Lineage Cell Therapeutics, Inc. Q4 FY2023 Earnings Call

Welcome to the Lineage Cell Therapeutics Fourth Quarter and Fiscal Year-End 2023 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.com. This call is subject to copyright and is the property of Lineage. And recordings for productions 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 your host for today's call, Ioana Hone, Head of Investor Relations of Lineage. Ms. Hone, please go ahead.

Thank you, John. Good afternoon, and thank you for joining us. A press release reporting our fourth quarter and fiscal year 2023 financial results was issued earlier today, March 7, 2024, and can be found on the Investors section of our website. Please note that today's remarks and responses to your questions reflect management's views as of today only and will contain forward-looking statements within the meaning of federal securities laws. Statements made during this discussion that are not statements of historical fact should be considered forward-looking statements, which are subject to significant risks and uncertainties. The company's actual results or performance may differ materially from the expectations indicated by such forward-looking statements. For a discussion of certain factors that could cause the company's results or performance to differ, we refer you to the forward-looking statements section in today's press release and in the company's SEC filings, including its annual report on Form 10-K, for the year ended December 31, 2023. We caution you not to place undue reliance on any forward-looking statements, which speak only as of today and are qualified by the cautionary statements and risk factors described in our SEC filings. With us today are Brian Culley, our Chief Executive Officer; and Jill Howe, our Chief Financial Officer. Now let me turn the call over to Brian.

Thank you, Ioana, and good afternoon, everyone. We appreciate you taking the time to join us today for a recap of 2023 and an update on some important items occurring in 2024. Over the past year, our team continued to focus on the advancement of our pipeline of differentiated cell transplants while also providing support for our lead program, which is partnered with Roche and Genentech. We continue to have many reasons to be excited about our future. I will, as usual, begin with OpRegen. During 2023, we had numerous scientific forums at which we broadened awareness of this exciting program and provided data updates from the Phase 1/2a trial, which we conducted. Some of these updates included new analyses and findings collected and observed by our partner, Roche. Each medical and scientific conference, which we participate in targets a certain audience and some such as the ARVO Annual Meeting are widely known, but I think the most compelling among the OpRegen presentations given last year was the one delivered by Dr. Adi Barak during the 23rd Annual EU Retina Congress. At that event, updated analyses, which describe durable findings of increased areas of retinal tissue, specifically of the RPE and ELM layers were provided in detail. To our knowledge, none of the complement inhibitors are capable of increasing the amount of RPE or ELM in patients and human beings are genetically incapable of this sort of self-recovery. So we continue to believe we are on the right track for a game-changing approach to potentially address this massive unmet need of dry AMD. While the original data released by Lineage were obviously compelling on their own and have been confirmed by three independent external parties, I often find myself turning to these more recent analyses when speaking with investors because they originate from one of the most commercially successful ophthalmology companies in the world and offer insights beyond our original exciting observations. So if you haven't had a chance to review the slides from the EU Retina Congress in detail, I encourage you to do so; they are available on our website. Additional and similarly elective data releases from Roche and Genentech include a presentation delivered at the recent Angiogenesis Meeting in January. The insights at that event include independently generated observations of the rapid time to onset of retinal structure improvements in OpRegen treated patients, which I will note exert their effects far faster than anti-complement approaches which take 12 to 24 months to detect. Because complement inhibition is commonly criticized for its small treatment effect and can require years of therapy before it meaningfully diverges from no treatment at all, many followers of this field are interested in the effects of complement inhibition after a third consecutive year of monthly treatment or as I like to call it, after 36 consecutive injections into your eye. For those patients who actually remain committed to therapy for that long, they presumably should enjoy a slowing of disease progression. Still, further deterioration of retinal structure and vision is always expected even on the best available therapy. In contrast, our data from Cohort 4 patients, which are patients with comparable disease severity to patients suitable for complement inhibition, and in all cases, with foveal involvement, showed that after just a single administration of OpRegen RPE cells, improvements in the retinal structure were detectable in some cases just days later, and always within three months. In most cases, those anatomical changes were accompanied by functional improvements. And most notably, all five patients who had extensive coverage of the GA lesion with a surgical bleb containing OpRegen RPE cells demonstrated evidence of improvement in outer retinal structure at 12 months and visual acuity gains averaging 7 letters. Maintenance or greater improvements in retinal structure were also observed over time. And now to go further, there are still 10 patients from Cohort 4 on long-term follow-up. I am pleased to share with you for the first time today that Cohort 4 patients treated with OpRegen, who previously exhibited average visual acuity gains of 7.6 letters after 12 months are still remaining above baseline after 24 months with an average gain of 5.5 letters among the 10 patients still evaluable on study. Furthermore, as we expected, the BCVA gains averaged slightly higher among the five patients with extensive surgical bleb coverage of their GA lesion when compared to those with no or limited bleb coverage. These greater BCVA gains were associated with evidence of anatomical improvement in outer retinal structure. Additionally, evidence of engraftment for OpRegen RPE cells has now extended to four years in one of the earliest treated patients, which continues to support the potential for OpRegen to be a one-time treatment. So as you can see, while we await data from the ongoing Phase 2a trial, which Genentech is conducting, updates from the original Phase 1/2a study can and do continue to provide new evidence which supports OpRegen as a promising therapeutic candidate. Fortunately, neither Lineage nor Roche and Genentech are likely done providing these kinds of updates, and in particular, we anticipate that our partner will provide a detailed overview of the 24-month data, which I just shared today at an upcoming medical meeting to be held in the second quarter. In addition and separate from the 24-month functional data I just revealed today, last Friday, abstracts for the 2024 RFO Annual Meeting were made publicly available. You will see there that Roche and Genentech plan to present preclinical results from a surgical development study evaluating the survival and distribution of OpRegen using varied surgical instrumentation and methodology. We believe these results are a complement to the ongoing clinical work and are intended to help guide the development of insights into the delivery and engraftment process. This study also serves as an example of how partnering with an experienced and well-resourced company can enhance the probability of success of a program in so far as Lineage may not have been in a position to perform this supplemental work. Therefore, this also serves as even more evidence of our partner's commitment to the optimization and further development of this program beyond the ongoing Phase 2a clinical trial, which continues to enroll patients. Medical publications often state that dry AMD is an irreversible and degenerative disease leading to vision loss. We aim through the OpRegen program to eliminate the word irreversible from those descriptions and literally rewrite the language in future textbooks. Moving next to OPC1, our spinal cord program. Last month, we announced a very important milestone, and that is the FDA clearance of our IND amendment, which will enable us to initiate clinical testing of OPC1 in particular. To test the clinical safety and performance of a new delivery device called My PSD. As a reminder, the pioneering work on this program was originally conducted by Geron and thereafter by Asterias, a company which we acquired. Their foundational work provides us with a significant advantage because, while other cell therapy companies are just now beginning their human studies and don't yet know how their cells will behave in people, we have in some cases as long as 10 years of safety data with OPC1. Nevertheless, when we acquired the program, we knew it was not ready to move into later-stage studies. The process by which the cells were made did not meet our vision for a commercially successful product candidate, and the method by which they were delivered was too cumbersome and inefficient. The original formulation required plating, washing, and counting the cells, which added complexity, cost, and risk. Additionally, the injection itself required the surgical team to turn off ventilation to the patient while administering the cells. Obviously, performing a procedure on a patient who is not breathing creates a time constraint, so we wanted to create a solution for that issue. Fortunately, the same team which successfully developed a commercially viable process for OpRegen, which thereafter successfully contributed to the deal with Roche, was deployed on solving similar changes for OPC1. For example, they developed an immediate-use injectable formulation, which eliminates the washing and plating steps. Our team's success, the details of which we have only partly shared publicly, permitted us to invest next in developing a new delivery system. That new system, which we developed through a collaboration we struck with a medical device company, is the subject of the clinical trial we are in the process of launching. We believe this new device will be far superior to the delivery system that was employed in the first 30 patients. Given our objective to simplify and improve the surgical delivery device, we conducted extensive engineering and in vivo experimentation to develop the manual inject Parenchymal Spinal Delivery System or My PSD. My PSD is designed to be easier for the surgeon to use and safer for the patient. The proposed study called delivery of oligodendrocyte progenitor cells for spinal cord injury, evaluation of a novel device or DOSED, is designed to evaluate the safety and efficacy of the My PSD to deliver OPC1 to patients with any of sub-acute or chronic and cervical or thoracic spinal cord injury. Importantly, the My PSD system has been designed to deliver OPC1 without stopping patient ventilation during cell administration. This study will also be the first time OPC1 is administered to patients with a chronic spinal cord injury, which will be a significant milestone for this program. In addition to the safety and performance of the new device, we will also be collecting functional assessments on all patients, which gives us the exciting opportunity to investigate whether any signals of efficacy are present among chronic injury patients. Pursuant to the protocol in the IND, which recently cleared the FDA process, we have begun activities to open our first clinical site in the DOSED study, which we anticipate will occur next quarter. There are very few opportunities for SCI patients to participate in clinical trials, so it is a privilege to be able to reengage with the SCI community, as part of our efforts to improve outcomes for individuals with a condition for which there currently are no FDA-approved treatments. We are even more excited by the opportunity to build upon promising results achieved with OPC1 in previous trials and to continue to seek improvements in how this therapy is manufactured, prepared, and administered. Some of you will recall that OPC1 was a recipient of one of the first cell therapy clinical awards granted by CIRM, the California Institute for Regenerative Medicine. We believe the OPC1 program is a strong match with CIRM's goals to accelerate the development of regenerative medicine, and we submitted an application for funding support for our DOSED study last month. But as many of you may have seen, the success of the CIRM program has led to a surge of funding applications. Consequently, quite unexpectedly, late last month, the CIRM board of directors announced that they would be halting the acceptance of new applications effective January 31. Our application was submitted on February 21, so we will not be reviewed as expected in the February cycle. I am, of course, disappointed on behalf of the Lineage team, which put a lot of work into preparing the grant, but I'm confident because CIRM has informed us that they are striving to reopen the CLIN1 and CLIN2 programs as soon as reasonably possible, suggesting to us that this is simply a pause to address workload issues, and to our knowledge, it is not specific to our application in any way. We believe the grant reviews will be restored following the June meeting, and presumably, we will be able to enter the July review cycle. If so, the overall impact looks simply to be a one and a half quarter delay to potentially receiving funding for the DOSED study. In the meantime, start-up activities for the DOSED study are already underway. We expect to have our first site open next quarter and we will begin enrolling patients as soon as we're able. We will simultaneously monitor things with CIRM so that we can hopefully partner with that excellent organization for a second time on this novel program. Related to OPC1, I also want to update you on our efforts to expand collaborative partnerships in the SCI field with the dual goals of enhancing awareness and informing our development strategies. In June last year, we launched a newly created forum to discuss the innovations, advancements, and challenges in the treatment of SCI. The Spinal Cord Injury Investor symposium, which we presented included sponsors such as the Christopher Denari Foundation, the Sanford Stem Cell Institute at UC San Diego, AbbVie, and CIRM. This event presented an opportunity for an open and collaborative dialogue among leading experts, researchers, companies, persons with lived experience, caregivers, advocacy organizations, investors, healthcare analysts, and members of the public and media. It was a wonderful success and we currently are in the planning stages for the second annual Spinal Cord Injury Investor Symposium, which is being expanded and planned to be a two-day event held on June 26 and 27 here in San Diego. You can expect to hear additional updates from us on this event in the coming months. For our preclinical programs, I will be brief. As planned, we are initiating a functional animal study of ANP 1, our cell transplant program to address hearing loss, which is the subject of a collaboration with the University of Michigan. Our initial objectives from this collaboration were to evaluate the delivery of our cells into specific target areas to monitor initial engraftment and to assess whether our cells survive after transplantation. We also wanted to see whether the cells migrated and if they are expressing certain markers of neuronal identity. We have been satisfied with the results from those early studies. Last month, evidence of successful engraftment and survival of our ANP 1 cells were presented at the 47th Association for Research in Otolaryngology Annual Meeting by Dr. Yehoash Raphael at the University of Michigan Kresge Hearing Research Institute. Given the early success of ANP 1, we next want to ask the critically important question of whether our cells can influence hearing, which is measured and detectable by electrical signaling, which occurs in specific regions of the brain. We are working closely with Dr. Raphael to develop and conduct those models and we'll be excited to see what we learn from them later this year. The other project worthy of mention today is our alliance with Eterna, which is important because it provides us with access to gene editing technology and supports our long-term vision of capitalizing on the combination of our extensive and proprietary process development capabilities with cell engineering and cell editing technologies together for the purpose of creating novel and potentially superior cell therapies to those in development today. In the case of Eterna, we are working to generate a hypoimmune iPSC line designed to reduce the immunogenicity of certain product candidates. And in at least one instance, we are making an additional edit that is intended to confer clinical differentiation and a competitive advantage in the applicable indication. I believe it's premature for us to provide details on any of our grassroots programs at this time but we look forward to sharing more on this initiative as we reach certain developmental milestones, which could occur later this year. My final comments today will serve as a transition to Jill's remarks because I wanted to provide some quick context around the financing we conducted last month. As you may have seen in our announcement, we raised approximately two additional quarters of cash, which improves our balance sheet and provides additional operating runway. Unlike most of the deals I have seen this year, at least those which didn't include a simultaneous data release, our raise was conducted as an at-market financing with no discount, no warrants, or other structural elements. We didn't even pay a banking fee because, while not all of the buyers were existing holders, two of the buyers were board members and all of them were familiar with the company, which we believe helped secure favorable terms for us as the issuer. It's well understood that developing new therapies is very expensive, but I'm proud that during the past five years, and in particular, during the years when biotech was out of favor, Lineage relied on a wide assortment of ways to raise funds, seeking out the lowest available cost of capital and diversifying our raises across BD deals, spin-offs, grants, ATM transactions, and for the first time in my tenure, a conventional equity raise. Our view is that creating new medicines is clearly exciting and rewarding, but we also will never lose sight of the importance of protecting shareholder interests. So to summarize three key points for today. One, we continue to be extremely happy with our alliance with Roche and Genentech, not only for their commitment to advancing OpRegen through the clinic, but also for enhancing awareness of the program at medical and scientific meetings. Two, we are excited to be putting a second cell transplant program into active enrollment this year in a disease with an enormous unmet need and limited competition. And three, we will continue to look for ways to build value from our early-stage pipeline and from strategic collaborations, which can help advance our programs and validate our approach. With that, I will hand the call to Jill for a review of our financials.

Thanks, Brian, and good afternoon, everyone. Beginning with our balance sheet, I'm happy to report that we remain well capitalized to conduct the near-term activities which Brian just outlined. Our reported cash, cash equivalents, and marketable securities totaled $35.5 million as of December 31, 2023, and along with the $13.8 million net proceeds we added to the balance sheet from our registered direct offering last month, is expected to support planned operations into Q3 2025. Next, I will review our fourth-quarter operating results. Our revenue is generated primarily from collaboration revenues and royalties. Total revenues were approximately $2.1 million, a net increase of $0.2 million, as compared to $1.9 million for the same period in 2022. Our operating expenses comprise research and development expenses and general and administrative expenses. Total operating expenses were $8.2 million, a decrease of $0.3 million, as compared to $8.5 million for the same period in 2022. R&D expenses were $3.9 million, a decrease of $0.2 million, as compared to $4.1 million for the same period in 2022. The net decrease was primarily driven by $0.2 million in OpRegen program expenses and $0.4 million for other research and development program expenses, partially offset by $0.2 million in OPC1 program expenses and $0.2 million for preclinical programs. G&A expenses of $4.3 million were in line with expenses for the same period in 2022. Loss from operations was $6.4 million, a decrease of $0.2 million, as compared to $6.6 million for the same period in 2022. Other income and expenses were $1.6 million, compared to other income of $0.3 million for the same period in 2022. The change was primarily driven by exchange rate fluctuations related to our international subsidiaries and fair market value changes in marketable equity securities. The net loss was $4.8 million or $0.03 per share, compared to a net loss of $6.4 million or $0.03 per share for the same period in 2022. Now I will review our full-year operating results. Total revenues were $8.9 million, a decrease of $5.8 million, as compared to $14.7 million for the same period in 2022. The decrease was primarily driven by lower collaboration revenue that was recognized from deferred revenue under the Roche agreement. Total operating expenses were $33 million, a decrease of $3.5 million, as compared to $36.5 million for the same period in 2022. R&D expenses were $15.7 million, an increase of $1.7 million, as compared to $14 million for the same period in 2022. The increase was primarily driven by $0.4 million in OpRegen program expenses, $1.2 million in OPC1 program expenses, and $2 million in preclinical programs. These increases were partially offset by $1.9 million in other research and development programs, primarily related to reduced manufacturing activities. G&A expenses were $17.3 million, a decrease of approximately $5.2 million, as compared to $22.5 million for the same period in 2022. This decrease was primarily due to $4.2 million in lower litigation and legal expenses, as well as an overall reduction in costs incurred for services provided by third parties, consulting costs, and rent-related expenses. Loss from operations was $24.7 million, an increase of $2.2 million, as compared to $22.5 million for the same period in 2022. Other income expenses reflected other income of $1.5 million, compared to other expenses of $3.3 million for the same period in 2022. The net change was primarily attributable to fluctuations in intercompany balances and exchange rates applicable to our international subsidiaries as well as fair market value changes on marketable equity securities. The net loss was $21.5 million or $0.12 per share, compared to a net loss of $26.3 million or $0.15 per share for 2022. As we've mentioned, last month, we added approximately two quarters worth of cash to our balance sheet, improving our operating runway. Our plan is to continue to maintain the same level of spending discipline, which has served us well to date. We believe this will continue to support our plan towards making important progress through reaching meaningful milestones and creating value for shareholders from our continued investment in our programs. Now I will hand the call back to Brian.

Thanks, Jill. To wrap up, we've all seen how cell therapy has revolutionized the oncology world. It now stands alongside chemotherapy and surgery as one of the pillars of cancer therapy. We believe a similar cell therapy revolution will extend beyond oncology into other important areas, including ophthalmology. We will continue to strive to apply differentiated cells in a replace and restore approach to help achieve this end. I believe Lineage continues to be well positioned to advance our business and become a very important company in the years ahead. I appreciate your attention today. With that, John, we are ready to take analyst questions.

Your first question comes from Joe Pantginis from H.C. Wainwright. Please go ahead.

Hey, everybody. Good afternoon. Thank you for taking the questions. So Brian, I wanted to focus my two questions on your OpGen update today. Obviously, that's believed to be very promising, and I think this solidifies Roche's investment in new guys for a global partnership. Thank you for sharing that. So I have specific points I want to ask and then a broader question about the overall program. So first, when you look at 24 months, you said there is still an average BCVA. Can you describe why that's clinically meaningful? Because based on the natural history of these patients, have they not gotten OpRegen? And what would you say are the factors that have contributed to these, I'd call it, minor reductions in BCVA because it's a long time. Is it some other degeneration or other factors contributing? And how often are these patients essentially looked at for these components?

Thank you for the question, Joe. Yeah, I recognize I may have varied the lead in this presentation. 24 months and still exhibiting an increase in visual acuity is certainly clinically meaningful. The reason that all of these sponsors conduct clinical trials is to create commercially successful products. I think the ultimate example that I would point to is the recent rejection in January by EMA of SYFOVRE. The CHMP issued a negative opinion attributable to the lack of a functional benefit. When I look at the recent data that was reported in the Lancet, at 24 months, patients on monthly or every other month SYFOVRE were losing 8 or 9 letters at two years, while patients that were untreated were losing 7. In contrast, our average of gaining 5.5 represents a 12, 13, or 14 letter delta. To be clear about this, this is not one patient with a 40-letter gain driving the average up; 80% of these patients were at baseline or better. Only 2 of the 10 patients lost vision, and neither of them were as bad as the best available therapy. So put differently, 100% of our patients are doing better at two years than if they had been on SYFOVRE. So I think there is a compelling difference between what we are seeing, albeit a small number of patients, but small changes can be very meaningful in this disease. I'm not sure that I'm ready to agree necessarily, but the difference between the 7 letters at 12 months and the 5.5 letters at 24 months is indicative of anything. It's conceivable and reasonable that our therapy, while it has evidence of being very durable, does not cure the underlying disease. These are elderly individuals that still suffer from dry AMD. So it's quite possible that what you said is occurring; patients are continuing to have the disease. There is continued degradation presumably happening in other areas, not with our healthy transplanted cells, but perhaps in other areas where the cells are not delivered. However, I can also state that compared to what you would expect in an untreated case, the difference between 7 and 5.5, compared to the difference between 7 and minus 7, minus 8, minus 9 is really striking. I don't know what's happening on a biological level and whether the changes which we make, the anatomical and functional changes, will persist for 5, 10, or even 15 years. But certainly, it is quite evocative to see these changes and benefits persisting at least for 24 months from a single administration.

Got it. That's a valuable perspective, thank you. My general question about the program is that everyone is eagerly awaiting the Phase 2a data from Roche, and my challenging question for you is whether there's any insight on when that might be released. This seems to be a common inquiry among investors. Additionally, regarding the upcoming ARVO data, you've described the Phase 2a as a very iterative study. As you mentioned, there will be presentations of preclinical data covering various methods, and you indicated that the Phase 2a will also be testing different approaches. So, I'm curious about how the current data from this preclinical study will inform the eventual outcomes. I apologize for the background noise; I'm not sure where it's coming from.

You're fine. I heard and understood your question. It is correct that I'm not yet able to provide any details about results from the ongoing trial, which Genentech is conducting. One of the messages I sought to deliver today is that the Phase 1/2a, which we conducted is still generating new information, which continues to be directionally positive for this program. Roche and Genentech are supporting that by conducting and releasing their own findings in this case at ARVO for the preclinical study. While I agree that there's tremendous interest in the ongoing study and when that data is released and what it looks like, there are still a lot of things that people can sink their teeth into ongoing. I do think that it's correct, your interpretation that the preclinical study is intended to be informative of the clinical work that's ongoing now. I would just only mention that by its very nature, the pig model is a model, so pigs are going to behave slightly differently than humans, and it's not going to be a perfect model in every case. But the general approach is that if you take that the delivery of OpRegen to the area of atrophy is, if not necessary, at least is driving better outcomes than OpRegen that's delivered in the neighborhood, then it is important to invest in and understand how best to get the cells to that area. So if preclinical models can help guide that through methodology or equipment, those learnings and lessons can then be applied to the clinical situation to generate comparable data and improve upon it. I often use the example of LASIK surgery; when it first came out, many of us would be reluctant to undergo that procedure because it was new and people didn't have thousands of procedures under their belts. Now it's almost routine. The history of new technologies would suggest and indicate that improvements are possible; they require some investment and some work. But I am encouraged by the fact that the historic arc of scientific discovery would suggest that there will be improvements leading to enhancements in clinical outcomes for patients.

Appreciate the color, Brian. Thank you very much.

Thank you, Joe, for the questions.

The next question comes from the line of Jack Allen from Baird. Please go ahead.

Great, thanks for taking the questions. And congratulations on the progress. A pleasant surprise today with the 24-month update around OpRegen, and I'll start there, along with some of the comments you're making around the preclinical model and the need to deliver these cells directly to the lesion. My first question is: any color as it relates to those patients? I know there were five from the first trial here that by happenstance had it delivered across lesion. How did they perform relative to the mean of 5.5, or must I wait until the second quarter of this year in the presentation to hear more?

I appreciate your comment and your question, Jack. Thank you. All I can say, because I don't want to take away any thunder from Roche and Genentech's forthcoming disclosure of some of this information, is that the patients that did receive OpRegen more fully across the area of atrophy on average did have higher as a subgroup had a higher elevation in BCVA compared to the 5.5 number for all patients. I referred to that as expected by me and expected by Lineage because we do feel that having the cells directly onto the area of atrophy, where the photoreceptors are hanging in there, not quite obliterated, makes a lot of sense. But I am trying to caution with respect to how tight the correlation is. One can imagine that delivering a bleb of OpRegen off center compared to 30% on compared to 65% on can yield different outcomes. Each patient's area of atrophy is unique; they are fingerprints. Some of them are very rounded. Some have large lows. Some people have very healthy Bruch's membranes. So we need to think about the three-dimensional characteristics of a bleb. While we and I believe our partners agree that delivering the cells as closely as you can to the area of atrophy and getting as much coverage probably is associated with the best possible clinical outcome, that’s not to say there couldn't be someone who may get 50% coverage and has a better outcome than someone that got 90% coverage for whatever reason. There are multiple variables that are moving when we think about these patients. We do have alignment that this is not a cell therapy that exerts its effects at great distances the way that some of the systemic delivery of stem cells has aspired to in early iterations of these technologies. We instead believe in two things. One, that a differentiated cell type, i.e., replacing the actual cell type is one condition that's required. And increasingly, two, delivering those cells directly to the place where they belong is also necessary for optimal clinical outcomes.

Got it. Got it. And then just to follow up. You mentioned some of the external comparisons and the progression and some with other mechanisms of action. But it's my understanding that you did have an internal control here and that there were fellows being tracked throughout the study. Any contextual evidence around the progression from those either of 24 months? And then I have one last one. I'll just give it my try on the Roche data. How do you contextualize the cash runway into the third quarter '25 and your expectations around the Roche Phase 2a data? Was that a strategic move to push beyond the Roche data? Or how should we think about that from a cash flow line perspective?

With respect to the contralateral eye, that is one that you will need to wait for the second quarter to get details on. Regarding financing, although I understand that interpretation and I can't sit here and reject it 100%, I do want to add for you and for everyone listening to this particular answer that there are many factors that go into a decision to raise capital. For example, to illustrate this point, if a company is getting down to approximately a year of cash and has a going concern, it might get flagged as attractive short for some investors to avoid that. That is, again, just an example unrelated to timing of Roche data but illustrative of factors that go into when and how much capital you raise. I'm only talking about it from the issuer side; there's also the demand side. And of course, there's the pricing; nobody likes to raise a lot of money at prices that they find unattractive. So I want to be very careful not to diminish the emotional impact while clarifying that our business productivity and output has been almost entirely unaffected.

Got it. Thanks so much for that context. I'll jump back in the queue; I'm sure others have questions as well.

I appreciate the questions, Jack. Thank you.

The next question comes from the line of Kristen Kluska from Cantor Fitzgerald. Please go ahead.

Hi, good afternoon. And apologies, my line cut off. So I'm sorry if I'm asking things that have already been asked. Maybe just for OPC1, obviously, I understand the upcoming study will be focused on safety. But how are you thinking about setting expectations in the bar you hope to achieve in light of some of the differentiating factors and potential improvements you think you can have with this process?

I appreciate that, Kristen, because I feel that the landscape is open with respect to a definition of clinically meaningful change. There is a commonly cited television commercial in this field, where Christopher Reeve, aka Superman, steps up out of a wheelchair and walks across the stage. I believe it was shown during the Super Bowl, so it had a very large number of viewers. It’s memorable, powerful, emotional, fantastic, and probably very unrealistic given the severity of the damage, at least where technology resides today. We found through our research, primary research with people affected by spinal cord injuries, that the reaction or the response to very small changes in their functional activities could be enormously valuable to them as individuals, which tells us as the developer of new therapies we want to use sensitive assessments. We want to use endpoints that have high sensitivity so that if those changes are driven by our therapy, we can detect them and show that convincing evidence to the regulatory bodies. I think there's an opportunity because there's a tremendous amount of work by leading academics to investigate new and in some cases even AI-oriented endpoints, because there's high awareness in the space that we need to find better tools than using the end of a Q-tip and poking someone in the arm while their eyes are closed and saying, 'Did you feel that?'

Thanks so much.

I appreciate that question, Kristen. Thank you.

The next question comes from the line of Mayank Mamtani from B. Riley. Please go ahead.

Good afternoon. Thanks for taking our questions. So maybe just related to a prior question, Brian, could you talk to what percentage of your spend is OpRegen related? And how might the global manufacturing supply chain evolve with your partners since you struck the deal initially in December 2021? Does your cash runway include any milestone payment from Roche? And then I have a couple of call outs.

So I can speak to the balance of the investment that we've put into OpRegen. I would say about one-third of our investment to date is really what we focused on throughout this operating year.

I can address global supply; I heard 2021. If we're going back into COVID there were two things that we did to address that. One is we were very early to react; one of our board members' insights helped us anticipate that there would be disruptions to supply chains, and they continue in different ways with tanker shipments, etc. We also benefit from the fact that we are a multinational organization. We have more employees located in Israel than we have in the U.S., so we are able to source materials, reagents, and talent from very diverse parts of the world. With respect to the ongoing war in Israel, we initially had a very brief disruption, which would not be surprising, and I think we characterized that as a week or two before work went back to normal. We're thankful that our extremely valuable, appreciated, and dedicated staff are not in direct harm's way, and there have been only a very small number of individuals whose spouses or they individually have been called up for military duty. I want to be very careful not to diminish the emotional impact while at the same time, making it clear that our business productivity and output has been almost entirely unaffected.

No, absolutely we appreciate that, and appreciate your comments on the empathy there. Just to clarify, assuming that the demand in the Roche study is for the 60 patients, pretty rapid thinking from a patient perspective, are you able to supply doses that are needed? I understand we don't have full color on how the enrollment is going. But are you able to comment on that?

Unfortunately, I'm not. I think that three of the first four questions, including a component of the ongoing trial, is a notable highlight of the interest in that data. But unfortunately, I'm not able to add any additional information beyond the comments I've made so far today.

Understood. Thank you, Brian. And then on the hyperimmune platform development activities, if you're able to comment on any progress in September, you and your partner, Eterna have had in the gene target identification, applicable indication. As you know, there's a big derisking event coming up for one of your peers, which could be very helpful for you.

Yes, we do follow the small number of peers that have hypoimmune cell therapy approaches in development. I think in light of the open questions over which kinds of edits are perhaps best or effective. Being a fast follower may be advantageous in this situation, although that's not the reason why we initiated at this time. We initiated a hypoimmune program because we're interested in moving into areas beyond those handful of areas that have immune protection, such as the eye and spinal cord. We're not at the point that we're comfortable talking about specific indications. In light of the interest, enthusiasm around the OpRegen program, I'm not sure we get much recognition. It makes much more sense for us to progress, advance some things through research, and then, if we have something interesting to talk about. I've been comfortable sharing that the intent here is to continue expanding the platform validated through the AMD program and to expand it into some other areas. If in the not very far future we find ourselves a very different company with many options regarding capital and partnerships, we might be able to accelerate our expansion of this platform and not have failed to anticipate that success and be ready for it. I think it's premature for. I don't want to overstate what we're doing. I'd rather roll out details when they're more fully packaged and will have a greater impact at that time.

Thanks for taking our questions, Brian.

I appreciate it, Mayank. Thank you.

The next question comes from the line of Sean McCutcheon from Raymond James. Please go ahead.

Hi guys, thanks for taking the question. Just a couple for me. First, can you give us some detail on the OPC1 device study expected target enrollment, maybe necessary waiting period for each patient, in the rank order of which subset of patients you're aiming to enroll first across sub-acute or chronic cervical thoracic? And then maybe just broadening out, trying to get a sense for timelines. How much follow-up do you think you'll need across all patients within the device study? What package will you need in order to get the device approved for subsequent studies? And how much of this can be accomplished in parallel or in sequence with the necessary regulatory steps for the new manufacturing protocol? Thanks.

Thanks, Sean. I appreciate the questions. We expect to enroll 6 to 10 patients in the current protocol, with a staging built in; we can go with chronic right away but there is a staging that reflects the Asia Impairment Scale of being both cervical and thoracic. We're aiming for 3 to 5 sub-acute and 3 to 5 chronic. The question as to how many patients will be enough to have the agency comfortable with us using this device in larger studies is unknowable because it will of course depend on the device's performance. My operating assumption is that because we're using the same size needle positioned the same way that we will not have any particular challenges, and hopefully, we'll have some great insights. However, there's nothing entering the patient that hasn't been before. Success perspective is we are well positioned. The work that we hope to do toward the end of the study and the reason why it's difficult for me to tell you when we think it will conclude is that we will introduce the new cells we have manufactured. We have shared some data around the new process and how much cleaner, pure, and reproducible we have made the production of those cells. But those cells have not yet made it into clinical testing. So the sequence of events here is a small number of patients with the device, a small number of patients, presumably a small number of patients with the new cells, as a bridge and then going into larger comparative or larger controlled studies. I don't yet know because we have not asked the question how many patients at the end of the DOSED study would we be doing with the new cells or if that would be a separate protocol alongside. It depends on the regulatory interactions we will be having this year so I will be informing everyone about what I think that will look like as we get a little bit further into this year and have those meetings with the FDA.

Thank you.

I appreciate that question, Sean. Thank you.

The next question comes from the line of Michael Okunewitch from Maxim Group. Please go ahead.

Hey, guys. Thanks for taking my question today.

Hi, Michael.

I guess to kick things off, I would just like to see if you could provide a bit more color on the rationale for going into chronic instead of just the subacute. Is this because you really just need to prove the device work? So the more exploratory data you can get, the better?

I think that's correct. The injury and the delivery of cells is not likely to be meaningfully, i.e., anatomically all that different between a subacute injury and a chronic injury. However, and I think that's what is being reflected by the FDA's permissiveness to allow us to go into chronic patients for the first time. I do want to point out that there are not a small number of academics that believe that patients with chronic injuries retain all of the biological capacity to regenerate, if it can be unlocked. We have as a field been unsuccessful in not figuring out how to do that. The highest and best use regarding probability of success is in a subacute patient. That's where we saw in the animals and that's where we've seen a signal in patients. Having the opportunity to go into chronic patients is a way to accelerate the device study and, along the way, get a free look into a chronic patient. A chronic patient will by definition have reached a plateau in their recovery. So while you treat a subacute patient, you really don't know their trajectory; you can make some educated guesses but there are exceptions and variability makes it difficult to tease out a signal. A chronic patient, perhaps three years since their injury, who has a very level and predictable ability for performance scores. If that individual goes through a procedure, receives cells, then has a change in some scores, that is going to stand out as a notable event. It won't be conclusive on its own, but, it will create a lot of questions, and some of those questions will include what the addressable market could look like if you're able to access individuals whose injuries are more than three to six weeks old.

So just on the assumption that if you do end up getting some strong signals in the chronic setting, is it something where you might consider then working off into a parallel program looking at both subacute and chronic or do you think for now at least, the plan is just to move forward to subacute after that?

I think not having seen that data yet, but if the data reflects what you just described, it would not be particularly difficult to find enthusiastic investment for that fork. I would be delighted to be able to have that opportunity. I hope very much that we do have that opportunity because it would be just earth shaking in the field.

All right. Thank you very much, and congrats on the progress this quarter.

I appreciate that, Michael. Thank you.

The next question comes from the line of Julian Harrison from BTIG. Please go ahead.

Hi, good afternoon. This is Ray on for Julian. Thanks for taking our questions. And congrats on the IND amendment for OPC1 getting cleared last month. You touched on this earlier, but we were wondering at what point could a partner make sense for the program?

At what price, Ray? No, I don't answer that. But I think that my philosophy regarding partnering has always been that there are points at which you may be able to get superior economics relative to other points. To be more detailed, I think being able to show a partner that you have an excellent process for manufacturing the cells and an excellent method to deliver the cells, and perhaps even concurrence around a study design, although that one's more debatable, can be an optimal time. Partners that come in and offer compelling economics can cause companies to change their mind about the right time to do that, if at all. Spinal cord injury is an orphan condition, and it’s not like every pharmaceutical company in the world has a spinal cord cell therapy commercial sales team that they need to have an asset for. The population of partners is more narrow but perhaps more dedicated. It is really a fluid situation, and it has to reflect our own share price, and our thoughts on continuing to advance programs without sharing the upside. If we sit in an environment like the last two or three years, when a lot of people looked at biotech unfavorably, doing partnerships makes a lot of sense. Look no further than the Roche agreement; I shudder to think what our situation would be had we not entered into that agreement with Roche. We were fortunate that the economics of that deal were favorable to the company, but we are entering a better period now. That gives us choices, making us, as innovators, more powerful in those negotiations. I apologize for not being able to put a pin on a specific strategy regarding Phase 2b or a number of patients; we approach value creation more fluidly than that. I do think that going to a potential partner saying, 'I've solved these problems,' is a more interesting proposition than saying, 'I have a program that's available but it has these problems.' I hope that answer makes sense.

Yes, that’s very helpful. Thank you so much.

Thank you, Ray.

The next question comes from the line of Joe Pantginis from HC Wainwright. Please go ahead.

Hey, guys. Thanks a lot for taking the follow-up. Brian, I want to go back to one of your earlier highlights going back to OpRegen, and that is with patients, obviously, having a lot of their own personal variability with their dosing and what their geographic atrophy looks like. With that said, as we look towards Roche getting to a pivotal and commercial process, and you combine that with sort of the area being relatively small surface area and eye docs have a lot of expertise in injecting the eyes, what do you personally feel or the company personally feel the level of the rate limiting step that getting the instruments and the methods down pat?

I believe that it's reasonable to say that there is no end to innovation and investigation on that matter. We have a baseline. The baseline was the time at which we entered into the agreement with Roche and Genentech. We had 24 treated patients, one compassionate use of 25 treated patients, 7 using a suprachoroidal delivery device, and the rest using a standard vitrectomy and retinotomy approach. That was data that obviously supported a nearly $700 million deal. It was a good starting point. The question I believe that you're asking is, 'How far can you go? What do you want to improve?' I presume, without being able to speak for our partner specifically, they would be looking at both benefits and risk. I think the SYFOVRE experience is a lovely example of this. The benefit is very small. Thus, a small risk is causing a lot of heartache for that program. If you have an enormous clinical benefit, and I think it's fair to say that the things we've shown in patients, especially now with today's update of two-year data, is exactly that. It’s an enormous benefit with vision going in the opposite direction of what’s expected. That provides some greater permissibility with safety because the surgical intervention, I presume, will always be more complex and lead to more adverse events than a simple injection into the eye. I will say that we don't have polyethylene glycol in our formulation, so we don't have to worry about the particular issue that SYFOVRE and Apellis are dealing with. However, it is still a surgery, and infrequent surgical events occurring with these kinds of interventions may be reduced with effort but probably will never go completely away. That will ultimately be part of the product profile and the package insert, and black boxes are relevant for different products. That’s how those things get addressed, and ultimately, their adoption by the surgeon and patient will determine whether it's successful. What I feel particularly good about is that the clinical benefit we're showing has been significant, and the product to date has been well tolerated in patients.

Very helpful. Thanks, again.

You’re welcome, Joe. Thanks for the question.

This concludes our Q&A session. I will now turn the call over to Mr. Brian Culley for closing remarks.

I have nothing more to add today, John. Thank you very much.

I would like to thank our speakers for today's presentation, and thank you all for joining us. This now concludes today's conference. You may now disconnect.