Lineage Cell Therapeutics, Inc.

Welcome to the Lineage Cell Therapeutics 3rd 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 WebVestor section of Lineage's website at www.lineagescell.com. This call is subject to copyright and is the property of Lineage. And recordings, reproductions, or transmissions 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, Ioana Hohn, Head of Investor Relations at LeanAge. Ms. Hohn, please go ahead.

Thank you, John. Good afternoon, and thank you for joining us. A press release reporting our third quarter 2024 financial results was issued earlier today, November 14, 2024, and can be found on the Investors 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 most recent annual report on Form 10-K and its subsequent quarterly reports on Form 10-Q. We caution you not to place undue 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, Iwona. Good afternoon, everyone. We appreciate you taking the time to join us on this call. As I normally do, I'll provide an update on OPERGEN today, along with some comments about our pipeline. But I want to begin by highlighting that we have updated the guidance for our cash runway, which we now expect to support our planned operations into Q1 of 2026. An extension of our runway into 2026 may be unexpected for many of you because it indicates a longer runway than we guided to last quarter. The pickup is partly attributable to our fiscal discipline, but also is a result of the additional interactions we had with FDA regarding the startup of the DOST study for OPC1. It's been a very long review process, but I'm pleased to share today that we held a During that meeting, which I attended, we believe we obtained a clear and straightforward path to commencing enrollment in the DOST study. I'll provide some details on that later in the call, but the main takeaway is that we completed many of the startup activities while waiting for FDA's input, which has provided us with more cash than we previously expected at this point. Moving now to our lead program, Oprogen, for the treatment of dry AMD, I assume everyone on this call is acutely aware of the ongoing phase 2A study, which our partner, Genentech, is currently conducting at five sites in the U.S. and one site in Israel. The primary and secondary endpoints for this open-label study occur three months after treatment, and Genentech treated its first patient more than 18 months ago. Therefore, While we are not aware of any efficacy analyses they may have conducted, we believe it is reasonable to assume that some amount of preliminary efficacy data from this open label study has been collected by the Genentech team. I want to be clear that Genentech does, excuse me, that Lineage does not have any such interim data. And we do not know when or where interim data or full data will be made available to us. But there are several public disclosures. from Roche and Genentech, which occurred this year, which we believe are consistent with the Phase 2A trial looking promising, and at the least, appear supportive and explanatory of their increased investment in the OPERGEN program. I want to briefly review four reasons for our optimism, but before doing so, I just want to emphasize that what we're providing today is management's perspective of the current situation based on our assumptions, experience, And Genentech or Roche's publicly available actions and statements, which we believe in the aggregate, are consistent with positive progress happening with the OPERGEN program. So first, Roche conducted a pipeline prioritization process early this year. They terminated approximately 20% of their developmental programs in order to enrich for what they describe as first-in-class and best-in-class assets. They refer to these as, quote, high-impact programs. Not only was Oprogen maintained, but after Roche terminated a competing anti-complement program, Oprogen has become, to our knowledge, the only clinical-stage GA program in Roche's pipeline. We believe this is meaningful, given Roche's long-standing commitment to ophthalmology. Second, In May, Genentech entered into a new and additional services agreement with Lineage to provide certain activities for the benefit of the OPERGEN program. To be clear, we did not reopen or renegotiate our original agreement. This was a separate agreement which provided capital to support activities like additional training of their staff, opening more clinical sites in the Phase IIa study, and following patients in lineages phase 1 to A study for an additional five years. These are medium and long-term actions, which we believe are consistent with Roche's ongoing commitment to Oprigen. Third, the current study began only at clinical sites which had prior experience with Oprigen. Starting off with a smaller number of sites can help reduce variability, which may be particularly important for smaller early-stage studies, and especially for assessing novel surgical techniques. Ultimately, what we should care most about is having these studies provide useful data and the highest probability of success for Oprogen. We believe Roche's clinical strategy supports that goal, and we're pleased to welcome the two clinical sites which came on board earlier this year. We also believe there may be additional sites being added to the ongoing trial. Given the effort required to open and train a site, we believe expanding the study to additional sites this far into a trial and broadening surgeons' experience with the product could be a signal that things are going well. Fourth, we noted that during Roche's recent Pharma Day, our partner spoke about Oprogen's potential, and they highlighted that they had recently obtained RMAT designation for the program. RMAT designation provides a number of potential regulatory benefits, which I encourage everyone to be familiar with, as it may provide insights into Roche's plans. I won't cover those benefits today, but again, we find it encouraging that more than a year and a half into the ongoing open-label Phase II trial, Roche was marshalling regulatory and medical resources to successfully obtain this designation. We believe those four indicators I just described may signal how operogen is faring, but there are additional smaller items which further contribute to our view of how things are going. Even things like just a few weeks ago, giving the ongoing trial a name seems encouraging to us. By the way, the trial is now known by Roche and Genentech as the GALET study, and they told us that that is how it will be referred to by them when it is brought to scientific podiums in the future. I should mention that lineage having incomplete information is a completely normal arrangement for a pharma partnership. What is perhaps slightly different in our case is that we continue for now to be the manufacturer of the product, so we spend a lot of time with our partner. And overall, we believe that Roche and Genentech continue to be fully committed to the development of Oprogen, and we're encouraged by the public actions and statements made by them to date. I now want to shift gears and talk about something we've been working on, which I think can highlight the unique capabilities of this company. Specifically, I want to address the topic of commercially viable manufacturing. Investors naturally get excited about clinical data, but cell therapy experts understand that commercial success can only occur if it is accompanied by affordable manufacturing. And to be clear, I'm not talking about products. which expand donor cells to tens, hundreds, or even thousands of doses because those approaches still need to solve for donor variability and product consistency and inefficient cost. And I'm certainly not talking about individual treatments which require a unique donor for each dose because from a cost and comparability perspective, those manufacturing chains more closely resemble autologous therapies. I'm talking about capitalizing on the consistency and cost advantages of a bona fide off-the-shelf solution, which can provide millions or tens of millions of therapeutic doses, all from a single starting cell line. The reason I emphasize this topic is because the advantages of a clinically proven allogeneic cell therapy can only convert to high-margin revenues if you make a consistent product at commercial scale at low cost. And the milestone of reducing to practice, not just promising or predicting future production levels, but actually manufacturing and releasing GMP material from a stable working cell bank, which itself was derived from a stable master cell bank, and thus credibly demonstrating a commercially scalable manufacturing process from start to finish, is a massive undertaking. So I like to listen carefully to what other companies are saying about this topic. As one recent example, I listened to a talk on this subject given at a Goldman Sachs conference last month by the CEO of a large, well-funded cell therapy company. That CEO described four challenges of developing an allogeneic therapy, which his company faces. He highlighted the requirement for one, a stable master cell bank, two, material to support phase one studies, three, overcoming rejection, and four, having the purity, potency, and yield needed to to support commercial scale manufacturing. And he explained that even foundational step one, establishing a stable master cell bank, quote, took a few years, and that it wasn't yet guaranteed they had one. His overall message, when talking about what lies ahead, and I'll use his words, was that their investors were, quote, probably going to be frustrated for a long time. And by the way, this view comes from a company which raised almost $700 million in their IPO. Now, I agree with that CEO about those four major challenges, and I admire his honesty to define the technical hurdles he faces. But I want to make it clear to our investors that the lineage manufacturing team is working right now not on the first three hurdles, but on the fourth and final hurdle, ensuring purity, potency, and yield necessary to support commercial-scale manufacturing. We're not aware of any company which has demonstrably completed these steps and with an off-the-shelf allogeneic product, but we believe we are on track to accomplish this milestone next year. My point is this, lineage has the experience necessary for succeeding in this new field. I believe that manufacturing expertise is a massive barrier to entry in cell therapy, too often mistakenly shoved into the background by the optimism of new capital, which perhaps finally is beginning to accept and understand production expertise as necessary but difficult table stakes for this field. All of that, if true, would seem to favor the experience of a lineage, and so it makes sense for me to highlight this point of view from time to time. If we can reduce to practice what every allogeneic cell therapy company is promising, and if the clinical data being generated by Genentech supports further development of Oprigen, we will be well positioned for late-stage trials