Lineage Cell Therapeutics, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Lineage is a clinical-stage cell-therapy company with programs spanning ophthalmology, spinal cord injury, oncology, and hearing loss. Amounts below are in U.S. dollars; financial statement amounts are in millions unless stated otherwise.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / prior balance date |
|---|---|---|
| Total revenue | $5.237 | $0.391 |
| Gross profit | $5.061 | $0.279 |
| Gross margin | 96.6% | 71.4% |
| Operating expenses | $11.457 | $7.329 |
| Operating loss | $(6.396) | $(7.050) |
| Net loss attributable to Lineage | $(7.087) | $(1.416) |
| Basic and diluted loss per share | $(0.04) | $(0.01) |
| Net cash from (used in) operating activities | $21.904 | $(7.424) |
| Cash, cash equivalents and marketable equity securities | $79.9 | $58.4 at Dec. 31, 2021 |
| Total liabilities | $59.302 | $83.647 at Dec. 31, 2021 |
Cash and cash equivalents were $78.062 million at quarter-end; marketable equity securities were $1.882 million. Operating cash flow benefited substantially from collection of Roche’s $50 million upfront payment, with related payments to the Israel Innovation Authority (IIA) and Hadasit and other working-capital movements. It should not be interpreted as recurring operating cash generation.
The filing reports no conventional borrowings. Lease liabilities were approximately $2.5 million for operating leases and $0.057 million for finance leases. Current assets were $81.872 million and current liabilities $24.593 million.
Changes versus the prior comparable period
- Revenue rose $4.846 million, primarily from $4.865 million of Roche collaboration revenue recognized from the upfront payment; royalties increased $0.079 million, while grant revenue fell $0.098 million.
- Operating loss narrowed by $0.654 million, but net loss attributable to Lineage increased by $5.671 million. The prior-year quarter included a $6.024 million realized gain on OncoCyte shares and a $1.239 million unrealized gain; Q1 2022 instead recorded a $0.735 million unrealized loss on marketable equity securities.
- Research and development expense declined 12% to $2.988 million, mainly reflecting lower OPC1 spending, partly offset by higher OpRegen, VAC, and ANP1 costs. General and administrative expense increased 115% to $8.469 million, including a $3.5 million litigation-settlement accrual and higher stock compensation.
- Cash and cash equivalents increased from $55.742 million to $78.062 million, while accounts and grants receivable fell from $50.840 million to $0.515 million, principally after Roche’s upfront payment was collected.
Business developments, outlook and risks
- Roche / OpRegen: Roche has exclusive worldwide development and commercialization rights to OpRegen and related RPE therapies. Lineage received a $50 million upfront payment and recognized $4.865 million of collaboration revenue in Q1 using a cost-incurred-over-total-estimated-costs measure. Lineage may receive up to $620 million in development, regulatory, and commercial milestones plus tiered double-digit royalties, subject to contractual conditions. Roche leads further development and commercialization; Lineage remains responsible for specified ongoing-study and manufacturing/process-development work.
- Partner-related payments: Lineage paid $12.1 million to the IIA and $8.9 million to Hadasit following receipt of the Roche payment. The IIA may receive approximately 24.3% of eligible Roche payments, subject to an accruing aggregate cap ($90.6 million at March 31, 2022); Hadasit also has contractual sublicensing and royalty entitlements.
- Liquidity and funding: Management believes cash, cash equivalents, marketable securities, and projected cash flows will fund planned operations for at least 12 months from issuance of the financial statements. The company nevertheless expects continued losses and says significant additional capital will be needed over the longer term. $63.8 million remained available under its ATM program at March 31, 2022. Management cautions that financing may be unavailable or dilutive and that programs could be delayed, curtailed, or suspended if funding is insufficient.
- Clinical pipeline: OpRegen was in Phase 1/2a follow-up with enrollment completed; OPC1 was in long-term follow-up; VAC2 was in a Phase 1 NSCLC trial conducted and funded by Cancer Research UK; ANP1 and other candidates were preclinical. The filing also describes PNC1 as preclinical as of the filing date.
- Litigation: In April 2022, after quarter-end, parties reached an agreement in principle to settle Asterias-merger litigation for approximately $10.7 million. Lineage expects to pay about $3.5 million, with insurance expected to cover the balance. Settlement remains subject to definitive documentation and court approval; the company recorded the estimated liability in Q1.
- Other uncertainties: Management identifies clinical-development, manufacturing, third-party performance, intellectual-property, funding, COVID-19, and Russia–Ukraine conflict risks. It warns that market-price changes in OncoCyte shares can materially affect reported earnings and that the securities’ sale value may differ from their stated fair value. No specific revenue or earnings guidance is provided.
Important facts for investors to verify
- Whether the Asterias litigation settlement is finalized and approved, and whether Lineage’s expected contribution remains approximately $3.5 million.
- Roche program progress, the basis and pace of upfront-fee revenue recognition, remaining performance obligations, and the conditions and timing for potential milestones and royalties.
- Actual cash burn excluding the Roche-related collection and associated payments, and the assumptions supporting management’s 12-month liquidity assessment.
- Future capital needs, ATM usage and potential dilution; the filing reports 169,727,395 common shares outstanding at March 31, 2022.
- Clinical progress and spending across partnered and internally funded programs, plus any effects of geopolitical or other disruptions on trials and suppliers.