Welcome to the Lineage Cell Therapeutics Fourth Quarter and Full Year 2022 Conference Call. At this time, all participants are in a listen-only mode. An audio webcast of this call is available on the Investors section of Lineage 's website at www.Lineage cell.com. This call is subject to copyright and is property of Lineage . And recordings, reproductions, or transmissions of this call without the express written consent of Lineage are strictly prohibited. As a reminder, today's call is being recorded. I would now like to introduce you to the host for today's call, Ioana Hone, Head of Investor Relations at Lineage . Ms. Hone, please go ahead.

Thanks, Mandeep. Good afternoon and thank you for joining us. A press release reporting our fourth quarter and full year 2022 financial results was issued earlier today, March 9, 2023, and can be found on the Investors section of our website. Please note that today's remarks and responses to your questions reflect management's views as of today only, and will contain forward-looking statements within the meaning of federal securities laws. Statements made during this discussion that are not statements of historical fact should be considered forward-looking statements, which are subject to significant risks and uncertainties. The company's actual results or performance may differ materially from the expectations indicated by such forward-looking statements. For a discussion of certain factors that could cause the company's results or performance to differ, we refer you to the forward-looking statement sections in today's press release and in the company's SEC filings, including its most recent annual report on Form 10-K. We caution you not to place undue reliance on any forward-looking statements which speak only as of today and are qualified by the cautionary statements and risk factors described in our SEC filings. With us today are Brian Culley, our Chief Executive Officer, Jill Howe, our Chief Financial Officer and Gary Hogge, our Senior Vice President of Clinical and Medical Affairs. With that, I'd like to turn the call over to Brian.

Thanks, Ioana, and good afternoon, everyone. Welcome to our full year 2022 call. We appreciate you joining us today. 2022 was another challenging year for biotech companies, but I think it was an exceptional one for Lineage . We worked successfully alongside Roche and Genentech to prepare OpRegen for its next clinical trial and that trial is now open and enrolling new patients. With the positive tailwinds from the OpRegen program in place, we made bold but financially responsible moves to expand our pipeline, adding a photoreceptor program which capitalizes on our experience and success in ophthalmology and by adding an auditory neuron program, which is the first time we've shown that we can not only improve upon existing assets but also create them from scratch in our R&D labs, vastly reducing any third party financial obligations from these in-house product candidates. 2022 also marked a year of important and successful clinic clinical and regulatory execution for the Lineage team as we advanced our clinical programs along the respective developmental pathways. I realize this is a 2022 recap call, but I know a lot of investor attention is presently focused on the dry AMD landscape, so I thought that would be a better way to use my opening remarks. Last month, FDA approved a complement inhibitor to treat dry AMD and with this approval the FDA has set a precedent that anatomical change in the form of photoreceptor preservation is an approvable endpoint in this condition. We believe this is an enormous regulatory decision for us because the data we have collected to date with OpRegen and its ability to improve outer retinal structure and either halt or even reverse the progression of GA is far greater than what has been demonstrated by either of the leading complement inhibitors. Critics…

Thanks, Brian, and good afternoon everyone. Beginning with our balance sheet, I believe we continue to be efficient with our spending and our well capitalized to conduct the near term activities, which Brian just outlined. Our reported cash, cash equivalent and marketable securities as of December 31, 2022 totaled $57.9 million, which is expected to support our planned operations into Q3 of '24. Please note this does not account for any of the Roche Genentech milestones which we may receive, nor for any business development or grant revenues, which we may receive during this same period. Let me start with an overview of our fourth quarter 2022 operating results. Our revenue is generated primarily from licensing fees, collaboration, revenues, royalties, and research grants. Total revenues for the fourth quarter were approximately $1.9 million, a net increase of $0.7 million as compared to $1.2 million for the same period in 2021, the increases driven by the recognition of deferred collaboration revenues in connection with the Roche agreement, which we entered into in 2021. Operating expenses are comprised of research and development expenses and general and administrative expenses. Total operating expense for the fourth quarter were $8.5 million, a decrease of $20.7 million as compared to $29.2 million for the same period in 2021. The overall decrease was almost entirely driven by a decrease in R&D expense due to the Roche collaboration. R&D expenses for the fourth quarter were $4.1 million, a decrease of $20.7 million as compared to $24.8 million for the same period in 2021. The decrease was substantially driven by the prior year $21 million accrual for financial obligations payable to the IIA and had a seat in connection with the $50 million upfront payment received in early 2022 under the Roche collaboration. This decrease was partially offset by…

Great, thanks Jill. Circling back to the beginning of this call, I continue to think that Lineage is doing quite well in an otherwise strained environment for the biotech industry. We have been hitting our milestones and advancing our programs in a responsible and positive way, and I expect Jill and I will continue to apply the same financial discipline to our programs this coming year. Our approach helped us land a valuable collaboration with Roche, and I believe it will continue to be an important attribute during 2023 and further out. As our programs demonstrate success in the clinic or in preclinical testing and potentially attract additional non-dilutive support, I believe we'll have opportunities to accelerate our work across a number of parallel paths. Broadly speaking, a few things we'll be working on this year in which you may want to watch for updates on include additional data from the completed Phase 1/2a trial of OpRegen, which we expect next month, additional regulatory progress with OPC1, which we will conduct during the second quarter of this year, and which will support OPC1 returning to clinical testing and we'll be doing our part to support the manufacturing. And Phase 1/2a study of OpRegen being conducted by Roche Genentech, the results of which we believe could be a seminal event not only for Lineage , but also for the entire GA field. In addition, we've planted a few seeds to prepare for the future, including our new preclinical programs and the internal option deal, which gives us affordable access to new technology, which we can combine with our existing capabilities in the furtherance of our goal of using the transplant of Whole Cells to change the course of disease in new and exciting ways. And with that Mandeep, we are ready to respond to any analyst questions that there may be.

[Operator instructions] Our first question comes from the line of Jack Allen from Baird. Please proceed.

Great. Thank you so much and congratulations with the team on all the progress made over the course of the quarter. Brian, you did a great job laying out some of your thoughts around the, the recent news in geographic atrophy, but I was wondering if you could dive a little bit more deeply into some of the conversations you'd have with your partner Roche on the heels of this announcement. Any sense as to how, how soon we could see data? I know you did make a comment as, as it really said earlier, but I'd love to hear any more feedback on the ground there. And then I have one quick follow up as we'll?

Yeah, thanks, Jack for the question. The shortest possible answer is no, nothing to add. The, the biggest challenge I think is the enrollment range. Being 30 to 60 makes it really difficult to say when, where and how the public disclosure of data will occur, whether it'll come in pieces or, major medical meeting and so forth. But I do suspect that as we get closer to that event or those events that we might be in an opportunity to provide more clarity and expectation around it.

Great. Great. And then my other question a little bit out of the box here. I'm not sure if you've seen the news coming from some of the medical suppliers here, but it's been hard to get your hands on non-human primates, or at least it, it could become more pressing to get your hands on non-human primates given some of the updates from some of the players in the space. I was wondering if you had any comment as it relates to your preclinical activities and the use of these valuable research assets and, and how you're factoring that into timelines there?

It's a, it's a great question. Part of the answer is that we do not do any non-human primate testing, so we haven't we're not susceptible to a supply challenge, but by chance, I was looking early this morning at a similar company's slide deck and noticed that they were reporting a lot of data in NHP and it, and it occurred to me, I wonder if that is an issue for them. It's not for us. I don't know how others are managing it, but we have, ever since Covid began, we have worked to ensure that our supply chains are in good order and we benefit by being a, a multinational company in that way, but specifically to NHP we don't have any, any clinical act excuse me, any preclinical activity utilizing that, that particular species.

Our next question comes from a line of Mayank Mamtani from B Riley Securities. Please proceed.

Hey, this is this is William Wood on for Mayank Mamtani today. Congratulations, Brian, to you and the team. Really excited to see all the progress you've been making and looking forward to the upcoming work. Couple questions here from us. We're excited obviously to see that you've got the upcoming opportunity to ARVO in April. Would be, I know you've touched on this already a little bit, but it'd be great to hear what we might be able to see as far as new or incremental maybe surrounding or, or remind us how your OPC anatomical results tend to correlate with visual acuity given or pretty long follow up that you've had now off treatment. And then also to clarify have you or your partner Roche seen the value of, of cutting BCVA data in terms of a, of a rate of vision loss by greater than 15 letters per three lines, any information?

I appreciate the questions, William. I'm going to hand off to Gary to speak to those. Thank you.

Yeah, so obviously there's a lot of news and buzz around the BCVA and cutting in looking at three line loss over time. The good thing is, is that we, we examined it closely throughout and, and, and the cohort four, which is the applicable population that is involved in those studies. For the MO we haven't had a three line loss in any part of cohort four patients, so that, that's certainly something to be intrigued about. Smaller numbers we know. But it looks like, we've maintained that those visual improvements that we observed over time and reported out and the data coming up on at ARVO will focus on looking at different analysis of the OPC assessment and how quickly those changes occur and how they tie into the visual acuity improvements, particularly in those patients that showed signs of auto retinal structural improvement. And so we're very excited to have those data again presented by an entirely independent analysis.

Appreciate that extra color there. And then also, just to clarify, do you know the timing of the release of ARVO abstracts? And then whether you expect that the abstract presenter may comment on the Phase2 enrollment status since there's a meaningful overlap in trial sites there?

Yeah, so the, per the ARVO website there will be available sometime in early March so perhaps the next week or two with regards to Dr. Benin and his ability to comment on the future or the ongoing study that's conducted by Genentech Roche, I don't think he'll be able to offer any additional comments at this time.

And William, I'm going to add here. I don't think I'm putting Roche on the spot, but as a general matter, when we were running the Phase 1/2a, these were the first 24 people on the planet to ever receive this experimental therapy. Now that there is a basket of safety and efficacy data available, it makes me think that the conversation between a prospective patient on the clinical trial and their doctor might go a little differently because they could actually show some results that are available in the, in the public domain. So I am hopeful, although I have no specific information because the trial is just underway, but I'm hopeful that enrollment will go faster than it was when we were running it.

Got it. That's really helpful. And then one last one, switching gears. In regards to your a and p one, there's obviously been a number of players in the hearing space, a lot of them incorporating intercom administration. I'm just curious what your plans are on delivering the sales into the inner ear. I know you've mentioned that it could be a good combo for cochlear implants, but I don't think you're going to be limiting to that. Maybe just walk us through your plans there?

Yeah, I, so I think what the right way for me to describe is that we have a, a lot of good ideas, but they need to be tested. And so we're not today in a position to say a whole lot more about an intended patient population or exactly what the right clinical application will be. There are many causes of hearing loss. We're going to follow the data that's collected, and right now we're just at the very earliest stages of that process. So it's, it's difficult, but I think as we reject some hypotheses, reject some options and begin to narrow down what we think is the best approach, that will be something we'll look forward to, to sharing when we are able to do so and feel confident in that information.

Our next question comes from the line of Kristen Kluska from Cantor Fitzgerald. Please proceed.

Hi, good afternoon. Thanks for taking my questions. So we've talked a lot about how a GA approval in general could help to better educate the market, but perhaps I'll ask you the question from a different direction. How do you think that the emergence of these commercial complement inhibitors can help frame eligible patients by the time OpRegen potentially reaches the market? So I know you've shown that if patients are perhaps too far along towards legal blind status, they may not be eligible. So do you think that more patients, should they be compliant on these complement inhibitors, could become eligible given there's at least some slowing of the progression?

I love it. We have a market leader that is going to condition a market to accept a new therapy in an environment where there are no approved therapies today. And I think there are a couple places where that can be beneficial. There are technologies out there that are helping people to identify this disease earlier. So I think we're going to see an increase in the prevalence through identification of patients. And I think most companies with these therapies in development are thinking that earlier patients are, are sort of more suited for therapy. And I also think that the aging population is going to increase the incidence of the condition. So if you, if you imagine that when my dad was first diagnosed with dry AMD, that he would've been told, we're sorry, there's nothing we can do for you, Mr. Culley. But now he would be brought in, he would have a specific caregiver, presumably he would be on therapy, and now he's a little bit of a of a captured population. So if you come along with the second, third, or fourth treatment in, in a, a disease setting you benefit from the precedent and the awareness of an educated patient population. So I would not feel so positively about it if we had a me too therapy, but because our therapy is so wildly different and, and I then I'm hopeful we'll continue to look so different in terms of its product profile. I think that it's actually a big positive for us.

Okay. Thank you. And given the, the data here and of course the validation from Genentech Roche, I'm, I'm wondering how you're thinking about this pathway with some of your earlier candidates as you start to do some work here. So do you like potentially establishing some proof of concept data in-house before potentially seeking partnerships similar to what you saw here? And then can you detail for us some of the preclinical work that you're intending to conduct in your term?

So with respect to the strategic component of your question, which has to do with, with partnering, I think the answer is that it, it very much depends on the cost of development that you're facing. Your probability of success, the macroeconomic business environment you're in, your cost of capital. All of these factors are sort of fun decisions that companies with multiple assets get to make. So we don't have [indiscernible] a plan to either partner or not partner any of our assets. We look at them as assets that have optionality and flexibility. We just try and make them as valuable as possible so that if we do elect to enter into a partnership that we can find that partnership to be financially rewarding and strategically valuable. And that means partnering with people who have high capabilities and are going to increase leadership to be financially rewarding and strategically valuable. And that means partnering with people who have high capabilities and are going to increase the probability of success. I do think from an approach that the success that we've had so far, and that I believe will continue with the OpRegen program does create a certain amount of a halo effect on other assets. Clearly, we are working with different cell types, and so there's not a perfect apples to apples comparison. But conceptually, the notion that cells are capable of doing things that are beyond the reach of small molecules is a notion that we think is being borne out in the setting of dry AMD and we believe will be applicable in other settings. And I could refer to this morning, there was a trial that was unsuccessful in the setting of spinal cord injury utilizing a particular scaffold. There were no biologics involved. It was just pure scaffold. Unfortunately for patients that was not a study that was successful. But again, to me, that is another reminder in the field that sometimes -- sometimes the standard or expected approaches just aren't quite strong enough when the condition is very severe, as in the case of cells that are dying off, it goes far beyond a single pathway and getting to the level of the entire cell or the cell has been destroyed through after an accident or, or some sort of trauma, such as the case of spinal cord injury.

Our next question comes from the line of Joe Pantginis from HC Wainwright. Please proceed.

Hey everybody, good afternoon. Thanks for taking the question. So Brian, I wanted to focus on your two leading regulatory discussions and I'll start with VAC2, if you don't mind. So obviously you talked about the pre-IND discussions right now are surrounding production processes as well as characterization of the cells. So I was curious, how do those processes differ, if any, from what CRUK is doing?

Thank you Joe for that question, I would say that the, the similarities in the process they, they exist, but one of the reasons that we exercise the option is that we saw an opportunity to improve upon those processes. I want to be really clear for everyone listening that each cell type that we try to manufacture demands and requires its own unique set of, of steps ,so we do not have a one size fits all differentiation secret sauce that we apply to different cell types. It, it really is a laborious effort to figure out how to get these cells to behave in the way that we want so that we're only manufacturing the cells, which we desire to be used in the clinic. So in the setting of the dcs, which we manufacture, we've made great strides in improving the characterization of those cells. And some of that data and information has been provided to FDA so that they can see what we would plan to use going forward. So there definitely are some differences relative to what we what we were making or what, excuse me, what was being used by CRUK. But at the end of the day, there are release criteria and properties that are consistent across the material. So it's not like it's a different cell type that would necessarily lead to large differences in clinical behavior. We really have been satisfied with the clinical performance. We're, we're looking more to how we can optimize it, how can we scale and get better production costs and make it more affordable and allogeneic off the shelf option for patients, and how can we increase the, the potency, perhaps lower the dose. These are all things that we are working on to see if we can improve a product profile in what is otherwise, very much a challenging clinical setting.

That's really helpful, thank you. And then just switching over to OPC1was hoping to get even some broad strokes at the minimum. the types of questions that have been going back and forth between you and the FDA and how that's translated into what your wish-list looks like going into the type B meeting?

That's a great question. I would say that the vast majority of the content in the materials that we've been sharing with FDA and the questions they've been coming back with have to do with the new device. This is a device that has not been used before for this purpose. And so they have a lot of questions about how it will be used and how it will perform. What provides us with some comfort and confidence is that the components that actually go into or touch the patient are the same. The, the cells that are being used are the same as before. The needle is the same type of needle. Everything that's different with the nerve gain device is actually external to the patient. So I think from a performance perspective, I feel confident that we will have a, a good outcome from this study. But nevertheless, the FDA is going to be prudent and want to understand, how, how do all these manipulators work? How do they attach, what happens in a fail situation? What's the worst case scenario? Very standard types of information seeking questions that we've been getting.

And I'll ask Gary if there's anything that he, that comes to mind that he'd like to add to that question, Joe? Yeah, just, just add to that, there's nothing unexpected, but many of these are first time in human use when the assembled together is an entire component. And so they, they want demonstration of if you pass the cell through, is it still viable and potent once it goes through the needle and syringe, are the components are the, what's the pH of the components, what's the software look like? They're all questions that we've got to address. Many of them involve very complex, detailed reports and analyses, and that's what the back and forth questions have been. Nothing unexpected, but many, much of it takes time.

Our final question comes from the line of Jason McCarthy from Maxim Group. Please proceed.

Hi good afternoon. This is Joanne Lee on the call for Jason. Thanks for taking the questions. Just two around OpRegen. My first one is regarding the recent approval from s which we noticed was purely based on disease trajectory with no benefit on visual acuity. Now that we've seen willingness from the FDA to prove based solely on structural changes in geographic atrophy does the upcoming data at ARVO take a greater importance for operation and how does this impact the importance of also demonstrating functional benefit in patients with [indiscernible]?

Thank you for the question, Joanne. I think that the ARVO data is going to be important because there will be parts of that data that have not been shared before, and we're working with a product candidate that is being discussed as being capable of, of creating anatomical changes far beyond that of the, the leading candidate and the more recently approved complement inhibitor. So I think any new data on our approach is definitely meaningful to the field. With respect to the second part of your question, how does it change the, the calculus on function? I think it's notable that the data from that, recently approved asset essentially proves with statistical significance that they do not affect the visual field. So I think that the opportunity to provide a greater clinical benefit in patients is sitting there for the taking for whichever approach and whichever company can find it, because the standard of care clearly has unquestionably, has no effect on visual function. So I, I see that as great opportunity and I think that we are one of the most important contenders to grab that opportunity.

Oh God, hit, appreciate the details. And then just given the differences and mechanism behind complement inhibition and retinal restoration how would you expect a one and done treatment like off operation could fit in with complement targeting drugs like and Bali and others? Would this be something patients could perhaps take and then afterwards at a follow up, receive complement inhibition to further prevent damage? Curious to see how you'd imagine OpRegen could be positioned in the treatment landscape?

I imagine myself as a patient looking at two product profiles, one that requires a monthly or every other month injection in the eye. And I'm an elderly individual who has difficulty getting to a clinic six to 12 times a year and comparing that with a one time procedure approximately 30 minutes and I'm awake for it with multiple years, maybe a lifetime of benefit. So I think the product profile just screams preference, but I'm going to invite Dr. Hogue to add to my thoughts?

I, I think there's two ways you can look at it. And both, both favor, hopefully patient outcome operation, potentially be used first and then follow up with the complement inhibitor. So you take care of an arrest, the GA you replaced with fresh RPE and you keep the foot receptors healthy and then given it is an aged dye, then the colan inhibition may further set up opportunity to succeed and, and be established for long-term benefit. Alternately, if you keep complement hip inhibition first, a decreased inflammatory cascade is ongoing put Ingen cells and they may be even more likely to succeed. But bottom line, the earlier intervention, the earlier identification of a much larger patient pool will help both patients, de physicians treat them. Joanne. I'm going to actually combine your question a little bit with the question that we got from Kristen Kska from Cantor because one of the sort of fun ways I think about the complement inhibitor is that it's sort of like one of those tower defense video games where it's slowing a process. So you can imagine there will be more patients in the, the hot zone, the addressable zone that could be treated by us. So in terms of, of the utility OpRegen, if a complement inhibitor becomes established, I, I think again, you could see a greater number of patients that exist in that addressable patient population spectrum. Because some of the very early individuals with dry AMD who get onto complement inhibition, if in fact they are on for years and there's 20% or so less progression, they might still be within an addressable profile for our product at some point in the future.

I would now like to turn the call over to Brian Culley for closing remarks.

All right. Well thank you everyone. We absolutely and sincerely appreciate your support of Lineage as we look to position ourselves as a leader in cell therapy and cell transplant medicine. Thank you very much for joining the call today and have a great rest of your week.

Thank you ladies and gentlemen. This concludes today's call. We thank you for your participation. You may now disconnect.