Lineage Cell Therapeutics, Inc.

Welcome to the Lineage Cell Therapeutics Second Quarter 2024 Conference Call. At this time, all participants are in a listen-only mode. An audio webcast of this call is available on the Investor Sections of Lineage's website at www.lineagecel.com. This call is subject to copyright and is the property of Lineage. And recording, reproduction, or transmission of this call without the express written consent of lineage are strictly prohibited. As a reminder, today's call is being recorded. I would now like to introduce your host for today's call, Ms. Iona Hone, Head of Investor Relations at Lineage. Ms. Hone, please go ahead.

Thank you. Good afternoon, and thank you for joining us. A press release reporting our second quarter 2024 financial results was issued earlier today, August 8th, 2024, and can be found on the investor section of our website. Please note that today's remarks and responses to your questions reflect management's views as of today only and will contain forward-looking statements within the meaning of federal securities laws. Statements made during this discussion that are not statements of historical fact should be considered forward-looking statements which are subject to significant risks and uncertainties. The company's actual results or performance may differ materially from the expectations indicated by such forward-looking statements. For a discussion of certain factors that could cause the company's results or performance to differ, we refer you to the forward-looking statement sections in today's press release and in the company's SEC filings, including its annual report on Form 10-K for the year ended December 31st, 2023. We caution you not to place under reliance on any forward-looking statements which speak only as of today and are qualified by the cautionary statements and risk factors described in our SEC filings. With us today are Brian Culley, our Chief Executive Officer, and Jill Howe, our Chief Financial Officer. I'll now hand the call over to Brian.

Thank you, Moana. Good afternoon, everyone. We appreciate you taking the time to join us on the call today. There are three things that I plan to discuss today. First, I'll have some brief comments about the macro environment because it's important and we obviously are affected by it. Second, I will provide an update on our lead program, Oprogen, for the treatment of dry AMD. And third, I'll provide an update on our IND amendment for the spinal cord program alongside some additional progress we've made with our pipeline. First, it's impossible to ignore that the biotech sector remains in an unprecedented bear market. While positive reactions to clinical data, M&A deals, and IPOs still occur in pockets, the overall sentiment for small-cap bioinvestors remains extremely cautious, with many investors on the sidelines or in some cases outright negative on the sector. And as you know, this regrettably sour environment has been present with us for several years. In times like these, it's critical for capital-intensive businesses like ours to manage their cash wisely, to focus only on one or two priorities, and to seek out the best available cost of capital. Some biotech companies have elected not to follow these practices, and a record number of them have suffered as a result. Now we obviously cannot control interest rates or generous flows, but we can, and we do, seek to optimize things which we can control, such as where our capital comes from, how that capital is deployed, and what we get in return from those investments. Our staged and measured approach coupled with our deep commitment to fiscal discipline has ensured that we've been able to weather multiple years of unpredictable market environment much better than many of our peers. And such sustainability is important because we believe our cell transplant technology can become a very powerful platform. This optimism comes not only from our current programs, but also from the continued success being shown by similar cell transplant programs in areas like diabetes and Parkinson's disease. And when the biomarkets do improve, and history suggests they will, we will be prepared to make the necessary and appropriate adjustments to capitalize on that environment as well. With those macro comments out of the way, up next is Oprigen, which is our retinal cell transplant to treat geographic atrophy, secondary to age-related macular degeneration. I assume everyone on this call is aware that our partners, Roche and Genentech, are currently conducting a phase two trial of the Oprigen program with an estimated enrollment of 60 patients. We are happy to announce today that the first ex-US clinical site for this study has been opened. This is an experienced site located in Israel and managed by an investigator who also participated in our Phase I-IIa study. We are pleased that the Genentech clinical team continues to expand the number of sites in the OPERGEN trial, which additionally helps to increase exposure of and experience with our lead product candidate. Because clinical data releases can be significant events for investors, we often are asked when the data from this trial will be available to the public. The answer, which by the way is a completely normal arrangement for pharma partnerships like ours, is that lineage does not control the timing or format of data coming from this Genentech-run trial. However, that does not mean we are in an information vacuum. There are a number of publicly available items which we believe are encouraging indicators for this program. And I'd like to highlight some of those positive signs for you today because having a clear and comprehensive view of Oprigen is not only critical to the investment thesis for lineage, but also informs the strategic decisions we make for the company. Starting off, it's important to point out that the ongoing trial has three outcome measures. The first outcome measure is the proportion of patients with successful delivery of Oprigen to the target region of the eye. The second is overall safety, and the third is improvement in retinal structure, which, by the way, is an outcome measure that wasn't even collected in the Sifovir or Isovay anti-complement trials because neither of those drugs has shown they can improve retinal structure. We believe even just the fact that our partners are collecting data on things like retinal improvement is an indication that Oprigen may offer patients a far superior profile than any of the non-cellular approaches. But as I was saying, there are three primary and secondary outcomes collected in this study. And importantly, they are all assessed at three months post-treatment. And as a reminder, the first patient in this open-label study was enrolled in March of 2023, which means Oprigen is currently in an unblinded open-label study with outcome measures being collected at three months and which has been running for 17 months. And while we do not know the extent of any analyses which may have been conducted, we nonetheless assume that based on these facts, some amount of interim clinical data has been collected and reviewed by our partners. While lineage does not have access to results from this study, we believe an informative amount of data may already be available from patients treated to date. And that relates to my next point. Roche has recently been undertaking a rigorous review of their product candidate pipeline. Last September, Bloomberg News reported that Roche's new CEO, quote, aims to move fast on high risk, high reward programs. Then this April, Endpoint News reported that Roche, quote, doubled down on high impact projects after slashing 20% of their pipeline. We saw evidence of this pipeline prioritization which in some instances included terminations to license agreements, terminated programs in cell therapy, and terminations in ophthalmology. But against this backdrop of ruthless culling and prioritization, there are signs which suggest to us that Oprogen, which is a licensed ophthalmology cell therapy program, remains in a good place. First, as I reported last quarter, Roche and Genentech electively reported long-term data from the lineage-run Phase 1-2A study at the Retinal Cell and Gene Therapy Innovation Summit in May, which showed durable increases to BCVA and durable increases to key retinal layers, lasting for at least 24 months. This is a starkly different result from what anti-complement therapies have demonstrated to date, where vision loss and tissue loss are the expected outcome over the same time period. And not long after that data update, Genentech entered into a new and additional agreement with Lineage to provide services which support certain development activities for OpraGen, including to provide an additional five years of follow-up for the patients enrolled in the Lineage-run Phase I-IIa study. And we have seen this kind of positive sign continue this year. As recently as the virtual ophthalmology day last month, where the global franchise head for ophthalmology said, quote, our interest in geographic atrophies remains really strong. While at the same time, we noted that they terminated another phase two program in GA. So from our perspective, while we are waiting for operogen data, we are encouraged that these statements from our partners continue to confirm their strong focus in geographic atrophy, And to our knowledge, OPERGYN is the only clinical program they currently have in this indication. Again, it's important for me to emphasize that as of today, we do not have information about the results of the ongoing trial. We also don't know to what extent our partners have or have not reviewed any interim data. All we are providing today is management's perspective of the situation based on our assumptions, as well as on publicly available actions and statements, which we believe in the aggregate more likely indicate positive rather than negative progress with Oprigen. At a minimum, whatever is known to Genentech appears to have been sufficiently supportive of Oprigen's continued development at a time when Roche is making deep cuts to their product pipeline. So we are encouraged by these signs and remain hopeful that additional signs like the ones I've highlighted for you today will increase investor interest in the coming months. While we await further news and progress from the DRY-AMD program, we remain optimistic about our future because we believe the fundamental mechanism of cell replacement, which has been partly validated by the successful partnering and continued clinical testing of the OPRGEN program, offers important advantages over small molecules and antibodies and that cell transplants could be applied to many other areas of the body. We've seen evidence of this idea recently in the surge of CAR T assets, which have moved into early stage autoimmune disease trials. But CAR T is a tremendously crowded area. We believe the far more exciting and untapped opportunity for cell therapy lies not in indication hunting with undifferentiated CAR T assets, but rather in using the appropriate cell type in the many non-oncology indications for which chronic degeneration is a prominent feature. A number of large companies, including Bayer, Novo Nordisk, Astellas, and Vertex have made major investments in this field, as well as newer entities which have raised significant capital from high-caliber investors. And while we welcome these new entrants for the additional validation they may bring to our approach, we remain comforted by our two decades of experience. Those working in this field know well that affordably scaled and well-controlled manufacturing, like ours, are extremely difficult to master, even by large, well-funded companies. We also continue to be one of very few, perhaps the only, pure play publicly traded company which can offer investors access to this technology via equity holdings. For these and other reasons, We believe we can remain a leader in this growing and powerful branch of medicine for many years to come. We have several pipeline programs which we're excited about, such as auditory neurons for hearing loss and an as yet undisclosed program in neurology. But our next most clinically advanced pipeline program is OPC1, which is our cell transplant program for spinal cord injury. The objective? of this program is to replace damaged cells located in the spinal cord in order to restore or provide function to people who have been paralyzed by a spinal cord injury. This approach is of great interest and importance to the SCI field, and Lineage has more experience, clinical data, and years of patient follow-up in SCI cell transplant therapy than any other company. We are manufacturing and transplanting cells which closely resemble those found naturally in the spinal compartment, which, by the way, is the same basic approach that has yielded positive clinical results in the ocular compartment with our DRY-AMD program. Similar to Oprogen, we manufacture our spinal cord cells at a CGMP facility which we own and control, rather than outsourcing this difficult work to a CDMO. We've collected and published as long as 10 years of safety and efficacy data on our SCI patients and believe the adjustments we've made recently to increase the purity and scale of our cells will further improve the quality and commercial profile which we've already demonstrated for this program. And in addition to improving the material we transplant, we're simultaneously investigating superior ways to deliver our cells to patients. As we finalize the information package for FDA, which will support our new manufacturing process, our most immediate objective for the OPC-1 program is to improve upon the delivery system. The original system used in previous studies was adequate but not optimized for that purpose. We have licensed rights to and have helped develop for our intended use a novel delivery system called MyPSD, which can administer OPC1 to the spinal parenchyma in both chronic and subacute SCI patients. This offers several advantages over the original device, including the ability to maintain patient respiration while the cells are being delivered. We believe MyPSD will offer a safer and easier to use solution for this therapy. We have filed an IND amendment with the FDA which, when cleared by FDA, would allow us to initiate our plan study to evaluate the safety and performance of this novel delivery device. As I reported on a prior earnings call, the FDA advised us to expect a delayed process for review of our INDA due to their significant workload and conflicting PDUFA priorities. As a promising sign, we nevertheless have received a number of information requests from the FDA, and we promptly submitted our responses to those requests. In response to our most recent requests for further information, the FDA advised in early July that their review was complicated by the requirement of inter-center review, specifically CBER and CDRH, and they were unable to provide a timeline for completion of their review, but that they were working to the best of their ability to deliver a response to us as soon as possible. Fortunately, we heard this week from the project manager that a call with the FDA review team is being arranged with us, so we're hopeful to have a positive update soon. I will add that we do not believe there are any unusual aspects to our INDA, especially considering that we're proposing to evaluate an externally positioned device with a therapy that already has been tested in 30 patients. And in fact, we have heard from a number of external advisors, both from the regulatory and legal fields, that other cell and gene therapy sponsors have been experiencing these kinds of delays in the FDA's review process as a result of a heavy workload. So, while that is unfortunate, we have, in the meantime, been conducting a number of customary trial preparations to support opening the first clinical study site, something which we continue to target as soon as feasible, pending receipt of FDA's feedback. And we also, concurrently, are working on resubmitting our CIRM grant application to support the DOST study. We continue to be very excited about the possibility of significantly reducing the cost of that trial via the CIRM Clin2 grant, but the timing of our submission is contingent on receipt of FDA clearance of our INDA. So, while we wait for FDA's clearance, we will take advantage of this additional time to continuously improve the application and give it the best chance of success. I'll also add that an unintended benefit of FDA taking a long time for its review is that we've not assumed many of the projected expenses associated with initiating this trial. we end up in a better than expected cash position for the period, which Jill can talk about in her section. The last few things I'd like to mention today is a reminder that we have very exciting preclinical programs in both sensorineural hearing loss and in an as yet undisclosed indication with our gene editing partner, Eterna. The hearing loss program, ANP1, is a cell transplant comprised of a population of auditory neuronal cells delivered to the inner ear to replace the cells which have become dysfunctional due to damage or degeneration. The manufacturing process for ANP1 has been built upon the same platform as the Oprygen program, which allowed us to accelerate its development and move rapidly into preclinical animal testing. And in fact, a functional test in an animal model is currently underway. In parallel, The manufacturing team wanted to highlight some of their recent accomplishments and are planning to present preliminary data at a scientific conference next month. I learned yesterday that the abstract for that data was accepted, so we will provide those details soon, which is something we can all look forward to. I also want to add that the ANP1 product candidate was created from investments we made in our in-house R&D team. It is an entirely homegrown program, which was not licensed from an academic lab and did not involve any external financial support or require any technology licenses. Being able to design and then in some cases own nearly 100% of a pipeline program is an underappreciated advantage which we have created from our experience and capabilities with directed differentiation and process development. While there is abundant attention on Oprogen today and for good reasons, I don't want us to lose sight of the long-term value which our development engine could create for this company. For this reason, we're continuing to grow our pipeline and engage in partnership discussions which align with this strategy. The ongoing efforts to generate a hypoimmune cell line with our gene editing partner, Eterna, continues to make progress, and we look forward later this year to announcing an initiative we started an entirely new indication. So to wrap up, I will offer three things investors may want to watch for in the coming period. The first is to monitor for any further updates, indications, or other information on Oprogen coming from either us or our partners. The second is us receiving a clear path forward from FDA to initiate the safety study of the new OPC1 delivery device and to apply for the CIRM clinical grant. And the third would be an update on the AMP1 program for sensorineural hearing loss, which, as I updated just today, is expected next month. With that, I will turn things over to Jill for a review of our financials.