kl07059.htm
K R A M E R L E V I N N A F T A L I S
& F R A N K E L LLP
Richard
H. Gilden
Partner
Tel: 212
715-9486
Fax: 212
715-8085
July
30,
2007
Mr.
Jim
B. Rosenberg
Senior
Assistant Chief Accountant
United
States Securities and Exchange Commission
Washington,
D.C. 20549
Re: Compugen
Ltd.
Form
20-F for the Fiscal
Year Ended December 31, 2006
File No. 000-30902
Dear
Mr.
Rosenberg:
We
are
U.S. securities counsel for Compugen Ltd. (the “Company”). The
Company has requested that we respond on its behalf to the Commission’s comment
letter dated June 29, 2007 (the “Comment Letter”).
For
convenience, we have set forth below in italics the comment contained in the
Comment Letter, followed by the Company’s response.
Item
5. Operating Results and Financial Review and Prospects, page
30
1. Please
refer to the Division of Corporation Finance “Current Issues and Rulemaking
Projects Quarterly Update” under section viii – Industry Specific Issues –
Accounting and Disclosure by Companies Engaged in Research and Development
Activities. You can find it at the following website
address: http://www.sec.gov/divisions/corpfin/cfcrq032001.htm#secviii.
Please
provide in disclosure-type format the following information for each of your
major research and development projects:
a. The
current status of the project;
b. The
costs incurred during each period presented and to date on the
project;
c. The
nature, timing and estimated costs of the efforts necessary to complete the
project;
d. The
anticipated completion dates;
e. The
risks and uncertainties associated with completing development on schedule,
and
the consequences to operations, financial position and liquidity if the project
is not completed timely; and finally
f. The
period in which material net cash inflows from significant projects are expected
to commence.
K R A M E R L E V I N N A F T A L I S
& F R A N K E L LLP
Mr.
Jim
B.
Rosenberg
July
30,2007
Page
2
Regarding
b., if you do not maintain any research and development costs by project,
disclose that fact and explain why management does not maintain and evaluate
research and development costs by project. Provide other quantitative
or qualitative disclosure that indicates the amount of the company’s resources
being used on the project.
Regarding
c. and d., disclose the amount or range of estimated costs and timing to
complete the phase in process and each future phase. To the extent
that information is not estimable, disclose those facts and circumstances
indicating the uncertainties that preclude you from making a reasonable
estimate.
We
have
reviewed the Staff guidance referred to in the Comment Letter based on such
guidance, as well as discussions with the Staff, we believe that the Company’s
current business model is not fully consistent with the nature of the
disclosures contemplated by the guidance.
The
Company, at this stage of its existence, is an early stage drug discovery
company. Its area of expertise is in the use of predictive biological
and computer-based mathematical models to discover potential therapeutic drug
candidates and diagnostic biomarker candidates that may, at a later stage,
be
pursued in conjunction with major pharmaceutical companies. Currently, the
Company's goal is early stage drug and biomarker discovery and not drug
development; therefore, it does not have drug research and development
projects in the classic sense (i.e. Pre-Clinical, Phase I, Phase II,
etc.). Early stage experimental “wet” biological validation is employed
regarding ideas and product candidates discovered by the Company’s predictive
modeling platform.
At
present, the Company focuses on and is structured along the lines of its three
principal activities: (i) research and discovery; (ii) therapeutics; and (iii)
diagnostics.
Research
and Discovery: The Company’s research and discovery
activities include the development of its underlying enabling technologies
comprising its computational based discovery platforms. The Company utilizes
these platforms to support its therapeutic and diagnostic activities. Its entire
discovery process begins in silico, meaning that product candidates are
discovered using its computational platforms.
Therapeutics
and Diagnostics: Using its discovery engines and related
technologies, the Company seeks to discover novel molecules and
candidates that may be suitable for further development as therapeutic and
diagnostic product candidates. The Company’s therapeutic and
diagnostic activities are in essence, an effort to use its underlying discovery
platforms to identify selected potential therapeutic and diagnostic product
candidates. The Company’s discovery
K R A M E R L E V I N N A F T A L I S
& F R A N K E L LLP
Mr.
Jim
B.
Rosenberg
July
30,2007
Page
3
capabilities
and understandings are not field or disease specific and may have numerous
applications, both in therapeutic and diagnostic areas.
At
any
given time period, Company discovery efforts span a number of candidates which
may in the future, become diagnostic or therapeutic product
targets. The majority of the Company’s employees are engaged in
research and discovery, and each such employee is usually engaged in several
activities in tandem. Management is not structured along fixed
project lines. The Company’s research activities are
dynamic and may change several times over the course of a year in response
to
interim results reached or in response to external requests. The
Company cannot accurately predict its research needs or know in advance the
direction certain projects may take. Management does not use
project-by-project data to manage the Company’s business or to make decisions
regarding its research and discovery activities. Therefore, the
Company does not allocate funds on a project by project basis.
Rather,
the Company allocates its research and discovery budget on an overall basis
aligned with its organizational structure and adjusts that allocation on an
ongoing basis to correlate with its changing needs. The Company’s
projects, as well as the structure of its organization and research activities,
are relatively fluid depending on many factors, including but not limited to,
results of earlier or parallel studies, intellectual property freedom to
operate, successful validation and customer requests. The results of
certain studies that have been discontinued are often applicable to other
studies.
The
Company seeks to further the process that will lead to commercialization of
its
diagnostic and therapeutic candidates by entering into strategic collaborations
with leading diagnostic, biotechnology and pharmaceutical companies as well
as
academic and medical institutions. It intends to generate revenues
through milestone and revenue sharing out-licensing and joint development
agreements with various collaborators in the pharmaceutical industry.
Accordingly, the Company’s business model is based on developing commercial
value in partnership with large pharmaceutical companies who can take the
Company’s early-stage discoveries and candidates, and support and fund
commercial development, from pre-clinical stages through
commercialization.
The
Company expenses research and discovery costs as incurred. The
Company’s research and discovery expenses currently include cost of salaries and
related expenses, activities related to intellectual property, protein
production, acquisition of tissue samples and other biological testing
materials, supplies, equipment depreciation, outsourced testing and other
services and consultants.
K R A M E R L E V I N N A F T A L I S
& F R A N K E L LLP
Mr.
Jim
B.
Rosenberg
July
30,2007
Page
4
The
Company is not a project-based drug development company and therefore, does
not
account for its research and discovery expenses like a typical biotechnology
or
drug development company which might typically have a drug development programs
with pre-clinical through clinical phases. The Company’s research and
discovery activities operate under one business unit with a variety of different
functions and is not managed on a divisional basis. Based on this
model, it is not practical or helpful to investors to account for R&D on a
project-by-project basis. Further, the Company believes the
disclosure provided in their Form 20-F conforms to its current business model
and operations as well as to its reporting requirements.
_______________________________________________________________________
In
responding to the Staff’s comments, we have been authorized to advise the Staff
that the Company acknowledges that:
|
§
|
The
Company is responsible for the adequacy and accuracy of the disclosures
in
the filing;
|
|
§
|
Staff
comments or changes to disclosure in response to staff comments do
not
foreclose the commission from taking any action with respect to the
filing; and
|
|
§
|
The
Company may not assert the Staff’s comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
|
If
you or
other members of the Staff have any further questions or comments concerning
these responses or if you require additional information, please feel free
to
contact me at the telephone number above.
Very
truly yours,
/s/
Richard H. Gilden
Richard
H. Gilden
cc: Tabatha
Akins, Staff
Accountant
Mary
Mast, Senior Accountant
Alex
Kotzer, CEO, Compugen
Ronit
Lerner, CFO,
Compugen