Lineage Cell Therapeutics, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparative period is FY2021. The filing also reports unaudited fourth-quarter results. Lineage is a clinical-stage biotechnology company developing allogeneic cell therapies; it has no approved products described in the filing.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $14.7 million | $4.3 million |
| Gross profit | $14.0 million | $2.9 million |
| Gross margin | 95.0% | 67.2% |
| Research and development expense | $14.0 million | $33.9 million |
| General and administrative expense | $22.5 million | $18.2 million |
| Operating loss | $22.5 million | $49.2 million |
| Net loss attributable to Lineage | $26.3 million | $43.0 million |
| Net loss per share, basic and diluted | $0.15 | $0.26 |
| Cash from (used in) operating activities | $1.1 million | $(23.6) million |
- Revenue was primarily collaboration revenue in 2022: $13.4 million, or 90.9% of total, versus $1.1 million in 2021. Royalties were $1.3 million, down from $2.8 million; grant revenue was nil versus $0.4 million.
- The revenue increase mainly reflects recognition of part of Roche’s $50 million upfront payment, received in January 2022 and initially deferred. At year-end, deferred revenue was $37.1 million; approximately $9.4 million was expected to be recognized within the following 12 months.
- R&D expense fell 59%, primarily because FY2021 included $21.0 million of royalty and redemption-fee expense related to the Roche agreement. G&A rose 24%, including increased legal and litigation costs, salaries and stock-based compensation.
- FY2022 other expense was $3.3 million, compared with $5.9 million of other income in FY2021. Results included a $2.2 million unrealized loss on marketable equity securities in 2022; FY2021 included a $6.0 million gain on sale of marketable securities.
Year-end financial position: Cash and cash equivalents were $11.4 million and marketable securities were $46.5 million, for total cash, cash equivalents and marketable securities of $57.9 million. Current assets were $60.0 million, current liabilities $19.0 million, total liabilities $51.7 million, and shareholders’ equity $71.9 million. The balance sheet shows lease liabilities; the filing does not identify conventional borrowing as a material source of debt. Operating cash flow benefited from working-capital movements related to the Roche payment and related payments. Investing cash outflow was $46.2 million, largely purchases of U.S. Treasury securities; financing cash inflow was $1.6 million.
Q4 2022: Revenue was $1.9 million, operating expenses $8.5 million, operating loss $6.6 million, and net loss attributable to Lineage $6.4 million.
Material changes and business developments
- Roche/Genentech launched a Phase 2a OpRegen study in late 2022, planned for approximately 30 to 60 patients with geographic atrophy secondary to age-related macular degeneration. Roche holds exclusive worldwide development and commercialization rights. Lineage may receive up to $620 million in milestones plus tiered double-digit royalties, subject to agreement terms and intellectual-property conditions.
- Lineage paid $12.1 million to the Israeli Innovation Authority and $8.9 million to Hadasit in connection with the Roche upfront payment. Further payments to these parties may be due on future Roche milestones and royalties.
- VAC2 Phase 1 enrollment in non-small cell lung cancer was completed at eight patients by Cancer Research UK. ANP1 auditory-neuron and PNC1 photoreceptor programs were added to the pipeline and remained preclinical.
- At December 31, 2022, the five programs were OpRegen (Phase 2a, partner-led), OPC1 (long-term follow-up after Phase 1/2a; further studies planned), VAC2 (Phase 1), ANP1 (preclinical), and PNC1 (preclinical).
Outlook, risks and unusual items
- Management said year-end liquidity was expected to fund planned operations for at least 12 months from issuance of the financial statements. It also said substantial additional capital will be needed to complete development and pursue regulatory approval and commercialization; no quantified longer-term funding forecast was provided.
- Lineage has incurred losses since inception and reported an accumulated deficit of $363.4 million. Management expects continued losses for at least several years. It may seek funding through equity, debt, grants, or collaborations; financing may be unavailable, dilutive, or require concessions of rights.
- Key risks include clinical and regulatory uncertainty; dependence on Roche for OpRegen; manufacturing and supply-chain challenges; reliance on a single cGMP manufacturing facility in Jerusalem; geopolitical and operational risks in Israel; potential intellectual-property and reimbursement limitations; and competition. The filing notes FDA approval of Syfovre in February 2023 and FDA acceptance of Iveric Bio’s Zimura application.
- Israeli Innovation Authority rules impose manufacturing, technology-transfer and payment obligations. The IIA’s stated aggregate payment cap associated with OpRegen was approximately $91.2 million at year-end 2022 and accrues interest until paid. CIRM funding for OPC1 totaled $14.3 million and entails potential royalties on qualifying future commercial revenue.
- In February 2023, a court approved settlement of Asterias merger litigation. The $10.65 million settlement was funded approximately $7.12 million by insurers and $3.53 million by Lineage. A separate Premvia product-liability settlement was also reached; the company said insurance covered its payment except for a $25,000 deductible.
- The independent auditor issued an unqualified opinion on the financial statements. Revenue recognition for the Roche collaboration was identified as a critical audit matter because it involved judgments about the performance period and estimated total inputs. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not express an opinion on internal-control effectiveness.
Important facts for investors to verify
- Progress, enrollment, safety and efficacy data from Genentech’s OpRegen Phase 2a study, and the timing and conditions for any Roche milestone or royalty payments.
- The reconciliation of Roche upfront cash received, revenue recognized, deferred revenue, and related obligations to the IIA and Hadasit; confirm how future payments and the IIA cap are calculated.
- Cash runway assumptions, spending plans, and whether additional financing will be required sooner than management’s stated 12-month liquidity horizon.
- Clinical plans and funding for OPC1, VAC2, ANP1 and PNC1, including regulatory feedback, delivery-device study milestones, and partner commitments.
- Exposure to production interruption at the Jerusalem facility, availability of key third-party supplies, and the cost and timeline to scale or transfer manufacturing.
- Final settlement cash impact and any additional material legal, tax, grant, lease or contingent obligations disclosed in subsequent filings.