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Operator: Welcome to the Lineage Cell Therapeutics Third 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 Investors section of Lineage website at www.Lineagecell.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 Hone, Head of Investor relations at Lineage. Ms. Hone, please go ahead.

Ioana Hone: 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.

Brian Culley: Thank you, Ioana. 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 OpRegen 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 as a result of the additional interactions we had with FDA regarding the startup of the DOSED study for OPC1. It’s been a very long review process, but I’m pleased to share today that we held a meeting with FDA reviewers just two days ago, and during that meeting, which I attended, we believe we obtained a clear and straightforward path to commencing enrollment in the DOSED 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, OpRegen 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 US and one site in Israel. The primary and secondary endpoints for this open label study occurred three months after treatment and Genentech treated it’s 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 appears supportive and explanatory of their increased investment in the OpRegen 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 OpRegen 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 “High Impact Programs”. Not only was OpRegen maintained, but after Roche terminated a competing anti complement program, OpRegen 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 OpRegen 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 2a study and following patients in Lineage’s Phase1/2a 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 OpRegen. Third, the current study began only at clinical sites which had prior experience with OpRegen. 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 OpRegen.

We believe Rocha’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 surgeon’s 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 OpRegen’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 2 trial, Roche was marshaling regulatory and medical resources to successfully obtain this designation. We believe those four indicators I just described may signal how OpRegen 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 GAlette 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 of 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 Roch and Genentech continue to be fully committed to the development of OpRegen 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 therapy. I’m talking about capitalizing on the consistency and cost advantages of a bonafide 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 1 studies; three, overcoming rejection; and four, having the purity, potency, and yield needed to support commercial scale manufacturing. And he explained that even foundational step one, establishing a stable master cell bank, 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, “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 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 the practice, what every allogeneic cell therapy company is promising, and if the clinical data being generated by Genentech supports further development of OpRegen, we’ll be well positioned for late stage trials and can apply the success to our other programs as well. I’ll now transition to the remainder of our pipeline.

I highlighted at the beginning of the call that Genentech has obtained RMAT designation for OpRegen. So as an example of how that designation can be helpful to sponsors, we took advantage of the RMAT designation we obtained for OPC1, our cell transplant for spinal cord injury, to hold an informal call with FDA to try and help them complete their review of the OPC1 IND amendment. That call was held two days ago and went very well. The call included reviewers for both CBER and CDRH divisions with the purpose of aligning on any items which would need to be completed prior to us being able to initiate the DOSED study. We already reached alignment with the agency on the clinical aspects of the DOSED study, so this meeting was focused on the novel delivery device which we intend to test.

During that meeting, which I attended, we believe we reached alignment on the final user tests which the agency requested. Those tests have been completed and we previewed their findings on the call, so we have no additional lab work to perform, just preparing and submitting the data which we expect should be completed in a few weeks. More importantly, FDA also indicated at this meeting that they do not expect to send us additional requests for information. Therefore, we currently anticipate that the agency will complete its review of this amendment in Q1 of 2025, and we currently plan to commence enrolling patients in the DOST study as soon as feasible after submitting these updates. As a reminder, once the IND Amendment Review is complete, that means we can submit our CIRM grant application for approximately 60% financial support of the DOSED study.

We continue to be very excited about the possibility of significantly reducing the cost of this trial via a CIRM CLIN2 grant. However, the CIRM grant portal is currently closed. CIRM indicated they expect the portal to reopen in the spring, so that timing works well from our perspective. Based on this week’s call with FDA, we can continue our site activation process while the agency finalizes their review of our submission in parallel. And because the CIRM grant portal doesn’t open until spring, we aren’t spending significant capital on things which otherwise could be reimbursed through a grant. And we have the benefit of additional prep time to work with the planned sites. Now for the sake of time, I’ll just provide a brief mention of ReSonance, also known as ANP1, our cell transplant program, to address sensorineural hearing loss.

In September, we presented preclinical data at the 59th Annual Ear Biology Workshop Conference, showing successful administration and survival of ReSonance into multiple locations of the inner ear. In parallel with generating that data, our team successfully manufactured resonance via a proprietary process which we developed in-house at Phase 1 clinical scale and with relevant in vitro functional activity. We also generated a cryopreserved ready to administer thaw and inject formulation at a clinically testable dose, a formulation which supported successful engraftment and survival in the pre-hearing loss model. I’ve already explained that we see manufacturing excellence as equally important as clinical evidence, but this work is additionally important because it shows how we are able to rapidly and successfully apply the technical achievements we made with OpRegen onto our other pipeline programs.

What we’ve done with ReSonance really captures our overall approach to running this business. We intend for the success and future value of the OpRegen program to help support our efforts to advance multiple cell transplants in areas of high unmet need and where we have even more favorable economics. We believe OpRegen data has the potential to validate our technology and our business plan, but we continue to remain mindful of macro and sector factors which affect our outlook. Overall, we may move faster or slower in any given quarter, but the progress we’ve made during the past few years is exciting. And if OpRegen proves itself in the ongoing study, we believe we’ll be able to move even faster and with greater confidence than ever before.

And with that, I’ll turn things over to Jill for a review of our financials.

Jill Howe: Thanks, Brian, and good afternoon, everyone. Our reported cash, cash equivalents and marketable securities of $32.7 million as of September 30th, 2024 is expected to support planned operations into Q1, 2026. As Brian mentioned, our expected runway is a quarter longer than we reported last quarter and is a result of not only managing our spend as it relates to OPC1 development, but also a reflection of our ability to be flexible in how we manage our cash resources to support the achievement of important milestones. Potential milestones include things like future payments under the Roche and Genentech collaboration, program grants, business development transactions, or new outside investments. We take a long view of creating value and seek to be mindful of striking a balance among our costs and investment of capital.

Now, I will review our third quarter operating results. Our revenue is generated primarily from collaboration revenues, royalties, and other revenues. Total revenues were $3.8 million, a net increase of $2.5 million, as compared to $1.2 million for the same period in 2023. The increase is primarily driven by more collaboration revenue recognized from deferred revenues under the Collaboration and License Agreement with Roche. Our operating expenses are comprised of research and development expenses and general and administrative expenses, and total operating expenses were $7.6 million, a decrease of $0.3 million as compared to $7.9 million for the same period in 2023. R&D expenses were $3.2 million, a net decrease of $0.6 million as compared to $3.7 million for the same period in 2023.

The net decrease was primarily driven by $0.6 million for our OPC1 program, $0.4 million for our preclinical program, and partially offset by $0.5 million for our OpRegen program. G&A expenses were $4.4 million, a net increase of $0.4 million, as compared to $4 million for the same period in 2023. The net increase was primarily driven by $0.3 million for personnel costs and $0.1 million for stock-based compensation expenses. Loss from operations were $3.8 million, a decrease of $2.9 million, as compared to $6.7 million for the same period in 2023. Other income and expenses reflected other income of $0.8 million compared to other expenses of $0.4 million for the same period in 2023. The change was primarily driven by exchange rate fluctuations related to our international subsidiaries.

Our net loss was $3 million or $0.02 per share compared to a net loss of $7.1 million or $0.04 per share for the same period in 2023. Now, Brian, I’ll hand the call back to you.

Brian Culley: Yes, thanks, Jill. So I’ll summarize today’s call in just three points. First, we interpret Roche and Genentech’s recent actions as potential indicators that things are proceeding well for OpRegen. As that trial continues to collect data, we will continue to monitor the information landscape and share insights as we are able. Second, we finally appear to have a clear path to initiating enrollment in DOSED, where we will be testing a new delivery system for OPC1. Because DOSED is an open label study, we likely will have preliminary safety data reading out after commencement, which will be exciting for everyone to watch for. And third, the manufacturing work. We’ve quietly been performing behind the scenes, just progressing nicely.

And we hope to be in a position to highlight some technical and production milestones for you in the first half of next year. As we bring those milestones forward, we believe they will help position Lineage as a pioneer in allogeneic product development, which ultimately is a path we believe will lead to new therapies for patients and greater awareness for our efforts. I really appreciate your attention today. With that, operator, we’re ready to take analyst questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the Q&A session. [Operator Instructions] Thank you. Our first question comes from the line of Mayank Mamtani with B. Riley. Please go ahead.

William Wood: Hi, this is William Wood on from Mayank Montani. I appreciate you taking our questions and congrats on a very nice quarter. Just two from us, I think. Just a little bit unclear on the timeline on your OPC1 getting that running. It says, you just went through it and said, submitting or the amendment review will be completed in first quarter of 2025, and then you submit, and then they have to wait for another review. Maybe walk me through that timeline on when we can actually expect this back into the clinic. Apologize.

Brian Culley: Yes, I’m happy to do so. Thank you for the question. The meeting that we had, we presented some top line information from use of the device. The agency’s evaluation of that was that it appeared to be sufficient, but of course, as is normal, they would want to see the full data. That’s sort of part one. Part 2 was we asked the question directly, is there anything else that you’ve got questions about, should we expect any further comments or requests for information? The normal answer that you would expect, the best possible answer is no, but send us the full data so that we can evaluate it. So there’s always a caveat built into anything that is yet to be delivered to FDA. However, we did share the takeaways from those studies and we have no reason to believe they will not be acceptable because that was essentially the message that we heard.

Now I will remind you and everyone else that we do have an open IND. So we are not prohibited from proceeding, but what we want to do is strike a balance between startup activities that we conduct somewhat at risk and actually dosing a patient. So the way that I would expect the events to unfurl from here is we will summarize and compile and present and submit the data that I just described to FDA and we have no reason to expect that that cannot be completed in the next few weeks. So that will be done before the end of the year. Members of the government are going to have a normal holiday schedule and then they presumably would be picking it up in earnest early next year. Typically, the agency might take 30 to 60 days to review information.

During that time, we still could be advancing the initiation activities of the study. We wouldn’t dose a patient in that window, but we can get our sites all geared up. We probably can conduct activities like training. And then after that period has cleared, it would be hopefully as little time as possible before we do actually identify the first patient for the study and are able to treat that individual with the new device. So there’s some overlapping activities that are in there, but generally speaking, I can narrow the guidance to say I would expect that the agency would be able to complete this. It won’t be a very large information package and they’ve already reviewed substantially all of the remainder of it over the last year. So I think that we are fully expecting that there will be no surprises or new requests for information because that was conveyed to us.

But again, until we actually get to that point, we just remain mindful that everything is always subject to the information and content in the submission. But again, we’re quite confident and the reason why we’re sharing it so explicitly is we think that what I just described is exactly how things will go.

William Wood: Got it. I appreciate that extra color. And then just an additional question. This is on your ReSonance, your ANP1 program. Just thinking about what you’ve learned in OpRegen about needing the cells to really be fully covered, not partially or around the edges, but really getting a good coverage, I believe you call it a bleb over it, with your pre-clinical studies and then thinking about moving in — maybe getting a little ahead of ourselves but moving into the clinic, what gives you confidence maybe taking what you’ve learned and translating that and making sure that these cells get fully covered in the cochlea, which is quite a bit different from an eye. Thank you.

Brian Culley: Thank you. That is a spectacular question. We haven’t been asked that before. One of the surprising findings from the preclinical study was that the transplanted cells, which we were able to track their location, did appear to migrate through and around some of the curves of the cochlea. Perhaps that shouldn’t be surprising because we do know that OPC1 can migrate a little bit so if you deliver the cells into the modiolus and you get some spread beyond that, what does that tell you about percent coverage? I don’t think it will be quite as defined as it is in dry-AMD where we could really look at the images and say we’ve got 100% coverage of the area of atrophy or maybe just 5% or 10% coverage of the area of atrophy.

I think in the setting of the eye, we have the benefit of high resolution imaging technology which allows us to track the cells. And I think in the spinal cord we’ve got the advantages of MRI to help us locate the transplanted cells. With respect to the inner ear, it is very much unknown at this point what percent coverage and really what the target area looks like in contrast to dry-AMD. So I don’t think we can answer it, but I am encouraged by the fact that even as early as we are, we already saw a migration of transplanted cells in and around some of the curves of the cochlea. And we would presume that that would be beneficial because otherwise trying to spray paint around corners would be considerably difficult.

William Wood: Got it. I appreciate that extra color. Thanks again, Brian, and I’m looking forward to updates. I’ll hop back into you. Thanks.

Brian Culley: Thank you.

Operator: Our next question comes from the line of Joe Pantginis with HC Wainwright. Please go ahead.

Joseph Pantginis: Hey everybody. Good afternoon. Thanks for taking the questions. Brian, you made some important, I guess — gave us some important anecdotes and made some important observations with regard to Genentech’s progress and activities with OpRegen. So, I guess maybe I’ll take that a further step. So, you have your services agreement with them. So, can you maybe provide first a little bit of details as to your activities? And do you think that the activities or potentially increased activities also could act as a proxy for Genentech’s progress?

Brian Culley: Thank you, Joe. I think that while remaining within the boundaries of public information, I think that there are some insights that one can take away. The one that I think is probably most poignant here is that we’ll continue to follow the patients on the Lineage Phase 1/2a trial for an additional five years. One might surmise that the logic behind that is that, if patients are enjoying an anatomical and/or functional benefit already for perhaps as long as five years in some cases, why would you not want to continue following that? It just doesn’t really make sense. If the theory was that the effect was wearing off after two or two years and patients were at baseline or they were deteriorating by year five, what’s the point in adding on five more years?

Now there are safety questions that maybe could be answered over long term, but this is elective following. This is not FDA requirement to follow these patients for additional years. So we really — we’re trying to be careful that we’re not only looking at the optimistic side or the optimistic interpretation of any activity, but rather looking at the constellation of multiple decisions, requests, actions, and statements by our partner, which we think in the aggregate are more likely to reflect supportive progress rather than the contrary.

Joseph Pantginis: No, that’s helpful, thanks. And then with regard to OPC1, like you alluded to, I mean the FDA can always come up with surprises, but it just seems that the amendment is almost locked in there, just pending, like you said, the data and then just completing the package. But as the study moves forward and you start to see safety and then potential efficacy what are your current views with regard to business development around the program?

Brian Culley: That’s a really good question. I think that every asset has sort of the optimal point where it’s going to be able to attract a partner. And it’s almost — it’s logical, right? Too early, you’re not getting paid well enough. Too late, and you’ve been holding through the risk of failure. So people need to really think carefully about when and how they conduct a partnership. My perspective on that with respect to OPC1 is firstly, having the optionality to partner is the most valuable thing, not the requirement or obligation. I think we felt a certain obligation to partner dry-AMD because it’s such a big indication. I think we could feel differently about spinal cord, right? A smaller company can establish a very bespoke field force and launch a smaller product.

But having the option to partner makes a lot of sense, especially if you’re a company that has a platform that can spin out a flywheel of different opportunities. But I think that if you want to get the highest and best value, it often makes sense to make modest investments to get past important milestones. So in the case of this product candidate OPC1, I think if we had sought to partner it over the past year or so, we really wouldn’t get the economics because we’re putting the burden of fixing the cell production and fixing the delivery and designing a study onto a partner. Those three things that I just mentioned, compared to clinical trials, are actually fairly affordable. So I think that the work that we have invested in and the capital that we have put into making a much more commercially viable delivery and a much more commercially viable product and then the thought and experience that we’re bringing in parallel into study design, I think would end up creating a partnership package which would frankly, pay us much better than if we were trying to partner it today as just a source of additional capital.

So it’s a wonderful question. It never has a straightforward answer because it’s not just the asset and its fundamental value, but of course, the environment and the interest from potential partners and how many of them, who’s in charge of HHS. I mean, there’s a thousand things that one might consider with respect to partnering. But from our view, having partnership optionality and trying to get yourself to that optimal point where you put as little money in to get as most the most out we really think that’s the right way to view these programs.

Joseph Pantginis: Fantastic. No comments on who might lead HHS but it’s also good to hear with the keyword being optionality there. And would you indulge me one other question. With regard to the ANP1 program, obviously you did an important, checked an important box recently with regard to your manufacturing initiatives. Just curious, I don’t know if it’s too early to ask this, but sort of the boxes you’re going to be checking in the relative near term to be able to get to IND status. And then more broadly speaking, and you sort of addressed this before, but I think it’s important to remind all of us, the last several years have been focused on takeouts and the progress of mutation specific types of hearing loss gene therapy, whether it’s Decibel or [indiscernible] or even in Europe, Sensorion. So how does ANP1 differentiate with regard to potential population targeting?

Brian Culley: I feel like I’ve indulged three questions. I’m going to try to answer them all. We would want to conduct a pre-IND meeting to really understand what FDA’s expectations are for an investigational new drug application. One of the things that of course comes to mind is animal models. When you work with human cells, many of the animal models may not be applicable. You can put a small molecule into all sorts of different species and assess its effect [indiscernible] etc. But when you put human cells into other species, it can be much more difficult to apply some of the same models. We saw this even when we had to develop an immunosuppressive regimen for a porcine model. So we’re going to collect enough data to make us feel good about going to the agency and having that pre-IND sort of first communication, understand expectations for an IND.

Why would we do that? Yes, it kind of feeds into your second question around takeouts and the opportunity in the hearing loss field. A number of companies that had promising starts really didn’t get very far. And perhaps, perhaps that is attributable to the fact that they were all focusing on single pathways. So these are standard conventional molecular approaches to treat hearing loss. It would not surprise me to learn that those are insufficient in the setting of hearing loss because, again, you have fundamentally the loss of an important and necessary cell type and adding a molecule in there might be able to modify the behavior of any residual cells but it’s not replacing the cells that are lost. So just like I think it’s fair to say that the anti-complement therapy, which focuses just on one pathway for the setting of dry-AMD, can bring about a clinically detectable benefit, it really leaves an awful lot of clinical benefit on the table for others.

And so, I think we’re really nicely positioned to look at failures of small molecules or antibodies in the setting of hearing loss. But you’re also asking about a company like a [indiscernible]. So when gene therapy goes to address hearing loss, which in some ways is still targeting a single pipeline or single pathway, although I’m incredibly excited to see that gene therapy can be disease modifying. It remains limited by the fact that you’re hitting just one gene. So the headline is hearing restored in hearing deficient child. But when you drill down and understand what the number of individuals with that one particular otopherrin deficiency are, and you start to calculate the investment required and the addressable market and the pricing, things don’t look quite as rosy.

In contrast, when you think about cell transplantation, we might have a much larger addressable patient population because frankly, we don’t care what gene is broken because we’re going to give you brand new auditory neurons and they’re going to be functional. And that really does speak to the heart of one of the key advantages in cell therapy. And part of our job is figuring out where the highest and best opportunities lie, because we’re not going to do 210 different cell types. We looked very carefully in the past on NK cells, for example, but I think that auditory neurons tick enough of the attractive boxes that we’re really excited, and it remains a fairly sparse field with respect to competitive threats. I’m only aware of one other company that is utilizing this approach.

So, very excited that we see the same sort of girth of competitive threat and elevated opportunity to succeed by using a more profound and greater horsepower intervention.

Joseph Pantginis: Great, really appreciate the details Brian, thanks a lot.

Brian Culley: Thank you, Joe.

Operator: Our next question comes from the line of Jack Allen with Baird. Please go ahead.

Jack Allen: Great. Thanks for taking the questions and congrats to the team on the progress. I have a couple to start on OpRegen and then a follow-up on the ANP1 program. I guess, first on OpRegen, any color you can provide as it relates to what data was shared with the FDA surrounding the RMAT designation that your partner was able to ascertain? Was that the Phase 1/2 data or was there any data from the Phase 2a study shared? Do you know? And then another one on OpRegen about when we may have three-year follow-up in that data set. I know we had two-year data presented this spring. Do you have any context around when three-year data from the Phase 1/2 study could be available?

Brian Culley: I admire the thoughtfulness of the questions and I feel handcuffed with my ability to respond. We have some information with respect to the RMAT content, but I am unable to comment on it and certainly unable to comment in the form that I think you would like me to be, the openness and clarity you’d like. And similarly with respect to 36 month data, all I can say is that Roche and Genentech seem very comfortable doing 24-month data. In fact, that is some of the most significant data that we have seen to date, patients gaining and retaining vision for two years and having increased layers of retinal tissue. We cannot guide at this time as to when 36-month data could become available if ever because that is under the control of Roche and Genentech, those disclosures, publication strategies, conference selection, etc.

Jack Allen: Got it. Got it. And then just one more to round it out on OpRegen. Has your partner Roche given you any more indication as it relates to what the next steps forward for the program could be? Or I guess, how should we be thinking about future disclosures? And then briefly on the AMP1 program, very interesting approach here. I wanted to ask if you’ve seen any kind of examples of hearing regeneration in nature or natural models maybe outside of those used in the lab? I think there are some species of animals that do regenerate their hearing. I think that would be interesting proof of concept for the basic science you’re looking to pursue here.

Brian Culley: Yeah, the regulatory question, that is their privilege to decide what the regulatory strategy is. I am incredibly encouraged that in the United States, the bar for approval in dry-AMD and the regulatory precedent for marketing authorization was a slowing in anatomical — slowing in progression, right? Reducing the growth of GA by 20%. And as I think you and others know that we showed at 12 months that the GAs were unchanged, right? So I love that there’s a precedent there, But I have to also say that I love that, our patients — it’s a small number but this just doesn’t happen naturally. Our patients see better and they’re seeing better at two years compared to seven, eight, nine letters of vision loss that you would expect even on therapy.

And I think that’s fair to say the reason why anti-compliment has not been approved in Europe. So there are a lot of directions that one could go. I also am further encouraged by the precedent set by [Averik] (ph), which was bought for, I think, $5 billion or $6 billion by Stellis. And that’s because Averik conducted a Phase 2b, which essentially served as the first of two Phase 3 studies. They had a large Phase 2b, and they agreed with the agency that it could serve as the first of two controlled studies, adequate well-controlled studies to support approval. So I think everything’s on the map up to Roche and Genentech, but my approach, if we had retained the asset, would have been to conduct a larger Phase 2b to seek agreement with FDA that that could serve as the first of two registrational studies because again, you’re not going to have an event rate on the control arm that’s anywhere close to your treatment arm because people don’t regrow their retinas spontaneously.

So I think that there is a massive opportunity to show very compelling statistical evidence of a treatment effect that could get you approved on that basis in the US and then have secondary endpoints, maybe hierarchically, no vision loss, five letter gain, 10 letter gain, whatever you do, so that you could send an MSL team out and you could detail this product as the only product proven to improve vision and patience while not necessarily having that as your first primary endpoint. Although, that would obviously be definitely the way to go if you’re thinking globally about the US and Europe. So I don’t know, I can only just answer that in the terms of what I think we would have done as a smaller company. With respect to ANP1, yes, there are corollaries.

I mean, there’s a fascinating science if you nerd out sort of on how the science of regeneration works. We think about species like [indiscernible] or starfish regrowing arms, certainly platyhelmentes, the planaria species. Hearing loss, actually there is a species, fascinating, birds. I don’t know if it’s all birds, but birds have an ability to regenerate their hearing capabilities. This all comes back to the evolutionary differentiation and expression of different genes and the control of those genes and the ability to regenerate. And that is really the core of our technology, right? Fundamentally, as I said at the outset of the call, what we are, I think, increasingly very good at is controlling the differentiation and expression of cells.

At this time, we are just scratching the surface and talking about things like editing the cells that we make. We mostly just use, let’s call them natural control measures to differentiate cells. But I do think that there’s an interesting question about whether we should have some higher order species logo like a bird if the hearing loss program picks up steam. Probably the axolotl has already been used by more than one company because it’s an adorable little thing. But you’re right to think about it that way, Jack, because people, human beings have to lose their regenerative capability because if you continue it, we all die of cancer very quickly. So it is necessary to turn that off, but it’s in there. It’s still present. And if you can turn it back on, that’s the holy grail of in vivo reprogramming, which is in its infancy.

And I don’t consider it a threat today, but everything we’re talking about is really just fascinating science and there are precedents for it and perhaps there are precedents in humans as well. We just may not be aware of them.

Jack Allen: Yes, definitely. Thanks so much for all the color, Brian.

Brian Culley: You bet. Thank you, Jack.

Operator: Our next question comes from the line of Kristen Kluska with Cantor Fitzgerald. Please go ahead.

Unidentified Analyst: Hi, this is Ayan on the line for Kristen. Thank you so much for taking our questions. Congratulations on the RMAT designation. Has your partner at all shared how they might utilize this to get in front of the FDA more often. And if so, what topics of discussion are most important to them to align with?

Brian Culley: Thank you, Ayan. I don’t know exactly how they intend to use it. I can only go so far to make the presumption that they didn’t do it for a bullet point on the resume, so to speak. But RMAT designation offers a number of different privileges or advantages. You can have discussions about endpoints that maybe are not obvious. There are a lot of different things that one can do with RMAT designation, including additional meetings. That was one of the ways that we used it. We had an informal [indiscernible] meeting, which was incredibly valuable and accelerated our process which had seemed otherwise to have gotten a little bit bogged down. I can’t speak to how Genentech and Roche would use RMAT designation specifically for OpRegen, but we certainly view it as a beneficial thing to have in your quiver, and we’re certainly hopeful to learn what their intents are as soon as possible.

Unidentified Analyst: Thank you for that. And my second question is we understand that specific timelines are not disclosed, but are you able to share if the company could receive any potential milestones upon completion or the waiting out of the Phase 2a study? Thank you.

Brian Culley: Yeah, thank you for the question. We remain eligible for all $620 million of milestones, as are both developmental and commercial. We are unable to disclose what they’re tied to and we are unable to disclose the amounts. And we don’t, for sake of being conservative, we don’t factor them into our runway guidance. And we wouldn’t until they’re received or very likely to be received. So I think that that is just something that you’ll have to wait until dollars hit and then you would see those in our filings. And that’s normal and expected because you know if Roche and Genentech want to do you know a similar deal with someone else they don’t want to use our deal as leverage as information leverage to try and strike something better. So I think it’s normal that it’s set up this way, but I appreciate the question. We’d be happy to — we wish we could share it, but we’re unable to do so.

Unidentified Analyst: Thank you again for taking our questions.

Brian Culley: My pleasure. Thank you [indiscernible].

Operator: Our next question comes from the line of Michael Okunewitch with Maxim Group. Please go ahead.

Michael Okunewitch: Hey guys, thank you for taking my questions today and congrats on the progress this quarter. I guess with regards to the CIRM grant, right, if at all you’re expecting to be open up in spring, but you’re approved to proceed with the study, the dose study before that, would you expect to start ahead of receiving approval on that grant, and then would you be able to get reimbursed for any expenses prior to the actual date of the agreement?

Brian Culley: Yeah, it’s a very insightful question and it really speaks to being thoughtful and careful with your cash management. So there are definitely things that we can do and we should do prior to applying for a CIRM grant and prior to the trigger event that allows us to get reimbursed. What we do not want to do is we don’t want to open the fire hydrant fully without better clarity as to where we are with that. What we do want to do is ensure we are not sitting passively and burning capital and burning clock time when we have a reason to believe and confidence that we will ultimately get a significant amount of capital through that grant process. So Jill is tasked with balancing these trade-offs and understanding which kinds of expenses are collectible and when.

And we factor in external factors as well. We think about where we are on the macro factors, where we are in the sector, how comfortable we are with alternate sources of capital, as Jill mentioned, business development, other grants that we don’t talk about quite as often. There are a lot of different things that go into it, but as a general matter, what we are trying to do is solve for the optimal solution and balancing the ability to move forward at risk, while not spending at a rate that makes us feel a little bit uncomfortable if there’s additional offset of that capital in the future, if all of that hopefully makes sense.

Michael Okunewitch: Yeah, no, certainly. Thank you for the additional color. And then just looking at [indiscernible] in particular the fact that you’ve already done testing with a thaw-and-inject, is there an expectation process for these in-house developed candidates could be faster than those you brought in, since you’re able to design them from the ground up with those optimization features that you learned from developing OpRegen.

Brian Culley: Absolutely, I’m really proud of how the team was able to go from the day that we decided to commit to auditory neurons. We do market analytics, we do background work, and then we decide we’re going to do this program. Within 12 months, we were in animal testing with the material that I described, right? A process that we developed, this is a program we own. And so I absolutely see this company going through this acceleration where in the earliest programs like OpRegen where you might have to say to someone, hey these cells have never been in a human being before, we have no idea what’s going to happen, do you mind if we implant them into your eyeball? You’re going to have a lot of screen failures. People might be scared to do that.

Now we’re at the point where maybe that’s not quite a problem that it was when the prior sponsor first started. Similarly, when looking at the spinal cord program, we didn’t like their process. We acquired this from Astellas. We were not happy with their process. We didn’t think it was commercially viable, so we had to change it. But going forward, programs like ANP1, we take those lessons, and my goodness, can we move so much faster now? Now, not every cell type is going to be amenable to cell transplantation, but there probably are a number of them that we’ve not talked about, some of which are pursued by other companies, which doesn’t scare us, and some of which we think might represent isolated territory where we could really break ground.

But in all cases, being able a priori to engineer in the features and the control measures and the knowledge and know-how that we’ve developed over 20 years is absolutely a massive and underappreciated advantage. And I think ANP1 is a really good example of applying that technology to be able to move quicker.

Michael Okunewitch: All right, thank you very much for taking my questions today, Brian.

Brian Culley: Thank you, Michael.

Operator: Our next question comes from the line of Albert Lowe with Craig-Hallum. Please go ahead.

Albert Lowe: Hi guys. Thanks for taking my questions. It was really great to have the discussion about how your existing experience and platform helped this rapid development for this auditory program. I was wondering if perhaps this pre-clinical work for your photoreceptor program is ongoing and whether we might be able to hear about this story sometime in the near future.

Brian Culley: Yes, thank you for the question Albert. Thanks for joining. We’re really delighted to have you along. Photoreceptors is an interesting program. We actually created some separation between us and an innovator to create some space and increase our share of ownership of the photoreceptor program. And there is another innovative company out there that recently had some news on their photoreceptor program moving forward. Photoreceptors is not getting a large amount of our capital today. It is really one of our lower priority initiatives, but we invested a meaningful amount of time in developing a very nice process. One of the challenges that I think we’re still grappling with is really trying to understand delivery and the best indication and setting for a photoreceptor.

There are some who believe that photoreceptors are best married with RPE cells. Well, we already — we have $50 million up front and hundreds of millions of eligibility and royalties for partnering RPE cells. So we can’t do that because we’ve licensed off commercial rights to the RPE program. But photoreceptors as a standalone asset or perhaps going back to that same company and seeing if they want to add photoreceptors or all sorts of other ideas are still things that we’re working on but we are a little bit capital constrained so we don’t have the same allocation of investment into photoreceptors but something that we did do recently, which did increase the value of that program to us, was we did create a clear distinction. We terminated some of the original licenses that we did not feel we needed and that improved significantly our economic share of that program.

So in the future you may hear more about that. It’s certainly worth thinking about.

Albert Lowe: Okay great, thank you. If I could ask one more, can you ask — can you tell us more about some of the exploratory endpoints that are going to be used in the dose study and I guess whether there’s new ones from the prior trial and which ones might be more informative, most informative for the clinically meaningful endpoints for this larger trial that I know you have planned?

Brian Culley: Yeah, this is a really interesting thing because we went into it thinking only about getting the safety data, right? Let’s just crank through six to 10 patients, get the safety data on the device so that we could go into a larger comparative study, which of course is going to answer much more exciting questions compared to just the safety of delivery using the same needle in the same location. But the agency, the FDA, was abundantly clear. They essentially insisted that we also collect some important functional measures and some quality of life measures and efficacy data points on those patients. And so we’re doing that. And so some of them are –excuse me, they’re all exploratory because on its face it’s a safety study.

But what’s really exciting to us is that, we are going to collect efficacy data, and the FDA has already agreed that some of those patients can have older injuries. So some of the patients are going to be chronic injury patients, not subacute. So subacute is three to six weeks for us, and chronic could be one to five years. The details of those will be forthcoming when the protocol gets posted to clinttrials.gov or maybe we’ll talk about it sooner than that. The only reason I want to wait is that even though we feel that we’ve got a clear agreement on the protocol with FDA, I just want to be mindful that you never know, we’re awfully close, if everyone can just wait a little bit longer, we’ll be able to get the protocol information out so that you can see what we’ll be measuring.

But we thought it was pretty exciting that FDA really did want to see efficacy metrics collected in what is ostensibly just a really straightforward safety trial. And they could be informative. The mind wanders to what happens if someone with a chronic injury who has been plateaued with their capabilities for three years suddenly gains a little bit — a few more degrees of activity in one way or another. That could really rip open the lid on what is possible in the setting of chronic spinal cord injury.

Albert Lowe: Great, thanks. Yes, that’s really exciting. Looking forward to seeing some of those data. So if I could squeeze in one last one, I know that you mentioned you’d be able to support commercial scale manufacturing at some point next year. I guess I just want to clarify, is that maybe within your own internal facilities or with Roche’s preparations?

Brian Culley: Yeah, what I’m describing is something that is entirely performed by us in our own facility. And what I’m really trying to emphasize in that part of the call is that, many companies talk about what they plan to do, what they think they can do. But I’m not aware of any company that is actually reduced to practice, that they can take a master bank, that they can develop a working cell bank, and that they can then make their product. And the reason why that’s a big deal is that the multiplication in scale is extraordinary when you go through that, right? You might have 100 vials of a master bank. If you make 100 vials of a working bank from that, that’s 100 times 100. And then if you make 1,000 vials of product from that, right, you get into really silly numbers.

And allogeneic companies, and I mean in this case off the shelf, ready to use allogeneic, again I can’t stress enough, I don’t mean someone that takes a source, divides the cells, and can make a hundred doses and then has to go get a new source. I mean a single source that is permanent forever for the life of your product, to be able to scale to many tens or even hundreds of millions of doses is something that once someone reduces it to practice, I really think that they have achieved something notable in this field. So I don’t want to say that we’ve done that yet, but I do want to say that we feel we’re getting very close. And this is something that we aim to do over and over. The challenge of doing that with ANP1 or resonance in hearing loss is going to be vastly lower because as somebody asked earlier, we’re already building in the right formulation and growing the cells and bioreactors instead of plates and all these other features that we’ve already worked out.

We’ve even had people approach us to try to license some of the little extra property that we developed for some of these technologies. So it’s absolutely the case that it’s a big threshold. And if we’re going to claim that we’re a leader in cell therapy and cell transplantation, these are the kinds of things that we need to show people. And I think it puts the burden on everyone else. Because if I can get Lineage to do this and I can show analysts and investors, here’s what we’ve actually done, then I want them to take it to the other places where people are deploying capital and say, hey, can you do this? And I think that’s just one of our many strategies with respect to investor relations and managing the business.

Albert Lowe: Okay, yes. I understand. Thanks for that explanation. I can see what you mean really going from start to finish in the whole process here.

Brian Culley: It’s is a great way of describing it and thank you Albert, appreciate it.

Operator: Our next question comes from the line of Sean McCutcheon with Raymond James, please go ahead.

Sean McCutcheon: Hey guys. Thanks for slotting me in. Just a couple for me. What gives you the confidence this time around that the FDA, that you have a clean line of sight on that IND amendment for OPC1 for the dose study versus the prior communications you’ve had with them that led you to believe that you would be able to start the study in the second quarter of this year. Were these user tests a sticking point previously discussed with the FDA? And then the second question is, what are your expectations and plans for what you’ll need for a comparability study for OPC1 with the newly manufactured product? Thanks.

Brian Culley: Thanks, Sean. Good question. So my confidence stems from two places. One is, I went to the meeting and so I heard exactly what was discussed and what was said. So I’m quite comfortable today supporting the comments that I made about our ability to start this study. The other thing is, and you’re clever to note it, I appreciate you paying close attention to our business in this way, we had at the meeting quite a number of representatives from CDRH. So not just CBER, which is where our cells are being viewed, but CDRH, which is on the device side, they weren’t around at the beginning of the process. So we had poor visibility into anticipating what their needs were going to be or their expectations were going to be.

And unfortunately, because there’s quite a chain of communication going from us to the sponsor, to our project manager, into CBER, and then out through individuals who help bridge and facilitate these cross-divisional interactions, a lot of time is consumed, and I think urgency is diminished as you get farther away from the sponsor themselves. So I don’t think there was anything unusual about the user tests. I don’t think there was anything particularly surprising. I think in many ways this was just the regrettable process of going through pretty much start to finish with CBER and then having to start with a start to finish process with CDRH. So hopefully we’re at the finish. With respect to your second question around the comparability of the cells, we have conducted the comparability studies that we believe would be sufficient.

We’re now actually doing additional studies, mostly in the form of some bioinformatics work. This would be supplemental. It just really helps hammer home the point. I think we have an excellent information package to demonstrate that the cells that we’re making compared to the cells that were made in the past look and perform at least as good as the original material. In a way, I don’t want them to be significantly better because they might be viewed as too potent and we do have to consider that if FDA deems our process to be vastly different than the original process, they may encumber us with some additional studies. But I think that what we have done in terms of trading off to increase the scale more than tenfold, to increase the purity remarkably, and to then take these cells and run them in the same models as before and see the same or better effects, that that reflects a very compelling comparability package.

But we have intentionally not delivered that data to FDA yet because we have been focusing them on the device and getting the dose study up. But once that study is up and going, we will prepare the documentations, request the meeting. We wouldn’t be able to introduce the new cells right away anyway. We have committed to using some older cells for this study, but we are eager to get them in because, it’s not beyond — it’s not unreasonable to think that they could be better. So we’re pretty excited about those and we’re glad to see that the data package is, you know, substantially complete, but we don’t want to be putting too many things in front of the agency simultaneously.

Sean McCutcheon: Got it. Thanks, Brian.

Brian Culley: You bet. Thank you, Sean.

Operator: And that does conclude the Q&A session for today. I would like to turn the call back over to Brian Culley for any closing remarks.

Brian Culley: It was excellent. We had so many questions. Thank you, everybody, for attending the call. And really glad about what we’re doing, and we look forward to being in touch. Thank you.

Operator: That concludes the meeting. Thank you for your participation. You may now disconnect.