Lineage Cell Therapeutics, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Amounts below are in U.S. dollars; financial statement figures are in millions unless otherwise noted.
Business context
Lineage is a clinical-stage biotechnology company developing allogeneic cell therapies. Its lead program, OpRegen (RG6501), is being developed by Roche for geographic atrophy associated with age-related macular degeneration. Other programs include OPC1 for spinal cord injury and preclinical ANP1, PNC1 and RND1.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Total revenue | $1.444 million | $2.386 million |
| Operating expenses | $8.105 million | $9.028 million |
| Operating loss | $6.661 million | $6.642 million |
| Net loss attributable to Lineage | $6.542 million | $4.372 million |
| Basic and diluted loss per share | $0.04 | $0.03 |
| Net cash used in operating activities | $5.783 million | $11.242 million |
- Revenue was primarily collaboration revenue: $1.187 million, down 44% year over year; royalties, license and other revenue was $0.257 million.
- Research and development expense fell 28% to $3.010 million; general and administrative expense rose 6% to $4.997 million.
- Cash, cash equivalents and marketable securities totaled $43.6 million at March 31, 2024. Cash, cash equivalents and restricted cash totaled $44.1 million.
- Operating cash use improved year over year. Financing provided $14.021 million, principally reflecting the February registered direct offering. The offering sold 13.462 million shares at $1.04 per share; the company reported approximately $13.8 million net proceeds.
- There was no marketable debt securities balance at quarter-end. The filing reports no conventional borrowings; liabilities include $3.254 million of operating and finance lease liabilities and $28.283 million of deferred revenue.
- Accumulated deficit was $391.4 million. Common shares outstanding increased from 174.987 million at year-end to 188.754 million at March 31; 188,798,145 shares were outstanding May 3.
Changes versus prior-year quarter and year-end
- Total revenue declined 39%, mainly because lower estimated costs to complete Roche collaboration obligations reduced revenue recognized under the cost-based revenue method.
- Operating expenses declined 10%, chiefly from lower R&D spending, partly offset by higher G&A costs. Operating loss was broadly flat.
- Net loss attributable to Lineage increased from $4.372 million to $6.542 million. Q1 2023 included a $1.803 million deferred tax benefit and $0.457 million of other income, including an employee retention credit; neither was recorded comparably in Q1 2024.
- Cash and cash equivalents rose from $35.442 million at December 31, 2023 to $43.576 million at March 31, 2024, largely following the equity financing. Shareholders’ equity increased to $70.990 million.
Outlook, commentary and risks
- Management believes available cash, cash equivalents and marketable securities, together with projected cash flows, will fund planned operations for at least 12 months from issuance of the financial statements. The company expects continued losses and says it will need significant additional capital over time; future financing could dilute shareholders or require relinquishing rights.
- Lineage may receive up to $620 million in additional developmental, regulatory and commercialization milestones, plus tiered double-digit royalties, under the Roche agreement. These payments are contingent; the company also owes the Israel Innovation Authority approximately 24.1% of future Roche milestone and royalty receipts, subject to an accruing cap that was approximately $93.8 million at quarter-end.
- In January 2024, Lineage filed an IND amendment for its planned OPC1 DOSED study. FDA review remained ongoing, although the company said information requests had not required activities expected to delay commencement. It was preparing to open the first site in Q2 2024.
- On May 7, 2024, after quarter-end, Lineage entered a Genentech service agreement to provide supplemental clinical, technical, training, manufacturing and procurement services for OpRegen.
- Manufacturing and more than two-thirds of the workforce are based at Cell Cure’s Jerusalem facility. The company reported no material adverse operational impact from the Israel-Hamas war as of the report date, but warned that prolonged disruption, facility damage or employee call-ups could materially affect operations; war-related losses may not be covered by insurance.
- A Cell Cure shareholder’s document-disclosure proceeding concerning the fairness of an intercompany agreement remained unresolved. The court proposed a third-party valuation assessment; the company recorded no contingency accrual because loss was not considered probable or estimable. The filing reports no other pending material litigation.
- The company reported no material changes to the risk factors in its 2023 Form 10-K. Disclosure controls were deemed effective, with no material changes in internal control over financial reporting.
Investor verification priorities
- Track cash burn, remaining runway and the timing and terms of any further financing; verify potential dilution from the $40 million remaining ATM capacity.
- Monitor Roche program progress, collaboration revenue recognition and whether milestone or royalty payments become achievable, including related IIA and Hadasit obligations.
- Confirm FDA clearance and actual site-opening timing for the OPC1 DOSED study.
- Assess the operational status of the Jerusalem facility and workforce amid regional conflict, including insurance coverage and business-continuity readiness.
- Follow the Cell Cure shareholder proceeding and any findings from the proposed independent valuation review.