow us to understand the toxicity of this molecules, the mechanism of action of this molecule and again pick the right patient to give this molecule to and advance it at a lower cost and with a higher chance of success than a pharmaceutical company or bear alone. Our goal is to bring one or two products to markets and CuraGen will share 44 percent of that upside and again we will be sharing expense after we have real products, a real potential product that we will be able to discuss with our investor base, next slide please. The next slide outlines the products from the Bayer collaboration again emphasizing the strategy of making sure that you spread your targets across mechanisms. Shown here are number of targets which cover

, metabolism, insulin secretion and insulin sensitivity. Although the details of these mechanisms are not important, what is important is once again, these targets are spread across mechanisms to ensure the highest chance of success and we have done this sale analysis with the targets with Abgenix and internally to make sure not only do we have a large number of the highest quality potential products and potential drugs but that we don't place our bets on one area of biology but spread it across the

of success. The next slide is the last slide I am going to show you summarizing our products in our pipeline. It is the lesser than 11 complete strains and showing you that it is an even distribution across obesity and diabetes and not shown it is as much as possible at even distribution across the mechanisms to make sure we have the best chance of success.

This completes the part of my talk focusing on using CuraGen's technology and CuraGen's pipeline of Protein, Antibody, and Small Molecular drugs. But as you know, this is only one-third of the equation and while it may be the most important part of the equation, it is now imperative that in an efficient we move drugs forward and give drugs for the right patient and I would like to share two slides with everyone today showing the progress we have made.

We have been working over the last two years on understanding why drugs work and why they sell? In this slide, showing

genomics we summarize some of the results from these collaborations and more specifically our Bayer collaboration on treating a generic low-cost method to

pipeline. So when you have small molecular drugs and you have a number of them, you can determine which are the safest. We are strong in this craft as we are able to categorize drugs and in this case drugs that have no toxicity and also predictions in terms of toxicity ranking

on this graph with those that we predict to be more toxic to those that are least toxic. Follows the actual data, showing that indeed molecular biology and genomics not only works for solving the identification of targets but shows clear potential and prioritizing the drugs and allowing people to spend on limited sources on the drug that have the highest chance of success.

Next slide, if you will shows the third leg of the equation, you find, you intervene, you prioritize your drug and again I am showing materials and data that you can now use to know what is to give the right drug for the right patient. These slides have

diagnostic markers, shows a number of cancers and what is most important is reduce the fully human monoclonal antibodies, the one I showed you earlier, curative that we published on net to show that not only can cure two target cancers, but you can take blood from cancer patient and determine who you would give to a

, and you would only give it to those patients who have the target of curative floating through their blood so you will be able to neutralize that. I am not by this slide suggesting that cura 2 is a therapeutic. I am showing a general paradigm that many drugs that we create will have diagnostic markers that we can use with them because we understand the marker mechanism of disease. We will be able to give the right drugs to the right patients.

My next slide summarizes our milestones.

So our milestones are grouped into technology, which remains important but remains important to push downstream to use this technology as I showed you to prioritize drugs and give drugs to the right patient. Our strategic relationships which remain important in terms of additional relationships but secondarily and our secondary to our progress in our own pipeline which is the third of milestone which is obviously

in the investors' mind by our first

in the first half of next year but again I want to emphasize that I&D has value because it is followed by a pipeline. A pipeline of validated proteins; we discussed a pipeline of validated antibodies that may not have equal and the pipeline of small molecules in our

collaboration. Behind that we are planning new potential validated proteins, new potential molecular antibodies, and additional completed screens but again I want to make clear that the efforts to understand the genome in terms of RAW targeted identifications are coming to an end with the identification by CuraGen and others of the 8000 pharmaceutically tractable genes, we claimed a few years ago as well as the identification of what we believe is the majority of targets that we were going to find for unmet needs and the emphasis is focused on

the projects we have created and moving forward. The validated proteins, antibodies, and small molecules we will continue to create and have created. I would like to turn it over to Dave Wurzer, our CFO and EVP to go through CuraGen's financials. Thank you.

Thanks John and then good morning everyone. Just a few comments on the numbers. First of all second quarter was a very solid quarter for the company, reported numbers in the range of what we understand to be analyst projection. From the revenue standpoint, we continue to record strong revenues from Bayer and Abgenix strategic collaboration and expenses grew slightly to support our internal drug developmental efforts. We are on track with the full year guidance that we provided to shareholders and analyst in January with one exception and that is the net interest income will be down by more than projected given the current

environment. We finished the quarter with 455 million dollars in cash and investment. We have a convertible debt issue outstanding of 150 million dollars that is it is 6 percent

due in 2007 and we planned to keep it. It is a good security for the company and we would like to tight

as it relates very well to the expected progressions of our clinical pipeline. Our cash burn for the quarter was 24 million dollars year-to-date difference is slightly over 50 million dollars. For the second half of 02, we expect to be fairly consistent in our cash burn in the first half. Arriving in an annual cash burn of about 100 million dollars consistent with the 80 to 100 million that we talked about back in January. We at the same time can talked a little bit to you about a protein development facility that we were expecting to build. As noted in our press release, we have deferred building or with a grand new protein development facility but instead have added to and improved our existing facilities at approximately 15 million dollars in burn, this is 40 million expected by the end of the year with the development of the protein facility. Our headcounts for the year, excuse me, for the end of the June finished at slightly over 540,

that 475 employees with no net growth in headcount during the first half of 2002 and we have planned the same for the second half of 2002 and our subsidiary report of

Corporation doing technology development, we finished the quarter with approximately 50 employees and our headcount is flattening out as well. So to summarize, we are leveling expenses, we are conserving our cash, and we are closely managing higher as we make a transition from discovery related expenses to components associated with developments in preclinical and clinical. Jonathan.

Thank you Dave. Our last slide, I will quickly wrap it up and it's titled 'Focussed on Our Pipeline', we have created a platform, we have used that platform with collaborated learn best practices and as discussed now through our alliances as well as our own protein program we have created a pipeline, which we believe is the best way for us and our investors to create lasting value. By moving downstream, we can turn this pipeline into potential drugs that will benefit all of us. Thank you. I will turn it over to Mark Vincent.

I'll open it for the questions and so please start them up.

Thank you sir. The question and answer session will begin now. If you are using a speakerphone please pick up the handset before pressing any numbers. Should you have a question please press one followed by four on your push-button phone at this time. If you would like to withdraw your question please press one followed by three. Your questions will be taken in the order they are received. Please standby for your first question. Our first question comes from Ahktar Samad; please state your affiliation followed your question.

Hi, Bear Stearns & Co. Inc. Quick question to you Jonathan, if you could give us a little bit more color on the timeline for the first antibody IND filing and also for the small molecule. I am sure you get that all time but also if can just give us a sense of how things have progressed in terms of moving the collaboration of these

internal goals you have set for yourselves looking at specific metrix like you know, proof of principle, type advances, or you know, moving towards IND filings, just give a comment on the Bayer collaboration and the Abgenix collaboration?

Thank you Ahktar. I will answer the first part of your question focused on our Pipeline and timing of our Pipeline. Chris Mcleod our EVP who is responsible for both the Abgenix and Bayer collaboration will elaborate on those aspects of your question. First and foremost we want to demonstrate by our first IND, that CuraGen and has put together a company that not only has the best handle on the genome, well may be emerging as one of the strongest Pipelines but a company that can bring it and lead across the first finish line if you will. So we really do want to focus on our first IND, the first half of next year. In terms of commenting on the others I think it should be clear that we have a number of proteins right behind and a large number of antibodies and hope to have them follow in the next 12 to 18 months and then have a steady progression of INDs. I am slightly cautious on commenting on anything that will specifically beyond that first IND. It is important as a company and for all of our investors that we do that and they can recognize by the publications and the projects progressing with the partners that we do have a tremendous opportunity behind that. I'll turn it over to Chris to go through specific progress on both the Abgenix as well as Bayer collaborations which are very fruitful and we are very very excited about. Chris?

Thank you Jonathan. As you mentioned earlier with Abgenix we do have back in 19 fully human monocloned antibodies that we are evaluating. We do have some of those that have shown efficacy in animal models, that is one of our internal milestones. The next major milestone that you would anticipate to be starting to scale up before IND. And IND, we would probably materialize 14 to 18 months after that. So realistically we'd probably be looking for our first antibody IND in early 2004.In terms of Bayer we've mentioned earlier, we did expand the alliance with them to include compounds that are in their internal program. I think this underscores the footability of our functional genomic platforms throughout the process of developing drugs. So its not helpful just in identifying targets but also in identifying mechanism of action of compounds, their toxicity potential, as well as which segments of the population benefits most from that. This compound since it has already undergone lot of characterization, potentially could be an IND again towards the end of 2003 or early 2004 but we can't comment since they would be driving when that happens. Our screens, there we have already completed 11 of those, they are in process now, realistically it's 18 to 24 months for one of those leads making it into clinic.

Thank you.

Thank you. Our next question comes from Miss Marondel, please state your affiliation followed by your question.

Gerard Klauer Mattison, hi guys. Hello...

Yes hello.

I didn't know if you could hear me. First of all, congratulations on such a great first quarter, you made a lot of progress on your pipeline and actually this is my first question may be for Chris, because you just mentioned that the number from antibodies has moved, have shown activity in animal studies and I was just wondering if you could give us a little more detail on how many of the 19 antibodies and also may be the 5 protein therapeutic candidates have oncological and clinical developments?

Well, at this point, we have probably about 4 or 5 that are underway in our studies.

Of antibodies?

Yes.

And the 5 proteins therapeutics?

I'll have to get back to you on protein.

Historically we haven't broken down our validated protein pipeline or antibody pipeline in terms of individual studies. So we would probably wait until peer review for more details. You can see our publication track records in both proteins and antibodies and as well as the publication track record in the animal studies. We think that's really the best way to give more clarity and also have the scientific support because you can inject hundreds of proteins into animals and you can or cannot see efficacy. What's more important is well-controlled studies that appear reviewed and we've had a number of peer review publications this year that I would refer you to and will continue to do that. We think we can get clear validation that the target is good by a partner like Abgenix or Bayer spending money on it. The upgradation of those proteins has to come from peer review and ultimately for IND. So we've tried not to go into through in detail for where we are in these animal studies but have used our publication track record, which is substantial whether it is the cover for nature for our technologies or recent cancer research on the pipeline.

Very well done, maybe quickly on the small molecules, I think you have stated that you wanted to select the first botanical part of small molecule in 2002. Is this still on track?

In 2002, no I don't think we have said our expects for molecule targets for small molecule drugs.

For botanicals, so that is not for this year. Okay, and then last I would like to ask a question with regard to the formulation development, and the system was, if you could give a little more detail on, you know, what the most prominent challenges are currently on your protein therapeutic, whether they are related to chemical or physical instability and the second thought is also how elastic the current panel is for the development of a robust formulation and identifying in the short past and given the

biotherapeutics from relation development and is it possible that you are under estimates at that time, resources that were necessary, or where is the confidence coming from at the moment?

You have asked an exceptionally good question and I think yeah, this is Jonathan speaking, your question really points to something very important and that is, a single drug is an individual, and has specific physical characteristics that you may or may not tackle. It may be in formulation, it may be in stocks, it may be in efficacy, and that's again why we have tried to put more emphasis on the pipeline behind it. That said, obviously formulation approaching this key, we have made major steps. Part of the facility based talks about its standing, has already improved a major area for formulation and we have gotten people with specific formulation experience, 25 plus years in the biopharmaceutical company to make sure we have the formulation expertise. Again, this is a long answer. First, each molecule is an individual, you have that as a pipeline. Second, we have staff development throughout the expertise. Third, one of your new board members Ronnie

reminds me of his projects with Lipitor. Over years, he shows chemistry across the company, to, if you will formulate the Lipitor. I am glad they made that back. One of the things that you should know, that is what CuraGen is focusing on this and we do believe we will solve the formulation problem. We have recognized that we cannot do it at the expense of the rest of the pipeline. So we will not be betting the company on formulating this whole thing. We are taking a balanced approach. We will see the projects with other four teams, and hope you will see projects on this. We do think it is a reason to finalize the full project next year.

Terriffic. Thank you.

Thank you. Our next question comes form Todd Nelson, please state your affiliation followed by your question.

All right. Thank you. RBC Capital Markets, and

me and my congratulations on a solid quarter and a productive time for the first part of year. I guess I have a couple of questions, to ask a couple, and then may be I can get back in the queue, but Jonathan could you, you have offered I think a pretty good explanations to how you got turned the Abgenix relationship with, you know partly on choosing targets and choosing what they should

develop. Could you help us to better understand about what you do following you know selecting those and perhaps I think you may have more things than you can use, what sort of process you go through, and are they any opportunities on that front? And then the second question is on the I&D. mucositis, as you know the incidence has decreased. There have been a number of historical trials and it have been very difficult and can you give us some insight into how their portfolio planning committee had decided to go through with mucositis and if there could be additional I&Ds after that.

Oh, Todd thanks for the question. I am going to pass the first part of the question over to Chris which will go through entire flight of how we plan it and where come Abgenix portfolio and process.

Yeah, a very general overview is once an anagen is elected, we will create.....

Over to Chris, would you go through and clarify how we plan and work on the Abgenix portfolio and process?

Yeah very general overviews. Once the antigen is collected, we will create the protein immunized into the genomics and antibodies as rays. Typically there are tens or hundreds of, you know, antibodies created. So we, next we need select those with the best physical properties for further development, those are characterized in in vitro assays to see which would be most effective and those that are then progressed and modeled. So it's obviously an extensive timeline, and that's why we have those 19 antibodies already created. There are various stages in that process. In terms of when they might be potentially partnered, once we have animal efficacies, you know, it's a potential for partnering, one item that I would like to emphasize with this, we have established a process at CuraGen to try to evaluate the market value of our

. So we can selectively outrise and see if appropriate and then you know, it is just one further opportunity but it creates and captures greater value for shareholders adjusting, you know, the time horizon from when we might realize revenue from drugs and the risk of further development and I will turn you back to Jonathan, for the other question.

Todd, on the mucositis indication, first and fore most, we focus on the biology of the molecule. This is an FGF-20 and it was clear that it could help eroding cells in both mucositis and ulcerative colitis and making both of them appropriate. Second in terms of estimating market potential, all of us have to be careful especially with the history of the biotechnology industry. You have to recognize that good molecules can change the market, again in the case of mucositis, it would expand the ability for pharmaceutical companies to bring to market potential therapeutics that are very effective in cancer and there are number of them that have high side-effects and so would expand the overall chemotherapeutic market. Second, I want to make clear that these are the first two indications for this molecule that we were bringing into and hope to bring it into another indications and these are two indications that we think we are well poised to initially address and again we will have a number of molecules following them.

Great, thanks very much. Now I will take the liberty ask a few more questions and then I will jump off. Could you comment a little bit on the evolution of the IP portfolio and then Dave, a question for you, are you planning on making any strategic investments in the next 12 to 18 months and where would you target those investments and what would the timing of those investments be?

This is Jonathan answering first the IP question. I will pass it to Dave on the investment front. On intellectual property, we have always as a company focused on utility, what a protein does, what an antibody does, what a small molecule target and ultimately small molecule drugs will do, at the same time we have had a major emphasis on the underlying intellectual property in terms of composition. We think we are well positioned. We have been systematic on both composition and we have been more focused, we feel than anybody else. By first focusing on the 8000 pharmaceutical retractable genes we were able to focus our intellectual property not on anything that wouldn't have pharmaceutical relevance. Then we are able to systematically build those pattern portfolios and animal data to support the claims on protein therapeutics, antibodies, and small molecules. The IP strategy is also evolving to allow us to now not only claim underlying targets but the actual antibodies themselves with Abgenix and we think we are doing that very systematically as well as Bayer. I don't want to go in to details of our strategy but we think it is sophisticated and because of the emphasis on function we think it is going to be the preferred strategy going forward for many people.

Thanks John.

I will now turn over it to Dave for the financial questions.

I think your question was related to strategic investments we might make in the next 12 to 18 months, generally we have come out with the category potential acquisitions and, you know, our continued thinking is that in one of the opportunities may exist over the next 12 to 18 months to enhance our product portfolio to add million dollars for the year for depreciation and amortization, but through the second half of the year it will be approximately half of that. Capital expenditure plans for the third and fourth quarter are approximately 4 to 5 million dollars per quarter as I said earlier management supports of improving our existing protein development facilities and we are building a brand new facility at this point of time. And last, your question is when you might achieve profitability; profitability is going to be a function of our pipeline developments. At this point I believe most analyst models put that in the profitability in the 2006 range to 2007 per sum, and I think that's appropriate, you know, what we know at this point of time.

Thank you. Our next question comes from Joy Michelle please state your affiliation followed by your question.

Hi this is Joy Michelle at CCL Partners and I just had a question regarding the protein facility you had, I guess, got it in your first quarter release or your sorry, it may be your year-end release that you are going to spend 40 million dollars in a new facility and now I guess you've decided not just to expand an existing facility but CAPEX is actually going to be 50 million dollars on that facility. I just wanted to clarify why actually the CAPEX is increasing?

You may have misheard me. CAPEX is going to be 15 million dollars.

Okay I did.

This is 14 or more million dollars on this facility.

Okay. And then just a follow on then, for the cash burn initially at the beginning of the year, it was expected to be I guess between 85 and 90 million dollars. I think, is that correct?

That's correct plus the additional expenditure in the protein facility.

Okay. So that wasn't included in that.

That's correct. We outlined it separately in our release.

Okay. Thank you very much.

Thank you.

Thank you. Our next question comes from Alex Hidell. Please state your affiliation followed by your question.

With AG Edwards. Question is on the welding of the compounds by Abgenix and Bayer, as you offer up targets to them, I am curious how many are getting kicked back because they are already working on them and how many are you know showing up as unique?

I don't know

you know what the acceptance rate would be. We will need obviously to consider many factors when accepting a target and uniqueness is just one of those, clearly we are looking for good biology, we are looking for market potential, so you know, just because the targets are not accepted, doesn't necessarily mean that its not unique. So I have to go back and really look into that before I can answer that.

I can do that, Jonathan, did that and one thing, and I will give an example from the Bayer collaboration. One of the reasons for the collaboration, things are just rejected or accepted. There is really plan around every single project, the detail plan and the plan on how to move our targets into those projects so specifically with Bayer we can come to the target, we can pay website and they can say could you please validate that in another model and a specific example on obesity and diabetes that we now have compositional manageably small molecules, so its a great target to work. At first they said you know it works on rats, we want to know that it works in man and we will re-confirm that target in gestational diabetes. Then, they said we want to make sure it is on a pathway that works and we showed that the current drugs that failed to toxicity regulated that gene. So, this tremendous power that we get back from these companies to guide our science, to make sure targets are accepted. So, it is interiorly processed, it is not something failed and it's gone as raise the bar and we are both going to set money then we have the highest probability of success.

Okay. That's helpful, what I am, more than anything trying to get a feel for though is how much are the targets that you are offerings up, new things for your partners to see and how much when you present them, does it turn out that, where we got, you know, 2 or 3 other people who offered us this.

It is difficult to get specific numbers, but I will say that the vast majority of the targets we offer are, we are the first to identify. We truly potentially have first move our advantage in using genomics to go through and identify targets. And, that's really exemplified by the fact that when I said we have 500 targets, we are going to get much more, we really think, we were the first mover and the majority of times with both Bayer and Abgenix we are the first to present a target, and a high-quality target. So, this was the moment in the history and we were right to spend our investors' money in doing those targets and that gives us the confidence.

Okay. And of course leads to the related question of, can you give us an update on where things stand on either publication or issuance of protein patterns?

I do understand that this is a great question. Very specifically we have 20 something issue patterns and over the next 18 months, the majority of our patterns will publish and it will be clear that, you know, we did pretty well in this rate on proteins and antibiotics and small molecule targets. And I think you are digging something more specific, Abgenix actually renewed with us. They first gave us 15 million, after they saw our targets, they put another 15 million. So, that probably speaks towards the uniqueness of the targets we were able to provide more specifically than the need.

Thank you. I will now turn the conference back to Mr. Vincent to conclude.

I just want to thank everybody for some fantastic questions. I am going to turn now the floor back over to Jonathan to conclude the call.

I wanted to thank everybody for listening the shareholders and very much thank you for your continuous support during these challenging times for not only investing in genomics but investing and we are going to execute on your faith. Thank you.

Ladies and gentleman. This concludes the conference call for today. Thank you all for participating and have a nice day. All parties may now disconnect.