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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2024
OR
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________ to ________
Commission file number 001-12830
Lineage Cell Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
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California |
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94-3127919 |
(State or other jurisdiction of incorporation or organization) |
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(IRS Employer Identification No.) |
2173 Salk Avenue, Suite 200
Carlsbad, California 92008
(Address of principal executive offices) (Zip code)
(Registrant’s telephone number, including area code) (442) 287-8990
Securities registered pursuant to Section 12(b) of the Act
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Title of each class |
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Trading Symbol |
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Name of exchange on which registered |
Common shares |
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LCTX |
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NYSE American LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☐ |
Accelerated filer ☐ |
Non-accelerated filer ☒ |
Smaller reporting company ☒ |
Emerging growth company ☐ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
The number of common shares outstanding as of May 3, 2024 was 188,798,145.
Lineage Cell Therapeutics, Inc.
Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. The forward-looking statements are contained principally in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report, but are also contained elsewhere in this report. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this report are forward-looking statements. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. Forward-looking statements in this report include, but are not limited to, statements about:
•the potential to receive developmental, regulatory, and commercialization milestone and royalty payments under our Collaboration and License Agreement with F. Hoffmann-La Roche Ltd and Genentech, Inc.;
•our plans to research, develop and commercialize our product candidates;
•the initiation, progress, success, cost and timing of our clinical trials and other product development activities;
•the therapeutic potential of our product candidates, and the indications for which we intend to develop our product candidates;
•our ability to successfully manufacture our product candidates for clinical development and, if approved, for commercialization, and the timing and costs of such manufacture;
•the potential of our cell therapy platform;
•our ability to obtain additional capital to fund our operations;
•our expectations and plans regarding existing and potential future collaborations with third parties such as pharmaceutical and biotechnology companies, government agencies, academic laboratories, and research institutes for the discovery, development, and/or commercialization of novel cell therapy products;
•the size and growth of the potential markets for our product candidates and our ability to serve those markets;
•the potential scope and value of our intellectual property rights; and
•the effects on our operations of the Israel-Hamas war, other geopolitical conflicts, political and economic instability, public health emergencies and macroeconomic conditions.
Forward-looking statements reflect our views and expectations as of the date of this report about future events and our future performance and condition, and involve known and unknown risks, uncertainties and other factors that may cause our actual activities, performance, results or condition to be materially different from those expressed or implied by the forward-looking statements. You should refer to “Item 1A. Risk Factors” in Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 10-K”) as filed with the Securities and Exchange Commission (the “SEC”) on March 7, 2024, for a discussion of important factors that may cause our actual activities, performance, results and condition to differ materially from those expressed or implied by our forward-looking statements. As a result of a variety of factors, including those discussed in Part I, Item 1A of the 2023 10-K, our forward-looking statements may prove to be inaccurate, and the inaccuracy may be material. Accordingly, you should not place undue reliance on any forward-looking statement. We anticipate that subsequent events and developments may cause our current views and expectations to change. However, while we may elect to update the forward-looking statements in this report at some point in the future, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date after the date of this report.
You should read this report completely and with the understanding that our actual future performance, results and condition may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
MARKET DATA AND TRADEMARKS
This report may also contain market data, industry forecasts and other data made by independent parties and by us relating to market size and growth and other data about our industry. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such data. In addition, projections, assumptions and estimates of our future performance and the future performance of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk.
All brand names or trademarks appearing in this report are the property of their respective owners. Solely for convenience, the trademarks and trade names in this report are referred to without the symbols ® and TM, but such references should not be construed as any indication that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.
******
Unless otherwise stated or the context requires otherwise, references in this report to “Lineage,” the “Company,” “our company,” “we,” “us,” and “our” refer collectively to Lineage Cell Therapeutics, Inc. and its consolidated subsidiaries.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
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March 31, 2024 |
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December 31, 2023 |
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(Unaudited) |
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ASSETS |
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CURRENT ASSETS |
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Cash and cash equivalents |
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$ |
43,576 |
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$ |
35,442 |
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Marketable securities |
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45 |
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50 |
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Accounts receivable, net |
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77 |
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745 |
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Prepaid expenses and other current assets |
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2,018 |
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2,204 |
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Total current assets |
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45,716 |
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38,441 |
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NONCURRENT ASSETS |
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Property and equipment, net |
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2,104 |
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2,245 |
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Operating lease right-of-use assets |
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2,855 |
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2,522 |
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Deposits and other long-term assets |
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596 |
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577 |
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Goodwill |
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10,672 |
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10,672 |
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Intangible assets, net |
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46,540 |
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46,562 |
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TOTAL ASSETS |
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$ |
108,483 |
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$ |
101,019 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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CURRENT LIABILITIES |
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Accounts payable and accrued liabilities |
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$ |
5,683 |
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$ |
6,270 |
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Operating lease liabilities, current portion |
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1,052 |
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830 |
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Finance lease liabilities, current portion |
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49 |
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52 |
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Deferred revenues, current portion |
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10,106 |
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10,808 |
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Total current liabilities |
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16,890 |
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17,960 |
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LONG-TERM LIABILITIES |
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Deferred tax liability |
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273 |
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273 |
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Deferred revenues, net of current portion |
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18,177 |
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18,693 |
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Operating lease liabilities, net of current portion |
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2,074 |
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1,979 |
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Finance lease liabilities, net of current portion |
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79 |
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91 |
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TOTAL LIABILITIES |
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37,493 |
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38,996 |
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Commitments and contingencies (Note 13) |
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SHAREHOLDERS’ EQUITY |
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Preferred shares, no par value, 2,000 shares authorized; none issued and
outstanding as of March 31, 2024 and December 31, 2023 |
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— |
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— |
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Common shares, no par value, 450,000 shares authorized as of March 31, 2024
and December 31, 2023; 188,754 and 174,987 shares issued and outstanding
as of March 31, 2024 and December 31, 2023, respectively |
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466,571 |
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451,343 |
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Accumulated other comprehensive loss |
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(2,771 |
) |
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(3,068 |
) |
Accumulated deficit |
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(391,398 |
) |
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(384,856 |
) |
Lineage's shareholders’ equity |
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72,402 |
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63,419 |
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Noncontrolling deficit |
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(1,412 |
) |
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(1,396 |
) |
Total shareholders’ equity |
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70,990 |
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62,023 |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
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$ |
108,483 |
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$ |
101,019 |
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See accompanying notes to the condensed consolidated interim financial statements.
LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
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Three Months Ended March 31, |
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2024 |
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2023 |
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REVENUES: |
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Collaboration revenues |
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$ |
1,187 |
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$ |
2,121 |
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Royalties, license and other revenues |
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257 |
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265 |
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Total revenues |
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1,444 |
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2,386 |
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OPERATING EXPENSES: |
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Cost of sales |
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98 |
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119 |
|
Research and development |
|
|
3,010 |
|
|
|
4,185 |
|
General and administrative |
|
|
4,997 |
|
|
|
4,724 |
|
Total operating expenses |
|
|
8,105 |
|
|
|
9,028 |
|
Loss from operations |
|
|
(6,661 |
) |
|
|
(6,642 |
) |
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES): |
|
|
|
|
|
|
Interest income, net |
|
|
462 |
|
|
|
410 |
|
(Loss) gain on marketable equity securities, net |
|
|
(5 |
) |
|
|
40 |
|
Foreign currency transaction gain/(loss), net |
|
|
(354 |
) |
|
|
(472 |
) |
Other income |
|
|
— |
|
|
|
457 |
|
Total other income (expenses), net |
|
|
103 |
|
|
|
435 |
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES |
|
|
(6,558 |
) |
|
|
(6,207 |
) |
|
|
|
|
|
|
|
Provision for income tax benefit |
|
|
— |
|
|
|
1,803 |
|
|
|
|
|
|
|
|
NET LOSS |
|
|
(6,558 |
) |
|
|
(4,404 |
) |
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interest |
|
|
16 |
|
|
|
32 |
|
|
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE TO LINEAGE |
|
$ |
(6,542 |
) |
|
$ |
(4,372 |
) |
|
|
|
|
|
|
|
Net loss per common share attributable to Lineage
basic and diluted |
|
$ |
(0.04 |
) |
|
$ |
(0.03 |
) |
|
|
|
|
|
|
|
Weighted-average common shares used to compute basic and
diluted net loss per common share |
|
|
182,909 |
|
|
|
170,127 |
|
See accompanying notes to the condensed consolidated interim financial statements.
LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(IN THOUSANDS)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2024 |
|
|
2023 |
|
NET LOSS |
|
$ |
(6,558 |
) |
|
$ |
(4,404 |
) |
Other comprehensive loss, net of tax: |
|
|
|
|
|
|
Foreign currency translation adjustment |
|
|
298 |
|
|
|
373 |
|
Unrealized gain (loss) on marketable debt securities |
|
|
(1 |
) |
|
|
91 |
|
COMPREHENSIVE LOSS |
|
|
(6,261 |
) |
|
|
(3,940 |
) |
Less: Comprehensive loss attributable to noncontrolling interest |
|
|
16 |
|
|
|
32 |
|
COMPREHENSIVE LOSS ATTRIBUTABLE TO LINEAGE
COMMON SHAREHOLDERS |
|
$ |
(6,245 |
) |
|
$ |
(3,908 |
) |
See accompanying notes to the condensed consolidated interim financial statements.
LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(IN THOUSANDS)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Common |
|
|
|
|
|
|
|
|
Other |
|
|
Total |
|
|
|
Shares |
|
|
Accumulated |
|
|
Noncontrolling |
|
|
Comprehensive |
|
|
Shareholders’ |
|
|
|
Shares |
|
|
Amount |
|
|
Deficit |
|
|
Deficit |
|
|
Income / (Loss) |
|
|
Equity |
|
For the Three Months Ended March 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE - December 31, 2023 |
|
|
174,987 |
|
|
$ |
451,343 |
|
|
$ |
(384,856 |
) |
|
$ |
(1,396 |
) |
|
$ |
(3,068 |
) |
|
$ |
62,023 |
|
Shares issued through registered direct financing |
|
|
13,462 |
|
|
|
14,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,000 |
|
Shares issued through ATM |
|
|
30 |
|
|
|
37 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
37 |
|
Financing related fees |
|
|
— |
|
|
|
(112 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(112 |
) |
Shares issued upon vesting of restricted stock units, net
of shares retired to pay employees’ taxes |
|
|
45 |
|
|
|
(23 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(23 |
) |
Shares issued upon exercise of stock options |
|
|
230 |
|
|
|
163 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
163 |
|
Stock-based compensation |
|
|
— |
|
|
|
1,163 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,163 |
|
Unrealized loss on marketable debt securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
298 |
|
|
|
298 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
(6,542 |
) |
|
|
(16 |
) |
|
|
— |
|
|
|
(6,558 |
) |
BALANCE - March 31, 2024 |
|
|
188,754 |
|
|
$ |
466,571 |
|
|
$ |
(391,398 |
) |
|
$ |
(1,412 |
) |
|
$ |
(2,771 |
) |
|
$ |
70,990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Common |
|
|
|
|
|
|
|
|
Other |
|
|
Total |
|
|
|
Shares |
|
|
Accumulated |
|
|
Noncontrolling |
|
|
Comprehensive |
|
|
Shareholders’ |
|
|
|
Shares |
|
|
Amount |
|
|
Deficit |
|
|
Deficit |
|
|
Income / (Loss) |
|
|
Equity |
|
For the Three Months Ended March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE - December 31, 2022 |
|
|
170,093 |
|
|
$ |
440,280 |
|
|
$ |
(363,370 |
) |
|
$ |
(1,403 |
) |
|
$ |
(3,571 |
) |
|
$ |
71,936 |
|
Shares issued upon vesting of restricted stock units, net
of shares retired to pay employees’ taxes |
|
|
53 |
|
|
|
(37 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(37 |
) |
Shares issued upon exercise of stock options |
|
|
28 |
|
|
|
25 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
25 |
|
Stock-based compensation |
|
|
— |
|
|
|
1,031 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,031 |
|
Unrealized gain on marketable debt securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
91 |
|
|
|
91 |
|
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
373 |
|
|
|
373 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
(4,372 |
) |
|
|
(32 |
) |
|
|
— |
|
|
|
(4,404 |
) |
BALANCE - March 31, 2023 |
|
|
170,174 |
|
|
$ |
441,299 |
|
|
$ |
(367,742 |
) |
|
$ |
(1,435 |
) |
|
$ |
(3,107 |
) |
|
$ |
69,015 |
|
See accompanying notes to the condensed consolidated interim financial statements.
LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2024 |
|
|
2023 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
Net loss attributable to Lineage |
|
$ |
(6,542 |
) |
|
$ |
(4,372 |
) |
Net loss attributable to noncontrolling interest |
|
|
(16 |
) |
|
|
(32 |
) |
Adjustments to reconcile net loss attributable to Lineage Cell Therapeutics, Inc.
to net cash used in operating activities: |
|
|
|
|
|
|
Loss (gain) on marketable equity securities, net |
|
|
5 |
|
|
|
(40 |
) |
Accretion of income on marketable debt securities |
|
|
— |
|
|
|
(326 |
) |
Depreciation and amortization expense |
|
|
153 |
|
|
|
138 |
|
Change in right-of-use assets and liabilities |
|
|
(10 |
) |
|
|
— |
|
Amortization of intangible assets |
|
|
22 |
|
|
|
33 |
|
Stock-based compensation |
|
|
1,163 |
|
|
|
1,031 |
|
Deferred income tax benefit |
|
|
— |
|
|
|
(1,803 |
) |
Foreign currency remeasurement and other loss |
|
|
371 |
|
|
|
465 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
|
668 |
|
|
|
95 |
|
Prepaid expenses and other current assets |
|
|
195 |
|
|
|
(847 |
) |
Accounts payable and accrued liabilities |
|
|
(574 |
) |
|
|
(3,463 |
) |
Deferred revenue |
|
|
(1,218 |
) |
|
|
(2,121 |
) |
Net cash used in operating activities |
|
|
(5,783 |
) |
|
|
(11,242 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
Purchases of marketable debt securities |
|
|
— |
|
|
|
(7,718 |
) |
Maturities of marketable debt securities |
|
|
— |
|
|
|
23,332 |
|
Purchase of equipment |
|
|
(38 |
) |
|
|
(188 |
) |
Net cash (used in) provided by investing activities |
|
|
(38 |
) |
|
|
15,426 |
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
Proceeds from employee options exercised |
|
|
132 |
|
|
|
51 |
|
Common shares received and retired for employee taxes paid |
|
|
(23 |
) |
|
|
(37 |
) |
Proceeds from sale of common shares |
|
|
14,037 |
|
|
|
— |
|
Payments for offering costs |
|
|
(112 |
) |
|
|
— |
|
Repayment of finance lease liabilities |
|
|
(13 |
) |
|
|
(13 |
) |
Net cash provided by financing activities |
|
|
14,021 |
|
|
|
1 |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
(70 |
) |
|
|
(100 |
) |
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
|
|
8,130 |
|
|
|
4,085 |
|
|
|
|
|
|
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH: |
|
|
|
|
|
|
At beginning of the period |
|
|
35,992 |
|
|
|
11,936 |
|
At end of the period |
|
$ |
44,122 |
|
|
$ |
16,021 |
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES: |
|
|
|
|
|
|
Cash paid for interest |
|
$ |
2 |
|
|
$ |
2 |
|
|
|
|
|
|
|
|
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING AND
INVESTING ACTIVITIES: |
|
|
|
|
|
|
Property and equipment expenditures in accounts payable |
|
$ |
3 |
|
|
$ |
153 |
|
Receivable from exercise of stock options |
|
$ |
31 |
|
|
$ |
6 |
|
|
|
|
|
|
|
|
Reconciliation of cash, cash equivalents and restricted cash, end of period: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
43,576 |
|
|
$ |
15,451 |
|
Restricted cash included in deposits and other long-term assets
(see Note 13 (Commitments and Contingencies)) |
|
|
546 |
|
|
|
570 |
|
Total cash, cash equivalents, and restricted cash |
|
$ |
44,122 |
|
|
$ |
16,021 |
|
See accompanying notes to the condensed consolidated interim financial statements.
LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization and Business Overview
We are a clinical-stage biotechnology company developing novel allogeneic, or “off-the-shelf”, cell therapies to address unmet medical needs. Our programs are based on our proprietary, cell-based technology platform, and associated development and manufacturing capabilities. From this platform, we design, develop, manufacture, and test specialized human cells with anatomical and physiological functions similar or identical to cells found naturally in the human body. The cells we manufacture are created by applying directed differentiation protocols to established, well-characterized, and self-renewing pluripotent cell lines. These protocols generate cells with characteristics associated with specific and desired developmental lineages. Cells derived from such lineages which are relevant to the underlying condition are transplanted into patients in an effort to (a) replace or support cells that are absent or dysfunctional due to degenerative disease, aging, or traumatic injury, and (b) restore or augment the patient’s functional activity.
Our business strategy is to efficiently leverage our technology platform and our development, formulation, delivery, and manufacturing capabilities to advance our programs internally or in conjunction with strategic partners to further enhance their value and probability of success.
A significant area of focus is a collaboration we entered into with F. Hoffmann-La Roche Ltd and Genentech, Inc., a member of the Roche Group (collectively or individually, “Roche” or “Genentech”), under which our lead cell therapy program known as OpRegen®, is being developed for the treatment of ocular disorders, including geographic atrophy (“GA”) secondary to age-related macular degeneration (“AMD”). OpRegen (also known as RG6501) is a suspension of human allogeneic retinal pigmented epithelial (“RPE”) cells and is currently being evaluated in a Phase 2a multicenter clinical trial in patients with GA secondary to AMD. OpRegen subretinal delivery has the potential to counteract RPE cell loss in areas of GA lesions by supporting retinal cell health and improving retinal structure and function. Under the terms of the Collaboration and License Agreement we entered into with Roche in December 2021 (the “Roche Agreement”), we received a $50.0 million upfront payment in January 2022 and are eligible to receive up to an additional $620.0 million in developmental, regulatory, and commercialization milestone payments. We also are eligible to receive tiered double-digit percentage royalties on net sales of OpRegen in the U.S. and other major markets. On May 7 2024, we entered into a service agreement with Genentech pursuant to which we will provide supplemental clinical, technical, training, manufacturing, and procurement services to support the ongoing advancement and optimization of the OpRegen program.
Our most advanced unpartnered product candidate is OPC1, an allogeneic oligodendrocyte progenitor cell therapy designed to improve recovery following a spinal cord injury (“SCI”). OPC1 has been tested in two clinical trials to date; a five patient Phase 1 clinical trial in acute thoracic SCI, where all subjects are followed for at least 10 years, and a 25 patient Phase 1/2a multicenter clinical trial in subacute cervical SCI, where all subjects were evaluated for at least two years. Results from both studies have been published in the Journal of Neurosurgery Spine. OPC1 clinical development has been supported in part by a $14.3 million grant from the California Institute for Regenerative Medicine (“CIRM”). In January 2024 we filed an Investigational New Drug (“IND”) amendment for OPC1 as it relates to our proposed DOSED (Delivery of Oligodendrocyte Progenitor Cells for Spinal Cord Injury: Evaluation of a Novel Device) clinical study, to evaluate the safety and utility of a novel spinal cord delivery device to administer OPC1 to the spinal parenchyma in subacute and chronic SCI patients. We have received written correspondence from the FDA, advising us that due to significant workload and conflicting PDUFA priorities at the agency, its review of our IND amendment and the DOSED study protocol is still ongoing. We have also received information requests from the FDA, all of which we are responding to in a timely manner, and such information request have not involved any commitments to perform additional activities that would delay commencement of the DOSED study. We intend to continue to work closely with the FDA to respond to any additional information requests and/or feedback. In parallel, we continue to focus on customary trial preparations and related activities to support opening our first clinical study site for the DOSED study in the second quarter of 2024.
Our pipeline of allogeneic, or “off-the-shelf”, cell therapy programs currently includes:
•RG6501 (OpRegen), an allogeneic RPE cell replacement therapy currently in a Phase 2a multicenter, open-label, single arm clinical trial, being conducted by Roche, for the treatment of GA secondary to AMD, also known as atrophic or dry AMD.
•OPC1, an allogeneic oligodendrocyte progenitor cell therapy which will be evaluated in the DOSED clinical study, to test the safety and utility of a novel spinal cord delivery device in both subacute and chronic spinal cord injuries and continues to be evaluated in long-term follow-up from a Phase 1/2a multicenter clinical trial for subacute cervical spinal cord injuries.
•ANP1, an allogeneic auditory neuron progenitor cell transplant currently in preclinical development for the treatment of debilitating hearing loss.
LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
•PNC1, an allogeneic photoreceptor cell transplant currently in preclinical development for the treatment of vision loss due to photoreceptor dysfunction or damage.
•RND1, a novel hypoimmune induced pluripotent stem cell (“iPSC”) line being developed in collaboration with Eterna Therapeutics Inc. (“Eterna”), which will be evaluated for differentiation into cell transplant product candidates for central nervous system (“CNS”) diseases and other neurology indications.
Other Programs
We have additional undisclosed product candidates being considered for development and we may consider others, which cover a range of therapeutic areas and unmet medical needs. Generally, these product candidates are based on the same platform technology and employ a similar, guided cell differentiation and transplant approach as the product candidates described above, but in some cases may also include genetic modifications designed to enhance efficacy and/or safety profiles.
Our efforts to broaden the application of our cell therapy platform and support long-term growth include a strategic collaboration we entered into with Eterna. This reflects a portion of our corporate strategy to capitalize on our process development capabilities by combining them with cell engineering and/or editing technologies, to create novel cell therapies with potentially superior product profiles compared to currently marketed therapies, if any.
In addition to seeking to create value for shareholders by developing product candidates and advancing those candidates through clinical development, we also may seek to create value from our non-core intellectual property or related technologies and capabilities, through licensing collaborations and/or strategic transactions, such as our business development approach to our VAC dendritic cell therapy platform.
2. Basis of Presentation, Liquidity and Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated interim financial statements were prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. In accordance with those rules and regulations, certain information and footnote disclosures normally included in comprehensive consolidated financial statements have been condensed or omitted. The condensed consolidated balance sheet as of December 31, 2023 was derived from the audited consolidated financial statements at that date but does not include all the information and footnotes required by GAAP. These unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the 2023 10-K.
The accompanying unaudited condensed consolidated interim financial statements, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our financial condition and results of operations. The condensed consolidated results of operations are not necessarily indicative of the results to be expected for any other interim period or for the entire year. Certain prior period amounts in the condensed consolidated interim financial statements and accompanying notes have been reclassified to conform to the current period presentation. The reclassification of these items had no impact on net loss, net loss per share, financial position or cash flows in the current or prior periods. Specifically, our reclassifications are (i) operating lease right-of-use assets are now presented separately from property and equipment, net, on the condensed consolidated balance sheets, (ii) cost of sales are now included in operating expenses on the condensed consolidated statements of operations, and (iii) foreign currency transaction gains (losses) are now presented separately from other income (expenses) on the condensed consolidated statements of operations.
LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Principles of Consolidation
The accompanying unaudited condensed consolidated interim financial statements include the accounts of our subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. The following table sets out Lineage’s ownership, directly or indirectly, of the outstanding shares of its subsidiaries as of March 31, 2024:
|
|
|
|
|
|
|
Subsidiary |
|
Field of Business |
|
Lineage
Ownership |
|
Country |
Cell Cure Neurosciences Ltd. |
|
Manufacturing of Lineage’s product candidates |
|
94%(1) |
|
Israel |
ES Cell International Pte. Ltd. |
|
Research and clinical grade cell lines |
|
100% |
|
Singapore |
(1)Includes shares owned by Lineage and ES Cell International Pte. Ltd.
As of March 31, 2024, Lineage consolidated its direct and indirect wholly owned or majority-owned subsidiaries because Lineage has the ability to control their operating and financial decisions and policies through its ownership, and the noncontrolling interest is reflected as a separate element of shareholders’ equity on Lineage’s condensed consolidated balance sheets.
Liquidity
At March 31, 2024, we had $43.6 million of cash, cash equivalents and marketable securities. Based on our current operating plan, we believe that our cash, cash equivalents and marketable securities, together with our projected cash flows, will be sufficient to enable us to carry out our planned operations through at least twelve months from the issuance date of the accompanying condensed consolidated interim financial statements.
Capital Resources
Since inception, we have incurred significant operating losses and have funded our operations primarily through the issuance of equity securities, the sale of common stock of our former subsidiaries, OncoCyte Corporation and AgeX Therapeutics, Inc., receipt of proceeds from research grants, revenues from collaborations, royalties from product sales, and sales of research products and services.
As of March 31, 2024, $40.0 million remained available for sale under our at-the-market offering program (“ATM”). See Note 10 (Shareholders’ Equity) for additional information.
Additional Capital Requirements
Our financial obligations primarily consist of obligations to licensors under license agreements, obligations related to grants received from government entities, including the Israel Innovation Authority (“IIA”), obligations under contracts with vendors who provide research services and purchase commitments with suppliers.
Our obligations to licensors under license agreements and our obligations related to grants received from government entities require us to make future payments, such as sublicense fees, milestone payments, redemption fees, royalties and patent maintenance costs. Sublicense fees are payable to licensors or government entities when we sublicense the applicable intellectual property to third parties; the fees are based on a percentage of the license-related revenue we receive from sublicensees. Milestone payments, including those related to the Roche Agreement, are due to licensors or government entities upon achievement of commercial, development and regulatory milestones. Redemption fees due to the IIA under the Innovation Law are due upon receipt of milestone payments and royalties received under the Roche Agreement. See Note 13 (Commitment and Contingencies) for additional information. Royalties, including those related to royalties we may receive under the Roche Agreement, are payable to licensors or government entities based on a percentage of net sales of licensed products. Patent maintenance costs are payable to licensors as reimbursement for the cost of maintaining license patents. Due to the contingent nature of the payments, the amounts and timing of payments to licensors under our in-license agreements are uncertain and may fluctuate significantly from period to period. As of March 31, 2024, we have not included these commitments on our condensed consolidated balance sheet because the achievement of events that would trigger our payment obligations and the timing thereof are not fixed and determinable.
LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
In the normal course of business, we enter into services agreements with contract research organizations, contract manufacturing organizations and other third parties. Generally, these agreements provide for termination upon notice, with specified amounts due upon termination based on the timing of termination and the terms of the agreement. The amounts and timing of payments under these agreements are uncertain and contingent upon the initiation and completion of the services to be provided.
Significant Accounting Policies
We describe our significant accounting policies in Note 2 to the consolidated financial statements in Item 8 of the 2023 10-K. There have been no changes to our significant accounting policies during the three months ended March 31, 2024.
Recently Issued and Recently Adopted Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. The Company has evaluated recently issued accounting pronouncements and does not believe any will have a material impact on the Company’s condensed consolidated interim financial statements or related financial statement disclosures.
3. Revenue
Our disaggregated revenues were as follows for the periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2024 |
|
|
2023 |
|
Revenues under collaborative agreements |
|
|
|
|
|
|
Upfront license fees (1) |
|
$ |
1,187 |
|
|
$ |
2,121 |
|
Total revenues under collaborative agreements |
|
|
1,187 |
|
|
|
2,121 |
|
|
|
|
|
|
|
|
Royalties, license and other revenues (2) |
|
|
257 |
|
|
|
265 |
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
1,444 |
|
|
$ |
2,386 |
|
(1)All of the upfront license fee revenue recognized each period was included within deferred revenue as contract liabilities at the beginning of the period. This revenue originated from the $50.0 million upfront payment under the Roche Agreement.
(2)Included within royalties, license and other revenues recognized each period, $30,000 and $0 was included within deferred revenues as contract liabilities as of January 1, 2024 and 2023, respectively.
We are recognizing the $50.0 million upfront payment under the Roche Agreement utilizing an input method of costs incurred over total estimated costs to be incurred. At each reporting period, we update our total estimated collaboration costs, and any resulting adjustments are recorded on a cumulative basis which would affect revenue and deferred revenue in the period of adjustment. We believe the input methodology represents the most appropriate measure of progress towards satisfaction of the identified performance obligations.
For contracts with customers including collaboration partners which are within the scope of Accounting Standards Update (“ASU”) 2014-09 – Revenue from Contracts with Customers (Topic 606), the aggregate amount of the transaction price allocated to remaining performance obligations as of March 31, 2024 was $30.0 million, of which $28.3 million is reported as deferred revenues. The $30.0 million is expected to be converted to revenue by December 2026.
LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Accounts receivable, net, and deferred revenues (contract liabilities) from contracts with customers, including collaboration partners, consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
Accounts receivable, net - beginning of the period (1) |
|
$ |
676 |
|
|
$ |
297 |
|
Accounts receivable, net - end of the period (1) |
|
$ |
77 |
|
|
$ |
676 |
|
|
|
|
|
|
|
|
Contract liabilities (1)(2) |
|
|
|
|
|
|
Deferred revenues - beginning of the period |
|
$ |
29,501 |
|
|
$ |
37,146 |
|
Deferred revenues - end of the period |
|
$ |
28,283 |
|
|
$ |
29,501 |
|
(1)Excludes amounts outside the scope of ASU 2014-09.
(2)As of March 31, 2024 and December 31, 2023, $10.1 million and $10.8 million, respectively, was recorded within current deferred revenues with the remainder included within long-term deferred revenue on the consolidated balance sheet.
4. Marketable Securities
The following table summarizes the fair value of marketable securities held by the Company and their location in the Company’s condensed consolidated balance sheet (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
Marketable debt securities |
|
|
|
|
|
|
Included within cash and cash equivalents (1) |
|
$ |
— |
|
|
$ |
8,856 |
|
Included within marketable securities |
|
$ |
— |
|
|
$ |
— |
|
Marketable equity securities |
|
|
|
|
|
|
Included within marketable securities |
|
$ |
45 |
|
|
$ |
50 |
|
(1)Cash equivalents have an original maturity of three months or less when purchased. The Company did not own any marketable debt securities as of March 31, 2024.
Marketable Debt Securities
The following table summarizes the available-for-sale debt securities classified within cash and cash equivalents in the Company’s condensed consolidated balance sheet as of December 31, 2023 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2023 |
|
Financial Assets: |
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Fair Value |
|
U.S. Treasury securities |
|
$ |
8,855 |
|
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
8,856 |
|
Total |
|
$ |
8,855 |
|
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
8,856 |
|
The Company has not recognized an allowance for credit losses on any securities in an unrealized loss position as of March 31, 2024 or December 31, 2023. The Company believes that the individual unrealized losses represent temporary declines resulting from changes in interest rates, and we intend to hold these marketable debt securities to their maturity.
Marketable Equity Securities
Marketable equity securities are reported at fair value with unrealized gains and losses related to mark-to-market adjustments included in income. Lineage’s marketable equity securities consist of the shares of common stock of OncoCyte Corporation ("OCX") and of Hadasit Bio-Holdings Ltd. (“HBL”). All share prices are determined based on the closing price of OCX and HBL common stock on the last day of the applicable quarter, or the last trading day of the applicable quarter, if the last day of a quarter fell on a day that was not a trading day. As of March 31, 2024, and December 31, 2023 the combined fair value of these shares was $45,000 and $50,000, respectively.
LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The following table represents the realized and unrealized (loss) gain on marketable equity securities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2024 |
|
|
2023 |
|
(Loss) gain on marketable equity securities, net |
|
$ |
(5 |
) |
|
$ |
40 |
|
Less: Loss recognized in earnings on marketable equity securities sold |
|
|
— |
|
|
|
— |
|
Unrealized (loss) gain recognized on marketable equity securities held
at end of period, net |
|
$ |
(5 |
) |
|
$ |
40 |
|
5. Property and Equipment, Net
Property and equipment, including finance leases, are stated at cost, net of accumulated depreciation and amortization. The cost of property and equipment is depreciated or amortized using the straight-line method over the estimated useful life of the asset, ranging from 3 to 10 years. Finance lease right-of-use assets are amortized over the lease term. Leasehold improvements are amortized over the shorter of the useful life or the lease term .
At March 31, 2024 and December 31, 2023, property and equipment, net was comprised of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
Equipment, furniture and fixtures |
|
$ |
3,598 |
|
|
$ |
3,614 |
|
Leasehold improvements |
|
|
2,280 |
|
|
|
2,313 |
|
Right-of-use assets - finance lease |
|
|
197 |
|
|
|
198 |
|
Accumulated depreciation and amortization |
|
|
(3,971 |
) |
|
|
(3,880 |
) |
Property and equipment, net |
|
$ |
2,104 |
|
|
$ |
2,245 |
|
Depreciation and amortization expense was $153,000 and $138,000 for the three months ended March 31, 2024 and 2023, respectively. These amounts include amortization expense for right-of-use finance lease assets of $14,000 and $10,000 for the three months ended March 31, 2024 and 2023, respectively.
6. Goodwill and Intangible Assets, Net
At March 31, 2024 and December 31, 2023, goodwill and intangible assets, net consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
Goodwill (1) |
|
$ |
10,672 |
|
|
$ |
10,672 |
|
|
|
|
|
|
|
|
Intangible assets: |
|
|
|
|
|
|
Acquired IPR&D – OPC1 (from the Asterias Merger) (2) |
|
$ |
31,700 |
|
|
$ |
31,700 |
|
Acquired IPR&D – VAC (from the Asterias Merger) (2) |
|
|
14,840 |
|
|
|
14,840 |
|
Intangible assets subject to amortization: |
|
|
|
|
|
|
Acquired patents |
|
|
18,953 |
|
|
|
18,953 |
|
Acquired royalty contracts (3) |
|
|
650 |
|
|
|
650 |
|
Total intangible assets |
|
|
66,143 |
|
|
|
66,143 |
|
Accumulated amortization (4) |
|
|
(19,603 |
) |
|
|
(19,581 |
) |
Intangible assets, net |
|
$ |
46,540 |
|
|
$ |
46,562 |
|
(1)Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in the Asterias Merger, see Note 13 (Commitment and Contingencies) for further discussion on the Asterias Merger. To date, we have not recognized any goodwill impairment.
(2)Asterias had two in-process research and development ("IPR&D") intangible assets that were valued at $46.5 million as part of the purchase price allocation that was performed in connection with the Asterias Merger. The fair value of these assets at the acquisition date consisted of $31.7 million pertaining to the OPC1 program and $14.8 million pertaining to the VAC platform.
(3)Asterias had royalty cash flows under patent families it acquired from Geron Corporation. Such patent families are expected to continue to generate revenue, are not used in the OPC1 or the VAC platform, and are considered to be separate long-lived intangible assets under ASC Topic 805, Business Combinations.
LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(4)As of March 31, 2024, the acquired patents and acquired royalty contracts were fully amortized.
Lineage amortizes its intangible assets over an estimated period of 5 to 10 years on a straight-line basis. Lineage recognized approximately $22,000 and $33,000 in amortization expense of intangible assets during the three months ended March 31, 2024 and 2023, respectively.
7. Accounts Payable and Accrued Liabilities
At March 31, 2024 and December 31, 2023, accounts payable and accrued liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
Accounts payable |
|
$ |
2,211 |
|
|
$ |
2,050 |
|
Accrued compensation |
|
|
2,481 |
|
|
|
3,123 |
|
Accrued liabilities |
|
|
991 |
|
|
|
1,097 |
|
Total |
|
$ |
5,683 |
|
|
$ |
6,270 |
|
8. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value in accordance with ASC 820-10-50, Fair Value Measurements and Disclosures:
•Level 1 – Inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
•Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3 – Inputs to the valuation methodology that are unobservable. Unobservable inputs are those in which little or no market data exists, reflect those that a market participant would use, and are therefore determined using estimates and assumptions developed by the Company, .
We have not transferred any instruments between the three levels of the fair value hierarchy.
The carrying value of cash, restricted cash, accounts receivable, accounts payable, and accrued liabilities approximate their respective fair values due to their relative short maturities. We measure our cash equivalents and marketable securities at fair value on a recurring basis. The fair values of such assets were as follows as of March 31, 2024 and December 31, 2023 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using |
|
|
|
Balance at March 31, 2024 |
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1) |
|
|
Significant Other Observable Inputs
(Level 2) |
|
|
Significant Unobservable Inputs
(Level 3) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Money market fund (1) |
|
$ |
37,446 |
|
|
$ |
37,446 |
|
|
$ |
— |
|
|
$ |
— |
|
Marketable debt securities (1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Marketable equity securities |
|
|
45 |
|
|
|
45 |
|
|
|
— |
|
|
|
— |
|
Total assets measured at fair value |
|
$ |
37,491 |
|
|
$ |
37,491 |
|
|
$ |
— |
|