Compugen Ltd. has reported financial results for the fourth quarter and year ended December 31, 2011.
Martin Gerstel, chairman of Compugen, remarked, “During 2011, as we advanced the therapeutic candidates in our Pipeline Program and continued to enhance our predictive discovery capabilities, we entered into a number of agreements for the development and commercialization of some of our past discoveries, which were mostly made while establishing and validating our unique discovery infrastructure. Now, as suggested by the title of our corporate presentation recently posted on our web site, we enthusiastically enter 2012 with the expectation that the value of our long-term investment in creating a predictive discovery capability for therapeutics will begin to be realized in a substantial manner. Our tremendous success with the first “therapeutic needs” driven prediction and selection discovery program, which targeted the discovery of novel B7/CD28-like immunomodulatory proteins, and the continuing advancement of our initial product candidates for oncology and immunology in our Pipeline Program, is now providing us with both rapidly growing industry recognition and opportunities for out-licensing and other milestone and royalty bearing collaborative relationships.”
Anat Cohen-Dayag, Ph.D., president and CEO, added, “A number of the Compugen-discovered B7/CD28-like protein family members are predicted to be expressed on cancer cells and have a function in the modulation of the immune response. Therefore, these promising discoveries can yield multiple types of product candidates for oncology and immunology, both as drug targets for mAb therapy and as protein therapeutics. During 2011 we disclosed several such candidates that have been experimentally validated in animal disease models and other accepted methodologies, and we are expanding this effort towards additional product candidates that are predicted to belong to this protein family. Furthermore, these initial successful results for our immunomodulatory pipeline candidates and the high industry interest in this class of proteins have led us to further expand our focus in this area to the identification of additional sets of immunomodulatory proteins, beyond the B7/CD28 family. During 2011 we developed two, as yet undisclosed, additional discovery platforms based on new approaches and algorithms to predict such novel immunomodulatory proteins. Initial discoveries from these new platforms are now entering validation studies as drug targets in the field of oncology and/or as protein therapeutics in immunology.”
As previously stated, since any revenues in the short-term will likely result primarily from license and 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 the fourth quarter of 2011 and calendar 2011, compared with $190,000 for the fourth quarter of 2010 and $1.1 million for calendar 2010.
The net loss for the most recent quarter was $4.4 million (including a non-cash expense of $768,000 related to stock based compensation), or $0.13 per share, compared with a net loss of $2.0 million (including a non-cash expense of $343,000 related to stock based compensation), or $0.06 per share, for the corresponding quarter of 2010.
The increase in net loss for the most recent quarter resulted in large part from non-cash finance expenses mainly deriving from the re-measurement of the embedded derivatives and exchange options components under the research and development funding arrangements signed in late 2010 and 2011, from related issuance expenses pertaining to the funding arrangement, from increased net research and development expenses, and from the increase in non-cash expense as stated above.
The net loss for calendar 2011 was $12.0 million (including a non-cash expense of $3.4 million related to stock based compensation), or $0.35 per share, compared with a net loss of $7.2 million (including a non-cash expense of $2.1 million related to stock based compensation), or $0.22 per share, for 2010.
The increase in net loss for calendar 2011 compared with calendar 2010 is mostly attributed to 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, increased research and development activities, and the increase in non-cash finance expenses referred to in the prior paragraph.
Research and development expenses, net, for the fourth quarter of 2011 were $1.9 million, compared with $1.6 million for the fourth quarter of 2010 and remained the Company’s largest expense. Research and development expenses, net, for calendar 2011 were $6.8 million compared with $5.2 million for 2010.
The growth in research and development expenses, net, for the fourth quarter and full year, reflects increasing activities primarily with respect to manufacturing of molecules, 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.
At yearend 2011 and 2010, the “Research and development funding arrangement” liability in the amount of $6.2 million and $4.0 million, respectively, relates to the accounting for the research and development funding arrangements signed in December of 2011 and 2010.
The liability balances are primarily estimated fair values of the instruments resulting from the right of the investor under both arrangements to waive his right to receive potential future payments in exchange for Compugen ordinary shares.
Also as a result of the accounting for these funding arrangements, in this case mainly deriving from the re-measurement of the embedded derivatives and exchange options components under these arrangements and related issuance expenses, the company recorded a financing loss of $306,000 for calendar 2011 compared with financing income of $241,000 for calendar 2010.
As of December 31, 2011, cash and cash related accounts totaled $22.4 million compared with $21.8 million at December 31, 2010. The $22.4 million for 2011 excludes $6.0 million to be received during 2012 under the December 2011 research and development funding arrangement.
The amounts for both 2011 and 2010 exclude the market value of Compugen’s holdings of Evogene shares at each such yearend. Compugen continues to have no long-term debt other than the book liabilities associated with the research and development funding arrangements, which do not represent future cash obligations.