Lineage Cell Therapeutics, Inc. (AMEX:LCTX) Q1 2023 Earnings Call Transcript

Lineage Cell Therapeutics, Inc. (AMEX:LCTX) Q1 2023 Earnings Call Transcript May 11, 2023

Lineage Cell Therapeutics, Inc. misses on earnings expectations. Reported EPS is $-0.03 EPS, expectations were $-0.02478.

Operator: Welcome to the Lineage Cell Therapeutics First Quarter 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 cell.com. This call is subject to copyright and is 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, Abby. Good afternoon and thank you for joining us. A press release reporting our first quarter 2023 financial results was issued earlier today, May 11, 2023, 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. 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; Jill Howe, our Chief Financial Officer; and Gary Hogge, our Senior Vice President of Clinical and Medical Affairs. With that, I’d like to turn the call over to Brian.

Brian Culley: Thank you everyone. Good afternoon everyone. We appreciate you taking the time to join us today. Our most recent quarterly call was just two months ago, but I’m happy to report today on additional and fairly exciting progress, which has occurred since then. The most significant event of the past two months was the ARVO Annual Meeting held in New Orleans where Dr. Al Benin, one of the investigators involved with the initial Phase 1/2a of OpRegen presented never before seen analyses, which Genentech performed on data collected in our study. To be clear, these were new independently generated analyses conducted by Genentech’s masked expert grader and while the data support and reinforce our original findings as well as the sub study findings made by the Doheny Image Research Lab, these were novel analyses and results, which Lineage had not previously reported.

We have previously reported and presented on unique clinical findings among some of our cohort 4 patients, including areas of GA being smaller at 12 months than at baseline and increases in patient visual function at 12 months which occurred notably among the five patients who received extensive coverage of OpRegen across their area of GA. But Genentech took these data analyses even further, using proprietary technology and imaging expertise and they were able to generate new analyses from the raw data and images. These additional results support what Lineage had reported previously, including structural and functional improvement in a disease previously thought to be inevitably progressive. Genentech showed new findings supporting the observation that extensive placement of OpRegen cells across the area of GA appear to result in the best clinical outcome seen in clinical trials to-date as well as continued evidence that transplants of OpRegen cells may result in a multiyear treatment effect from a single dose.

We believe these findings compare favorably versus the burden of someone typically elderly and with very poor vision, seeking out a monthly or even every other monthly injection of a complement inhibitor. And importantly, these data were collected using a common surgical technique, which every licensed vitreoretinal surgeon is capable of performing using standard instrumentation. And these outcomes occurred five out of five times when OpRegen was placed extensively across the area of GA. Additionally, something which I believe has continued to be overlooked is the evidence Genentech presented, which showed a patient who no longer had features of cRORA near the border of their GA following treatment with OpRegen. I’ll remind you that cRORA is an area of complete RPE and outer retinal atrophy, which essentially means the complete loss of photo receptors and the essential supporting RPE.

I’d also like to point out that, thousands of patients have completed clinical trials through the two leading complement inhibitors. But despite recent reports from extensive subgroup analyses of those data, I’m not aware of even a single case of cRORA resolution among them. Now while Lineage may not have yet as many data points as the competition, but even setting aside the vision gains we have report in patients who should be losing vision, we are reporting much larger anatomical changes in the competition. And we are using objectively collected methods on anatomical features unaffected by patient effort. So I believe these direct comparisons and questions about relative value are completely valid. We welcome these comparisons, especially as the OpRegen program advances through the clinic.

As a reminder, the primary and secondary endpoints for the ongoing study occur at just 90 days post-treatment, which means these data are detectable and collected nine months earlier than the more common 12 month treatment outcomes. Before moving on, I’d just like to convey my appreciation to our partners Roche and Genentech, for enthusiastically supporting our desire to have these new data presented at ARVO. Their retinal tissue segmentation algorithm and additional resources which they deployed, give us further conviction in our cell transplant approach, and reflect the insights and expertise, which we were counting on when entering into the license agreement for the development and commercialization of OpRegen from which I’ll remind you, we’re eligible to receive up to $620 million in additional payments as well as double digit royalties.

In the meantime, we’ll closely monitor the establishment and size of the dry AMD commercial market. While Lineage does not have a commercial product today, we believe the recent approval of Syfovre and reported $5.9 billion acquisition by Astellas of a similar complement inhibitor asset will not only help create engaged and informed physician and patient populations, but also set the stage for potential next generation products like OpRegen by verifying expectations of a multi-billion dollar commercial market, which is comprised of patients eager to find effective interventions for their debilitating condition. Moving next to our OPC1 program, which is intended to help patients recover more fully from a spinal cord injury, our recent focus has been on completing the requisite regulatory interactions to support the initiation of the dose trial, which is a 6 to 10 patient safety study of a new spinal cord cell delivery system.

This new system is expected to greatly improve the transplant procedure by allowing the surgeon much more time to administer the cells to the spinal cord and to do so while the patient’s respirator is still connected. As you’ll recall, we previously held an RMAT meeting with FDA to discuss the use of the new delivery device. Along with the device information, we included a protocol synopsis for the clinical safety study we plan to conduct in subacute and chronic SCI patients. That RMAT interaction was followed by a request from Lineage for a type B meeting to discuss specific items which would be included in an IND amendment. Unexpectedly, the FDA noted in response to our report that their written responses from that meeting would not be available until the last week of June, which is approximately eight weeks later than we’d expected for a type B meeting request.

Matej Kastelic/Shutterstock.com

I want to provide some comfort that to our knowledge, this later than expected meeting date is in no way a reflection on the OPC1 program. The FDA explained that the delay was due to time constraints among certain essential staff members necessary for our topics. So, we find this to be unfortunate, but not entirely surprising given the deluge of cell and gene therapy programs currently in development. And nevertheless, after the type B meeting is held this summer and provided that the agency’s responses support the use of the new delivery system, we expect to be able to submit an IND amendment for OPC1 in Q4 and open the dose study clinical site as soon as possible thereafter. I do have three additional updates on OPC1 today. The first is that we strengthened our intellectual property position through a patent which was granted for claims covering manufacturing processes, which lineage developed, that patent has claims which expire no earlier than 2040, providing us with a long period of protection for this program.

Second, I want to provide an update on our announcement regarding the creation of the First Annual Spinal Cord Injury Investor Symposium, a conference which Lineage will be presenting this year alongside the Christopher and Dana Reeve Foundation, and which will be held the last week of June at the Stanford Consortium for Regenerative Medicine in La Jolla, California. We created this event to increase engagement between industry and patients and the patient advocacy community, which in our experience can help inform and improve the product development process. The Reeve Foundation is a recognized leader in the field of spinal cord injury and we’re proud to have them as a partner as we advocate for those affected by paralysis. We aim to increase disease awareness, elevate the probability of success for product development, and promote clinical trial participation by focusing on topics such as patient appropriate endpoints and the benefits of partnerships among in between for-profit and non-profit organizations.

For most notably, two days ago, we announced that we’d received an education grant from the California Institute for Regenerative Medicine or CIRM, recognizing the SCI Investor Symposium as an important scientific conference and supportive of CIRM’s overall mission and objectives. We are thankful for this additional financial support from CIRM, and you may recall that OPC1 was one of the first clinical trials ever supported by CIRM and we’re grateful to the agency for its continued commitment to spinal cord injury. As I have shared before, we still expect to approach CIRM about a clinical trial grant to support the dosed clinical study, but that step is normally performed after the IND Amendment has been submitted. So, third and lastly for OPC1 today I just want to convey my appreciation to all the members of team Lineage, both in Carlsbad in Israel, as well as any investors who participated in the Wings for Life World Run last weekend.

The World Run’s an important and global fundraiser for SCI research and embodies the importance of broad-based collaboration, which as I just explained, we believe is core to successful product development in this condition. Moving along, I have just a few more updates to share for VAC2. As you know from our previous discussions regarding the pre IND written feedback we received, we have a fairly clear path to support the CMC side of an IND submission, but it would be expected for us to also include any ex-U.S. clinical data which has been collected. That means, providing data from the UK based Phase 1 trial performed by Cancer Research UK in eight patients with non-small cell lung cancer. We’ve been waiting for that data to arrive and I’m happy to share today that we received some key updates and now expect the complete data package to arrive next quarter.

I have stated previously, that we believe Strategic Alliances offer us the best mix of risk and reward for the VAC platform, and our BD team has several exploratory discussions ongoing for VAC2 and the VAC platform more generally. While there can be no assurance that any development partnerships we’re exploring will come to fruition, our preference for the VAC program is to de-risk it through one or more alliances rather than proceeding independently, and the BD team will continue to work on this initiative. There also have been some encouraging clinical results reported in the neoantigen vaccine space lately, so we intend to continue to monitor this landscape closely because doing so, will better inform our corporate strategy and help us determine the best development path for VAC2 or any other VAC platform programs which we may pursue through academic or corporate partnerships.

For ANP1, which is our transplant program for hearing loss, the preclinical testing is ongoing through a collaboration with the University of Michigan. Our initial objectives from this collaboration are to determine the preferred location for the cell transplants, and to determine how long the cells can survive after transplantation. Last week, I was provided with the first ever images generated from that preclinical work. And in fact I’ll if we can post one of those images to our Twitter accounts after this call. I think it’s kind of a cool thing to see. I was excited to see the early data because as you will recall, our hearing loss program didn’t even exist at the beginning of last year and yet we already have our first preclinical data emerging.

This is such a great example of the speed and return on investment from our R&D dollars. We developed a differentiation method, filed intellectual property and proceeded into in-vivo testing in less than 12 months and with a commitment of less than $1 million R&D dollars. And frankly, I think one of the key advantages for Lineage in what continues to be a difficult environment for small biotech companies, is that our core technology offers us the ability to make tremendous progress without also having to make tremendous expenditures. Our disciplined spending and efficient use of R&D dollars is a foundation which Jill and I believe is appropriate for our stage of development, and which can help us bridge to important events and opportunities which lie ahead, such as completing enrollment and reporting data from the ongoing Phase 2 trial of OpRegen, the initiation and conduct of clinical trials for OPC1, and progress in partnerships which we pursue across other areas of our business.

As a final but actually quite important note, I’m also happy to report that, based on preliminary estimates of market cap cut-off, we anticipate Lineage will be added into the Russell 3000 and the Russell Microcap indices this summer, an inclusion, which may help to expand investor awareness, increase institutional ownership and provide additional liquidity in our stock. With that, I will now hand the call over to Jill for a discussion of our financials.

Jill Howe: Thanks, Brian, and good afternoon everyone. Beginning with our balance sheet, I believe we continue to be efficient with our spending and are well-capitalized to conduct the near-term activities, which Brian just outlined. Our reported cash, cash equivalents and marketable securities as of March 31, 2023, totaled $46.8 million which is expected to support our current planned operations into Q3 of 2024. Please note this does not account for any of the Roche, Genentech milestone payments nor for any business development or grant revenues, which we may receive during the same period. Now let me review our first quarter operating results. Our revenue is generated primarily from licensing fees, royalties, collaboration revenues and research grants.

Total revenues for the first quarter were approximately $2.4 million a decrease of $2.8 million as compared to $5.2 million for the same period in 2022. This decrease was driven by lower collaboration and licensing revenues in conjunction with the Roche agreement. Our operating expenses are comprised of research and development and general and administrative expenses. Total operating expenses for the first quarter were $8.9 million a decrease of $2.5 million as compared to $11.4 million for the same period in 2022. R&D expenses for the first quarter were $4.2 million, an increase of $1.2 million as compared to $3 million for the same period in 2022. The increase is primarily driven by a half a million of nonclinical related expenses to support the OPC1 program and $0.2 million in OpRegen program expenses to support the Roche collaboration.

Another $0.4 and $0.2 million of the increase was related to R&D spending on the auditory neuron and photo receptor programs respectively. G&A expenses for the first quarter were $4.7 million, a decrease of $3.7 million as compared to $8.4 million for the same period in 2022. The decreases primarily driven by the $3.5 million in lower litigation in legal expenses related to this serious litigation settlement that was accrued in the prior year and $0.2 million in lower expenses for accounting and tax services. Loss from operations for the first quarter was $6.6 million, an increase of $0.2 million as compared to $6.4 million for the same period in 2022. Other income for the first quarter was $0.4 million compared to other expenses of $0.7 million for the same period in 2022.

The income was primarily driven by the change in the fair market value of our marketable equity securities, interest from our marketable debt securities and a receivable for the employee retention credit program, partially offset by exchange rate fluctuations related to our international subsidiaries. The net loss for the first quarter was $4.4 million or $0.03 per share compared to a net loss of $7.1 million or $0.04 per share for the same period in 2022. Overall, we continue to maintain our same spending discipline as we have adhered to for years and which has served us well in the past as the biotech markets continue to face uncertainty. We believe that maintaining discipline in our spending will continue to allow us to maintain our plan to reach meaningful milestones, make important progress, and create value for shareholders from our investments in our programs.

Now, let me hand the call back to Brian.

Brian Culley: Thanks, Jill. I continue to believe Lineage is making good decisions in a challenging biotech environment. We’ve been conservative and disciplined with our spending and we’re advancing our programs in a responsible way. Our collaboration with Genentech and Roche is progressing extremely well, and one of the many things we’ll be excited to work on this year will be continuing to support Genentech and Roche in the further clinical development of OpRegen for the treatment of dry AMD with geographic atrophy. As always, we sincerely appreciate your support of the Company as we look to position lineage to become a leader in cell therapy and cell transplant medicine. And with that operator, we are ready to respond and to any analyst questions.

See also 30 Most Polluted Cities in the U.S. and 10 Best Gold Royalty Stocks to Buy Now.

Q&A Session

Operator: [Operator Instructions] Your first question comes from the line of Jack Allen from Baird. Your line is open.

Operator: Your next question comes from the line of Joe Pantginis from H. C. Wainwright. Your line is open.

Operator: Your next question comes from the line of Kristen Kluska from Cantor. Your line is open.

Operator: Your next question comes from the line of Mayank Mamtani from B. Riley. Your line is open.

Operator: Your final question comes from the line of Michael Okunewitch from Maxim Group. Your line is open.

Operator: There are no further questions at this time. Mr. Brian Culley, I turn the call back over to you.

Brian Culley: Thank you, Anna. Thank you everyone for joining today and we will look forward to our next update, and feel free to get in touch in the meantime. Thank you.

Operator: This concludes today’s conference call. You may now disconnect.