Lineage Cell Therapeutics : Immediate Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

• 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
• 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)

California	94-3127919
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)
2173 Salk Avenue, Suite 200
Carlsbad, California 92008
(Address of principal executive offices) (Zip code)

(Registrant's telephone number, including area code) [phone]

	Securities registered pursuant to Section 12(b) of the Act
Title of each class			Trading Symbol		Name of exchange on which registered
Common shares			LCTX		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.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth company ☐

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

Page

PART I.

FINANCIAL INFORMATION

5

Item 1.

Financial Statements (Unaudited)

5

Condensed Consolidated Balance Sheets

5

Condensed Consolidated Statements of Operations

6

Condensed Consolidated Statements of Comprehensive Loss

7

Condensed Consolidated Statements of Changes in Shareholders' Equity

8

Condensed Consolidated Statements of Cash Flows

9

Notes to the Condensed Consolidated Interim Financial Statements

10

Item 2.

Management's Discussion and Analysis of Financial Condition and Result of Operations

27

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

34

Item 4.

Controls and Procedures

34

PART II.

OTHER INFORMATION

35

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

35

Item 3.

Defaults Upon Senior Securities

35

Item 4.

Mine Safety Disclosures

35

Item 5.

Other Information

35

Item 6.

Exhibits

36

Signatures

37

2

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.

3

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.

4

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

		March 31, 2024		December 31, 2023
		(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	43,576		$	35,442
Marketable securities		45			50
Accounts receivable, net		77			745
Prepaid expenses and other current assets		2,018			2,204
Total current assets		45,716			38,441
NONCURRENT ASSETS
Property and equipment, net		2,104			2,245
Operating lease right-of-use assets		2,855			2,522
Deposits and other long-term assets		596			577
Goodwill		10,672			10,672
Intangible assets, net		46,540			46,562
TOTAL ASSETS	$	108,483		$	101,019
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	5,683		$	6,270
Operating lease liabilities, current portion		1,052			830
Finance lease liabilities, current portion		49			52
Deferred revenues, current portion		10,106			10,808
Total current liabilities		16,890			17,960
LONG-TERM LIABILITIES
Deferred tax liability		273			273
Deferred revenues, net of current portion		18,177			18,693
Operating lease liabilities, net of current portion		2,074			1,979
Finance lease liabilities, net of current portion		79			91
TOTAL LIABILITIES		37,493			38,996
Commitments and contingencies (Note 13)
SHAREHOLDERS' EQUITY
Preferred shares, no par value, 2,000 shares authorized; none issued and
outstanding as of March 31, 2024 and December 31, 2023		-		-
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		466,571			451,343
Accumulated other comprehensive loss		(2,771 )		(3,068 )
Accumulated deficit		(391,398 )		(384,856 )
Lineage's shareholders' equity		72,402			63,419
Noncontrolling deficit		(1,412 )		(1,396 )
Total shareholders' equity		70,990			62,023
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	108,483		$	101,019

See accompanying notes to the condensed consolidated interim financial statements. 5

LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

	Three Months Ended March 31,
	2024			2023
REVENUES:
Collaboration revenues	$	1,187		$	2,121
Royalties, license and other revenues		257			265
Total revenues		1,444			2,386
OPERATING EXPENSES:
Cost of sales		98			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	$	(0.04 )	$	(0.03 )
basic and diluted
Weighted-average common shares used to compute basic and		182,909			170,127
diluted net loss per common share

See accompanying notes to the condensed consolidated interim financial statements.

6

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	$	(6,245 )	$	(3,908 )
COMMON SHAREHOLDERS

See accompanying notes to the condensed consolidated interim financial statements.

7

LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(IN THOUSANDS)

(UNAUDITED)

												Accumulated
	Common										Other		Total
	Shares			Accumulated	Noncontrolling	Comprehensiv	Shareholders'
				e
	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	Comprehensiv	Shareholders'
				e
	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.

8

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		546			570
(see Note 13 (Commitments and Contingencies))
Total cash, cash equivalents, and restricted cash	$	44,122		$	16,021

See accompanying notes to the condensed consolidated interim financial statements. 9

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-termfollow-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.

10