Lineage Cell Therapeutics, Inc. (AMEX:LCTX) Q4 2023 Earnings Call Transcript
Lineage Cell Therapeutics, Inc. (AMEX:LCTX) Q4 2023 Earnings Call Transcript March 7, 2024
Lineage Cell Therapeutics, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Welcome to the Lineage Cell Therapeutics Fourth Quarter and Fiscal Year-End 2023 Conference Call. At this time, all participants are in a listen-only mode. An audio webcast of this call is available on the Investors section of Lineage's website at www.lineage.com. This call is subject to copyright and is the property of Lineage. And recordings for productions 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 you to your host for today's call, Ioana Hone, Head of Investor Relations of Lineage. Ms. Hone, please go ahead.
Ioana Hone : Thank you, John. Good afternoon, and thank you for joining us. A press release reporting our fourth quarter and fiscal year 2023 financial results was issued earlier today, March 7, 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 statements section 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 31, 2023. 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. Now let me turn the call over to Brian.
Brian Culley : Thank you, Ioana, and good afternoon, everyone. We appreciate you taking the time to join us today for a recap of 2023 and an update on some important items occurring in 2024. Over the past year, our team continued to focus on the advancement of our pipeline of differentiated cell transplants, while also providing support for our lead program, which is partnered with Roche and Genentech. We continue to have many reasons to be excited about our future. I will, as usual, begin with OpRegen. During 2023, we had numerous scientific forums at which we broadened awareness of this exciting program and provided data updates from the Phase 1/2a trial, which we conducted. Some of these updates included new analyses and findings collected and observed by our partner, Roche.
Each medical and scientific conference, which we participate, at targets a certain audience and some such as the ARVO Annual Meeting are widely known, but I think the most compelling among the OpRegen presentations given last year, was the one delivered by Dr. Adi Barak during the 23rd Annual EU Retina Congress. At that event, updated analyses, which describe durable findings of increased areas of retinal tissue, specifically of the RPE and ELM layers were provided in detail. To our knowledge, none of the complement inhibitors are capable of increasing the amount of RPE or ELM in patients and human beings are genetically incapable of this sort of self recovery. So we continue to believe, we are on the right track for a game-changing approach to potentially address this massive unmet need of dry AMD.
While the original data released by Lineage were obviously compelling on their own and have been confirmed by three independent external parties, I often find myself turning to these more recent analyses when speaking with investors because they are coming by one of the most commercially successful ophthalmology companies in the world and offer insights beyond our original exciting observations. So if you haven't had a chance to review the slides from the EU Retina Congress in detail, I encourage you to do so, and they are available on our website. Additional and similarly, elective data releases from Roche and Genentech include a presentation delivered at the recent Angiogenesis Meeting in January. The insights at that event include independently generated observations of the rapid time to onset of retinal structure improvements in OpRegen treated patients, which I will note exert their effects far faster than anti-complement approaches which take 12 to 24 months to detect.
Because complement inhibition is commonly criticized for its small treatment effect and can require years of therapy before it meaningfully diverges from no treatment at all. Many followers of this field are interested in the effects of complement inhibition after a third consecutive year of monthly treatment or as I like to call it, after 36 consecutive injections into your eye. For those patients who actually remain committed to therapy for that long, they presumably should enjoy a slowing of disease progression, but further deterioration of retinal structure and vision is always expected even on best available therapy. In contrast, our data from Cohort 4 patients, which are the patients with comparable disease severity to patients suitable for complement inhibition.
And in all cases, with foveal involvement, they showed that after just a single administration of OpRegen RPE cells, improvements in the retinal structure were detectable in some cases, just days later, and always within three months. In most cases, those anatomical changes were accompanied by functional improvements. And most notably, all 5 patients who had extensive coverage of the GA lesion with a surgical bleb containing OpRegen RPE cells, demonstrated evidence of improvement in outer retinal structure at 12 months and visual acuity gains averaging 7 letters. Maintenance or greater improvements in retinal structure were also observed over time. And now to go further, there still are 10 patients from Cohort 4 on long-term follow-up. And I'm pleased to share with you for the first time today that Cohort 4 patients treated with OpRegen, who previously exhibited average visual acuity gains of 7.6 letters, after 12 months are still remaining above baseline after 24 months with an average gain of 5.5 letters among the 10 patients still evaluable on study.
Furthermore, as we expected, the BCVA gains averaged slightly higher among the 5 patients with extensive surgical bleb coverage of their GA lesion, when compared to those with no or limited bleb coverage. These greater BCVA gains were associated with evidence of anatomical improvement in outer retinal structure. Additionally, evidence engraftment for OpRegen RPE cells has now extended to four years in one of the earliest treated patients, which continues to support the potential for OpRegen to be a one-time treatment. So as you can see, while we await data from the ongoing Phase 2a trial, which Genentech is conducting, updates from the original Phase 1/2a study can and do continue to provide new evidence which supports OpRegen, as a promising therapeutic candidate.
And they secondarily provide indications of Roche Genentech's interest and support of the program. Fortunately, neither Lineage nor Roche and Genentech are likely done providing these kinds of updates and in particular, we anticipate that our partner will provide a detailed overview of the 24-month data, which I just shared today at an upcoming medical meeting to be held in the second quarter. In addition and separate from the 24-month functional data, I just revealed today, last Friday, abstracts for the 2024 RFO Annual Meeting were made publicly available. You will see there that Roche and Genentech plan to present preclinical results from a surgical development study evaluating the survival and distribution of OpRegen using varied surgical instrumentation and methodology.
We believe these results are a complement to the ongoing clinical work and are intended to help guide and develop insights into the delivery and engraftment process. This study also serves as an example of how partnering with an experienced and well-resourced company can enhance the probability of success of a program in so far as Lineage may not have been in a position to perform this supplemental work. Therefore, this also serves as even more evidence of our partner's commitment to the optimization and further development of this program, beyond the ongoing Phase 2a clinical trial, which continues to enroll patients. Medical publications often state that dry AMD is an irreversible and degenerative disease leading to vision loss. We aim through the OpRegen program, to eliminate the word irreversible from those descriptions and literally rewrite the language in future textbooks.
Moving next to OPC1, our spinal cord program. Last month, we announced a very important milestone, and that is the FDA clearance of our IND amendment, which will enable us to initiate clinical testing of OPC1 and in particular, to test the clinical safety and performance of a new delivery device called My PSD [ph]. As a reminder, the pioneering work on this program was originally conducted by Geron and thereafter by Asterias, a company which we acquired. Their foundational work provides us with a significant advantage because, while other cell therapy companies are just now beginning their human studies and don't yet know how their cells will behave in people. We have in some cases, as long as 10 years of safety data with OPC1. Nevertheless, when we acquired the program, we knew it was not at that time, ready to move into later-stage studies.
The process by which the cells were made did not meet our vision for a commercially successful product candidate and the method by which they were delivered was too cumbersome and inefficient. The original formulation required plating, washing and counting the cells, which added complexity, cost and risk. And the injection itself required the surgical team to turn off ventilation to the patient while administering the cells. Obviously, performing a procedure on a patient, who is not breathing creates a time constraint, so we wanted to create a solution for that issue. Fortunately, the same team which successfully developed a commercially viable process for OpRegen, which thereafter successfully contributed to the deal with Roche, was deployed on solving similar changes for OPC1.
For example, they developed an immediate use to inject formulation, which eliminates the washing and plating steps. Our team's success, the details of which we have only partly shared publicly permitted us to invest next in developing a new delivery system. That new system which we developed through a collaboration we struck with a medical device company is the subject of the clinical trial we are in the process of launching. We believe this new device will be far superior to the delivery system, which was employed in the first 30 patients. Given our objective to simplify and improve the surgical delivery device, we conducted extensive engineering and in vivo experimentation to develop the manual inject Parenchymal Spinal Delivery System or My PSD.
My PSD is designed to be easier for the surgeon to use and safer for the patient. The proposed study called delivery of oligodendrocyte progenitor cells for spinal cord injury, evaluation of a novel device or DOSED, is designed to evaluate the safety and efficacy of the My PSD to deliver OPC1 to patients with any of sub-acute or chronic and cervical or thoracic spinal cord injury. Importantly, the My PSD system has been designed to deliver OPC1 without stopping patient ventilation during cell administration. This study also will be the first time OPC1 is administered to patients with a chronic spinal cord injury, which will be a significant milestone for this program. And in addition to the safety and performance of the new device, we also will be collecting functional assessments on all patients, which gives us the exciting opportunity to investigate whether any signals of efficacy are present among chronic injury patients.
Pursuant to the protocol in the IND, which recently cleared the FDA process, we have begun activities to open our first clinical site in the DOSED study, which we anticipate will occur next quarter. There are very few opportunities for SCI patients to participate in clinical trials. So it is a privilege to be able to reengage with the SCI community, as part of our efforts to improve outcomes for individuals with a condition, for which there currently are no FDA-approved treatments. And we are even more excited by the opportunity to build upon promising results achieved with OPC1 in previous trials and to continue to seek improvements in how this therapy is manufactured, prepared and administered. Some of you will recall that OPC1 was a recipient of one of the first cell therapy clinical awards granted by CIRM, the California Institute for Regenerative Medicine.
We believe the OPC1 program is a strong match with CIRM's goals to accelerate the development of regenerative medicine, and we submitted an application for funding support for our DOSED study last month. But as many of you may have seen, the success of the CIRM program has led to a surge of funding applications. Consequently and quite unexpectedly, Late last month, the CIRM board of directors announced that they would be halting the acceptance of new applications with an effective date of January 31. Our application was submitted on February 21, so we will not be review it, as expected in the February cycle. I am, of course, disappointed on behalf of the Lineage team, which put a lot of work in to prepare the grant, but I'm confident because CIRM has informed us that they are striving to reopen the CLIN1 and CLIN2 programs, as soon as reasonably possible suggesting to us that this is simply a pause to address workload issues and to our knowledge, is not specific to our application in any way.
We believe the grant reviews will be restored following the June meeting, and presumably, we will be able to enter the July review cycle. If so, the overall impact looks simply to be a one and half quarter delay to potentially receiving funding for the DOSED study. In the meantime, start-up activities for the DOSED study are already underway. We expect to have our first site open next corner, and we'll begin enrolling patients as soon as we're able. And we will simultaneously monitor things with CIRM, so that we can hopefully partner with that excellent organization for a second time on this novel program. Related to OPC1, I also want to update you on our efforts to expand collaborative partnerships in the SCI field with the dual goals of enhancing awareness and informing our development strategies.
In June last year, we launched a newly created forum to discuss the innovations, advancements and challenges in the treatment of SCI. The Spinal Cord Injury Investor symposium, which we presented included sponsors, such as the Christopher Denari Foundation, the Sanford Stem Cell Institute at UC San Diego, AbbVie and CIRM. This event presented an opportunity for an open and collaborative dialogue among leading experts, researchers, companies, persons with lived experience caregivers, advocacy organizations, investors, health care analysts and members of the public and media. It was a wonderful success and we currently are in the planning stages for the second annual Spinal Cord Injury Investor Symposium, which is being expanded and planned to be a two-day event, held on June 26 and 27, here in San Diego.
You can expect to hear additional updates from us on this event in the coming months. For our preclinical programs, I will be brief. As planned, we are initiating a functional animal study of ANP 1, our cell transplant program to address hearing loss, which is the subject of a collaboration with the University of Michigan. Our initial objectives from this collaboration were to evaluate the delivery of our cells into specific target areas to monitor initial engraftment and to assess whether our cells survive after transplantation. We also wanted to see whether the cells migrated. And if they are expressing certain markers of neuronal identity. We have been satisfied with the results from those early studies. And last month, evidence of successful engraftment and survival of our ANP 1 cells were presented at the 47th Association for Research in Otolarygology Annual Meeting by Dr. Yehoash Raphael, at the University of Michigan Kresge Hearing Research Institute.
Given the early success of ANP 1, we next want to ask the critically important question of whether our cells can influence hearing, which is measured and detectable by electrical signaling, which occurs in specific regions of the brain. We are working closely with Dr. Raphael to develop and conduct those models, and we'll be excited to see what we learned from them later this year. The other project worthy of a mention today is our alliance with Eterna, which is important because it provides us with access to gene editing technology and supports our long-term vision of capitalizing on the combination of our extensive and proprietary process development capabilities with cell engineering and cell editing technologies together for the purpose of creating novel and potentially superior cell therapies to those in development today.
In the case of Eterna, we are working to generate a hypo immune iPSC line designed to reduce the immunogenicity of certain product candidates. And in at least one instance, we are making an additional edit that is intended to confer clinical differentiation and a competitive advantage in the applicable indication. I believe it's premature of us to provide details on any of our grassroots programs at this time but we look forward to sharing more on this initiative, as we reach certain developmental milestones, which could occur later this year. And my final comments today will serve as a transition to Jill's remarks because I wanted to provide some quick context around the financing we conducted last month. As you may have seen in our announcement, we raised approximately two additional quarters of cash, which improves our balance sheet and provides additional operating runway.
Unlike most of the deals I have seen this year, at least the deals which didn't include a simultaneous data release, our raise was conducted as an at-market financing with no discount no warrants or other structural elements. We didn't even pay a banking fee because, while not all of the buyers were existing holders, two of the buyers were board members and all of them were familiar with the company, which we believe helped secure favorable terms for us as the issuer. It's well understood that developing new therapies is very expensive, but I'm proud that during the past five years, and in particular, during the years when biotech was out of favor and the XPI [ph] was languishing at $70 to $80, that Lineage relied on a wide assortment of ways to raise funds, seeking out the lowest available cost of capital and diversifying our raises across BD deals, spin-offs, grants, ATM transactions and for the first time in my tenure, a conventional equity raise.
Our view is that creating new medicines is clearly exciting and rewarding, but we also will never lose sight of the importance of protecting shareholder interest. So to summarize three key points for today. One, we continue to be extremely happy with our alliance with Roche and Genentech, not only for their commitment to advancing OpRegen through the clinic, but also for enhancing awareness of the program at medical and scientific meetings. Two, we are excited to be putting a second cell transplant program into active enrollment this year in a disease with an enormous unmet need and limited competition. And three, we will continue to look for ways to build value from our early-stage pipeline and from strategic collaborations, which can help advance our programs and validate our approach.
With that, I will hand the call to Jill for a review of our financials.
Jill Howe : Thanks, Brian, and good afternoon, everyone. Beginning with our balance sheet, I'm happy to report that we remain well capitalized to conduct the near-term activities which Brian just outlined. Our reported cash, cash equivalents and marketable securities of $35.5 million as of December 31, 2023, and along with the $13.8 million net proceeds we added to the balance sheet from our registered direct offering last month, is expected to support planned operations into Q3 2025. Next, I will review our fourth quarter operating results. Our revenue is generated primarily from collaboration revenues and royalties. Total revenues were approximately $2.1 million, a net increase of $0.2 million, as compared to $1.9 million for the same period in 2022.
Our operating expenses are comprised of research and development expenses and general and administrative expenses. Total operating expenses were $8.2 million, a decrease of $0.3 million, as compared to $8.5 million for the same period in 2022. R&D expenses were $3.9 million, a decrease of $0.2 million, as compared to $4.1 million for the same period in 2022. The net decrease was primarily driven by $0.2 million in OpRegen program expenses and $0.4 million for other research and development program expenses, partially offset by $0.2 million in OPC1 program expenses and $0.2 million for preclinical programs. G&A expenses of $4.3 million were in line with expenses for the same period in 2022. Loss from operations were $6.4 million, a decrease of $0.2 million, as compared to $6.6 million for the same period in 2022.
Other income and expenses were $1.6 million, compared to other income of $0.3 million for the same period in 2022. The change was primarily driven by exchange rate fluctuations related to our international subsidiaries and fair market value changes in marketable equity securities. The net loss was $4.8 million or $0.03 per share, compared to a net loss of $6.4 million or $0.03 per share for the same period in 2022. Now I will review our full year operating results. Total revenues were $8.9 million, a decrease of $5.8 million, as compared to $14.7 million for the same period in 2022. The decrease was primarily driven by lower collaboration revenue that was recognized from deferred revenue under the Roche agreement. Total operating expenses were $33 million, a decrease of $3.5 million, as compared to $36.5 million for the same period in 2022.
The R&D expenses were $15.7 million, an increase of $1.7 million, as compared to $14 million for the same period in 2022. The increase was primarily driven by $0.4 million in OpRegen program expenses, $1.2 million in OPC1 program expenses and $2 million in preclinical programs. These increases were partially offset by $1.9 million in other research and development programs, primarily related to reduced manufacturing activities. G&A expenses were $17.3 million, a decrease of approximately $5.2 million, as compared to $22.5 million for the same period in 2022. This decrease was primarily due to $4.2 million in lower litigation and legal expenses, as well as an overall reduction in costs incurred for services provided for third parties, consulting costs and rent-related expenses.
Loss from operations were $24.7 million, an increase of $2.2 million, as compared to $22.5 million for the same period in 2022. Other income expenses reflected other income of $1.5 million, compared to other expenses of $3.3 million for the same period in 2022. The net change was primarily attributable to fluctuations in intercompany balances and exchange rates applicable to our international subsidiaries as well as fair market value changes on marketable equity securities. The net loss was $21.5 million or $0.12 per share, compared to a net loss of $26.3 million or $0.15 per share for 2022. As we've mentioned, last month, we added approximately two quarters worth of cash to our balance sheet and improving our operating runway. Our plan is to continue to maintain the same level of spending discipline, which has served us well to date.
We believe this will continue to support our plan towards making important progress through reaching meaningful milestones and creating value for shareholders from our continued investment in our programs. Now I will hand the call back to Brian.
Brian Culley : Thanks, Jill. To wrap up, we've all seen how cell therapy has revolutionized the oncology world. It now stands alongside chemo and surgery, as one of the pillars of cancer therapy. We believe a similar cell therapy revolution will extend beyond oncology into other important areas, including ophthalmology. And we will continue to strive to apply differentiated cells in a replace and restore approach to help achieve this end. I believe Lineage continues to be well positioned to advance our business and become a very important company in the years ahead. I appreciate your attention today. And with that, John, we are ready to take analyst questions.
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