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TWST: Can we start with a brief introduction to Compugen and then just bring us up to date with recent developments?

Mr. Amitai: Compugen, a drug and diagnostic discovery company, is a leader in incorporating ideas and methods from mathematics, computer science and physics into the scientific disciplines underlying pharmaceutical research and development, namely molecular biology, organic chemistry, and medicine. We undertake these efforts with the objective of creating technologies that can significantly increase the probability of success of drug and diagnostic development. This unique and powerful approach results in two types of discoveries – deeper understandings of significant scientific phenomena and specific discoveries of potentially valuable intellectual property. For example, the recent publication of our finding regarding the common occurrence of natural antisense is an example of a scientific phenomenon with potential implications on future drug discovery; and is based on our earlier understanding of alternative splicing. In addition, our understanding of alternative splicing is resulting in the prediction and discovery of important splice variants of genes with potential therapeutic and diagnostic importance, such as the PSA and recently announced VEGF splice variants. Compugen operates in three areas of research activity - molecular biology, organic chemistry and medicine. The most mature of these is in the combination of biology with computational sciences, in which we aim at obtaining deeper understandings of important biological phenomena and discovering specific therapeutic proteins and diagnostic markers. This is the area where we have signed most of our agreements up until now. We also have operations developing a new technology for discovering small molecules that can bind or block currently undruggable targets. In this area, we combine the disciplines of organic chemistry with physics and advanced computational technologies. In addition, our newest and smallest area of activity is what we call predictive drug response, in which we combine medicine with mathematics and computer science in an attempt to develop methods to help predict the response, side effect, and efficacy of drugs for specific patient populations. Our commercial development is now moving along two revenue streams. One is what we call technology-driven revenues, which arises from licensing the tools we develop to the industry. The second type is discovery-based revenues, in which we license our discoveries to other companies and expect to receive royalties or other forms of profit sharing from future products.

TWST: Could you go a little deeper into these agreements to license your in-house drug discovery activities?

Mr. Amitai: As I mentioned, our agreements with other companies can result in two different types of revenue. The first, and primary revenue source for us to date is technology based revenues generated from licensing our platforms, tools and services to pharmaceutical and biotechnology companies such as Pfizer, Novartis, Abbott and diaDexus. The second - discovery-based revenues – is derived from the specific discoveries we are making that have the potential to lead to pharmaceutical or diagnostic products. For example, a few months ago we announced an agreement with Diagnostic Products Corporation to develop diagnostics for prostate cancer, based on two proteins that we discovered through our understanding of alternative splicing. Another recently signed agreement is with MultiGene Vascular Systems, under which we granted them a nonexclusive license to develop and commercialize gene and cell therapy products based on a novel protein for use in the treatment of cardiovascular diseases. If successful in either of these cases, we will receive substantial royalties from sales of these products.

TWST: Is the second revenue stream, the licensing of your drug discovery activities and the royalties that go with it, the way forward for Compugen?

Mr. Amitai: There is no question we are investing more and more of our efforts in internal discovery that should lead to discovery-based revenues and we expect that in the future, the majority of our revenues will come from milestones and royalties on sales. Certainly, the potential of this kind of revenue is much larger than any other, because one drug in this industry can bring in huge revenues.

TWST: When you look out over the next 12 months, what will make that time frame a success?

Mr. Amitai: I believe that the power inherent in our unique approach to drug and diagnostic discovery will become much more apparent to both the pharmaceutical and financial communities over the next 12 months as we continue developing our technologies in the three areas that I mentioned. This will result from a number of expected achievements, such as additional scientific publications and discovery of potential therapeutic proteins and diagnostic markers. Also, during the next 12 months, we expect to announce additional agreements with partners based on our technologies and discoveries.