CGEN Compugen Ltd

Compugen Ltd. (NASDAQ:CGEN) today reported financial results for the second quarter ended June 30, 2007. �During the past quarter we saw significant progress, particularly in the areas of product candidate development, negotiations for new licensing agreements, new engine creation and discovery validation. In addition, our recent announcement regarding the development and first discoveries from a new proprietary discovery engine targeted at identifying existing drug molecules predicted to have important, but currently unknown, therapeutic indications, is another example of the uniqueness and power of the Compugen approach,� said Alex Kotzer, President and Chief Executive Officer of Compugen. Martin Gerstel, Chairman of Compugen, added, �Many companies are attempting to find new indications for specific drugs of interest because of the potential for much quicker time to market for successful discoveries of this type. However, unlike high throughput � and largely random � experimentally-based efforts focused on a single drug, Compugen has used its exceptional computational biology skills and platforms to develop an engine that, in addition to finding new uses for specific drugs, has been designed for the in silico identification of those drugs predicted to have new indications from amongst all drugs either in commercial use or undergoing clinical trials. This in silico phase is then followed by experimental validation of the predicted product candidates.� Mr. Gerstel continued, �Similar to our recently announced achievements in discovering new ligands for GPCRs and large scale genetic variations, this hypothesis-driven discovery process is proving to provide unparalleled breadth, power and efficiency.� As previously projected, current revenues continued to be insignificant. No revenues were reported for the second quarter of 2007 or for the six months ended June 30, 2007, compared to revenues of $5,000 for the second quarter of 2006 and $205,000 for six months ended June 30, 2006. The net loss from continuing operations for the most recent quarter was $2.7 million (including a non-cash expense of $436,000 related to stock based compensation) or $0.09 per share, compared with a net loss from continuing operations of $3.3 million (including a non-cash expense of $459,000 related to stock based compensation), or $0.12 per share, for the corresponding quarter of 2006. The net loss from continuing operations for the first six months of 2007 was $5.6 million (including a non-cash expense of $1.2 million related to stock based compensation), or $0.20 per share, compared with a net loss from continuing operations of $6.0 million (including a non-cash expense of $1 million related to stock based compensation), or $0.22 per share, for the same period in 2006. The net loss for the most recent quarter was $3.2 million (including a non-cash expense of $342,000 related to stock based compensation) or $0.11 per share, compared with a net loss of $3.6 million (including a non-cash expense of $472,000 related to stock based compensation), or $0.13 per share, for the corresponding quarter of 2006. The net loss for the first six months of 2007 was $6.3 million (including a non-cash expense of $1.2 million related to stock based compensation), or $0.22 per share, compared with a net loss of $6.7 million (including a non-cash expense of $1 million related to stock based compensation), or $0.24 per share, for the same period in 2006. Research and development expenses of $2.3 million for the second quarter of 2007, compared to $2.7 million for the second quarter of 2006, remain the Company�s largest expense. These amounts are before the deduction of governmental and other grants, which totaled $293,000 for the second quarter ended June 30, 2007, compared with $105,000 for the corresponding quarter in 2006. As of June 30, 2007, Compugen had $20.8 million in cash, cash equivalents, deposits and marketable securities, a decrease of $5.6 million for the six months from December 31, 2006. Affiliated Companies: As previously disclosed, Compugen is currently not making additional cash investments in its affiliated companies. During the past quarter, Evogene, an agricultural biotechnology company which Compugen established in 2002, completed an initial public offering on the Tel Aviv Stock Exchange (TASE). In addition, Keddem, a small molecule drug discovery company which Compugen established in 2004, is limiting its activities to corporate development and intellectual property protection until third party funding, currently under discussion with various potential sources, is achieved. Pursuant to the relevant accounting rules and regulations, each of the above events is reflected in the Company�s quarterly financial statements for the most recent quarter. Prior to Evogene�s IPO, Compugen�s investment in Evogene was accounted for under the Cost Method of Accounting. Following the IPO, as of the end of each reporting period, those Evogene shares owned by Compugen which are either then unrestricted or will become unrestricted within one year of such date, are recorded on the Company�s Balance Sheet as an asset based on the market price of such shares at such time. With respect to Keddem, in view of the fact that there can be no assurance that additional financing will be achieved, Keddem�s assets are presented as a one line item in the Company�s balance sheet as �Assets related to discontinued operations� and Keddem�s expenses are shown as a separate one line item as �Loss from discontinued operations� in the Company�s statement of operations. Conference Call and Web Cast Information Compugen will hold a conference call to discuss its first quarter results on August 2, 2007 at 10:00 a.m. EST. To access the conference call, please dial 1-888-281-1167 from the US or +972-3-918-0610 internationally. The call will also be available via live webcast through Compugen�s website, located at www.cgen.com. A replay of the conference call will be available approximately two hours after the completion of the live conference call. To access the replay, please dial 1-888-782-4291 from the US or +972-3�925-5901. The replay will be available until 12 noon EST on August 6, 2007. About Compugen Compugen�s mission is to be the world leader in the discovery and licensing of product candidates to the drug and diagnostic industry. The Company�s powerful discovery engines enable the predictive discovery of numerous potential therapeutics and diagnostic biomarkers. This capability results from the Company�s decade-long pioneering efforts in the deeper understanding of important biological phenomena at the molecular level through the incorporation of ideas and methods from mathematics, computer science and physics into biology, chemistry and medicine. To date, Compugen�s diagnostic and therapeutic product discovery efforts and its initial discovery engines have focused mainly within the areas of cancer, immune-related and cardiovascular diseases. The Company's primary commercialization pathway for its product candidates is to enter into milestone and revenue sharing out-licensing and joint development agreements with leading therapeutic and diagnostic companies. Compugen has established an agricultural biotechnology affiliate � Evogene, and a small-molecule drug discovery affiliate � Keddem Bioscience. For additional information, please visit Compugen's corporate Website at www.cgen.com. This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include words like "may," "expects," "believes," and "intends," and describe opinions about future events. These forward-looking statements involve known and unknown risks and uncertainties that may cause the actual results, performance or achievements of Compugen to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Some of these risks are: changes in relationships with collaborators; the impact of competitive products and technological changes; risks relating to the development of new products; the ability to implement technological improvements; the ability of Compugen to obtain and retain customers. These and other factors are identified and more fully explained under the heading "Risk Factors" in Compugen's annual reports filed with the Securities and Exchange Commission. COMPUGEN LTD. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (U.S. dollars in thousands, except for share and per-share amounts) � Three Months Ended June 30, Six Months Ended June 30, 2007 Unaudited 2006 Unaudited 2007 Unaudited 2006 Unaudited � Revenues - 5 - 205 Cost and Expenses Cost of revenues - - - 6 Research and development expenses 2,324 2,743 4,662 5,204 Less: governmental and other grants (293 ) (105 ) (590 ) (522 ) Research and development expenses, net 2,031 2,638 4,072 4,682 Sales and marketing expenses 272 360 866 770 General and administrative expenses 623 497 1,176 1,062 Total operating expenses (a) 2,926 3,495 6,114 6,520 � Operating loss (2,926 ) (3,490 ) (6,114 ) (6,315 ) Financing income, net 227 167 503 277 Other income 5 6 14 6 Net loss from continuing operations (2,694 ) (3,317 ) (5,597 ) (6,032 ) Loss from discontinued operations (464 ) (303 ) (668 ) (676 ) Net loss (3,158 ) (3,620 ) (6,265 ) (6,708 ) Basic and diluted loss per ordinary share from continuing operations (0.09 ) (0.12 ) (0.20 ) (0.22 ) Basic and diluted loss per ordinary share from discontinued operations (0.02 ) (0.01 ) (0.02 ) (0.02 ) Basic and diluted net loss per ordinary share (0.11 ) (0.13 ) (0.22 ) (0.24 ) Weighted average number of ordinary shares outstanding 28,242,570 27,938,110 28,220,723 27,920,170 � (a) Includes stock based compensation COMPUGEN LTD. CONDENSED CONSOLIDATED BALANCE SHEETS DATA (U.S. dollars, in thousands) � June 31, 2007 Unaudited December 31, 2006 Audited � ASSETS Current assets Cash, cash equivalents, short term deposits and marketable securities 18,804 25,403 Trade receivables - 10 Receivables and prepaid expenses 995 824 Assets related to discontinued operations 108 401 Total current assets 19,907 26,638 � Long-term investments Long term deposits and marketable securities 2,000 1,000 Investment in Evogene 124 - Other assets 1,406 1,370 Property and equipment, net 1,570 1,848 Total assets 25,007 30,856 � LIABILITIES AND SHAREHOLDERS� EQUITY Current liabilities Accounts payable and accrued expenses 1,636 2,794 Deferred revenues 100 75 Liabilities related to discontinued operations 254 287 Total current liabilities 1,990 3,156 � Long-term liabilities Accrued severance pay 1,481 1,436 Other long-term liabilities 60 60 Excess of losses over investment in Evogene - 466 Total long-term liabilities 1,541 1,962 � Total shareholders� equity 21,476 25,738 Total liabilities and shareholders� equity 25,007 30,856