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Compugen Ltd. (CGEN)

Q2 2012 Earnings Call

August 7, 2012 10:00 AM ET


Martin Gerstel – Chairman

Mary Haak-Frendscho – Chairperson

Anat Cohen-Dayag – President and CEO


Brian Coleman – Hawk Hill Asset Management

Christopher Hernandez – Gilder Gagnon Howe

Mara Goldstein – Cantor Fitzgerald

Brett Reiss – Janney Montgomery Scott



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Ladies and gentlemen, thank you for standing by. Welcome to the Compugen Ltd., Second Quarter 2012 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, August 7, 2012. With us online today are Mr. Martin Gerstel, Chairman of the Board, Dr. Anat Cohen-Dayag, President and CEO; Dr. Mary Haak-Frendscho, Chairperson of the Board for Compugen Incorporated 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?

Martin Gerstel

Yes, thank you very much. And on behalf of all of us with Compugen, welcome to our Q2 2012 conference call. I am now in California at our regionally established monoclonal antibody facility with Dr. Mary Haak-Frendscho, Chairperson of Compugen Inc, while Anat, our CEO; and Dikla, our CFO are at our offices in Israel. Hopefully this geographical difference will not create any problems during our call, but if it does, I apologize in advance.

After my introductory remarks, Mary will report on the progress to-date and expectations we have with respect to our monoclonal antibody operations, followed by Anat, who will provide a status update with respect to the two product candidate arms of our pipeline program. The call will then be opened for any questions you might have. In the interest of time, in sense there is nothing unexpected in our financial results for the quarter other than the effect of both non-cash income and non-cash expenses, we will not address these results in our prepared remarks, but please feel free to raise any questions you may have regarding them in the Q&A session.

This is a very exciting time for us at Compugen, after committing more than a decade to the creation of a truly unique predictive biology discovery capability and then in the last two years focusing this capability on therapeutic monoclonal antibodies and therapeutic proteins for use in oncology and immunology. We are now clearly demonstrating in a number of ways to potential value of the capability we have created. First, our B7/CD28-like molecule program which was our initial focus discovery efforts was extremely successful with the identification of a significant percentage of new B7/CD28 family members compared to the total number previously reported worldwide, results which far exceeded even our own expectations.

This is a truly a remarkable achievement when you consider the high level of interest and likely orders of magnitude greater efforts undertaken during the past decade by others in both academia and industry utilizing various discovery methodologies in order to identify the previously known members. Secondly, likely based on the success of our B7/CD28-like discovery efforts, we have today a therapeutic pipeline program consisting of approximately 30 product candidates at various stages of validation and pre-clinical development in our areas of focus.

Thirdly, in addition to our accomplishments in our areas of focus, we have in parallel identified opportunities to further develop and commercialize certain of our discoveries in diagnostic and/or therapeutic areas outside of these areas, whereby our shareholders would obtain the right to share in any future success from commercializing these discoveries but without the need to commit any further Compugen financial resources.

In recent months, we have announced a number of agreements including the announcement during the last quarter of the joint establishment with Merck Serono of a new biomarker company. And we expect to announce additional such arrangements in the future, thus significantly extending our strong base for future growth in shareholder value beyond our initial areas of focus.

As a discovery company, our underlying strategy is to maximize the returns to our shareholders from our multiple candidates through licensing and other arrangements with the industry and to do so at pre-selected key value enhancement point, relative of course to the cost of getting to these place [ph]. This business model offers exceptional potential shareholder value through the matching of our unique discovery capabilities with the enormous development capabilities existing in the biopharma industry but without any broadly applicable systematic source for attractive product candidates such as we have established.

The most recent decisions we have made in implementing the strategy and business model were; first, to provide further differentiation for our multiple product candidates, and second through license our monoclonal antibodies themselves rather than just the targets that we discover and validate. Anat in her remarks will provide additional information about our ongoing differentiation efforts. With respect to monoclonal antibodies, although the quality of the target is the most critical variable determining the value of any monoclonal antibody therapy, it is clear that under most circumstances we would achieve much greater value and leverage our discoveries more fully by licensing out the monoclonal antibody therapeutic candidates rather than the target.

In both cases, we are confident that the additional efforts we are undertaking would be more than compensated for by the times we should be able to achieve upon licensing the candidates, assuming of course continuing development success. Therefore, as the final piece of infrastructure required with regard to implementing our strategy for our current areas of focus, we were extremely pleased that Mary, a world recognized expert in the monoclonal antibody field agreed to take the lead in establishing a monoclonal antibody development capabilities for us here at Compugen Inc in South San Francisco.

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