Lineage Cell Therapeutics, Inc. (AMEX:LCTX) Q2 2025 Earnings Call Transcript

Lineage Cell Therapeutics, Inc. (AMEX:LCTX) Q2 2025 Earnings Call Transcript August 12, 2025

Lineage Cell Therapeutics, Inc. misses on earnings expectations. Reported EPS is $-0.13 EPS, expectations were $-0.02.

Operator: Welcome to the Lineage Cell Therapeutics Second Quarter 2025 Conference Call. [Operator Instructions] An audio webcast of this call is available on the Investors section of Lineage’s 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 expressed 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 C. Hone: Thank you, Desiree. Good afternoon and thank you for joining us. A press release reporting our second quarter 2025 financial results was issued earlier today, August 12, 2025, 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 sections in today’s press release and in the company’s SEC filings, including its most recent annual report on Form 10-K and in subsequent SEC filings. 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 M. Culley: Thank you, Ioana. Good afternoon, everyone. We appreciate you taking the time to join us on the call today. I will begin with some recent updates on the OpRegen program, then say a few words about how OpRegen’s progress is driving a new strategic direction for the company. Then I will review details around the first participant we treated in our spinal cord program before handing off to Jill for financials and then Q&A. As a reminder, OpRegen is an off-the-shelf RPE transplant for patients suffering from dry AMD with geographic atrophy. Last quarter, our partners, Roche and Genentech, provided an update on patients treated in Lineage’s Phase I/IIa clinical trial, which showed that the anatomical and functional benefits, which we first reported have lasted for 3 years.

Notably, the 5 patients who received fulsome coverage of OpRegen across their area of atrophy had a mean gain of vision of 9 letters. In contrast, these patients’ untreated eyes lost 11 letters, which means that at 3 years, there is a 20-letter difference in mean visual acuity between OpRegen treated and untreated eyes in individuals who received OpRegen cells across their GA. These effects were also reported at 1 year and 2 years, reflecting a consistent as well as durable treatment effect. And because vision gains are not known to occur spontaneously in the natural course of this disease, we believe these effects are increasingly validated with each analysis, especially as the untreated eyes continue to worsen. Importantly, the loss of 11 letters in the untreated eyes on this trial matches recent results reported in the journal Retina, which showed data on more than 18,000 dry AMD patients’ eyes for as long as 3 years.

Human beings have not shown themselves capable of regrowing retinal tissue or reversing the damage from dry AMD on their own. So with each passing year, the maintenance of vision gains and the growing delta between treated and untreated eye seems to be adding support to OpRegen having the potential in some patients to be a onetime functional cure and challenging the long-held view that GA is an irreversible condition. In addition to these exciting results, we can now point to 3 other companies with RPE suspensions in clinical development, which this year followed Lineage and reported that they too have observed gains of vision in GA patients following an RPE transplant. Notably, one of those companies is Astellas, a global leader in regenerative medicine.

So while this is admittedly an entirely new therapeutic approach, there are now 4 independent groups reporting vision gains from an RPE transplant, which in the aggregate reflect more than 20 individuals exhibiting an effect which is known to not occur naturally. From our perspective, these new reports of positive outcomes using RPE cell transplants are welcome because they provide independent validation of this mechanism, but they do not create a lot of concern for us because not only is Lineage the farthest along in clinical development, we also believe we are in the best overall position to capture the large commercial opportunity offered by GA, an opportunity which does not appear to be being satisfied by the currently available anticomplement drugs.

In particular, we expect that our alliance with Roche and Genentech will provide the clinical and development expertise and the financial backing to conduct the trials necessary for approval, and if approved, the commercial infrastructure to launch an ophthalmology product on a global basis. To support our partner, our recently reported accomplishments in cell manufacturing have produced a GMP banking and production platform capable of generating millions of doses of our product candidates in a xeno-free 3D culturing system. And as a fourth competitive advantage, we believe the ongoing Phase IIa clinical trial being run by Genentech will provide insights into surgical procedure and delivery methods, which may further extend our existing leadership position.

While there is still much to be done and no guarantee of positive results continuing, we do note in addition to the data and positioning I just described, that there is a growing list of events, which seem consistent with things moving in a positive direction for OpRegen. This list consists of our partners seeking and obtaining RMAT designation, adding additional sites to the ongoing Phase IIa trial, acquiring proprietary delivery technology and engineering expertise from a third party and continuing to highlight OpRegen results at major medical meetings. All this activity has occurred against a rigorous pipeline prioritization, which Roche conducted last year, leading to the termination of multiple programs and alliances, but which, to our knowledge, has not impacted the OpRegen program.

We are, of course, encouraged by what these data and events may indicate, but I will remind everyone that we do not have access to the data from the ongoing Phase IIa trial, and we do not know the timing for any such updates or other development decisions which may get announced. But given what appears to be a growing list of asymmetrically positive indicators for the successful continuation of the OpRegen program, we are increasingly thinking about how we can continue to grow and capitalize on the clinical, technical and financial success that we’re anticipating from OpRegen. To that end, we have taken preliminary steps into several new therapeutic areas, which we think can capitalize on our directed differentiation expertise and recent manufacturing accomplishments.

As we demonstrated with the resonance program for hearing loss, we were able to generate an entirely new cell type and advance it into preclinical testing in about 1 year, and with an approximate R&D investment of just $1 million. That program continues to advance in the preclinical setting, and we think we can leverage that experience to work on additional cell types and have those programs built from the start on our preferred proprietary platform. If we’re successful, this strategy may be able to create additional opportunities for early-stage funded partnerships while at the same time, expanding and diversifying our pipeline beyond OpRegen. There are 3 main reasons why we plan to move in this direction. The first is that, if OpRegen continues to advance, we believe we will not only receive the approximately $37 million in proceeds from the exercise of issued warrants, but also we’ll be transitioning our manufacturing and quality activities to Genentech, which frees up capacity and capital for us to do other things.

The second reason to launch new programs is that, Lineage has reduced to practice a platform capability consisting of both manufacturing and directed differentiation. And that platform is not limited to just RPE cells. We have invested in technology and innovation using RPE cells as the prototype, but our platform technology resides above the generation and administration of RPE cells. So we can take the discoveries that have already been funded by our prior investments and apply them to new programs, thereafter potentially attracting additional funded partnerships. Third, because the biotech markets remain challenging, we want to be mindful of our cost of capital. Over the past few years, we have invested only about $30 million per year, which is lower than the total annual burn of many of our peers, but we remain in a prolonged period of sector underperformance.

So we want to be considerate of the dilution of traditional capital raises and be more aggressive about funding our progress through nonequity dilutive transactions. That means we’ll be focusing on 5 things. We want to enter into deals which partly or completely fund existing product candidates. We want to create new assets, which can attract such funding. We want to capitalize on our unique manufacturing capability to solve issues which impede others’ programs. We want to obtain grants like the CIRM CLIN2 grant we applied for in June. And finally, we want to complete activities required to collect milestone revenues from our partnership with Roche and Genentech. These are all strategies we are evaluating or employing, to help us reduce our dependency on the equity capital markets while still advancing our programs through significant milestones.

Overall, while we will always remain open to all sources of capital, we believe successfully employing this strategy is the best path toward increasing the value of the company’s shares. Moving on, I next will provide an update on OPC1, our off-the-shelf cell transplant program designed to increase mobility for people who have suffered from a spinal cord injury. To date, OPC1 has been administered to 31 individuals with acute severe spinal cord injuries in Phase I/II clinical trials. And the long-term safety and efficacy data we have collected so far is both promising and worthy of further investigation. However, we had 2 areas of improvement we wanted to complete before we would feel ready that OPC1 could successfully complete a later-stage trial.

The first area of improvement is delivery and the second is manufacturing. Regarding delivery, last week, it was a privilege to announce that we had administered OPC1 for the first time to a chronic injury participant. This is an important milestone because chronic injuries represent an additional and larger potential addressable population for this experimental therapy. Treatment occurred in what we call the DOSED study, which is the third clinical study of OPC1 and is evaluating the safety of a novel system designed to deliver our proprietary cells without stopping ventilation during treatment. The first participant in DOSED was neurologically complete SCI injury AIS Grade A, with a single neurological level of injury between T1 and T10, and the novel delivery system successfully administered the intended onetime injection of 10 million OPC1 cells.

In addition to the safety and performance of the new device, we also will be collecting functional assessments, which gives us the opportunity to investigate any signals of efficacy that may arise. We believe the device we are testing in the DOSED study will be superior to the original delivery system in 2 ways. First, it’s easier to use and deploy to clinical sites. But more importantly, the new device is intended to allow a dose of cells to be administered over 4 to 5 minutes without stopping the participant’s respiration. Previously, it was necessary to stop ventilation when you deliver the cells. So if this device is proven to be safe and effective, this would be a significant enhancement to the safety of the procedure. In addition, this delivery system is compatible with a forthcoming immediate use formulation of OPC1 that we developed and which eliminates the complex DOSED preparation steps required with the original clinical material.

Importantly, the first time we use this device in a clinical setting, it successfully delivered the cells to the target locus, which was an important risk-reducing event for this new device. We still need to conduct this procedure in a range of injury types, but having the first administration via success was a great milestone for the team. And with some increased confidence, we next look forward to opening the study at additional sites and building on the promising work and results observed in prior studies of OPC1. The second area of OPC1 improvement I mentioned is our new manufacturing process for which we have increased the scale, purity and control of the cells we make, and we developed a new immediate use formulation, which eliminates the lengthy dose preparation steps that required — were required with the original clinical material.

Subject to clearance from FDA, our plan is to introduce the cells from this new and improved process into the open enrollment phase of the ongoing DOSED trial. In parallel with DOSED, we also are working on the design of a larger clinical trial with a focus on collecting specific and clinically relevant endpoints, which would help address the well-documented challenges of data collection in this patient population. When all 3 of these activities have been concluded, the design, the device and the cells, we believe we, either alone or with a partner, will be in a position to conduct a larger clinical trial of OPC1. And finally, at the end of June, we also submitted a clinical grant application to CIRM to request support of the ongoing DOSED study and are currently awaiting updates from the CIRM review process.

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

Jill Ann Howe: Thanks, Brian, and good afternoon, everyone. As of June 30, 2025, our overall cash position was $42.3 million. This capital is expected to support our planned operations into Q1 of 2027, which we believe will allow us to reach multiple milestones and events. As we have previously discussed, we may receive $37 million of capital, if Roche and Genentech publicly disclosed the intent to advance OpRegen into the next trial, provided our share price is above $0.91 and other customary conditions are met. And as Brian just reviewed, we also continue to pursue nondilutive sources of funding such as the milestone payment we are eligible for under the Roche-Genentech collaboration agreement, program grants like the CIRM grant and additional collaborations, which we may elect to enter into the future.

Now, let me review our second quarter results. With respect to our second quarter operating results, we largely came in line with our historic periods. Total revenues were $2.8 million, a net increase of $1.4 million as compared to $1.4 million for the same period in 2024. The increase is primarily driven by more collaboration revenue being recognized from deferred revenues under the Roche agreement, as well as from deferred revenues recognized following termination of the VAC platform-related collaboration agreement. Operating expenses were $22.5 million, an increase of $5.2 million as compared to $7.3 million for the same period in 2024. The overall increase was noncash and driven by a $14.8 million expense recognized for the loss on impairment for the intangible asset related to the VAC platform.

R&D expenses were $3.1 million, an increase of $0.2 million as compared to $2.9 million for the same period in 2024. The net increase was primarily driven by greater activities in our preclinical programs compared to last quarter. G&A expenses were $4.6 million, an increase of $0.2 million as compared to $4.4 million for the same period in 2024. The net increase was primarily driven by more costs incurred for services provided by third parties. Loss from operations were $19.8 million, an increase of $13.9 million as compared to $5.9 million for the same period in 2024. This increase in loss was primarily driven by the impairment expense of $14.8 million related to the VAC platform, which is a nonrecurring transaction. Other income reflected other expense of $10.6 million compared to other income of $0.1 million for the same period in 2024.

The net change was primarily attributed to the quarterly fair value remeasurement of the value of the warrant liabilities of $12.7 million, primarily due to an increase in our share price as compared to the prior quarter, and this was partially offset by $1.7 million for exchange rate fluctuations related to our international subsidiaries. The net loss was $30.5 million or $0.13 per share compared to a net loss of $5.8 million, or $0.03 per share for the same period in 2024. The change was primarily driven by the loss on impairment expense related to a 2019 acquisition and the quarterly fair value remeasurement of the warrant liability. As you can see from our financial results, we continue to demonstrate a commitment to fiscal discipline and always are seeking to strike a balance between our cost of capital and any investments we make in our pipeline.

With that, I’ll hand the call back to Brian.

Brian M. Culley: Thanks, Jill. I will summarize by saying that, we remain confident in the potential for OpRegen to drive positive clinical outcomes in dry AMD, and we’re encouraged by our partners’ continued signs of commitment to the program. We also believe the independent evidence generated by other RPE cell transplant trials supports and elevates the evidence. Second, we’re planning for a successful future by seeking to capitalize on our investments in our cell transplant platform and use recent manufacturing achievements as a foundation from which additional programs can be advanced via funded partnerships or independently, depending on what makes sense at the time. And third, we are steadily advancing OPC1 by ensuring it has the necessary attributes to qualify for later-stage clinical testing. As always, we appreciate your support and belief in our vision. And with that, operator, we are ready to take analyst questions.

Q&A Session

Operator: [Operator Instructions] And our first question comes from the line of Jack Allen with Baird.

Jack Kilgannon Allen: Congrats on all the progress made over the course of the quarter. Maybe the first one I’ll ask is on the DOSED study. Congratulations on getting that first chronic patient DOSED. I guess, I’d love to hear some more context around how quickly you can enroll patients in this trial. Are there any staggers for the initial couple of patients DOSED? And then kind of looking down the road here, but how should we think about the potential cadence for disclosure of data? I’ve long thought that, if you could see a meaningful result in a chronic patient, that could be quite meaningful. I’d love to hear any thoughts you have there as well. And then I have a quick follow-up as well.

Brian M. Culley: Yes. Thank you for the question, Jack. I think that, we have poor predictive power in estimating enrollment because we don’t have experience with enrolling chronic patients. Our experience is with subacute patients. And there are not a large number of applicable precedent trials for us to look at. We do imagine that, there are very good reasons to participate in a trial like this. And we think that as a general matter, patients with spinal cord injuries are enthusiastic supporters of exploratory or experimental approaches. But it’s very difficult. Our objective — it was very difficult to know exactly what the enrollment will look like. Our objective with this first patient was to have a successful administration, see if there were any learnings and lessons and then apply any changes, if needed, to additional patients going forward.

The FDA, I think, is in alignment with that approach because we do have a stagger process. So, the first patient that I described as ASIA level A, that was a requirement for patient #1. Patient #2, we will be looking for ASIA level B and then patient #3 can be either A or B. So, we do have some criteria. We do actually have a 4-patient stagger. And so, after the initial administration of OPC1 to this first patient, after approximately 30 days, we will take the data to a safety monitoring board that would provide us to go past and enroll the next patient. So there is a stagger. There’s going to be some meaningful number of weeks or potentially months, especially when you get into the subacute phase, waiting for patients. But we hope to offset that in part by effective enrollment strategies as well as by additional sites.

But we didn’t want to deploy those initiatives until we had some information that merited those additional investments. I think we have that now. And so that’s why I described this as an important risk reduction event that we had a brand-new device that had a successful administration. With respect to the cadence of data, it will necessarily follow the enrollment. But I think what I can say is that, this company has a very good history of being transparent with respect to sharing data. We did that with OpRegen on an ongoing basis, and I anticipate that we will continue that practice with OPC1. I agree that it will be very interesting and exciting if a chronic patient has some change in their functional performance. We want to be very careful that any early indications of that have some time to stabilize and that we have a good handle on it.

So, it’s not something that you might hear about in a short number of weeks, but we will be following these patients out to as much as a year. And if we think that there’s something exciting to talk about, we will do so when we have the right degree of conviction — in that information, which, by the way, is exactly how we proceeded with OpRegen when we first had evidence of what we called at the time retinal restoration. It was a number of months before we were willing to share that publicly because it’s a very strong statement about what’s potential with this therapy. And so, we want to be careful before we start declaring victory about ensuring that we have a full understanding of any observations that we see. But of course, the main takeaway is that we are very hopeful that a patient receiving a clinical dose of OPC1 would have some detectable level of performance improvement on this trial.

Jack Kilgannon Allen: Got it. Got it. Yes. Very exciting to see that really get into the clinic and get underway here. Maybe just 2 more quick follow-ups for me. I guess the first one I’ll toss out there and see if I get any response. But any additional color as it relates to the enrollment in the Phase IIa study? I know it’s being run by Roche, but I know that’s a key catalyst for investors following the lineage stock. And then the other question I had was on the manufacturing progress you made over the course of the quarter. How are you thinking about timelines to potential partnerships? Are there any discussions ongoing at this point? Or is it really in the infancy as it relates to reaching out to potential partners?

Brian M. Culley: So, thank you for those questions. So, I will have no comment on enrollment for all the good reasons that I’ve explained several times, but I appreciate your boldness in asking the question. But with respect to manufacturing timelines, manufacturing is, in fact, core to those 5 strategies that I outlined earlier on the call. When I am describing those strategies as important areas of focus, I’m referring to that being a 2025 effort. It can certainly continue into 2026, but I would be profoundly disappointed, if we haven’t put up some valuable points that fit into those 5 strategies before we get to the end of the year. So, I don’t want to be very specific. Obviously, some conversations are going to be more advanced than others, and there could be no guarantee that anything we’re working on is going to come through.

For example, the CIRM grant, I think, is a really great initiative, but I think the timing of that for a decision is probably November. Everything else is to be determined. But what I described there is not object speculation lacking basis. We have active conversations, and we think we’re going to be able to meet some of these internal objectives in these areas of focus before year-end.

Operator: Our next question comes from the line of Joe Pantginis with H.C. Wainwright.

Joseph Pantginis: Brian, so one question on OPC1. You gave a lot of great answers there. With regard to enrollment, how are you working with the sites hand-in-hand to be able to identify patients, especially since we’re assuming, and you’ve told us that the sites have been already trained on the new device.

Brian M. Culley: Thanks, Joe. We have a team with a lot of experience in conducting clinical trials. I’m not an active operator on that initiative, but I also have a lot of experience having successfully completed the largest to-date clinical trial in sickle cell disease, and that was in 75 sites in 15 countries, almost 400 people participate in that study. One of the core tenets that I’ve developed over the years is really around the relationship. And I think that Lineage has done a truly exemplary job through some of the relationships we’ve established with the leading groups in the spinal cord injury. Of course, the Christopher & Dana Reeve Foundation comes to mind, but we also have a number of other very strong relationships in the space.

Owing in part to the spinal cord injury Investor Symposium that we’ve now successfully produced 3 years in a row. So a deep understanding of the motivations, incentives and obstacles that patients have to participating in studies as well as having not just the patient perspective, but also a real commitment to addressing site-by-site issues. So site-specific hurdles and objectives. As one kind of interesting example, you might imagine a site could be on the border and there could be a lot of people who speak a different language. And so having your materials in multiple languages. I don’t know that it’s necessarily relevant to this particular study, but it is an example of sort of a nuanced thinking about making sure you’re making it easy and accessible for the patient.

So, we’ll employ a lot of these strategies. Most of them are inexpensive. Of course, additional sites can help. CIRM involvement can help. And I think if we take all of these initiatives in the aggregate, it gives us the best opportunity to secure not only the initial thoracic injury patients, but also thereafter, the cervical injury patients. And we imagine that approximately half of the patients on the study will be chronic and approximately half will be subacute. The important distinction there, and I’m pretty certain you’re aware of this, is that chronic patients can be more easily to identify because they exist. They’re under care and varying degrees, where subacute patients have a window of opportunity where you have to sort of catch them in the net.

So, I think as a general matter, subacute is more difficult, but we think we’ll be able to get everything we need in order to clear the use of this device in larger settings.

Joseph Pantginis: No, that’s helpful. I appreciate that. And then my other question really has to do with the — your prepared comments about the pipeline and the future. So, number one, obviously, your manufacturing capabilities and being able to drive potential BD is very promising. And hopefully, we’ll get to see something in the not-too-distant future. But specifically for your own assets, hearing loss, been talking about that for a while, and I believe I and others have asked you. So, when do you think we might see preclinical data from this program? And then with regard to other programs and new cell types, would you say that you’ve had any early inbounds or any outbounds for that matter with regard to business development?

Brian M. Culley: It’s a great question, Joe. I think as a general matter, outbound is more — is definitely more the case, because I don’t think that this company is really extensively well-known compared to some of the other companies that do similar work, which, by the way, is a point of great frustration for me because we work very hard to increase awareness. So, I think we are more likely to be talking about outgoing outreach solicitation, which is normal. That’s what we did with OpRegen. We had to go out and make the world aware of what we’re doing in order to ultimately end up with a very valuable transaction with Roche and Genentech. But there’s another component that I think is probably underappreciated, which are the insights that we have from our decades of manufacturing and directed differentiation work that I think give us unique insights into where the best opportunities may reside to apply our technology where, for example, people cannot proceed but for the existence of our technology.

So, I think there’s a window of opportunity where we have a really compelling story or pitch for some others. But just like approaching investors and getting them to invest, you’re talking about showing data, having long conversations before you may or may not elect to enter into a deeper relationship. So, I think my professional history would be that I don’t talk glibly or casually about things like business development transactions unless I feel confident that there’s going to be something — there’s going to be some kind of follow-through. But at the same time, I think that what we’re bringing to the table is more than just saying we’re open for business, we are using a very tactical and strategic way of approaching people and having conversations about our capabilities, so that we can find the highest and best use of our technology because we cannot simultaneously run a 7, 8, 9 program campaign.

We have to be very selective about the kinds of things we do. And we have, in particular, over the past year, developed a really rigorous system of evaluating things that we believe we should hold internally for longer versus things that we think might be more suitable through partnership. And I hope that’s adequately addressing the question that you had.

Joseph Pantginis: No, it certainly is. And I just wanted to just go back a little bit to see if there’s any potential guidance on preclinical data from the hearing program.

Brian M. Culley: Thank you for circling back on that. I neglected to mention the preclinical work is absolutely ongoing this year. We don’t have guidance yet as to when we think there could be some reportable information. But as soon as we have such information, I’m sure we would enthusiastically talk about it. But we do not have that kind of data in our hands yet, but that work absolutely does continue.

Operator: Our next question comes from the line of Madison El-Saadi with B. Riley Securities.

Madison Britt Wynne El-Saadi: Congrats on the progress. Maybe sticking with your achievement in in-house GMP production. I guess, maybe what is kind of the next hurdle or milestone regarding just your internal manufacturing scale up? And should we expect this not only to accelerate potential partnerships — but thinking of your partnership framework, should we expect more platform-based partnerships? Or could it be asset or single cell type based? And I’m just wondering if this could also maybe translate to Lineage capturing greater economics during those early negotiation phase.

Brian M. Culley: Yes. Thank you, Madison. I think there are some really interesting specific ways of answering the question that you and others will need to wait a little bit further for. But as a general matter, I think there’s — in some pockets, insufficient appreciation of the difficulty of the purity, scale, reproducibility of a GMP banking system and production system. So, without going into a lot of detail about specific hurdles for specific cell types, although those certainly do exist, I think manufacturing as a general matter needs to be viewed shoulder to shoulder with generating provocative clinical data. Right now, I think that there’s so much attention on clinical data that people tend not to ask tough questions about manufacturing.

We welcome tough questions on manufacturing because we’re very confident in what we’ve been able to do, and we’re happy to have those conversations. With respect to platform versus asset, I think that the true value creation is the ability to generate multiple assets from what is at least partly an identical platform. That maximizes the return on your investment, that maximizes the efficiency of your business because if you have a single facility and even a single, albeit large team that are working on different cell types, you are cranking out a lot of different discrete assets from a fixed cost, and that makes your proportional investment into each of those assets a lot smaller. And by the way, it’s hard for me not to mention that compared to the process of developing a new small molecule where you might have to generate and screen a library of compounds.

You have to develop a potency assay. You’ve got structure activity relationship. You have so much work. In our case, it’s about capitalizing on our lessons and intellectual property that is tied to the directed differentiation and control of discrete cell types. So, I think that the platform is the engine by which discrete assets can be generated, and that’s the maximum monetization of this platform outside of an acquisition exercise. With respect to the economics, as we demonstrate greater and greater capabilities and as our expertise is validated by others and as we learn more, I think our ability to extract greater value from deals is supported and enhanced. There are some specific examples which come to mind but they are part of our business development strategy.

So, they’re hard for me to point to. But again, as a general matter, when you enter into a deal, whether it’s with a large pharmaceutical company or a smaller company with a very innovative and novel technology, inevitably, things creep up, which you can learn from and say, okay, I’m going to do this a little bit differently next time. So I think similar to the question that was asked previously, I think our understanding about the challenges with specific cell types gives us somewhat of an edge in thinking about where the opportunities lie and the mix of opportunities that we would have in a basket of a pipeline that has diversity. And I think that overall, that is the right way to generate value from this platform and make this a very successful business.

Madison Britt Wynne El-Saadi: Got it. And then I guess, secondly, thinking back to your recent visual acuity data, clearly, greater coverage equals greater results. So, should the assumption be that most patients will experience this greater coverage? I’m just wondering if graft coverage, if this is maybe the key variable driving efficacy variance across different — across peer programs.

Brian M. Culley: Yes, that’s a great question because it really does invite a discussion of whether everyone can benefit from this therapy. And perhaps there are no genetic variants that you might have in other situations or off-target effects might be an analogous situation for small molecules. I think what Lineage demonstrated quite convincingly in its Phase I/IIa trial is that if you do, in fact, put the cells thoroughly across the area of atrophy, you get by far the most exciting and positive effects. If you deliver the cells away from the area of atrophy, I can’t say that, that’s not beneficial, but it clearly is subordinate to delivering the cells in a fulsome way across the area of atrophy. And I think in part, there’s no better place to find affirmation of that view than Genentech running a surgical optimization study because ultimately, if you really believe that these cells work not through arm’s length trophic effects, but rather through the direct transplantation, then anything you do to increase the success — the rate of successful delivery should give you even better clinical outcomes.

So I think that we go to great lengths at this company to point out that we are unlike undifferentiated cells that are modulating some immune effects and using words like boosting, and instead, analogizing what we do to more of something like a bone marrow transplant, which has for 70 or 80 years, shown quite convincingly that it’s a life-saving technology. And so, I happen to believe that regardless of someone’s genome or phenotypic expression that they — that everyone with this condition could benefit if they receive the cells in the correct place and those cells remain functional and durable, which is really exciting because that’s so unlike many gene therapy or even some small molecule approaches or antibody approaches, which have to do some sort of market segmentation exercise to get to their actual addressable market.

We know of no genetic or other predisposing factor that would preclude someone who met our enrollment criteria to ultimately being a good candidate. But at the end of the day, that ultimately will be led and driven by our partners. And for today, this is still an experimental therapy in clinical testing. So, it’s hard to say, but we do ascribe to the view that delivering the cells to the target locus, whether in spinal cord injury, dry AMD with GA, or probably every other area of focus. And in fact, it affects how we think about new opportunities. We believe that it is very much the case that this is a transplant technology and not “cell therapy” technology.

Operator: Next question comes from the line of Jason McCarthy with Maxim Group.

Jason Wesly McCarthy: Congrats on the great progress. So, I just wanted to start off. You mentioned that you wanted to expand the sites for the DOSED study. About how many sites do you anticipate on expanding to?

Brian M. Culley: Yes. Thank you for the question. We don’t yet know. It will actually connect back to the first question that we received from Jack Allen insofar as we definitely want to go to experienced and capable sites. But unless we know what the enrollment rate is going to look like, it’s hard for us to say how many sites will be necessary to complete enrollment in a reasonable time. Our objective initially was just to get a first site up and to get that first patient treated and show that the device could be used successfully before engaging in any meaningful expansion. Although to be clear, we have already initiated the process with our second site, and it’s moving along well. So — we’ll at least expect to have a second site open a little later this year.

And then we’ll start asking questions about whether we’re going to 3, 4, 5, 6 and how many sites would be needed. But ultimately, with the total enrollment between 6 and 10 patients, we don’t think that it’s going to need to be a very large number. And we are focusing, by the way, on California centers as those are the sites that are more eligible for CIRM support for the grant that we applied for recently.

Jason Wesly McCarthy: Yes, absolutely. And I noticed in your previous studies that you guys have followed up 7 years, 13 years. So, beyond your 1-year follow-up, do you guys anticipate to follow and evaluate these patients for longer? And if so, how much longer do you expect?

Brian M. Culley: Yes, we will minimally follow these patients for at least 5 years. I very much appreciate you — excuse me, we will minimally follow these patients for at least 10 years. I appreciate you recognizing that we do, in fact, have one of the longest running clinical follow- ups in our example with spinal cord, where we’ve got patients follow up not just 7, but for the thoracic patients out to 13 years. I don’t think anyone in the field has that kind of robust safety data. So, we do like to follow patients not just because it’s mandated by FDA. But I think it’s really intriguing when we look at something like the OpRegen program in dry AMD, the longer we follow these patients, it appears the greater and more obvious the treatment effect can be assessed.

So, while it may be the case that FDA has previously approved agents in dry AMD after just 12 months of follow-up, our data at 36 months is considerably stronger than it even was at 12 months. So, there’s a good scientific and efficacy rationale to follow patients for longer because if you are stimulating the cells that are transplanted to a spinal cord injury, we don’t know how far the limit. We don’t know what the ceiling is by delivering brand-new functional cells. Perhaps patients could enjoy more than a year of improvement if they’re continuing to utilize that and build on that. We don’t know about multiple dosing. We really have no idea about the ceiling because this is a brand-new technology, but there are very good reasons to follow up patients for multiple years.

The good news is it’s fairly inexpensive. When you get into the out years, you’re talking about a phone call and maybe some basic assessment. So, it’s not that hard. But it does occasionally end up being a piece of concern for investors because they see 10-year follow-up and they think that you’re not going to have any data for 10 years. But it’s important for everyone to pay attention to what the primary endpoint is because that’s the main reporting deadline. So, for our DOSED study in spinal cord, that’s just 30 days, although we would expect that the conventional efficacy follow-up for spinal cord or for dry AMD typically would be more like 12 months.

Jason Wesly McCarthy: Right. Absolutely. And lastly, just kind of touch upon what you briefly mentioned. Do you think there’s a difference in what threshold of benefit you’d need to see, for example, the subacute group and the chronic group in order to consider it meaningful? For example, would you think that you would need to see a smaller benefit on the chronic to be easier to resolve than the subacute based on its disease trajectory?

Brian M. Culley: That’s an outstanding question. These are definitely discrete patient populations, although really they’re discrete by virtue of when their injury occurred, but they really have different needs — and I think it’s important for any therapy that’s being developed to be attuned to and sensitive to the specific needs of the population. So. for a chronic patient who has plateaued at a certain level of function, what is required to be clinically meaningful to that patient is probably going to be different, yet easier to detect in a chronic patient because they have their own reference point, i.e., I haven’t been able to do X for the last 18 months. And now after this therapy, I can do X. So that’s a really nice internal control, which is not available with the subacute patients for which you need to have some kind of synthetic or authentic control because their injury is very recent.

And their baseline is, of course, full and normal functional ability prior to their injury. So, we view these as very discrete patient populations. It’s almost like 2 separate programs when it comes to data analysis, but it was actually FDA that encouraged us to utilize this new delivery system in the chronic patients, and we welcomed that recommendation with open arms.

Operator: And our last question comes from the line of Sean McCutcheon with Raymond James.

Sean McCutcheon: You mentioned bridging to the new formulation of OPC1 within the DOSED IND. Can you speak to the steps you’re taking to that end and kind of when within the study you think you’d be able to do that? And then beyond the device study, what insight do you have into how the FDA may be thinking about endpoints in the SCI population, whether that’s subacute or chronic given the general lack of precedent here?

Brian M. Culley: Yes. Two really good questions, Sean. So first, with respect to the new cells, the new process by which we manufacture those cells. We will need to do a full battery of comparability testing and present that data to FDA, which will include in vivo testing, i.e., you are conducting surgeries in preclinical models to show that you have activity and a treatment effect in those models. That work is substantially complete at this time. We actually are in the process of pulling the information together in order to put it in front of the FDA in a very cohesive and comprehensive way. I believe all of the wet lab work is complete. And at this point, we are just doing a little bit of bioinformatics work, which, by the way, didn’t even exist a certain number of years ago.

So this is a nice example of how the field of cell transplantation has matured and one ‘s ability to characterize the material that one makes is so much farther and more advanced than it was when this program began many years ago under a different sponsor. Overall, our goal would be for the new formulation and the new cell manufacturing process to be introduced into the back half of the ongoing dose study. So, we have at least 4 patients that are part of the stagger, and then we go into open enrollment. Whether that means we’re ready on patient 5 or we’re not ready after patient 10 really depends on the FDA feedback. And we have not requested that meeting date yet, but I think that’s information we would be happy to share when it occurs because it will be more informative to answer that very good question about when are we going to get the new cells in.

But as I said, substantially all of that comparability work has already been completed, and we’re very satisfied with the findings. We think the FDA is going to be very happy with the new process we’re using. In particular, it’s far more pure, and we’ve vastly increased the scale and some of that data has been shared for quite some time through our corporate slides. With respect to the question about FDA’s thinking on either or both of subacute or chronic patients, I — without trying to be humorous, I would say, I don’t know which FDA. All of us are quite aware that key individuals have turned over sometimes more than once. And so, I think at this point, it’s very difficult for us to know. We have not yet had a meeting with FDA to talk about the design of a controlled study or a larger later-stage study.

So, we don’t have a lot of input. We do have minutes from a meeting that a prior sponsor held on the topic, but we neither think that, that product nor that group is necessarily indicative of how the agency would see things today. We don’t know, if they’re the current thinking is going to be more flexible, less flexible. It’s really unknown. But when we are prepared to do so, we will, of course, go to the agency and initiate that conversation. But we’re encouraged that the field, which includes Lineage, has initiated a whole PFDD effort. So, patient-focused drug development, conversations with FDA. There’s a whole group led by a nonprofit organization that are working on a PFDD. And I know that, that is one of their objectives is to have a very open and productive conversation about suitable endpoints.

From a company perspective, we spend time with people who suffer from spinal cord injuries, and we have all been abundantly convinced that even small changes in mobility lead to significant changes in quality of life. I think that information needs to be presented in a very thoughtful way to the agency, maybe not just by Lineage, but by a lot of independent experts in the field to really highlight how even a small treatment effect can be life-changing for individuals who suffer from spinal cord injury because every injury is unique. This is not a homogenous patient population, even if hopefully, the product could be administered to a wide range of patients. So, we have to come up with creative and thoughtful ways of assessing the endpoints, and that will make the program much more valuable.

So, as we go through those normal and expected steps, we’ll be able to share our insights. But we don’t even have the ability to speculate today because you have, as I said, significant turnover in that agency, which we hope will stabilize and derisk the whole process when we do go and have those conversations.

Operator: That concludes the question-and-answer session. I would like to turn the call back over to our CEO, Brian Culley, for closing remarks.

Brian M. Culley: Thank you, Desiree. Nothing more to add. I appreciate everyone, and please stay tuned. I think we’re going to have a very exciting second half of 2025.

Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining, and you may now disconnect.