UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2021
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from___________ to __________
Commission
file number 001-12830
Lineage
Cell Therapeutics, Inc.
(Exact
name of registrant as specified in its charter)
2173
Salk Avenue, Suite 200
Carlsbad,
California92008
(Address
of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code (442) 287-8990
Securities
registered pursuant to Section 12(b) of the Act
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock LCTX NYSE American
Securities
registered pursuant to Section 12(g) of the Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐No☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐No☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No☒
As
of June 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market
value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant was approximately $356.8
million.
The
number of common shares outstanding as of March 4, 2022 was 169,709,292
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement relating
to its 2022 annual meeting of shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.
Lineage
Cell Therapeutics, Inc.
Table
of Contents
Page Number
Part I.
Item 1 Business 6
Item 1A Risk Factors 33
Item 1B Unresolved Staff Comments 65
Item 2 Properties 65
Item 3 Legal Proceedings 65
Item 4 Mine Safety Disclosures 66
Part II.
Item 6 Reserved 67
Item 7A Quantitative and Qualitative Disclosures about Market Risk 78
Item 8 Financial Statements and Supplementary Data 79
Item 9A Controls and Procedures 121
Item 9B Other Information 121
Item 9C Disclosure Regarding Foreign Jurisdictions that Present Inspections 121
Part III.
Item 10 Directors, Executive Officers, and Corporate Governance 122
Item 11 Executive Compensation 122
Item 14 Principal Accountant Fees and Services 122
Part IV.
Item 15 Exhibits and Financial Statements Schedules 123
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PART
I
FORWARD-LOOKING
STATEMENTS
This
Annual Report on Form 10-K (this “Report”) contains forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve
substantial risks and uncertainties. The forward-looking statements are contained principally in Part I, Item 1. “Business,”
Part I, Item 1A. “Risk Factors,” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” but are also contained elsewhere in this Report. In some cases, you can identify forward-looking statements
by the words “may,” “might,” “will,” “could,” “would,” “should,”
“expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,”
“estimate,” “predict,” “project,” “potential,” “continue” and “ongoing,”
or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve
known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements
to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we
have a reasonable basis for each forward-looking statement contained in this Report, we caution you that these statements are based on
a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain. Forward-looking
statements include statements about:
● our plans to research, develop and commercialize our product candidates;
● the potential scope and value of our intellectual property rights;
● our ability to recruit and retain key personnel;
● the effects of the COVID-19 pandemic on our operations; and
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You
should refer to “Item 1A. Risk Factors” in this Report for a discussion of important factors that may cause our actual results
to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure
you that the forward-looking statements in this Report will prove to be accurate. Furthermore, if our forward-looking statements prove
to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you
should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and
plans in any specified time frame, or at all. The forward-looking statements in this Report represent our views as of the date of this
Report. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these
forward-looking statements at some point in the future, we undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise, except as required by law. You should, therefore, not rely on these
forward-looking statements as representing our views as of any date subsequent to the date of this Report.
You
should read this Report and the documents that we reference in this Report completely and with the understanding that our actual future
results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
This
Report also contains market data, industry forecasts and other data made by independent parties and by us relating to market size and
growth and other data about our industry. This data involves a number of assumptions and limitations, and you are cautioned not to give
undue weight to such estimates. In addition, projections, assumptions and estimates of our future performance and the future performance
of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk.
All
brand names or trademarks appearing in this Report are the property of their respective owners. Solely for convenience, the trademarks
and trade names in this Report are referred to without the symbols ® and TM, but such references should not
be construed as any indication that their respective owners will not assert, to the fullest extent under applicable law, their rights
thereto.
Unless
the context requires otherwise, references in this report to “Lineage,” “we,” “us,” and “our”
refer to Lineage Cell Therapeutics, Inc. and its consolidated subsidiaries.
RISK
FACTOR SUMMARY
Below
is a summary of the material factors that make an investment in our common shares speculative or risky. This summary does not address
all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face,
can be found below under the heading “Risk Factors” in Item 1A of Part I of this Report and should be carefully considered,
together with other information in this Report and our other filings with the Securities and Exchange Commission (“Commission”)
before making investment decisions regarding our common shares.
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● Our intellectual property may be insufficient to protect our products.
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ITEM 1. BUSINESS
Overview
Lineage Cell Therapeutics,
Inc. (“Lineage,” “we,” “us,” or “our”) is a clinical-stage biotechnology company developing
novel cell therapies to address unmet medical needs. Our programs are based on our proprietary cell-based technology and associated
development and manufacturing capabilities. From this platform, we design, develop, and manufacture specialized human cells
with anatomical and physiological functions which are similar or identical to cells found naturally in the human body. These
cells which we manufacture are created by developmental differentiation protocols applied to established and well-characterized,
pluripotent, and self-renewing cell lines. These functional cells are transplanted into patients to either replace or support cells
that are dysfunctional or absent due to degenerative disease or traumatic injury, or are administered as a means of helping the body
mount a more robust and effective immune response to cancer or infectious diseases.
Our strategy is to efficiently
leverage our technology platform and manufacturing capabilities to develop and advance our programs internally or in conjunction with
strategic partners to further enhance their value. As one example, on December 17, 2021, we entered into a Collaboration and License
Agreement with F. Hoffmann-La Roche Ltd and Genentech, Inc., a member of the Roche Group (collectively, “Roche”), wherein
Lineage granted to Roche exclusive worldwide rights to develop and commercialize retinal pigment epithelium
cell therapies, including its proprietary cell therapy known as OpRegen®, for the treatment of ocular disorders, including advanced
dry age-related macular degeneration with geographic atrophy. Roche has paid Lineage a $50.0 million upfront payment under this alliance
and Lineage is eligible to receive up to an additional $620.0 million in certain developmental, regulatory, and commercialization milestone
payments. Lineage also is eligible for tiered double-digit percentage royalties on net sales of OpRegen.
Currently, Lineage is working
with Roche in support of the dry age-related macular degeneration (OpRegen) program and is clinically testing therapies to treat
spinal cord injuries and non-small cell lung cancer, as well as conducting research and preclinical development activities intended
to advance our pipeline into other therapeutic indications and target tissues or organs.
Product
Candidates & Other Programs
We
have several allogeneic, or “off-the-shelf,” cell therapy programs in development:
In
addition to seeking to create value for shareholders by developing product candidates and other technologies through our clinical development
programs, we also seek to create value from our technologies through partnering and strategic transactions. We founded two companies
that later became publicly traded companies: OncoCyte Corporation (“OncoCyte”) and AgeX Therapeutics, Inc. (“AgeX”).
We continue to hold common stock in OncoCyte as of December 31, 2021.
During
the year ended December 31, 2021, we received approximately $10.1 million in gross proceeds in connection with our sale of shares of
OncoCyte. In August 2020, we also received $24.6 million from Juvenescence Limited (“Juvenescence”), representing principal
and accrued interest under a promissory note we received in connection with our sale of AgeX shares to Juvenescence in August 2018.
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Corporate
Information
Lineage
is incorporated in the State of California. Our common shares trade on the NYSE American and the Tel Aviv Stock Exchange under the symbol
“LCTX.” Our principal executive offices are at 2173 Salk Avenue, Suite 200, Carlsbad, CA 92008, USA, and our phone number
at that address is +1- (442) 287-8990. Our website address is www.lineagecell.com. The information on, or that can be accessed through
our website is not part of this Report. Lineage routinely uses its website as a means of disclosing material non-public information and
for complying with its disclosure obligations under Regulation FD. We also make available, free of charge through our website, our most
recent annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports as
soon as reasonably practicable after the reports are electronically filed with or furnished to the Securities and Exchange Commission.
2021
Chronological Highlights
We
achieved numerous strategic accomplishments during 2021, including advancing clinical trials and product development in several key programs.
Business
Strategy
Our goal is to address unmet
medical needs by developing and advancing allogeneic, or “off-the-shelf,” treatments comprised of functional cells derived
by differentiation of pluripotent cells from established and self-renewing cell lines. We direct pluripotent cells to become specific
cell types and use those differentiated cells as treatments to restore diseased or diminished functions, such as impaired vision, loss
of movement and sensation, or to increase immune response to tumors or infectious agents. Significant near-term activities that underlie
our business strategy include:
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● Initiating a clinical study of VAC2, with an anticipated IND submission;
Cell
Therapy Technology Platform
We
believe we are a leader in pluripotent, cell-based asset development based on directed derivation protocols of cellular lineages and
whole cell manufacturing capabilities. Pluripotent cells, which are widely published as capable of becoming any human cell type, have
potential applications in many areas of medicine with large unmet patient needs, including certain age-related degenerative diseases
and degenerative conditions for which there presently are no cures. We are currently in clinical development for various pluripotent
cell-derived product candidates such as RPE cells, oligodendrocyte progenitor cells and dendritic cells. In addition, we are exploring
the differentiation of pluripotent cells into other cell types that may have therapeutic benefit in other areas of unmet medical need.
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Examples
of Cell Types Which Can Be Derived from Pluripotent
Stem Cells
Highlighted
cell types indicate currently active clinical programs of Lineage
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Cellular therapies are often
aimed at regenerating or replacing entire affected cells or tissues and therefore, may have more durable, broader, or more suitable applicability
than many traditional pharmaceutical products which are aimed to influence a single molecular target or group of biological pathways.
Small molecules and biologic therapies that require systemic delivery into the body often have unexpected side effects that can limit
their usefulness. When cell replacement is locally administered, particularly to a specific anatomical compartment, systemic side effects
are usually minimal and well-tolerated. Cell therapy more closely resembles that of transplant medicine, being focused on whether the
transplanted cells are retained or rejected by the body and whether the cells function as expected, rather than causing intolerable or
dose limiting side effects.
A key advantage of our
approach is that it provides us the opportunity to rapidly develop new programs without the extensive and costly steps
traditionally required to develop a new small molecule. Whereas small molecule product development typically requires selection or
validation of a drug target, followed by screening millions of molecules to identify a series of hits, followed by chemical
modification known as structure-activity relationship or “SAR” to develop a hit into a more potent lead, the process of
developing a new cell therapy from pluripotent lines can be comparatively faster because the target cell type is already known and
fully “validated”, insofar as it is well-established in the literature as being the cell type which is dysfunctional or
deficient in the patient. The most critical step in developing a new cell therapy is the establishment of a proprietary and
commercially feasible differentiation protocol which can create the needed cells, a process which avoids mass screening campaigns
and is more readily accomplished via the combination of literature reviews and in-house experience with pluripotent cell
differentiation. This approach can facilitate our pipeline expansion faster and at a lower cost than traditional methods.
In addition to our corporate
headquarters located in San Diego, CA, we have a modern and innovative manufacturing facility in the Bio Park on the campus of the
Hadassah University Hospital in Jerusalem, Israel. The facility includes process development laboratories and a state-of-the-art, current
good manufacturing practice (“cGMP”) cell manufacturing facility. It is designed and equipped to run simultaneous cGMP processes
and to produce a range of cell therapy products for human use in clinical trials as well as improve scalability for potential commercialization.
Currently, all of our cGMP manufacturing processes, including cell banking and product manufacturing for our cell therapy product candidates,
are conducted in this facility.
Novel
Clinical Cell Therapy Pipeline
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OpRegen
OpRegen
is an ophthalmic product candidate (currently in a Phase 1/2a clinical trial) for the treatment of advanced dry AMD with GA. AMD
is a gradual, progressive, deterioration of the macula, the small sensitive area in the center of the retina that provides clear, high-definition
central vision. AMD affects over 30 million people worldwide and approximately 1.6 million people are diagnosed annually in the United
States. It is a leading cause of vision loss in people over the age of 65 in the developed world. As the area of atrophy begins to include
the fovea (the center of the macula), patients lose their central vision, making facial recognition, reading and driving difficult or
impossible, and often resulting in legal blindness. The exact cause of dry AMD is unknown, but is thought to result from multiple factors,
such as genetics, age, and environmental effects. There are two clinical presentations of AMD, the dry form and the wet form,
or neovascular form (growth of abnormal new blood vessels). Dry AMD typically advances slowly toward GA in which RPE cells and photoreceptors
deteriorate over time. RPE cells support and nourish the retina by metabolizing waste by-products and producing a number of components
useful for photoreceptor health and function. If the metabolic waste products accumulate, lesions known as drusen are generated. Approximately
85-90% of AMD patients suffer from dry AMD, for which there is no FDA-approved medical therapies. Dry AMD may also lead to wet AMD, a
condition for which there are several FDA-approved treatments administered locally to inhibit the growth of new blood vessels, but these
treatments are not effective nor approved for the treatment of dry AMD. Physicians often recommend a healthy diet, exercise and/or nutritional
supplements for dry AMD, but nutritional supplements have shown limited efficacy in delaying the onset of more progressive disease in
longer-term studies. The schematics below show a representation of the process of drusen formation and the goal of cell replacement therapy.
Dry
AMD involves the loss of retina cells, creating an area of geographic atrophy (GA), which causes impaired vision and blindness
We
believe one of the most promising approaches to treat dry AMD is to replace the layer of damaged RPE cells with new, healthy and functional
RPE cells manufactured from a well-characterized cell line. OpRegen is a cell replacement therapy derived from our pluripotent cell technology
in which our proprietary directed-differentiation methods convert pluripotent stem cells into nearly pure populations of RPE cells. Using
this method, OpRegen is grown free of any animal products and consists of human RPE cells with high yield and purity that can be transplanted
directly into the patient’s eye, where the patient’s own RPE cells are missing or dysfunctional. The OpRegen therapeutic
approach is designed to replace damaged or lost RPE cells with the goal of slowing disease progression to preserve and/or restore visual
function.
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OpRegen
is an injection of RPE cells delivered to the retina, to replace lost retinal cells and preserve or restore vision
OpRegen
is intended to be an allogeneic, or “off-the-shelf,” product provided to retinal surgeons in an “easy-to-use”
form for transplantation. We believe OpRegen could have a lasting benefit from a single administration, or once every several years.
This approach differs from other investigational drugs for dry AMD and approved agents currently marketed for wet AMD, such as ranibizumab
(Lucentis®) and aflibercept (Eylea®), that require repeated, frequent intravitreal injections into the
eye.
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The
patients in our ongoing Phase 1/2a clinical trial are 50 years of age or older, whose dry AMD has advanced to the GA stage, with absence
of additional concomitant ocular disorders. The trial includes 24 subjects. The first 12 subjects (Cohorts 1-3) were legally blind at
the outset of the trial, with significant progression of GA. Cohort 4 consists of 12 patients with less advanced disease, smaller areas
of GA, and better baseline visual acuity at the outset of the trial. In all 24 subjects, the eye in which the disease has progressed
the most is treated, while their other, untreated eye serves as a measure of disease progression. Following injection, the patients are
followed for 12 months at specified intervals to evaluate the safety and tolerability of OpRegen.
Following
the initial 12-month period, patients are evaluated at longer intervals for up to a total of five years following administration. A secondary
objective of the clinical trial is to examine the ability of transplanted OpRegen to engraft, survive, and modulate disease progression
in the patients. In addition to thorough characterization of visual function, several vision tests are used to quantify stabilization
or improvements in visual function. We also perform anatomical evaluation imaging to assess the restoration of the structure of the retina.
Interim
data have been encouraging and suggest that OpRegen RPE cells are generally well-tolerated when administered by subretinal injection
in patients with GA. Findings on clinical examination by different imaging modalities show improvements in retinal structure and decreases
in drusen, which are collections of waste deposits associated with AMD, as well as durable engraftment of OpRegen cells now extending
to more than five years in the earliest treated patients. Across the study, a trend toward slower GA progression in treated compared
to untreated eyes continues to be present. Of particular note, four subjects in Cohort 4 have shown evidence of retinal tissue restoration,
evidenced by a reduction in size or no growth in the area of atrophy at least 12 months post-treatment and the presence of key retinal
cells that were not observable at baseline study entry. This anatomical effect was accompanied by improvements in visual acuity in all
four subjects. Furthermore, differences in visual acuity between treated and untreated eyes remains statistically significant across
Cohort 4 patients at 15 months post-treatment.
Importantly,
in the safety-focused aspect of the trial, no unexpected ocular adverse events have been observed and those events expected to occur
based on the procedures involved in OpRegen administration, such as vitrectomy, have been predominately mild in severity. The majority
of these subjects had pre-existing epiretinal membranes (“ERMs”) at the time of trial enrollment and in most cases,
experienced new or worsening ERMs following the surgical procedure, which is believed to be partially attributable to the route of administration
via pars plana vitrectomy (“PPV”) and retinotomy. The majority were mild to moderate in severity, though three patients
with severe ERM were successfully treated via a routine surgical procedure where the ERM was removed. These subjects are being monitored
during trial follow-up. Two instances of retinal detachment were reported among all patients, one of which occurred in a patient who
was legally blind prior to treatment. The event was not assigned as related to treatment, procedure or to the combination. The patient
continued for a period of time in the trial following successful surgical repair but has since withdrawn due to other unrelated health
issues. The second case, also successfully repaired, took place in an area of the retina away from the site of the OpRegen transplant
and was thought by the investigators and other reviewers to be related to an existing retinal tear in the patient. The independent data
safety monitoring board (“DSMB”) approved moving to Cohort 4 based on the safety data from the Cohorts 1-3. Cohort
4 incorporated an additional variety of objective and subjective assessments to look for signs of potential efficacy as well as potential
anatomical changes indicative of OpRegen cell function following implantation.
We
completed enrollment in Cohorts 1-3 (12 patients) in the middle of 2018 and as previously reported, OpRegen was well tolerated with no
unexpected systemic serious adverse events (“SAEs”) or ocular adverse events (“AEs”). Importantly, there were
several patients that exhibited improved retinal structure, reduction in drusen, alterations in the pattern of GA progression and indications
of long-term survival of the OpRegen cells. We began enrollment of Cohort 4 shortly thereafter and treated three patients via the traditional
route of administration. In 2019, we amended our clinical protocol to incorporate the Gyroscope Therapeutics, Ltd. Orbit Subretinal Delivery
System (“Orbit SDS”), a single use vitrectomy-free delivery device designed to deliver products to the subretinal
space through a sclerotomy and suprachoroidal approach, and our new thaw and inject formulation into our Phase1/2a clinical trial. In
February 2020, we announced that after reviewing promising preliminary data from the ongoing OpRegen Phase 1/2a clinical trial, our independent
data safety monitoring board removed the protocol-mandated treatment stagger. The COVID pandemic slowed the rate of patient accrual,
but study enrollment was completed on November 10, 2020, with the treatment of the twelfth Cohort 4 patient, seven via the Orbit SDS
and five via PPV/retinotomy. Five different surgeons at four centers successfully delivered OpRegen using the Orbit SDS and there were
no unexpected AEs. Encouraging structural and clinical changes were observed in these better vision patients, including better visual
acuity and increased reading speed.
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In
June 2020, we were able to report the first known example of retinal restoration following OpRegen administration in a Cohort 4 patient
who was treated via the PPV/retinotomy route, with the findings confirmed by several independent reviewers. It is hypothesized that photoreceptor
cells in the transition areas at the boundary of the GA are dysfunctional and dying, but not completely lost. The addition of new RPE
cells may restore the microenvironment in surrounding tissue and contribute to the possibility of restoring function to existing cells
that otherwise, if left untreated, would inevitably progress to further expansion of the atrophic region. Specifically, in this patient,
the area of GA assessed at nine months following OpRegen treatment was approximately 25% smaller than the patient’s pre-treatment
baseline. As reported in November at the 2020 American Academy of Ophthalmology (“AAO”) Annual Meeting, this patient
continued to show signs of a smaller area of GA and improved visual acuity. Further, as reported throughout 2021, this patient continued
to show zero progression of atrophy growth for three full years after treatment. This unprecedented finding supports the view that
dry AMD is not an irreversible, degenerative condition and that some portion of diseased retinal tissue may be recoverable in atrophic
end-stage disease patients.
In
May 2021, we reported at the Association for Research in Vision and Ophthalmology Annual Meeting (“ARVO”) that 83%
of all Cohort 4 patients were at or above baseline visual acuity, based on per protocol scheduled visits ranging from 4.5 months to approximately
three years post-transplant. In contrast, 83% of the patients’ untreated eyes were below baseline entry values at the same time
points. As well, previously reported structural improvements in the retina, decreases in drusen density, and a trend toward slower GA
progression in treated compared to untreated eyes continued.
In
June 2021, we reported that retinal restoration was observed in two additional Cohort 4 patients, evidenced by optical coherence tomography
(“OCT”), bringing the total to three observed cases of retinal tissue restoration. These findings continue to suggest
integration of new RPE cells with functional photoreceptors in areas that previously showed no presence of any of these cells. In addition
to the observed anatomical changes, all three patients’ visual acuity increased above baseline levels.
In
September 2021, it was reported at the Annual Retina Society Meeting that updated interim results of our Phase 1/2a study showed a statistically
significant difference in visual acuity between treated and untreated eyes across Cohort 4 patients, at month nine as well as months
12 and 15 post-transplant. These results, when combined with the previous evidence of retinal restoration in areas previously considered
to be atrophic, suggest that both a structural and functional benefit is possible with OpRegen therapy. Additionally, it was reported
that OpRegen continues to be well tolerated, with no new, unexpected ocular or systemic AEs or SAEs.
In
November 2021, we reported that evidence of retinal restoration was observed in a fourth patient enrolled in the Phase 1/2a clinical
study of OpRegen. Importantly, reduction or no progression for at least one-year post-transplant, was observed in the total area
of GA in all four of these better-vision Cohort 4 patients. In addition, all four retinal restoration patients reported improvements
in their visual acuity, which has been maintained for at least 12 months in all cases. This new and additive finding continues to support
our view that atrophic AMD is not an irreversible, degenerative condition and that some portion of diseased retinal tissue may be recoverable.
In
December 2021, we entered into an exclusive worldwide collaboration and license agreement with Roche, for the development and commercialization
of OpRegen. Roche paid us a $50.0 million upfront payment and we are eligible to receive up to $620.0 million in additional development,
approval, and sales milestone payments, in addition to tiered double-digit royalties. See Note 14 to our consolidated financial statements
included elsewhere in this Report for discussion on the Roche collaboration agreement.
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OPC1
OPC1
is our lead product candidate for the treatment of SCI. SCI occurs when the spinal cord is subjected to a severe crush or contusion injury,
such as that caused by a car or motorcycle accident and typically results in severe functional impairment, including limb paralysis,
aberrant pain signaling, and loss of bladder and sexual function. There are approximately 18,000 new spinal cord injuries annually in
the U.S. (NSCIC SCI Facts and Figures at a Glance (2019)), and there are currently no FDA-approved drugs specifically for the treatment
of SCI, although methylprednisolone, a corticosteroid generally used as an anti-inflammatory drug, is sometimes prescribed on an off-label
basis to reduce acute inflammation in the injured spinal cord immediately after injury. It is believed that to effect substantial benefit
in treating this complex injury, multiple mechanisms of action are required, such as introduction of biologics that preserve surviving
neurons and stimulate new nerve axon outgrowth, suppression of lesion cavity formation at the injury site, generation of new blood vessels
to repair the ischemic damage from injury, and myelination of the demyelinated and newly formed nerve axons. A key therapeutic target
in SCI is replacement of oligodendrocytes that are selectively lost at the injury site. As the sole source of the insulating protein
myelin in the brain and spinal cord, oligodendrocytes wrap around nerve axons and allow conduction of electrical impulses throughout
the central nervous system (“CNS”).
Oligodendrocytes
are the myelinating cells of the CNS and are critical for nerve signal conduction.
OPC1
is an oligodendrocyte progenitor cell therapy derived from our pluripotent cell technology under cGMP conditions using a directed differentiation
method. These cells are stored frozen until ready for use and prepared for direct administration into the injured spinal cord. Based
on preclinical studies, when OPC1 is transplanted into the injured spinal cord, the cells undergo further maturation to generate a replacement
population of oligodendrocytes at the injury site that are capable of remyelinating denuded and newly formed nerve axons. Based on preclinical
studies, prior to their maturation the transplanted oligodendrocyte progenitor cells are believed to stimulate additional reparative
processes, including promotion of neuron survival and nerve axon outgrowth, and induction of blood vessel formation in and around the
injury site. In addition, OPC1 cells rapidly migrate from the injection point to the injury site where they generate a supportive tissue
matrix and suppress cavitation. Cavitation is a destructive process that occurs within the spinal cord following SCI, and typically results
in permanent loss of motor and sensory function. A patient with cavitation can develop a condition known as syringomyelia, which results
in additional neurological and functional damage to the patient and can result in chronic pain. Based on the multiple reparative properties
associated with OPC1, we believe this candidate cell therapy product is ideally suited to treat neurological conditions such as SCI and
other demyelination disorders of the CNS.
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Suppression
of spinal cavitation in a rat contusion model.
Under
a grant for clinical development, the development of OPC1 has been supported by $14.3 million in funds from CIRM, from 2014 through the
date of this Report. We are eligible for and may seek to apply for additional grants from CIRM for the program’s continued development.
Prior
to its acquisition, Asterias Biotherapeutics, Inc. (“Asterias”) was testing OPC1 in two clinical trials: a five patient Phase
1 safety trial and a 25-patient Phase 1/2a dose escalation trial, which we call the SCiStar trial. The SCiStar trial is an open-label,
single-arm trial testing three sequential escalating doses of OPC1 administered at up to 20 million OPC1 cells with subacute, C-4 to
C-7, motor complete (AIS-A or AIS-B) cervical SCI. These individuals have essentially lost all movement below their injury site and experience
severe paralysis of the upper and lower limbs. AIS-A patients have lost all motor and sensory function below their injury site, while
AIS-B patients have lost all motor function but may retain some minimal sensory function below their injury site. OPC1 was administered
21 to 42 days post-injury. Patients continue to be followed by neurological exams and imaging procedures to assess the safety and activity
of the product. Enrollment consisted of five cohorts:
Cohort Injury Type; OPC1 Dose # of Patients
Cohort 1 AIS-A; 2 million OPC1 cells (low dose for safety evaluation) 3
Cohort 2 AIS-A; 10 million OPC1 cells 6
Cohort 3 AIS-A; 20 million OPC1 cells* 6
Cohort 4 AIS-B; 10 million OPC1 cells 6
Cohort 5 AIS-B; 20 million OPC1 cells* 4
*
One patient from Cohort 3 and one patient from Cohort 5 were administered 10 million cells.
In
January 2019, top-line 12-month data from the SCiStar trial were announced by Asterias, which included the following key findings:
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In
November 2019, we provided an update on the SCiStar trial that highlighted, among other things:
In
November 2020, the formal clinical study report (CSR) for the SCiStar study with the above supporting data was submitted to the FDA.
The
FDA designated OPC1 as a Regenerative Medicine Advanced Therapy (“RMAT”), for the treatment of subacute SCI. RMAT is an accelerated
development pathway and includes the ability for increased interfacing with the FDA during clinical development, and granted OPC1 Orphan
Drug Designation, providing a pathway to possible market exclusivity.
In
2019, we transferred all cGMP manufacturing processes, including the establishment of cell banks and the OPC1 process development and
manufacturing for clinical studies, to our cell therapy manufacturing facility in Jerusalem, Israel. Improvements to the manufacturing
process were completed to include enhancements to the production process to ensure robust, controlled, reproducible and commercially
viable scale, and purity of OPC1. We also developed a thaw and inject formulation of OPC1 to facilitate logistics and handling at the
point of care with the elimination of the dose preparation at the clinical site. An information amendment describing the new process,
an improved analytical plan, and a proposed comparability plan was filed with the FDA. Throughout 2021, we manufactured clinical
batches based on the improved process in a thaw and inject formulation in preparation for a larger-scale, late-stage clinical trial.
In February 2021, we announced
an exclusive agreement with Neurgain Technologies, Inc. (“Neurgain”) to evaluate a novel delivery system for OPC1. Preliminary
assessment of prototypes revealed promising compatibility with OPC1 product while simplifying the surgical procedure by providing surgeons
with an instrument that is small, simple to use and would not require stopping the patient’s ventilator to perform the injection,
allowing far more flexibility for accurate delivery to the injury site. We continued to evaluate the Neurgain device throughout 2021
and intend to submit an IND amendment during the third quarter of 2022 for a human safety clinical study to validate the device
and which is intended to support use of the device in a late-stage clinical study to follow.
We
continue work to expand our partnerships with SCI advocacy and support organizations to support their mission to accelerate stem cell
treatments to patients with unmet medical needs and fast-track the development of the most promising stem cell technologies.
VAC
Platform
VAC
is our immuno-oncology platform using dendritic cells loaded with antigens for the treatment of cancer. Cancer afflicts millions worldwide
and is one of the largest unmet clinical needs with current treatment options providing limited efficacy and a wide range of debilitating
side effects. As the most potent type of antigen-presenting cell in the body, dendritic cells instruct our body’s immune system
to attack and eliminate harmful pathogens and unwanted cells, including cancer cells.
Specifically,
to provide a more effective and targeted treatment of non-small cell lung cancer, we are currently developing VAC2 as an allogeneic,
or non-patient specific, cancer vaccine candidate designed to stimulate patient immune responses to an antigen hTERT, which is commonly
expressed in cancerous cells but not in normal adult cells. VAC2 is produced by our pluripotent cell technology using a directed differentiation
method and is comprised of a population of mature dendritic cells to which the hTERT antigen was introduced. To target cancerous cells,
VAC2 is engineered to express the tumor-selective antigen telomerase, which is found in over 85% of all cancers. The tumor antigen is
loaded exogenously into the dendritic cells. The VAC1 autologous program, which preceded VAC2, serves as an effective and encouraging
proof of concept behind our approach to dendritic cell vaccines targeting telomerase, which is the backbone of the VAC2 program.
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Using
pluripotent cells as the starting material for VAC production adds several additional advantages to this therapeutic candidate. Compared
to technologies that rely on the use of a patient’s own blood, our pluripotent cell technology provides a scalable system for production
of a large number of vaccine doses in a single lot, lower manufacturing costs, greater product consistency, and more notably, off-the-shelf
availability to provide broader and immediate access to patients. In addition, we believe that as an allogeneic therapy, VAC has the
potential to stimulate a more robust immune response through an adjuvant effect resulting from the partial immune mismatch between the
VAC cells and patients receiving the therapy. We believe that VAC can be used as a platform technology that can be modified to carry
any antigen, including patient-specific tumor neo-antigens.
In
September 2014, Asterias initiated clinical development of VAC2 by entering into a Clinical Trial and Option Agreement (the “CRUK
Agreement”) with CRUK and Cancer Research Technology Limited (“CRT”), a wholly owned subsidiary of CRUK, under which
CRUK agreed to fund Phase 1 clinical development of VAC2 in NSCLC. CRUK was responsible, at its own cost, for manufacturing clinical
grade VAC2 and for carrying out the Phase 1 clinical trial of VAC2. Patient enrollment began in June 2018, and as of December
31, 2021 seven patients have now completed dosing in the initial aspect of the trial.
In
October 2020, we reported preliminary results of the ongoing Phase 1 clinical study of VAC 2 in non-small cell lung cancer. As reported,
VAC2 demonstrated remarkable potent induction of immune response in all patients dosed to date, with high levels of peripheral antigen-specific
immunogenicity observed at multiple time points. As well, VAC2 appeared to be well tolerated with no unexpected adverse events.
In
April 2021, Lineage entered into a worldwide license and development collaboration agreement with ITI. Lineage licensed to ITI
patents and materials for the development and commercialization of a novel cancer immunotherapy agent derived from the VAC platform utilizing
an antigen provided by ITI, for the treatment of GBM. Under the terms of this agreement, Lineage is entitled to upfront licensing fees
totaling $2.0 million paid over the first year, and up to $67.0 million in development and commercial milestones across multiple indications.
Lineage will also be eligible to receive royalties of up to 10% on net sales of future products.
We
completed the transfer of all cGMP manufacturing processes, including the establishment of cell banks and the VAC2 process development
and manufacturing for clinical studies, to our cell therapy manufacturing facility in Jerusalem, Israel.
Throughout
2021 and early into 2022, we focused on updating and optimizing the manufacturing process for VAC to ensure reliable supply for future
clinical studies and possible commercial development. An improved VAC manufacturing process will be the subject of a key interaction
with FDA in the future to introduce VAC in an IND. We also continue to evaluate additional opportunities for the introduction of new
VAC candidates based on internally identified or partnered tumor antigens to expand the VAC platform.
Collaboration
Agreements
To
accelerate the discovery and advancement of transplanting specific cell types into the body, we have entered into, and intend to seek
other opportunities to form collaborations with a diverse group of strategic partners. We have forged productive collaborations with
pharmaceutical and biotechnology companies, government agencies, academic laboratories, and research institutes with diverse area expertise
and resources in as effort to advance our discovery and development platforms.
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One key principle of our approach
to collaborations is to share rewards and risks of conducting large-scale clinical trials and commercializing a product, but also to
provide the broadest patient population the earliest access to our therapies. Significant on-going collaboration agreements include the
following:
Roche
Collaboration Agreement
On
December 17, 2021, Lineage and its subsidiary, Cell Cure Neurosciences Ltd. (“Cell Cure”) entered into a Collaboration and
License Agreement (the “Roche Agreement”) with Roche, pursuant to which Lineage granted to Roche exclusive worldwide rights
to develop and commercialize retinal pigment epithelium cell therapies, including its proprietary cell therapy known as OpRegen, for
the treatment of ocular disorders, including advanced dry AMD with GA.
Under
the terms of the Roche Agreement, Roche will assume responsibility for further clinical development and commercialization of OpRegen,
which currently is being evaluated in a Phase 1/2a open-label, dose escalation clinical safety and efficacy study in patients with advanced
dry AMD with GA. Lineage will be responsible for completing activities related to the ongoing clinical study, for which enrollment is
complete, and performing certain manufacturing and process development activities.
Roche
paid Lineage a $50.0 million upfront payment and Lineage is eligible to receive up to an additional $620.0 million in certain developmental,
regulatory and commercialization milestone payments. Lineage is also eligible for tiered double-digit percentage royalties on net sales
of OpRegen. All regulatory and commercial milestone payments, and royalty payments, are subject to the existence of certain intellectual
property rights that cover OpRegen at the time such payments would otherwise become due, and the royalties on net sales of OpRegen are
subject to financial offsets based on the existence of competing products.
The
OpRegen program has been supported in part with contributions made by Hadasit Medical Research Services and Development Ltd. (“Hadasit”),
the technology transfer company of Hadassah Medical Center, and the Israel Innovation Authority (the “IIA”), an independent
agency created to address the needs of global innovation ecosystems. A significant portion of early development on the OpRegen program
occurred at Cell Cure, which was established by the Hadassah Medical Center, where the intellectual property underlying the differentiation
and manufacture of RPE cells originated. In addition, significant monetary support for the OpRegen program was provided by the IIA through
a series of separate research grants, beginning in 2007. Each of these parties’ contributions began when the OpRegen program was
in its earliest stages of development. As a result, and subject to the terms of contracts among the applicable parties and applicable
law, Lineage is obligated to pay Hadasit and the IIA a portion of the upfront, milestone, and royalty payments which may be received
from Roche under the Agreement. Lineage is obligated to pay approximately 24.3% of the upfront payment and any future payments it receives
from Roche to the IIA, up to an aggregate cap on all payments to IIA, which currently stands at approximately $102.7 million.
In
addition, pursuant to that certain Second Amended and Restated License Agreement, dated June 15, 2017, between Cell Cure and Hadasit,
as amended (the “Hadasit License)”, and a certain letter agreement entered into on December 17, 2021, by and between Cell
Cure and Hadasit (the “Hadasit Letter Agreement”), Cell Cure is obligated to pay to Hadasit a maximum of 21.5% of the upfront
payment (subject to certain reductions) and any milestone payments, and up to 50% of all royalty payments (subject to a maximum payment
of 5% of net sales of products), Lineage receives from Roche. The Hadasit Letter Agreement generally terminates upon the termination
of the Roche Agreement.
Unless
earlier terminated by either party, the Roche Agreement will expire on a product-by-product and country-by-country basis upon the expiration
of all of Roche’s payment obligations under the Roche Agreement. Roche may terminate the Roche Agreement in its entirety, or on
a product-by-product or country-by-country basis, at any time with advance written notice. Either party may terminate the Roche Agreement
in its entirety with written notice for the other party’s material breach if such party fails to cure the breach. Either party
also may terminate the Roche Agreement in its entirety upon certain insolvency events involving the other party.
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In
January 2022, Lineage received the $50.0 million upfront payment from Roche. Lineage made a subsequent payment of $12.1 million to the
IIA, pursuant to Lineage’s obligations under the Innovation Law. Additionally, Lineage made a subsequent payment of $8.9
million to Hadasit, pursuant to Lineage’s obligations under the Hadasit License.
ITI
Collaboration Agreement
On
April 16, 2021, Lineage entered a worldwide license and development collaboration with ITI (the “ITI Agreement”). Lineage
is the sole and exclusive owner of the rights to the VAC platform and has licensed to ITI patents and materials for the development and
commercialization of novel cancer immunotherapy agent derived from this platform utilizing an antigen provided by ITI.
Under
terms of the ITI Agreement, Lineage is entitled to upfront licensing fees totaling $2.0 million paid over the first year, and up to $67.0