Business context and reporting period
Lineage Cell Therapeutics, Inc. filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2021. The clinical-stage biotechnology company is developing allogeneic cell therapies: OpRegen for dry age-related macular degeneration, OPC1 for spinal cord injury, and VAC2 for non-small cell lung cancer. All three programs were in clinical development; Lineage had no approved therapeutic products described in the filing.
Financial results and liquidity
| Metric | Three months ended June 30, 2021 | Six months ended June 30, 2021 | Comparable 2020 period |
|---|---|---|---|
| Revenue | $0.512 million | $0.903 million | $0.386 million and $0.900 million |
| Gross profit | $0.387 million | $0.666 million | $0.311 million and $0.731 million |
| Gross margin | 75.6% | 73.8% | 80.6% and 81.2% |
| Operating expenses | $7.467 million | $14.796 million | $6.713 million and $14.571 million |
| Operating loss | $7.080 million | $14.130 million | $6.402 million and $13.840 million |
| Net loss attributable to Lineage | $4.788 million | $6.204 million | $6.522 million and $14.921 million |
| Net loss per share | $0.03 | $0.04 | $0.04 and $0.10 |
| Net cash used in operating activities | Not separately provided | $12.840 million | $9.265 million |
Dollar amounts are shown in millions except per-share data. Revenue remained modest and consisted of grant revenue, royalties and license fees, and collaboration revenue; it was not reported as product sales. The Q2 gross margin percentages are calculated from reported revenue and gross profit.
At June 30, cash and cash equivalents were $62.001 million and marketable equity securities were $6.745 million, or approximately $68.7 million combined. Total current assets were $71.577 million, current liabilities $6.768 million, and working capital $64.8 million. Total assets were $134.754 million, total liabilities $11.153 million, and shareholders’ equity $123.601 million. Accumulated deficit was $300.282 million.
Cash increased by $29.333 million during the six months. Operating activities used $12.840 million; investing activities provided $9.959 million, primarily from OncoCyte share sales; and financing activities provided $32.257 million, mainly from common-share sales and employee option exercises. The company reported $2.868 million of operating lease liabilities, $0.033 million of finance lease liabilities, and $0.384 million of warrant liabilities. The $0.523 million PPP loan was forgiven in May 2021; Lineage recognized a corresponding gain.
Material changes versus prior comparable periods
- Q2 revenue rose 33% to $0.512 million, reflecting $0.213 million of new ITI collaboration revenue and higher royalties, partly offset by lower grants. Six-month revenue was nearly unchanged at $0.903 million: higher royalties and collaboration revenue offset lower grant revenue.
- Q2 operating expenses rose 11%, with R&D up 4% and general and administrative expense up 16%. Six-month operating expenses increased about 2%.
- Operating cash use increased to $12.840 million from $9.265 million in the first half of 2020.
- Lineage raised capital through its at-the-market offering and employee option exercises. By June 30, it had sold 13.86 million shares under the ATM for $33.1 million gross proceeds; common shares outstanding increased from 153.1 million at December 31, 2020 to 167.0 million at June 30, 2021.
- Other income was materially affected by OncoCyte investment sales and fair-value movements. First-half 2021 included $6.024 million in realized gains and $1.830 million in unrealized gains on marketable securities, as well as the PPP forgiveness gain.
Outlook, management commentary, risks and unusual items
- Management stated that cash, cash equivalents, and marketable equity securities were expected to fund planned operations for at least 12 months from issuance of the interim financial statements. This assessment depends on forecasts and assumptions; Lineage cautioned that inadequate financing could require it to delay, curtail, or suspend programs. It may sell marketable securities or seek additional financing, which could dilute shareholders.
- No quantified revenue, earnings, or cash-burn guidance was provided. Lineage expects continued operating losses and substantial R&D spending while its candidates remain in development.
- On April 16, 2021, Lineage signed a worldwide VAC-platform collaboration with Immunomic Therapeutics. Terms include $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 recognized $0.213 million of collaboration revenue in the quarter and first half; $0.464 million of deferred revenue remained at June 30.
- Management reported an update from the fully enrolled 24-patient OpRegen Phase 1/2a trial: three Cohort 4 patients showed retinal tissue integration, and visual acuity improved above baseline within six months in those patients. The filing notes these findings are preliminary and do not predict later trial results.
- COVID-19 had affected OpRegen enrollment previously and was affecting VAC2 trial activity; future enrollment and follow-up delays remained uncertain. Other central risks include clinical and regulatory failure, manufacturing and supply constraints, dependence on funding and collaborators, intellectual-property challenges, and volatility in the value of the OncoCyte investment.
- A Delaware shareholder lawsuit concerning the Asterias merger remained pending. Lineage stated it intended to defend the claims; it recorded no liability because a loss was considered possible but not probable or reasonably estimable. The filing also describes a prior related California action resolved with a $0.200 million attorneys’ fee payment.
- Lineage ended its option period for Gyroscope’s Orbit subretinal delivery device in May 2021 without pursuing a distribution and sale agreement. It also disclosed restrictions and potential royalty or approval obligations associated with Israeli Innovation Authority-funded technology.
Most important facts for investors to verify
- Whether the stated liquidity runway remains adequate as clinical-program spending and operating cash use continue.
- Progress, safety, enrollment, and follow-up data for OpRegen, OPC1, and VAC2, including the status and limitations of preliminary OpRegen findings.
- Actual cash receipts and performance obligations under the ITI agreement, and the likelihood and timing of any milestones or royalties.
- Future OncoCyte share-sale proceeds and fair-value exposure; the reported investment value can fluctuate and may not be fully realizable at the quoted market price.
- Potential dilution from further ATM issuance, employee equity awards, or other financing, and the remaining availability under the $50 million ATM program.
- Developments in the Asterias-merger litigation, COVID-related trial disruption, manufacturing capacity, and IIA restrictions on funded intellectual property.