Lineage Cell Therapeutics, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed March 11, 2021. This is an annual report, not a standalone Q4 filing. Amounts below are U.S. dollars unless stated otherwise.
Business context and programs
Lineage is a clinical-stage biotechnology company developing allogeneic cell therapies. Its three clinical programs are OpRegen for advanced dry age-related macular degeneration (Phase 1/2a), OPC1 for acute spinal cord injury (Phase 1/2a and long-term follow-up), and VAC2 for non-small cell lung cancer (Phase 1). The company reported no FDA-approved therapeutic products and remains reliant on financing, grants, royalties and asset sales.
Financial performance and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | $1.826 million | $3.515 million |
| Gross profit | $1.441 million | $3.103 million |
| Gross margin | 78.9% | 88.3% |
| Research and development expense | $12.317 million | $17.948 million |
| General and administrative expense | $15.571 million | $24.031 million |
| Loss from operations | $26.447 million | $38.876 million |
| Net loss attributable to Lineage | $20.649 million ($0.14/share) | $11.709 million ($0.08/share) |
| Net cash used in operating activities | $19.753 million | $31.947 million |
Revenue fell 48%, mainly due to lower grants, royalties and license fees, and the cessation of research-product sales. Operating expenses declined 34%, including lower merger-related costs and reduced spending. Despite the smaller operating loss, attributable net loss widened, as FY2019 included substantial noncash gains on the Asterias and OncoCyte investments and a larger tax benefit.
At year-end, cash and cash equivalents were $32.585 million and marketable equity securities were $8.977 million; together these totaled $41.6 million. Working capital was $36.2 million, total assets $107.9 million, total liabilities $12.8 million, and shareholders’ equity $95.1 million. Liabilities included a $523,000 PPP loan and lease obligations; the filing reports no off-balance-sheet arrangements. Management said available cash, cash equivalents and marketable securities were expected to fund planned operations for at least 12 months from the financial statement issuance date, subject to assumptions and risks.
Operating cash burn improved year over year. Investing activities provided $13.0 million, primarily from sales of OncoCyte, AgeX and Hadasit shares. Financing activities provided $29.9 million, principally from repayment of the Juvenescence note ($24.6 million), ATM share sales ($5.1 million gross) and the PPP loan. These sources, including investment sales and note repayment, are important when assessing the sustainability of liquidity.
Material changes, outlook and risks
- OpRegen enrollment in the 24-patient Phase 1/2a study was completed in November 2020. Management reported preliminary tolerability and efficacy signals, including a patient with an approximately 25% smaller assessed geographic-atrophy area nine months after treatment; these findings are preliminary, not evidence of established efficacy.
- VAC2 was brought in-house through early exercise of the CRUK option. The license involved a £1.25 million signature fee, up to £8.0 million in development/regulatory milestones, up to £22.5 million in sales milestones and mid-single-digit royalties. Management targeted completing VAC2 enrollment in the first half of 2021.
- Management cited OPC1 manufacturing improvements and a ready-to-inject formulation. It planned to discuss further development with the FDA in the second half of 2021; those plans were not guarantees of trial progression or approval.
- Other stated 2021 priorities included presenting OpRegen data, evaluating OPC1 delivery improvements, and pursuing partnerships. The filing provides no financial revenue, earnings or cash-burn guidance.
- In the fourth quarter, revenue was $355,000, operating loss was $5.882 million, and net income attributable to Lineage was $2.032 million ($0.01/share). Annual net loss remained $20.649 million; quarterly earnings should be considered alongside volatile investment-related gains/losses and tax effects.
- After year-end, through March 5, 2021, Lineage reported $19.9 million gross proceeds from ATM sales and filed to offer an additional $25 million of shares. It also sold OncoCyte shares; its remaining holding was valued at about $4.2 million on March 5, 2021. These post-year-end proceeds and holdings are not year-end cash.
- Key risks include continued losses and possible future dilution; uncertain clinical outcomes and regulatory approval; COVID-19-related trial and operational disruption; dependence on third-party suppliers and collaborators; reimbursement and commercialization uncertainty; and fluctuating OncoCyte investment values. IIA grant terms can restrict transfer or manufacture of supported technology outside Israel and may require approval and payments.
- A Delaware shareholder action concerning the Asterias merger remained pending. Lineage denied the allegations and recorded no contingency accrual because loss was not considered probable or reasonably estimable. The company also applied for forgiveness of its PPP loan but could not assure forgiveness.
Most important facts for investors to verify
- Current unrestricted cash and cash runway, distinguishing cash from marketable securities and considering subsequent ATM proceeds and share dilution.
- Final, audited clinical data and safety follow-up for OpRegen, OPC1 and VAC2, and whether FDA discussions led to specific next-trial requirements or timelines.
- Whether the reported OpRegen structural and visual signals persist in follow-up and are supported by prespecified, controlled efficacy evidence.
- Actual costs, milestones, royalties and obligations under the CRUK license, and whether VAC2 enrollment and manufacturing plans were achieved.
- Resolution of the merger-related lawsuit and PPP forgiveness, plus any consequences of IIA restrictions or additional capital needs.