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, 2022
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 shares 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. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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, 2022, 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 $200.6
million.
The
number of common shares outstanding as of March 3, 2023 was 170,145,713.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the registrant’s definitive proxy statement relating to its 2023 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 7
Item 1A Risk Factors 32
Item 1B Unresolved Staff Comments 76
Item 2 Properties 76
Item 3 Legal Proceedings 76
Item 4 Mine Safety Disclosures 76
Part II.
Item 6 Reserved 77
Item 7A Quantitative and Qualitative Disclosures about Market Risk 88
Item 8 Financial Statements and Supplementary Data 89
Item 9A Controls and Procedures 128
Item 9B Other Information 129
Item 9C Disclosure Regarding Foreign Jurisdictions that Present Inspections 129
Part III.
Item 10 Directors, Executive Officers, and Corporate Governance 129
Item 11 Executive Compensation 129
Item 14 Principal Accountant Fees and Services 129
Part IV.
Item 15 Exhibits and Financial Statements Schedules 130
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PART
I
FORWARD-LOOKING
STATEMENTS
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. Forward-looking statements in this report include, but are not limited to, statements
about:
● our plans to research, develop and commercialize our product candidates;
● the potential of our cell therapy platform;
● the potential scope and value of our intellectual property rights; and
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Forward-looking
statements reflect our views and expectations as of the date of this report about future events and our future performance and condition,
and involve known and unknown risks, uncertainties and other factors that may cause our actual activities, performance, results or condition
to be materially different from those expressed or implied by the forward-looking statements. You should refer to “Item 1A. Risk
Factors” in Part I of this report for a discussion of important factors that may cause our actual activities, performance, results
and condition to differ materially from those expressed or implied by our forward-looking statements. As a result of a variety of factors,
including those discussed in Part I, Item 1A of this report, our forward-looking statements may prove to be inaccurate, and the inaccuracy
may be material. Accordingly, you should not place undue reliance on any forward-looking statement. We anticipate that subsequent events
and developments may cause our current views and expectations to change. However, while we may elect to update the forward-looking statements
in this report 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 after 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
performance, results and condition 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
otherwise stated or the context requires otherwise, references in this report to “Lineage,”, the “Company,” “our
company,” “we,” “us,” and “our” refer collectively to Lineage Cell Therapeutics, Inc. and its
consolidated subsidiaries.
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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 (the “SEC”)
before making investment decisions regarding our common shares.
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● We currently have no marketing and sales force or distribution capabilities.
● Our intellectual property may be insufficient to protect our products.
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ITEM 1. BUSINESS
Overview
Lineage
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 platform and associated development and manufacturing capabilities. From this platform, we
design, develop, manufacture, and test specialized human cells with anatomical and physiological functions similar to, or identical
to, cells found naturally in the human body. Cells which we manufacture are created by specific developmental biological
differentiation protocols that we apply to established, well-characterized, and self-renewing pluripotent cell lines. These cells
are transplanted into patients and are designed to (a) replace or support cells that are absent or dysfunctional due to degenerative
disease, aging, or traumatic injury, and (b) restore or augment functional activity in the affected person.
Our strategy is to efficiently
leverage our technology platform and our development, formulation, delivery, and manufacturing capabilities to advance our programs internally,
or in conjunction with strategic partners, to further enhance their value and probability of success. As one example, in December 2021
we entered into a Collaboration and License Agreement (the “Roche Agreement”) with F. Hoffmann-La Roche Ltd and Genentech,
Inc., a member of the Roche Group (collectively or individually, “Roche” or “Genentech”), wherein we granted to
Roche exclusive worldwide rights to develop and commercialize retinal pigment epithelium (“RPE”) cell therapies, including
our proprietary cell therapy program known as OpRegen®, for the treatment of ocular disorders, including geographic atrophy
(GA) secondary to age-related macular degeneration (AMD). Under the terms of the Roche Agreement, Lineage received a $50.0 million upfront
payment and is eligible to receive up to $620.0 million in certain developmental, regulatory, and commercialization milestone payments.
Lineage also is eligible to receive tiered double-digit percentage royalties on net sales of OpRegen in the U.S. and other major markets. See
Note 14 (Commitments and Contingencies) to our consolidated financial statements included elsewhere in this Report for discussion on the
Roche Agreement.
As
of December 31, 2022, we have five allogeneic, or “off-the-shelf,” cell therapy programs in development, of which three have
reached clinical testing:
Product
Candidates
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Other
Programs
We
have additional undisclosed product candidates being considered for development, which cover a range of therapeutic areas and unmet medical
needs. Generally, these product candidates are based on the same platform technology and employ a similar guided cell differentiation
and transplant approach as the product candidates detailed above, but in some cases may also include genetic modifications designed
to enhance efficacy and/or safety profiles.
In
addition to seeking to create value for shareholders by developing product candidates and advancing those candidates through
clinical development, we also may seek to create value from our large patent estate and additional related technologies and capabilities, through
partnering and/or strategic transactions.
2022
Development Highlights
We
achieved numerous strategic and operational accomplishments during 2022, including advancing our clinical programs 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 delivered to the body. Our biological therapies are derived from the differentiation of pluripotent stem cells from
established and self-renewing cell lines. We direct these pluripotent cells to become specific cell types, or combinations of cell types,
and use those differentiated cells as treatments to restore diseased or diminished functions, such as impaired vision, loss of movement,
sensation, and hearing, or to increase immune response to tumors or infectious agents.
To
support the furtherance of our product candidates, we aim to generate or have generated in vitro and in vivo data to support human testing
where such testing is warranted. In some cases, we may collaborate with strategic partners, external advisors, or consultants to support
the development of our cell therapy technology.
One
area of focus is our continued effort to support our partner, Genentech, with the production and testing of our lead product candidate,
OpRegen (RG6501), which currently is being evaluated in a 30-60 patient Phase 2a multicenter, open-label, single arm clinical study,
as well as in the follow-up portion of a 24-patient Phase 1/2a multicenter, open-label, clinical study, in patients with dry age-related
macular degeneration (dry AMD).
We
also aim to advance our clinical-stage product candidate, OPC1, for the treatment of spinal cord injury, into a clinical study to evaluate
the safety and performance of a novel cell delivery system to deliver oligodendrocyte progenitor cells to the spinal parenchyma.
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Our
clinical stage dendritic cell product candidate, VAC2, is the subject of a Phase 1 clinical trial conducted by our partner, Cancer Research
UK, which has completed enrollment of eight (8) patients with advanced non-small cell lung cancer and we anticipate receiving additional
data from that trial during this year.
Our
preclinical product candidates, ANP1 for hearing loss and our photoreceptor program, PNC1, to address various forms of blindness,
will continue to be evaluated in preclinical testing to determine the suitability of each program to advance into initial human
testing.
We
have identified, and we may seek to develop, additional product candidates based on our cell replacement approach. We may elect to conduct
these activities on our own or through various collaborative arrangements. Such additional product candidates could include gene edits,
which may provide enhanced functionality or offer more attractive safety or commercial profiles. We may utilize various types of pluripotent
cell lines as starting material for our product candidates. Presently, our process development and manufacturing activities, including our cGMP
production of clinical trial material, are predominantly conducted at our facility located in Jerusalem Israel, but such work
may be supplemented or complemented by our additional facility located in Carlsbad, California.
Cell
Therapy Technology Platform
We
believe we are a leader in pluripotent, cell-based asset development based on directed differentiation protocols of cellular lineages and
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, degenerative
conditions, or traumatic injury. We are currently in clinical development
for various pluripotent cell-derived product candidates such as RPE cells, oligodendrocyte progenitor cells, and dendritic cells and
preclinical development for auditory neurons and photoreceptor cells. In addition, we are considering the differentiation of pluripotent
cells into additional cell types that may have therapeutic benefits in other areas of unmet medical need.
Cellular
therapies are often aimed at regenerating or replacing affected cells or tissues and therefore may have more durable, broader, or
more suitable applicability than certain traditional pharmaceutical products which seek 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 to a specific anatomical
compartment, systemic side effects are usually well-tolerated. Lineage’s cell therapy approach resembles transplant medicine,
as it is focused on whether transplanted cells are retained or rejected by the body and whether the transplanted cells function as
expected.
A
key advantage of our approach is that it can provide us the opportunity to rapidly develop new programs without the extensive and
costly steps traditionally required to develop a small molecule agonist or antagonist. Whereas small molecule product development
typically requires selection and validation of a drug target, followed by screening millions of molecules (e.g., a
“library” of compounds) to identify hits, followed by chemical modification guided by 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 to be “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 challenging
step in developing a new cell therapy is the establishment of a controllable and reproducible differentiation protocol which can
create the quality of cells to support clinical testing and commercial supply, 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 pipeline expansion at a lower cost than traditional methods (Figure
1).
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Figure
1. Lineage’s Internal cGMP Facility Capabilities
In
addition to our corporate headquarters located in Carlsbad, California, we recently opened a new research and development (R&D) facility
also located in Carlsbad, expanding the Company’s R&D capabilities in the U.S. and supporting the development of current
and future allogeneic cell transplant programs. We also 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 (Figure 2).
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Figure
2. Novel Clinical Cell Therapy Pipeline
OpRegen®
OpRegen
is a retinal pigment epithelial cell therapy in Phase 2a development for the treatment of geographic atrophy secondary to age-related
macular degeneration. Following subretinal delivery, OpRegen has the potential to counteract RPE cell loss in areas of GA lesions by
supporting retinal structure and function. OpRegen is being developed under a worldwide collaboration between Lineage, Roche and Genentech,
a member of the Roche Group. See Note 14 (Commitments and Contingencies) to our consolidated financial statements included elsewhere
in this Report for discussion on the Roche Agreement.
OpRegen
has been granted Fast Track Designation from the U.S. FDA, which includes an expedited regulatory path with the ability for increased
interfacing with the FDA during the clinical development process.
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.
It is a leading cause of vision loss in people over the age of 65 in the developed world. According to a 2022 report in JAMA Ophthalmology,
18.34 million individuals in the U.S. 40 years and older (11.64%) were living with early-stage AMD and 1.49 million (0.94%) were living
with late-stage AMD in 2019. As the area of atrophy begins to include the fovea (the center of the macula), patients may lose their central
vision, making facial recognition, reading, and driving difficult or impossible, and may ultimately become legally blind. The exact cause
of GA secondary to AMD is unknown, but is thought to result from multiple factors, such as genetics, age, smoking history, and environmental
effects. There are two clinical presentations of AMD, the dry form, and the wet, or neovascular form (growth of abnormal new blood vessels).
Dry AMD typically advances slowly toward GA as RPE cells and photoreceptors become dysfunctional and deteriorate over time. RPE
cells support and nourish the retina by metabolizing waste by-products and producing a number of components essential for photoreceptor
health and function. If the metabolic waste products accumulate, lesions known as drusen may result. Approximately 85-90% of AMD patients
suffer from the dry form of AMD, for which there is only one FDA approved therapeutic option at this time. Additionally, 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. 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 in Figures 3 and 4
show a representation of the process of drusen formation and the goal of cell replacement therapy.
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We
believe one of the most promising approaches to treat GA secondary to dry AMD is to replace the layer of damaged RPE cells with new,
healthy, and functional RPE cells manufactured from a well-characterized, allogeneic cell line, transplanted to the subretinal space
around the atrophic area (GA). 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.
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 may be administered every
several years. This approach differs from other investigational agents, as well as for the single approved drug for treatment of GA secondary
to AMD, pegcetacoplan injection (SYFOVRE®), and approved agents currently marketed for wet AMD, such as ranibizumab (Lucentis®)
and aflibercept (Eylea®). All of these approaches require repeated, frequent (monthly or every-other-month) intravitreal
injections into the eye.
In a Phase 1/2a clinical trial,
OpRegen has demonstrated the potential to slow, stop or reverse disease progression in geographic atrophy secondary to AMD. This is an
open-label, single-arm, multi-center, dose-escalation trial evaluating a single administration of OpRegen delivered subretinally in patients
with bilateral GA. Patient enrollment completed in November 2020, with twenty-four patients recruited into four cohorts. The first three cohorts
enrolled only legally blind patients with a best corrected visual acuity (BCVA) of 20/200 or worse. The fourth cohort enrolled 12 patients
with impaired vision (BCVA from 20/65 to 20/250 with smaller mean areas of GA). Cohort 4 also included patients treated with a new “thaw-and-inject”
formulation of OpRegen, which could be shipped directly to sites and used immediately upon thawing. The primary objective of the study
was to evaluate the safety and tolerability of OpRegen as assessed by the incidence and frequency of treatment-emergent adverse events.
Secondary objectives evaluated the preliminary activity of OpRegen treatment by assessing the changes in ophthalmological parameters measured
by various methods of primary clinical relevance. Long-term follow-up of patients in this study is currently ongoing.
Results from the primary endpoint,
the safety and tolerability at one year post-OpRegen transplant, were presented at the 2022 Association for Research in Vision and Ophthalmology
Annual Meeting (ARVO 2022), and suggest that OpRegen RPE cells are generally well-tolerated with an acceptable safety profile. Importantly,
no unexpected ocular adverse events (AEs) were observed and those events that were observed were considered expected based on the surgical
procedures involved in OpRegen administration, such as vitrectomy. Most AEs reported (cohorts 1-3, 87%; cohort 4, 93%) were mild in severity.
Findings on clinical examination
by different imaging modalities have shown positive clinical benefits in some patients as evidenced by retinal structure improvement and
decreases in drusen, 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 note, five subjects
from cohort 4 where the OpRegen suspension was delivered to most or all of the GA area, including the fovea, have shown evidence of outer
retinal structural improvement (tissue restoration). This was accompanied by a reduction in the overall 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 most cohort 4 treated patients (average gain of 7.6 letters
read), but particularly the five patients with better surgical coverage (average 12.8 letter gain). Furthermore, differences in visual
acuity between treated and untreated eyes remained statistically significant across Cohort 4 patients at 15 months post-treatment. These
unprecedented findings support 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.
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In
December 2021, we entered into the Roche Agreement for the development and commercialization of OpRegen. See “—Collaborations—Roche
Collaboration Agreement,” below.
In
November 2022, we announced our partner Genentech, a member of the Roche group has launched a Phase 2a, multicenter, open-label, single
arm clinical study of RG6501 (OpRegen), a retinal pigment epithelial cell therapy. The study is intended to optimize subretinal surgical
delivery and evaluate the safety and activity of OpRegen in approximately 30, and up to 60, patients with geographic atrophy (GA) secondary
to age-related macular degeneration. The primary objectives of the study are to evaluate (i) the proportion of patients with subretinal
surgical delivery of OpRegen to target regions under the retina, and (ii) to evaluate the safety of subretinal surgical delivery of OpRegen
as measured by the incidence and severity of procedure-related adverse events at 3 months following surgery. A key secondary objective
is to evaluate the proportion of patients with qualitative improvement in retinal structure, as determined by Optical Coherence Tomography
(SD-OCT) imaging, within 3 months following surgery. RG6501 (OpRegen) is currently being developed under an exclusive worldwide collaboration
between Lineage, Roche and Genentech.
OPC1
OPC1
is an oligodendrocyte progenitor cell therapy in Phase 1/2a development for the treatment of acute 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/or 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. Approaches
to treat this complex injury may include multiple mechanisms of action, such as 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 promising 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 the conduction of electrical impulses throughout the central nervous
system (“CNS”), as shown in Figure 5.
Figure
5. Oligodendrocytes are the myelinating cells of the CNS and are critical for nerve signal conduction
OPC1
is 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 (Figure 6). 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.
Figure
6. Suppression of spinal cavitation in a rat contusion model
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The
development of OPC1 has been supported by a $14.3 million clinical development grant from CIRM. We intend
to apply for additional grants from CIRM for the program’s continued development. See “—Grants from Government Entities,”
below.
Before
our acquisition of Asterias Biotherapeutics, Inc. (“Asterias”), Asterias was testing OPC1 in two clinical trials: a five-patient
Phase 1 safety trial in acute thoracic SCI and a 25-patient Phase 1/2a dose escalation trial in subacute cervical SCI, called the SCiStar
trial. The SCiStar trial was an open-label, single-arm trial that tested 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. OPC1 was administered 21 to 42 days
post-injury. Patients were followed by neurological exams and imaging procedures to assess the safety and activity of the product. Key
findings for both the thoracic and cervical studies are shown in Figure 7.
Figure
7. OPC1 Thoracic & Cervical Clinical Trials Overview
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. The FDA has also 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 performed to create enhancements to the production process and scale and to achieve greater 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. 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 for flexibility with accurate delivery to the injury site. We continued to evaluate the Neurgain device
throughout 2021 and 2022. We have submitted an RMAT package to the FDA to support the use of a new delivery device, along with a protocol
synopsis for a small safety study in both subacute and chronic patients. We intend to submit an IND amendment during 2023 for a human
safety clinical study to validate the device (DOSED – Delivery of Oligodendrocyte Progenitor Cells for Spinal
Cord Injury: Evaluation of a Novel Device) and an additional submission to support the use of the device in a late-stage
clinical study to follow.
We
are actively working both on expanding our existing and establishing new collaborative partnerships with SCI patient engagement and advocacy
organizations, with the overarching goals of enhancing awareness of SCI and elevating the patient’s voice in the treatment development
process.
VAC
Platform
VAC
is our immuno-oncology platform using dendritic cells loaded with antigens for the treatment of cancer. Cancer afflicts millions worldwide
and represents one of the largest unmet clinical needs with current treatment options providing limited efficacy and a wide range of
potentially debilitating side effects. As the most potent type of antigen-presenting cell in the body, dendritic cells instruct the human body’s
immune system to attack and eliminate harmful pathogens and unwanted cells, including cancer cells.
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To
provide a more targeted treatment for non-small cell lung cancer (NSCLC), we are currently developing VAC2 as an allogeneic, or non-patient
specific, cancer vaccine designed to stimulate patient immune responses to an antigen, human telomerase reverse transcriptase (hTERT),
which is commonly expressed in cancerous cells but is not usually found 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 via an mRNA construct which is loaded into the dendritic cell via electroporation. The VAC1 autologous program, which
preceded VAC2 but relied on the same antigen, served as proof of concept behind our approach to utilize dendritic cell vaccines targeting
telomerase to treat cancer.
Using
pluripotent cells as the starting material for VAC production offers certain advantages. Compared to technologies that rely on the use
of a patient’s own blood, our pluripotent cell technology provides a path to a more scalable system for the production of a large
number of vaccine doses, lower manufacturing costs, greater product consistency, and off-the-shelf availability. 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 a diverse number or type of 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 Cancer Research UK (“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. In April 2022, we announced that CRUK
had completed patient enrollment in the ongoing Phase 1 clinical trial of VAC2 for the treatment of NSCLC. All eight patients completed
dosing in the initial aspect of the trial and CRUK is currently conducting analyses of various samples collected per protocol.
As
previously reported, VAC2 demonstrated potent and specific induction of immune response in all patients dosed and analyzed to date, with
high levels of peripheral antigen-specific immunogenicity observed at multiple time points. Importantly, VAC2 appeared to be well tolerated
with no unexpected adverse events (AEs) and no dose-limiting toxicity, serious adverse events (SAEs) or AEs.
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.
In
April 2021, Lineage entered into a worldwide license and development collaboration agreement with ITI. See “—Collaborations—ITI
Collaboration Agreement,” below.
Throughout
2022, we focused on improving the manufacturing process for VAC to provide a reliable supply for potential future clinical studies and
commercial development. We submitted a pre-IND package to the FDA in the third quarter of 2022 and have received important feedback that
will help guide any future full IND submission(s). 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.
Auditory
Neurons
The Auditory Neurons program was
established in 2022 with the goal of advancing auditory neuron transplant therapy as a treatment option for hearing loss conditions. The
initial focus of this program is on the treatment of auditory neuropathy spectrum disorders (ANSD), a group of conditions characterized
by the loss of auditory neuron function where the sound is not transmitted properly from the cochlea (inner ear) to the brain. Based on
our proprietary technology platform, we have developed a unique differentiation process for generating auditory neurons (ANP1), which
are planned to undergo preclinical testing this year to assess their safety and delivery system. In February 2023, we reported that preclinical
testing of ANP1 had begun through a collaboration with the University of Michigan and Yehoash Raphael, Ph.D., The R. Jamison and Betty
Williams Professor of Otolaryngology, Department of Otolaryngology-Head and Neck Surgery and Lab Director at the University of Michigan
Kresge Hearing Research Institute.
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Photoreceptors
The
Photoreceptor program is developing the process of directing the differentiation of human pluripotent cells into clinical-grade
transplantable photoreceptor precursors/cells (PRCs) and to show their further differentiation, integration, and function after
transplantation into the subretinal space of animal models of photoreceptor degeneration. Photoreceptor degeneration is the hallmark
of a variety of retinal diseases such as retinitis pigmentosa (RP). Currently, the only approved treatments are gene therapies which
treat specific genetic defects that lead to RP. Our PNC1 program is aimed to replace damaged photoreceptors regardless of the origin
of degeneration. We hope to be able to present top-line preclinical data once the appropriate intellectual property submissions have
been made and as data become available.
Collaborations
To
accelerate the discovery and advancement of transplanting specific cell types into the body, we have entered into, and intend to seek
additional opportunities to form collaborations with a diverse group of strategic partners. We have entered collaborations with pharmaceutical
and biotechnology companies, government agencies, academic laboratories, and research institutes with resources and expertise in diverse
areas in an effort to advance our discovery and development platforms and will continue to evaluate such collaborations.
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 with the earliest access to our therapies.
Roche
Collaboration Agreement
On
December 17, 2021, Lineage entered into the Roche Agreement,
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,
Lineage will be responsible for completing activities related to the ongoing clinical study Phase 1/2a open-label, dose-escalation clinical
safety and efficacy study in patients with advanced dry AMD with GA, for which enrollment is complete, and performing certain manufacturing
and process development activities.
Roche
paid Lineage a $50.0 million upfront payment (which was received in January 2022) 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 milestone payments, and royalty payments, due under the Roche Agreement 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.
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 advanced 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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Lineage
is obligated to pay to the IIA (as defined below) approximately 24.3% of the upfront payment and of any future payments Lineage
receives under the Roche Agreement, up to an aggregate cap on all payments to IIA, such cap growing over time via interest accrual
until paid in full, which currently stands at approximately $91.2 million. In addition, pursuant to the Second Amended and Restated
License Agreement, dated June 15, 2017, between our foreign subsidiary located in Jerusalem, Israel, Cell Cure Neurosciences Ltd.
(“Cell Cure”), and Hadasit Medical Research and Development Ltd. (“Hadasit”), as amended, and a letter
agreement entered into between Cell Cure and Hadasit on December 17, 2021, Cell Cure is obligated to pay to Hadasit (i) a maximum of
21.5% of the upfront payment (subject to certain reductions) and of any milestone payments Lineage receives from Roche under the
Roche Agreement, and (ii) up to 50% of all royalty payments (subject to a maximum payment of 5% of net sales of products) Lineage
receives from Roche under the Roche Agreement. In accordance with the foregoing obligations, from the $50.0 million upfront payment
Lineage received from Roche in January 2022, Lineage paid $12.1 million to the IIA and $8.9 million to Hadasit. See
“—Grants from Government Entities,” below, and Note 14 (Commitments and Contingencies) to our consolidated
financial statements included in this report for additional information related to our obligations to the IIA and
Hadasit.
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 a novel cancer immunotherapy agent derived from this platform utilizing an antigen provided by ITI.
Under
terms of the ITI Agreement, Lineage is entitled to initial fees totaling up to $2.0 million, which we have received $1.0 million,
and up to an additional $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. ITI has received a research and development grade of the VAC-CMV product
and is evaluating its next steps.
Grants
from Government Entities
Grants
from the Israeli Innovation Authority
Under
the Israeli Encouragement of Research, Development and Industrial Initiative Technology Law, 5744-1984, as amended, and related regulations
(collectively, the “Innovation Law”), research and development programs which meet specified criteria and are approved by
the Israel Innovation Authority (the “IIA”) are eligible for grants of up to 50% of the project’s expenditure, as determined
by the research committee, in exchange for the payment of royalties from the revenues generated from the sale of product candidates and
related services developed, in whole or in part pursuant to, or as a result of, a research and development program funded by the IIA.
The royalties are generally at a range of 3.0% to 5.0% of revenues until the entire IIA grant is repaid, together with an annual interest
generally tied to an interest rate index.
Under
the Innovation Law, the manufacture of product candidates developed with government grants is required to be performed in Israel. The
transfer of manufacturing activity outside Israel may be subject to the prior approval of the IIA, and if approved, may increase the
royalties payable to the IIA, in certain cases substantially. The amount of the increase in the royalties payable depends on the percentage
of manufacturing activity that occurs outside Israel.
The
know-how developed within the framework of the Innovation Law plan may not be transferred to third parties outside Israel without the
prior approval of a governmental committee chartered under the Innovation Law. The IIA approval to transfer know-how created, in whole
or in part, in connection with an IIA-funded project to a third party outside Israel where the transferring company remains an operating
Israeli entity is subject to payment of a redemption fee to the IIA calculated according to a formula provided under the Innovation Law