Compugen third quarter net loss decreases to $3.6 million

Compugen Ltd. (NASDAQ: CGEN) today reported financial results for the third quarter ending September 30, 2011.

“We look forward to sharing news of our achievements in these various areas over the coming months.”

Anat Cohen-Dayag, Ph.D., President and CEO, stated, "These are exciting times for Compugen, as we aggressively advance our Pipeline Program, consisting of more than 30 therapeutic candidates; enhance and expand our cutting edge science and predictive models; and engage in active discussions with an increasing number of potential licensees and collaborators. We are particularly pleased with the ongoing progress in the validation and early pre-clinical studies of Compugen-discovered B7/CD28-like proteins and certain other Pipeline Program candidates in the fields of oncology and immunology. We have also begun the validation of two additional discovery platforms based on new approaches and algorithms, which have already predicted several novel immunomodulatory proteins that are about to enter initial product candidate validation studies."

Dr. Cohen-Dayag continued, "With respect to Compugen's commercialization activities, in recent months, a significant portion of our business development efforts has involved potential arrangements for a number of promising Compugen therapeutic and diagnostic discoveries not in our main areas of focus. These past discoveries were made in large part during validation activities for our various discovery platforms, and our intent is to have them further developed without the use of additional Compugen resources, but with us sharing in any future revenues. We are now beginning to shift these business development efforts to certain Pipeline Program candidates as they move forward in preclinical related activities, and to discovery on demand type collaborations."

Dr. Cohen-Dayag concluded, "We look forward to sharing news of our achievements in these various areas over the coming months."

As previously stated, since any revenues in the short-term will likely result primarily from research fees and initial milestones, quarterly results are, and will continue to be, subject to substantial fluctuations due to timing. No revenues were recorded for either the third quarter of 2011 or the third quarter of 2010. For the nine months ending September 30, 2011, no revenues were reported, compared with $925,000 for the same period in 2010.

The net loss for the most recent quarter was $3.6 million (including a non-cash expense of $587,000 related to stock based compensation), or $0.10 per share, compared with a net loss of $1.6 million (including a non-cash expense of $435,000 related to stock based compensation), or $0.05 per share, for the corresponding quarter of 2010. The increase in net loss for the most recent quarter resulted in large part from increased research and development expenses, net, and the effect of exchange rate changes on our reported financial income (loss), each as more fully described below, and the increase in non-cash expense as stated above.

The net loss for the first nine months of 2011 was $7.7 million (including a non-cash expense of $2.6 million related to stock based compensation), or $0.22 per share, compared with a net loss of $5.2 million (including a non-cash expense of $1.8 million related to stock based compensation), or $0.16 per share, for the same period in 2010. The increase in net loss for the first nine months of 2011 compared with the same period in 2010 is due to the above factors pertaining to the third quarter of 2011 and a $1.3 million one-time non-cash expense charge in the second quarter of 2011 to general and administrative expenses, relating to an extension of the time period to exercise certain previously outstanding and vested options.

Research and development expenses, net were $2.1 million for the third quarter of 2011, compared with $1.2 million for the third quarter of 2010, and remain the Company's largest expense. The growth in research and development expenses, net for the third quarter of 2011, reflects increasing activities primarily with respect to manufacturing of molecules and payments to independent investigators with respect to evaluation studies of product candidates in the Company's Pipeline Program, and a decrease in amounts received from governmental grants, which are presented as a reduction of research and development expenses. Research and development expenses, net were $4.9 million for the first nine months of 2011, compared with $3.7 million for the first nine months of 2010, which amounts are more indicative of the year to year increase than are the results for the third quarters of each of these years.

For the third quarter of 2011, the company recorded a financing loss of $495,000 compared with financing income of $312,000 for the third quarter of 2010, in large part due to exchange rate variations between the US dollar and New Israeli Shekel ("NIS"). The Company's cash is maintained in both US dollars and NIS, and therefore the recent decline in value of the NIS against the US dollar reduced the value of our NIS deposits in US dollar terms, which is the currency used for Compugen's reporting purposes.

As of September 30, 2011, Compugen had $21.7 million in cash and cash equivalents and short-term bank deposits, compared with $26.8 million as of December 31, 2010, after increasing the reported amount at yearend 2010 to reflect the receipt in early 2011 of $5.0 million from a research and development funding arrangement signed in December 2010. These amounts for 2010 and 2011 do not include the market value of Compugen's holdings of Evogene shares at such times. With respect to net cash usage for calendar 2011, the Company now expects that such net cash usage will be less than its previous guidance of approximately $10 million.