Welcome to the Lineage Cell Therapeutics’ First Quarter 2021 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.lineagecell.com. This call is subject to copyright and is the property of Lineage. Any recordings, reproduction or transmission of this call without the expressed written consent of Lineage are strictly prohibited. As a reminder, today's call is being recorded. I would now like to introduce your host for today's conference, Ioana Hone, Director of Investor Relations at Lineage. Ms. Hone. Please go ahead.

Thank you, Ioana, and good afternoon, everyone. We always appreciate you joining us on these calls. It has been an extremely productive start to the year for us. We continued to deliver positive clinical results with our lead program OpRegen and we entered into two strategic partnerships, which expand and support our clinical pipeline programs, OPC1 and VAC. We also strengthened the overall team through the appointment of two individuals to our Board of Directors, both of them possess significant medical and healthcare experience. As a reminder, Lineage is pioneering a new branch of medicine based on the transplant of whole cells and simultaneously positioning ourselves as an important leader in this rapidly growing field. Our approach is to manufacture differentiated cell types and transplant them into the body to restore or improve function, which has been lost due to injury or disease. Simply put, we believe that if retina cells are dying, you need to transplant retina cells directly to the eye. If spinal cord cells are damaged or missing, you need to provide replacement spinal cord cells directly to the area of injury.

Thank you. Your question comes from the line of Kristen Kluska from Cantor Fitzgerald.

So first one I had was in regards to the patient who had the retinal tissue restoration now at about three years out. Wondering what work you might look to understand the particular effects or characteristics around this patient? And then can you discuss the importance of evaluating the long-term trends that you've observed relative to other approaches in the space?

What we think is most notable about the retinal restoration patient beyond the initial observation of retinal restoration and the truly fantastic durability of that observation is that their procedure was unlike the patients which preceded them. And by that, I mean specifically, they had a fairly thorough or complete coverage of OpRegen cells right across the area of geographic atrophy, and that has never happened before. One of our advisors was going through those OCT images, which I mentioned before, because again, you don't see restoration by using just FAF. He observed in the nine-month images these benefits that have been thoroughly discussed by us previously. As we gained confidence in that observation and had it vetted by additional imaging experts and experts in ophthalmology generally, we then advised or asked our investigators if they would work to try to get more aggressive delivery or more complete delivery of OpRegen across the area of geographic atrophy. That was different because in the early patients we tended to stay fairly far away from the area of atrophy because we wanted to be careful that we didn't disrupt the patient’s preferred retinal locus; we wanted to make sure that we didn't cause any harm or disrupt their baseline vision. But I think what we discovered with that particular patient is that it may not be the case that OpRegen’s effects can work at their best at a distance, and that means the cells may need to be truly replacing right there in the area of the dead cells or in the diseased cells or the cells that are not functioning fully. The patients which followed that extraordinary finding are now past four and a half months, so they are getting into the same timeframe where we think this observation of restoration can occur. And all of them, we ask the investigators to try to get more complete coverage. In some cases, they were successful, and in some cases, they were unsuccessful. We have a mixture, which is kind of an interesting test, where we will be looking, in particular, for restoration patients that had more complete coverage of the OpRegen cells across the area of geographic atrophy and we will be able to prepare those with patients that did not have as complete coverage across the area of geographic atrophy. We do think that placement of cells is very important in terms of obtaining the best outcomes. With respect to your other question about the importance of trends, reaching into my background, originally, as a scientist, as a bench scientist, as you work a problem it was always very interesting; if you couldn't get too excited about a single observation. But as more and more observations, especially using different methodologies piled on and were directionally correct or facing the right way, even if any one of them was not statistically significant, you can start to build a lot more confidence. For example, if you're seeing BCVA benefits and geographic atrophy benefits, and you're seeing quality of life benefits, and you're seeing low light reading speed benefits. If everything is directionally going your way, it is much easier to be confident that you're having an effect. Even within a single assessment such as BCVA, you cannot choose just one single time point, be it three months, six months, or nine months, and say, '25 letter gain'; you really need to look at the area under the curve and say, 'Okay, maybe that patient was many letters at month six, how were they at month nine and three and twelve?' By looking not only within each assessment but across multiple assessments, you get a much more fulsome picture. I think that's what we're enjoying and that is why I referenced that I feel like every time we tout an interim update, it presents a more complete picture of our data which can provide greater confidence and conviction that delivering the OpRegen cells to these patients is driving a benefit in them in support of a further development.

And then I know there are no approved therapies for dry AMD. But perhaps from what's been observed in the field of wet AMD, based on the discussions you've had with physicians and key opinion leaders, how do you imagine both the day and their patients might rank or evaluate the importance of these different endpoints that you're observing in the trial, as well as items like safety and convenience?

Yes, there are several important parameters. Ultimately, the patients care most about seeing better because avoiding falling down a flight of stairs in dim light or being able to use your cell phone and watch your grandchild's piano recital; those quality of life issues are incredibly important. However, the burden of proof is sometimes more easily achieved with other methods. For example, anatomical methods, improvements in the anatomy and the structure of the retina. The patients and regulatory guardians of these markets are not always perfectly aligned. In our case, I'm encouraged because I think that we're going to be able to demonstrate that we can provide both. I do think that there is imperfect alignment. The overall objectives of safe and effective therapies is really going to be FDA’s judgment. However, individual patients will have their own criteria in terms of their risk tolerance, their stage of disease, and how they are managing with one eye or both eyes. There are many factors there. But I believe that something notable about the cell transplant approach is that, I believe that ultimately we're going to be able to deliver both; demonstrate improvements to the retina that give us a good basis for regulatory evaluation and show some degree of visual acuity improvements. It's a complicated situation because there is no regulatory precedent, as you know, and so there is no clear path. However, I do want to mention that we remain open; just because one sponsor decides to pursue a certain endpoint does not set that as the bar for every other sponsor. Ultimately, you need to align your therapy and its attributes and benefits with some sort of primary efficacy endpoint. There is a long history, not just for analogy but more generally for ethical pharmaceuticals, of trying to figure out what's the right way to measure the benefit that you are conferring and be able to do that in the context of a clinical trial, which is affordable, enrollable, and convincing. That's a very long answer, but I hope that I touched on all the points that you made there.

Next question comes from Joe Pantginis from H.C. Wainwright.

Brian, I want to go to some of your prepared comments and then also some of your commentary about the restoration of patients. So first, let me go to your prepared comments about your decision to not exercise your option for gyroscope and then link that to a direct question about the restoration patient. Do you feel then now that the PPV delivery is maybe more appropriate to deliver more accurately to cover the area of geographic atrophy?

I think the short answer is yes. I think that we've had a couple of years of data to review and we've learned a lot of things with this new technology. I believe that having the flexibility or better replacement capability is really important because it is ultimately going to be tied to the clinical outcome. So I think the answer to that question is yes.

And then sort of going forward with that restoration patient. How are you going to be able to share some, let's call it, delivery data for the current patients to describe how and where the cells were delivered? Because like you said early on you were avoiding the area of geographic atrophy and have each patient subsequently been getting closer with regard to their delivery in the areas of the GA that you could be able to see restoration. As time progresses, I guess it really comes down to what can you share at some point with regard to where the delivery occurred versus where the geographic atrophy was?

Yes, it's a nice question because the company historically has been extremely transparent with its data. We have provided patient level data at essentially every single endpoint with all of our exploratory assessments. So it will be no problem for us to provide not only the clinical outcomes but to match those up with some sort of scale or score, plus minus type analysis on placement of cells. That's the case not only for restoration but more generally for how the patients are performing. So even if what we see is that patients with the best BCVAs also had the better placement of cells, that's incredibly validating of the direction that we're going in and affirms for us that cell transplant and cell replacement is really driving this; that it's not so much trophic effects, or again, cells operating at a distance, which, frankly, has been our philosophy throughout this and across all of our applications. Not to say that there may be some factors, some biological factors that are coming from our cell lines that are beneficial and contributing to clinical outcomes; we just don't think that they are sufficient for optimal outcomes. The ultimate goal here is to be able to show restoration and more restoration, the better. If restoration only happens with great placement, that's fine; that's the direction we're going regardless. If we do not show restoration, but can still demonstrate clinical benefits that can lead to an improved product and we're showing those that are happening with better placements or more exquisite placements, then I think all of those are victory or winning scenarios. I should add that one of the other things we've learned is around patient selection. We are seeing some signals as to which kinds of patients might be more likely to respond to our therapy, and we're starting to refine our thinking there. It used to be just that earlier is better. I agree that earlier is still better, but we're beginning to think possibly about how we could score the Bruch’s membrane health in some way and establish selection criteria for patients and so forth. These ideas are still very much a work-in-progress because, once again, this is a new technology, and we are learning while doing. But I also think that's incredibly encouraging because we have a lot of areas where we can improve since we have a new technology. So I hope that is responsive to your question.

No, it certainly is. And actually, your statement of new technology is a great segue to my next question, and I want to ask about the regulatory topic and split it into two parts. So first since we're on OpRegen, if you're going to go into the FDA meetings and talk about a potential registrational study, how much are you willing to disclose right now about what your wish list looks like, since it is a new technology? What would you like a registrational study to look like and hope that the FDA agrees to maybe with some tweaking or what have you? And then the second part of that is with regard to your OPC1 upcoming regulatory interactions. If I heard you correctly on your prepared comments, you said that this potential registrational study would be a comparative study, and I just wanted to verify would it be compared to what?

It's an interesting question that you're asking there. I think the regulatory directions kind of fall across two parameters. There is visual acuity in all its different variations: reading letters on an eye chart, reading speed, and low light reading. Visual acuity is something we're seeing benefits in, so that's on the table. Then there is geographic atrophy growth or area, some sort of geographic atrophy change. I want to keep it broad because we need to remain open that it's not just the circumference of the circle we're looking at. One of the things that we think we can bring are changes to the depth or health of the retina. I think of the retina like it’s an eight-layer birthday cake. If you've got all these layers that have smushed together and they're dysfunctional, if you can inflate those; I'm using really poor terminology, but you know that little kids are going to be a lot happier with a cake that’s inflated rather than one that’s collapsed. That doesn’t always translate easily in the aerial views that a lot of us use to look at geographic atrophy. So, there’s a geographic atrophy component here. But you asked me a different question about what my ideal study would look like. My ideal is very clear: I would like to collect evidence of retinal restorations and then utilize high-resolution OCT to demonstrate that there are anatomical changes to the retina which never occur naturally. I believe that would be incredibly powerful and would be a real win if we're able to have a study like that. But there are a lot of requirements; we need to see it, we need to be convinced of it, and we need to figure out ways to measure it. But you asked me for my wish, and that’s my answer.

And then the OPC1 comparator wish?

The OPC1 comparator—that’s a tough question. The challenge with OPC1 is how to conduct a sham control with a surgical procedure. In my opinion, which I believe is shared by most people, it is not ethical to make an incision and conduct a sham procedure for spinal cord injury patients. A statistician would have a different view because they're holding on to a different part of the elephant. However, I think there are ways of doing partial blind studies. Maybe the family knows if there's an incision under the bandage, but maybe the person who’s doing the assessment, who’s collecting the data on mobility or sensation, is blinded. There are hybrid ways or pseudo-blindings that are probably possible. We're in the early days of discussing what would be the most compelling and powerful way to execute that. However, I do hope to avoid having to enroll a large number of semi-matched patients, essentially doubling the study size. Ultimately, we need to go to FDA with a compelling case and a convincing story about why that approach is best. It's similar with dry AMD; the best comparator seems to be a matched population of patients who we observe to see what happens to their geographic atrophy in real time. I previously complained that we’re matching our data against a contralateral eye, which we always know starts out better, which seems a little unfair. However, that is the only comparison available. What if we could create a control group of untreated patients who have similar atrophy size and disease stage, and we monitor what happens? That would provide a much better comparison for assessing changes in OpRegen compared to using the contralateral eye. I think this approach applies to both geographic atrophy and best corrected visual acuity.

Next question comes from Robert LeBoyer from Noble Capital.

I had a question about the presentation of the OpRegen data and the additional interim analysis that's going to be presented. I was wondering whether it was going to be presented in a press release or at a scientific conference, and then when would the full data set be presented?

A final decision hasn't been made, but we do not currently have any major medical conference planned for the next update. So what I believe would be most likely is that we would provide a press release, which in our case, typically would link out to a slide deck that we would make available, allowing you to see more of the totality of the evidence over time. We're too early for me to say exactly what we'll do. But realistically, that is one way we’ve provided more information than can fit into just a press release with some top-line data.

And just in the few minutes that remain, could you quickly summarize what the time frame for the OPC1 program and the milestones might be after the end of the year assuming everything goes well?

The two major activities on OPC1 are our RMAT meetings. We need to talk with the FDA about this new Neurgain PSD, so we have an RMAT interaction scheduled for next month, which is not far away. Around the end of the year, we aim to discuss the manufacturing improvements that I described in previous calls. We want to ensure that we have good alignment with the agency regarding our developed process, which has greater purity, control, and scale, and ensure the agency is comfortable with that process creating cells to be used in patients. Those are a couple of things to look forward to. Additionally, we always keep open lines of communication with the California stem cell agency or CIRM. That's an ongoing aspect that could be part of our news flow moving forward, though there’s nothing specific or imminent on that topic today.

Next question comes from Keay Nakae from Chardan.

Brian, I want to talk to you about your decision regarding the Orbit device. We appreciate that you guys are finding that better coverage of the geographic atrophy area is advantageous. So if we consider the trade-offs of why the Orbit device was initially thought to be beneficial in terms of the epiretinal membrane formation, are you comfortable that utilizing PPV is something that your surgeons can perform the procedure while minimizing the trade-off of the injury versus the better coverage?

That is definitely an astute question. Regarding retinal surgeon experience, PPV is widely used, and all retinal surgeons have extensive experience with this. I was told by one specific surgeon that it’s a requirement; if you want to graduate from retinal surgeon school, you need to be able to perform a PPV. We’ve continued to use PPV while evaluating the Orbit device in parallel. We didn't have much data two years ago when we entered into the evaluation agreement. Since that time, there have been 12 more patients treated, about half with PPV and half with Orbit. Some interesting things have been observed as referenced in Dr. Riemann’s ARVO presentation. The PPV procedure only needed a single device to successfully deliver the cells and had a high success rate doing so. We didn’t experience timeout while using PPV; there was one case of CNV that arose in a PPV patient, which occurred two years post-treatment, and we don't think that was related to our cells or the procedure. The primary reason we explored alternatives a couple of years ago was that PPV has a high rate of epiretinal membrane formation. However, not only are the majority of the ERMs in our study clinically insignificant, but we also demonstrated that a severe ERM, which needed to be removed, could still result in an improvement in visual acuity after its removal. At this point, we think the totality of the data supports the continued use of PPV to deliver OpRegen. We remain committed to exploring ways in which we can improve our therapy. There may be alternate or improved sub-retinal delivery solutions out there. However, we allowed the option agreement with the manufacturer to expire in May in accordance with its terms. We're already in the process of exploring two areas of potential improvements to the PPV procedure, which could further enhance outcomes. Therefore, we believe that using PPV to deliver OpRegen will ultimately prove to be the better choice for patients, surgeons, and for Lineage.

There are no further questions at this time. Brian Culley, you may proceed with your closing remarks.

So I thank you all for your participation. We'll keep working hard for you, and we look forward to our upcoming events and milestones, and our continued communication with all of our shareholders. Thanks and have a great afternoon.

This concludes today's conference call. Thank you all for your participation. You may now disconnect.