Celldex Therapeutics Inc (CLDX) 2002 Q3 法說會逐字稿

Good morning.

My name is Carnesia (ph), and I will be your conference facilitator today.

At this time, I'd like to welcome everyone to the CuraGen Corporation third quarter conference update.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer period.

If you would like to ask a question during this time, simply press star, then the number one, on your telephone keypad.

If you would like to withdraw your question, press the pound key.

Thank you.

Mr. Vincent, you may now begin your conference.

Thank you.

Well, welcome to CuraGen's third quarter conference call and strategic update.

Here today from CuraGen are Jonathan Rothberg, our founder, Chairman and CEO, David Wurzer, our Executive Vice President and Chief Financial Officer, Christopher McLeod, our Executive Vice President, and Tim Shannon will be joining us today, Senior Vice President of R&D and also our Chief Medical Officer.

Now I would like to bring your attention to our safe harbor statement.

This presentation may contain forward-looking statements that are subject to certain risk and uncertainties.

Please refer to our annual report on 10-K, for the fiscal year ended December 31, 2001, for a complete description of these risks.

At this time, I'd like to turn the presentation over to Dr. Rothberg.

Thank you, Mark.

I'm going to go to the third slide titled Curagen's Business Strategy.

This quarter we strengthened our platform.

Specifically, we introduced our PCS (ph) platform, which allows us to do predictive toxicity in a high through-put (ph) manner, and we received the (ph) milestone from Bayer Pharmaceutical (ph).

Chris McLeod will go into more detail after my presentation on that.

Also, in terms of service collaboration, last night we announced an expansion with Ono Pharmaceutical (ph), which uses our new predictive toxicology technology to triage their pipeline and allow them to best spend their resources.

Third, I will go through the progress we have made in our pipeline - our protein pipeline, our antibody pipeline that we're doing in conjunction with Abgenix and our small molecule pipeline with Bayer.

Our strategy has been to focus on what we do well - understand the genome - and leverage collaborators to reduce our expenses while giving us ownership of a strong pipeline.

Next slide, please.

Currently, CuraGen has completed its analysis of the pharmaceutically-tractable (ph) genome.

We have filed patent applications on 3,500 of these pharmaceutically-relevant genes, protein drugs, antibody targets and small molecule targets.

And 500 of them we have qualified in terms of their disease ramifications.

Out of those 500, we are now focused on 200 of them.

These 200 we're working with Bayer on to mix more molecules, with Abgenix to make antibodies and in-house to make proteins, as shown in this diagram.

Next slide.

In the next slide, I break down our targets by disease area, as well as therapeutic potential.

What I want to make clear is that genomics, as practiced at CuraGen, has led to over 500 targets, which is greater then the total number of targets that have been identified to date or (ph) all of the marketed pharmaceutical products.

It is now our challenge and our explicit focus to turn these targets into a pipeline, and, as I'll show you today, we are making significant progress with that pipeline.

We have a number of validated proteins.

We have an exciting IMD (ph) candidate.

We have what may be one of the largest collections of fully-human monoclonal antibodies against these targets with 28 monoclonal antibodies.

And, now, for our collaboration with Bayer, we have 17 small molecule projects in advanced stages.

Next slide please.

The next slide summarizes the status of our 57 protein projects.

As you can see, five of them are now validated, and one, which I'll go into a little bit more detail on the next few slides, is ready to go into clinic.

Our proteins are applicable in both inflammation and oncology, as shown in this slide.

Next slide, please.

The next slide focuses on our IMD (ph) candidate FGF-20, and, as shown here, we have completed studies in animals that shows the promise of this protein in inflammatory bowel diseases, including Crohn's disease and ulcerative colitis, as well as mucousitis.

In this corridor, we've published these results in a peer-reviewed article.

Also shown is that we're exploring the use of FGF-20, a molecule that CuraGen discovered, patented and patented in these methods of use.

In addition to mucousitis and ulcerative colitis, it has potential in osteoarthritis and has potential in stroke.

On the next slide, I want to focus on its promise in mucousitis, which is our first indication, as we have discussed.

Shown here, on the slide titled Oral Mucousitis, is results from a hamster model that clearly shows the efficacy of our product in multiple animal models.

For questions on this after my presentation, Tim Shannon is available to go into more details.

Next slide just summarizes that we have a significant - a statistically (ph) significant improvement in these animal models, and we are now, as we have discussed, preparing to move this into the clinic.

Next slide's titled CuraGen's Abgenix Alliances Focus on Our Antibody Strategy.

Our antibody strategy has consisted of understanding the genome, understanding the antibody targets, identifying the best target and systematically raising, and then testing, fully-human monoclonal antibody.

To date, the collaboration with Abgenix had been extremely productive.

We've been able to not only identify 96 potential genomic targets, we've been able to create 28 fully-human monoclonal antibodies, that, together with Abgenix, we are no characterizing.

In the next slide, I summarize these 28 monoclonal antibodies that we have created, against 28 separate genomic targets, with application to, as shown in this table, oncology and inflammation.

We are now moving forward with this portfolio to find the most efficacious, in terms of their ability to treat unmet medical needs, as well as their ability to work in animal models.

In the next slide, I go into detail on one of the antibodies, Cura-2 (ph), as an example of our antibody pipeline.

This is an antibody, when (ph) we use to look at human blood serum - the title of the slide is Biochemical Validation - we find that the target of this antibody is up-regulated in lupus and nephritis, over a normal population.

In the next slide, we show that the protein we discovered proliferates cells that are in the kidney.

Next slide shows where these cells reside and why a proliferation of them leads to nephritis.

And in the next slide, we now take our antibody, and on the right panel, on the slide titled Biochemical Validation in (ph) Unit (ph) with the Chemistry, you can see that this antibody specifically stings (ph) the protein that's up-regulated in the model of nephritis.

In the next slides, we show that not only do we have an antibody against the protein that we've shown to be involved in nephritis, but this antibody, that we've raised against this protein, neutralizes the activity of this protein in cells, as shown in this graph on our cell validation slide.

And as I show in the next slide, animal results - MAV (ph) Animal Validation in (ph) Acute Nephritis - this antibody, in models of kidney failure, reduce nephritis.

Again, Tim Shannon's here to answer questions.

I just wanted to give you an overview.

In the next slide, I want to outline how CuraGen is reducing its expenses but having the upside from small molecule.

Again, the proteins we have the capability to move along - we can partner them when we can show real value.

For instance, in phase two, the antibodies - we have Abgenix make the antibodies, and, again, we're free to partner them, after we've created tremendous value, or bring them to market.

And in the small molecules, we have Bayer as a partner to reduce our expenses - to turn our targets into potential product.

This is just an overlook (ph) view of our strategy, showing it's a true collaboration.

We not only, with Bayer, find the target, but we can prioritize the molecules that we get, and we can make sure we understand the human genetics and have markers for the disease, to make sure we give the right drugs to the right patient.

In the next slide, I summarize the progress with Bayer, in terms of the types of targets we've gotten.

I show that we've gotten these targets to cover a wide range of areas that are important for obesity and diabetes, as well as a wide range of heart (ph) target classes, to make sure we're really hedging our approach towards treating a disease that is now a bigger drain on U.S. healthcare than smoking.

In the next slide, I go into more detail of our pipeline.

We have elected now 55 targets with Bayer.

That means we don't totally think these targets are good.

It means Bayer's scientists think that it's good.

We have now completed screens on 10 of these and have seven others in screening.

So, again, CuraGen is able to create a portfolio of proteins, antibodies and small molecules - move these molecules along to generate value, without having large expense of actually doing the screening or the additional (ph) chemistry, but add our value, in terms of understanding the best targets in the genome and prioritizing the (ph) data (ph).

In the next slide, I summarize the 17 advanced projects, in terms of their applicability to either diabetes or obesity.

If you have questions on the Bayer collaboration, Chris will be available on the end of my discussion to go into more detail.

Now we've discussed our portfolio and how we've moved it forward, in terms of the breadth of our portfolio.

What I'd like to talk to you about now is how we're getting better at prioritizing our portfolio.

This quarter, Bayer agreed to pay us a milestone for being able to predict, early on, the toxicity of a drug.

We've been doing this for a few years with clients such as Roche - Glaxo.

And as we just announced, we're expanding it with Ono.

What we've been able to do in this collaboration is reduce the cost of understanding toxicity to (ph) orders of magnitude and industrialize it.

And be able to predict, not only that something's going to have toxicity, but what type of toxicity.

And, again, Chris will go into more details here.

On the next slide, I show that we've been able to turn this knowledge into a high through-put (ph) chip (ph) that we can operate in our assembly line to triage pipelines.

And what's nice is since we've gotten this molecule work (ph) for Bayer, we have made a sale of this technology to Ono to help with their pipeline.

In the next slide, I show you how companies are using this technology - both Bayer and now Ono - to take early (ph) hits (ph) they get and concentrate their efforts on those that are either less toxic or understand how to concentrate - or change those that are more toxic, because we're able to rank compounds, in terms of their toxicity, as well as their type of toxicity.

Next slide, please.

The next slide is the third major impact of CuraGen's technology.

We talked about target discovery.

We've talked about prioritizing pipelines, and I want o go back to one of the most important points, and that is giving the right drug to the right person.

I'm showing you, again, our antibody Cura-2 (ph).

And what I want to make clear is that if you understand the molecular basis of disease, like we understand the molecular basis of this growth factor in kidney failure, you can use that molecular basis not only to create a therapeutic, as in Cura-2 (ph), which neutralizes this protein, but you can create a potential diagnostic.

So when you look at this graph, not only do you recognize that this may be a good therapeutic in lupus or nephritis, you recognize that you only want to give the drug to those people who are having kidney failure, due to this protein.

And you can use this antibody in a simple serum elixir (ph), from a blood sample, to see if this patient or any patient would be appropriate to treat with the drug.

And what I want to make clear is that CuraGen is learning this is the rule, not the exception.

In the same way that understanding a molecular basis has given the world great drugs like erseptin (ph) and glevec (ph), the molecular basis is allowing us to diagnose who will respond.

In my last two slides, I just want to summarize our progress.

I will turn it over to Dave Wurzer, who will go through the financial details, Tim, who will give you an introduction to himself, and how he's triaging our pipeline, and Chris, who will go into more details on our deals.

But I do want to say we are moving forward.

We've - in the public milestone slide, as shown here, we have a great CEO on our subsidiary.

We've made major technical progress, as shown by our Bayer milestones, and our pipeline continues to progress, in terms of protein drugs, antibody drugs and potential small molecule drugs.

The next slide is the financial highlights.

I won't go into any detail on this.

Dave is going to bring you through that.

And last, I'd like to end with a summary slide, explaining that we're absolutely focused on moving forward.

The genomics revolution has led to an understanding, has led to a characterization of the genome at CuraGen, has led to a portfolio of projects that we're now 100-percent focused on moving them forward into the clinics to make drugs.

I thank you for your attention, and I turn it over, first, to Tim Shannon and, then, to Chris McLeod.

Tim?

Good morning.

Again, my name's Tim Shannon, and I am the Senior Vice President of Research and Development at CuraGen, as well as the Chief Medical Officer.

I just wanted to spend a moment or two talking a bit about my background and, then, a bit about what my initial plans are for CuraGen, in regard to the capabilities I bring.

I am a physician by training - board certified in internal medicine, pulmonary medicine and critical care medicine.

I have spent the last 10 years of my professional life with Byer (ph), where most recently I held the position of the head of Byer's (ph) global medical development organization, and, in that capacity, I was responsible for all strategic and operational aspects of Byer's (ph) medical development activities, but specifically responsible for all activities from phase one through phase four, as well as for the support of our products in the marketplace.

I joined CuraGen now about seven weeks ago - attracted to CuraGen, because I see CuraGen as a company that has a chance of making a difference in people's lives.

I think CuraGen really has done a leading job in what they have done over the past years and see my capabilities as a good mix with CuraGen, in terms of advancing those assets into humans (ph).

Specifically, what I will be doing over the - my initial months here are looking at those assets, looking at our pipeline and trying to prioritize that pipeline, based on medical need and potential for value generation, specifically with the goal of moving as much as possible to the phase two, proof-of-concept stage as we can possibly move in the next three to five years.

That will be my specific focus.

Now I plan to utilize CuraGen's asset in doing that, so much as we use toxicogenomics and pharmacogenomics with our alliance partners and as much as we use the development of file (ph) markers with our alliance partners.

Every one of our programs will look to take advantage of those very unique CuraGen capabilities, again, bringing value to the way we at CuraGen see development with our own products.

So that's my introduction, and, again, I'll be available in the Q&A session for any specific questions.

And now I'll turn it over to Dave Wurzer.

Thank you, Tim, and good morning, everyone.

My remarks will address four primary areas.

First, review of our results for the quarter, our outstanding vertical debt, cash burn and, finally, our focus on expense reduction.

First, turning to the quarter, we had a solid financial quarter.

Overall, we reported numbers that are in the range of or slightly better than what we understand to be analyst estimates.

Revenues were highlighted, as Jonathan mentioned, by a $2.9 million milestone payment from Bayer.

We also continued to record additional revenues from our strategic collaborations with Abgenix and Bayer.

Research and development expenses, you may note, decreased slightly, as compared to the second quarter of 2002, as we completed our work on the predictive toxicogenomics screen and as we aggressively managed expenses, focusing only on essential discovery and development costs in support of our pre-clinical pipeline.

G&A expenses continued to increase slightly over the second quarter, as intellectual property costs went up in support of our growing pre-clinical pipeline as well.

Investment income also increased over the second quarter, as we lengthened some maturities, and the resulting increase in yield offset the impact of decrease in cash balances.

I want to point out that income taxes also had a significant change during the first - during the third quarter of 2002.

The state of Connecticut tax law - effective in July - made all companies in Connecticut minimum tax payers, and, therefore, the accrual of our estimated $300,000 obligation in the state of Connecticut will be recorded over the second half of 2002 and offset income tax benefits we receive from exchanging research and development credits in Connecticut.

Finally, the minority interest and (ph) subsidiary loss line, which, as a reminder to you, is the number that is a portion of 454 (ph) corporation losses included in our consolidated financial statements that relate to the 40 percent minority ownership of 454 (ph) corporations - they did increase over prior quarters.

They are increasing, because 454 (ph) continues rapid development of their technologies.

And, with that, I will turn over to convertible debt.

The convertible debt outstanding is $150 million at six percent, with an approximate $64 conversion price.

And, importantly, it's not due until February of 2007.

It is currently our plan to keep the debt.

It is a good security for us, and its maturity relates well to our expected drug development timeline.

That is, we believe the 150 million will be integral to potentially funding our clinical trials, the result of which will allow us to raise additional capital and fund the debt in the event that we do not exceed the conversion price by February 2007 (ph).

Turning to cash burn, as Jonathan mentioned, cash and investments had a balance of 431 million at September 30th.

Our cash burn, year to date, has been $77 million.

For the quarter, our cash burn was approximately $24 million.

The guidance we provided back in January of 2002 for cash burn still holds.

We continue to believe that the full-year, operating cash burn will be approximately 85 to $90 million for 2002.

And on top of that, capital expenditures for 2002 are expected to be approximately $15 million.

Finally, turning to expense reduction, we have been conserving cash aggressively by close management of hiring and expenses throughout the quarter.

We wanted to do this now, while we're in a strong financial position and as we continue to transition from a drug discovery company to a drug development company.

We are working very hard and very diligently on 2003 budget.

The focus of the budget is to decrease our costs from 2002 levels - help stretch our cash reserves to support future clinical trials.

I would emphasize that we will provide additional, detailed guidance on 2003 expense levels, and cash burn, during our January 2003 investor conference call.

And, with that, I'm going to turn it over to Chris McLeod to comment on recent strategic developments.

Chris?

Thank you, Dave.

The one highlight I really want to emphasize today is the completion of the effort we had with Bayer to develop a predictive toxicology screen, and it's important for several reasons.

First, we derived a major milestone for proving that we could look into cellular assays and predict animal toxicity in the liver.

Now this is very important, because it allows pharmaceutical companies to eliminate major costs in their pipeline.

The implication with Bayer, beyond just receiving the milestone, is we now move into the production phase of our agreement, where we will be using this technology on their compounds across all of their disease areas.

Importantly, we also have the right to offer this assay to other companies as a service.

We announced last night that Ono Pharmaceutical (ph) is - has entered into an agreement and will be the first, external partner to work with us in this area.

Doing this not just to generate some revenue from services, but, importantly, I think it reinforces the value that we bring in pharmacogenomics to partners that we have in the area of small molecule drug development.

And we continue our efforts there with Bayer to develop metabolic drugs, and we are looking - continuing our discussions in the areas of oncology and inflammation to hopefully enter partnerships to do the same in those diseases.

With that, I'm going to turn it over to Mark Vincent to coordinate any questions.

Thank you, Chris.

At this time, we're going to take a few questions, if (ph) the operator can coordinate that on our behalf.

At this time, I want to remind everyone if you would like to ask a question, please press star, then the number one, on your telephone keypad.

We'll pause for just a moment to compile the Q&A roster.

We are still pausing to compile the Q&A roster.

Your first question comes from Peter McDonald (ph).

Peter McDonald (ph): Hello.

Just a - first quick question on the - on a (ph) model.

In the fourth quarter, do you expect R&D spending to be pretty much in line for the - with the rest of the quarters of 2002?

This is Dave.

Yes.

We do expect it to be pretty much in line, and our guidance is (ph) a function of the guidance for the full year, which we provided at the beginning of the year, and I think that pretty much (boils (ph) down and would show that it's pretty much in line, maybe with a slight increase.

Peter McDonald (ph): OK.

Great.

And, second, how is the optimization of your IMD (ph) candidate's formulation progressing?

I'm going to turn that question over to Tim Shannon.

Tim?

Yes.

Thanks.

Our goal remains, as stated by Jonathan, to file an IMD (ph) in the first half of the year.

Again there - the compound is assigned (ph) 3135, and, as you saw on the slides, there are two lead indications.

One, inflammatory bowel disease, meaning ulcerative colitis and Crohn's, and the second one being oral mucousitis.

Those use two different formulations, so if oral mucousitis is an IV formulation, then inflammatory bowel disease is a subcu (ph) formulation.

We have made progress with the subcu (ph) formulation, but I don't want to promise that we've overcome all hurdles, but it's something we're committing our resources to doing and hope to be overcome.

So - but, that - again, that's just one of the options for an IMD (ph).

The second option's an IV formulation where the - again, it's a more straightforward formulation issue.

That would be the other possible IMD (ph) filing.

Peter McDonald (ph): OK.

And that's it, I think.

Jonathan Rothberg (?): Thank you, Peter (ph).

Peter McDonald (ph): Thanks.

Your next question comes from James Rosen.

Hi, guys.

This is Jimmy Rosen - a couple of questions.

First one's for Dave.

Can you give us some more details on the Ono deal?

What does the increase mean with regard to revenues, and when can we expect to see some milestone payments from that?

Somewhere - we did not provide any additional financial details.

The amounts we believe people have already built into their models, and, on its own, specifically, will not be material to the revenues.

If I could jump in.

It's Chris.

This type of service work now will not entail milestones.

This will be more of a fee for service.

OK.

So it's sort of - it's use as needed.

Has Ono queued up any compounds yet that they specifically want to run across the assays?

Yes.

They have.

Can you tell us how many?

No.

We're not going into those specifics.

OK.

And then the next question is maybe for Tim, and that is, with regard to CG52053, do you have an estimate of, let's say, the number of DSRD (ph) patients who might - whose disease might be caused by this protein?

Good question, and it's a hard thing to get at, because, again, it's not a disease population that's well - been well-defined, largely because there's no specific therapy available for it.

But, you know, just in terms of spectrum, in terms of indications, I think it would be on the low end in ways we could define it currently.

However, we think if we could come in - up with an effective, specific therapy, that we do have a well-defined population to go into, but our suspicion would be that we'd be able to broaden that use beyond those populations, again, if we had an effective product that people - that people had confidence in.

But would you have any plan, sort of, before going forward full bore with development of the drug - of a drug, let's say, of a therapeutic to make a diagnostic and do a clinical study with that diagnostic to give you an idea of what the market might be?

Well, again, I - in one of Jonathan's slides, he showed one candidate, for such a diagnostic, being a serum marker of the protein that causes proliferation, which the antibody's directed against.

So that's one thing we're currently evaluating, and we will use that, to some extent, to be - to try to define populations, where this may be of benefit, that aren't readily identifiable through other techniques.

OK.

How will you make the decision as to whether or not to do that?

Well, I - we are committed to trying to develop that marker.

Again, whether or not we run into any technical obstacles, I can't tell you right now.

But, again, you know, we would be committed to developing that marker, as a marker of patients, where the specific protein we're targeting is active and implicated in the progression of the renal disease.

OK.

That's it for me.

Thanks.

Your next question comes from Todd Nelson (ph).

Todd Nelson (ph): Thanks - just a couple of questions.

I guess, Jonathan, just a high-level, strategic question to start out, and that, I guess, relates to the partnering of some of these programs.

Clearly, you've made a lot of progress over the course of the last couple of years, and in (ph) really your stages of pipeline.

And I would guess, you know, based upon our modeling of your pipeline, you'll have more opportunities than, you know, you'll know - you'll be able to handle internally.

Can you just discuss, maybe, you know, at the high level, strategically, at what point you feel shareholders are going to be conferred the most advantage, as far as the timing of the partnering of some of these projects?

Whether you are seeing interest at the pre-IMD (ph) stage for partnering is my first question.

And, then, I guess the second question - Dave, maybe this is for you.

When is the next milestone in either the Abgenix or Bayer deals that we'll see that will trigger a financial payment?

Todd (ph), it's Chris, and, actually, I'll try to address both of the questions for you.

In terms of partnering out our portfolio of our internal pipeline, if you look at the marketplace right now, I think you can see that pharma is most interested in products that will be able to bring to market a, you know, once-in-two-year (ph) period.

And so the sweet spot, if you will, is at the end of phase-two efficacy demonstration.

You know, prior to that, their interest (ph) in (ph) clients precipitously.

So, you know, what we're trying to do is gear things towards that point.

We do talk with pharma - with our pre-clinical candidates.

I think that's another natural point for us to look for a partnership before we've incurred any clinical expense.

And so those would be the two - the two - the two points that we're concentrating on.

In terms of the milestone payments, with Bayer, you'll recall, in terms of our metabolic program, there are no milestone payments.

That's a true, profit-sharing relationship.

So, right now, we're looking to try to get things to market, and both of us are working towards that goal as aggressively as possible.

In terms of Abgenix, there would be milestone payments from either party, depending on who's taking a product forward.

Realistically, we don't anticipate significant milestone payments until you get into the clinic, which will be 2004 at the earliest.

Todd Nelson (ph): OK.

Thanks.

And then just to follow up - maybe just to provide a little bit more clarity, you could help me to, perhaps, better understand, specifically, what steps need to be gone through before the IMB (ph) for your first candidate is filed.

And, I guess, just at a high level, what are the timings of your interactions with the FDA?

And, you know, how critical is it that you have the subcutaneous formulation before you make a decision on the IMD (ph)?

This is Tim Shannon again.

With the IMD (ph) candidate for the two formulations, the project is in, what I would call, typical stages for something pre-IMD (ph).

So, specifically, we're doing - toxicology studies is a routine requirement for filing IMD (ph) - and then doing the final aspects of the formulation work, both for the IV formulation and the subcutaneous formulation.

So, again, I think, unlike the situation earlier there, where we had one shot at this, we really now have two shots at this IMD (ph) with two indications - with two different formulations, which should increase our likelihood of hitting our target of filing in the first half of the year.

In terms of the FDA, we have had dialogue with the FDA around this filing, and that's ongoing and, I think, you know, going well at this point.

Again, I don't want to over-commit.

We have studies that are ongoing, and the data needs to fall the right way to hit these filing dates, but that's science.

But in terms of things we can control, I think those are under control.

Todd Nelson (ph): All right.

Thanks very much.

Chris McLeod (?): Thanks, Todd (ph).

Your next question comes from Derek Weiner (ph).

Derek Weiner (ph): Yes - two things.

I wanted to know the depreciation and amortization levels for the quarter and whether you can give any cap spending guidelines at this point.

This is Dave.

First of all, for the quarter, I believe we are in the 7.5 to $8 million range for depreciation for the quarter.

And capital spending, as I mentioned earlier in the call - for the full year, we expect to be at about $15 million, and the majority of that has already taken place during the year.

Derek Weiner (ph): Did you say 7.5 to eight million for D&A?

I said for deprecation.

That's what you asked for.

Derek Weiner (ph): Yes - 7.5 to eight million?

I believe so.

I'm checking the detail level at this point in time, but I do believe that on a - on a - the fourth quarter has trended up.

We've added, as we've mentioned, about $15 million of capital during the earlier parts of the year, and that's trending up to a run rate that is closer to 8.5 to $9 million, as we finish the year.

Derek Weiner (ph): OK.

Thank you.

Wurzer (?): Go ahead.

Chris McLeod (?): Derek (ph), do you have another question?

Derek Weiner (ph): Depreciation and amortization last quarter was two million.

I'd be happy to discuss it with you offline.

Derek Weiner (ph): OK.

Your next question ...

I'm sorry.

OK.

I apologize.

The full-year number is going to be approximately $9 million, not the fourth quarter.

I apologize.

Derek Weiner (ph): OK.

So do you have third quarter there?

Third quarter - third quarter year to date was $7 million.

Third quarter's about $2.5 million on its own.

I apologize.

I thought we were talking about year to date.

Thank you.

Derek Weiner (ph): Thank you.

Your next question comes from Han Lee (ph).

Dave Witsky (ph): Good morning.

Actually Dave Witsky (ph) here with Han Lee (ph).

Question on the FGF-20 program, and, I guess, first off, what is the degree of homology (ph) with KGF-1 (ph) and KGF-2 (ph), which I guess is FGF-7 (ph) and 10.

And how does the receptor distribution and specificities compare, and where do you think you have a competitive advantage - in which indications?

Hi.

This is Jonathan.

I'll make the first pas at it.

Very specifically, one of the differentiating factors about FGF-20 is it works on both the exterior layer, if you will, of the colon, as well as the underlying layer.

And most of the FGF's are only working on the epithelial.

I like comparing it to fixing the carpet, but the concrete is all broken.

So we have an advantage, in terms of the cell types it's acting on.

We also, as we've discussed before, have an advantage that it works on both models of ulcerative colitis and mucousitis that are induced by radiation, chemistry, physical abrasion, as well as in inflammatory bowel disease through an inflammation pathway - so if you knock out IL-10 (ph).

So we think we have a mechanistic advantage, an advantage, in terms of the cell types, and we did do a recent publication on the receptor of distribution.

Dave Witsky (ph): OK.

And Jonathan, would you look for other indications - maybe wound healing - or where else could this go?

Where do you see the advantages today?

I'm going to turn it over to Tim, but we did show a chart, and the ones that are most exciting are those that are inflammation-mediated, because those are, obviously, the greatest markets.

And I'll turn it over to Tim to summarize that.

Yes.

The program is most advanced in the two indications that we've spoken about - oral mucousitis and inflammatory bowel disease.

As the slide mentioned, we're evaluating the potential in both osteoarthritis and stroke.

So those are the initial indications we're looking at.

The slide mentions other possibilities, again, based on the mechanism of action, which, again, suggests that this, you know, has the potential to have broad activity.

Again - and I think, as Jonathan pointed out, the consistency of results across the oral mucousitis models - multiple models - and the inflammatory bowel disease across multiple models - does suggest that is an active compound with good potential.

Dave Witsky (ph): OK.

And turning to the antibody program - Abgenix.

Of the 28 you've received, how many have been through cellular assay validation at this point?

We haven't been giving that level of detail at this point, but we probably will sometime next year - give an update on that.

Dave Witsky (ph): That's quite a large number, and, if I'm looking at '04 and beyond, the distribution of potential IMD's (ph) - I'm trying to better understand how that would play out.

Well, very specifically, we really have to coordinate that with Abgenix.

We do have 28.

As you can see, that's progressing quarter to quarter, and it is a pipeline.

So a number of those that we've had long enough have progressed further.

And, again, you'll be hearing a lot more about that in both publications, as well as joint announcements.

But (ph) we will be coordinating the depth of our pipeline with Abgenix.

I'd like to say that we've created tremendous breadth, and it's valuable.

But it's the depth that's financeable, and that depth will be - we'll be doing announcements with Bayer, as well as Abgenix.

Dave Witsky (ph): Very good.

Thank you.

At this time, there are no further questions.

I would now like to turn the call back over to Mr. Vincent.

Great.

Well, I'd like to thank everyone for listening in and especially for the questions at the end.

We can always follow up later on with additional - or questions in regards to detail that - on the financial models, as David Wurzer had said.

But, for today, we'd like to thank everyone for signing in, and we look forward to the next quarter and presenting additional achievements, as we do make them.

Thank you.

Chris McLeod (?): Thank you.

This concludes today's CuraGen Corporation third quarter conference update.

You may now disconnect.