Lineage Cell Therapeutics, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Lineage is a clinical-stage biotechnology company developing cell therapies. Its three clinical programs are OpRegen for dry age-related macular degeneration, OPC1 for acute spinal cord injury, and VAC2 for non-small cell lung cancer.
Financial results and liquidity
| Metric (USD millions, except per-share data) | Q1 2021 | Q1 2020 |
|---|---|---|
| Total revenue | $0.391 | $0.514 |
| Gross profit | $0.279 | $0.420 |
| Gross margin | 71.4% | 81.7% |
| Research and development | $3.394 | $3.339 |
| General and administrative | $3.935 | $4.519 |
| Operating loss | $(7.050) | $(7.438) |
| Net loss attributable to Lineage | $(1.416) | $(8.399) |
| Basic and diluted loss per share | $(0.01) | $(0.06) |
| Net cash used in operating activities | $(7.424) | $(5.026) |
- At March 31, cash and cash equivalents were $56.2 million and marketable equity securities were $6.2 million, or $62.4 million combined. Working capital was $58.0 million; accumulated deficit was $295.5 million.
- Management said available cash and marketable securities were expected to fund planned operations for at least 12 months from issuance of the interim financial statements. It may sell securities or seek additional financing; future financing is not assured and equity issuance could dilute shareholders.
- Cash provided by investing activities was $10.1 million, primarily from selling OncoCyte shares. Financing activities provided $21.0 million, principally from $19.3 million net share-sale proceeds and $1.7 million from option exercises. Cash, cash equivalents and restricted cash increased $23.5 million to $56.7 million.
- Total liabilities were $11.4 million, including $3.0 million of operating lease liabilities and a $0.5 million PPP loan payable. On May 13, 2021, the company received notice that the PPP loan was forgiven in full. No material conventional borrowings were reported in the supplied filing text.
Material changes versus the prior period
- Revenue declined 24% as grant revenue fell $0.25 million, mainly because NIH grant activities had ended in 2020; royalties and license fees rose $0.13 million. Gross profit fell 34%, and gross margin declined from 81.7% to 71.4%.
- Operating loss narrowed by $0.39 million. Lower G&A, including reduced merger-related, legal, and facility costs, was partly offset by slightly higher R&D spending.
- Net loss improved substantially, chiefly because of investment-related gains: $6.0 million realized gain from OncoCyte share sales and $1.2 million unrealized gain, versus a net investment loss in Q1 2020. These gains are not operating revenue and may fluctuate with OncoCyte’s share price.
- Operating cash use increased by $2.4 million year over year. Lineage sold about 2.5 million OncoCyte shares during the quarter and held approximately 1.1 million shares, valued at $5.8 million at quarter-end.
- Common shares outstanding rose to 162.1 million at March 31 from 153.1 million at December 31, 2020. The company had completed $25 million of its ATM offering and registered an additional $25 million capacity; no sales under that additional capacity had occurred by May 7, 2021.
Outlook, developments and key risks
- Management expects continued operating losses and substantial R&D spending; the filing provides no revenue, earnings, or clinical milestone guidance. All three programs remained in early-stage clinical trials.
- COVID-19 had affected enrollment in the OpRegen and VAC2 studies as some sites paused enrollment and patients deferred participation. The majority of sites had resumed enrollment, but further delays remained possible.
- As of May 3, the filing described data from the fully enrolled 24-patient OpRegen Phase 1/2a trial: the procedure and cells were generally well tolerated, with no treatment-related systemic serious adverse events reported; vision in 10 of 12 patients in the better-vision cohort had improved or remained stable. These findings were preliminary and not predictive of later trial outcomes.
- On April 16, 2021, Lineage licensed VAC-platform rights to Immunomic Therapeutics. The agreement provides for $2.0 million in upfront fees over the first year, up to $67.0 million in development and commercial milestones, and royalties of up to 10% on future net sales.
- Lineage exercised an extension of its Gyroscope device option for $0.5 million, then decided not to pursue a distribution agreement; the agreement terminated May 11, 2021.
- A Delaware shareholder action relating to the Asterias merger remained pending. The company said loss was possible but not probable or reasonably estimable and recorded no accrual. Other principal risks include clinical and regulatory uncertainty, manufacturing and supply constraints, funding needs, intellectual-property challenges, dependence on partners and grants, and volatility in the value of OncoCyte holdings.
Important facts for investors to verify
- Current cash runway assumptions, expected R&D spending, and whether additional ATM sales or other financing will be required.
- Progress, enrollment, safety, and complete results for OpRegen, OPC1, and VAC2, including the effect of COVID-19 and any manufacturing changes.
- Terms, timing, and collectability of the Immunomic upfront payments, milestones, and royalties.
- OncoCyte share value and the resulting realized or unrealized gains, losses, and liquidity available from any future sales.
- Developments in the Asterias merger litigation and any change in the company’s assessment of potential loss.