Lineage Cell Therapeutics(LCTX) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents Lineage Cell Therapeutics, Inc.'s unaudited interim financial statements and management's discussion Item 1. Financial Statements (Unaudited) Presents Lineage Cell Therapeutics, Inc.'s unaudited condensed consolidated interim financial statements and detailed notes Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and shareholders' equity at specific interim dates | ASSETS (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Cash and cash equivalents | $42,271 | $45,789 | | Marketable securities | $17 | $2,016 | | Total current assets | $43,844 | $50,997 | | Intangible assets, net | $31,700 | $46,540 | | TOTAL ASSETS | $90,799 | $113,218 | | LIABILITIES AND SHAREHOLDERS' EQUITY (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------------------------- | :------------ | :---------------- | | Total current liabilities | $10,756 | $13,977 | | Warrant liabilities | $18,801 | $6,161 | | TOTAL LIABILITIES | $43,687 | $36,206 | | Total shareholders' equity | $47,112 | $77,012 | - Total assets decreased from $113.2 million at December 31, 2024, to $90.8 million at June 30, 2025, primarily due to a decrease in intangible assets and cash/marketable securities[22] - Warrant liabilities significantly increased from $6.2 million to $18.8 million, reflecting changes in fair value[22] Condensed Consolidated Statements of Operations This statement details the company's revenues, expenses, and net loss for the interim periods | (in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Collaboration revenues | $2,532 | $1,098 | $3,802 | $2,285 | | Total revenues | $2,765 | $1,408 | $4,267 | $2,852 | | Research and development | $3,106 | $2,868 | $6,220 | $5,878 | | General and administrative | $4,560 | $4,363 | $9,417 | $9,360 | | Loss on impairment of intangible asset| $14,840 | $— | $14,840 | $— | | Total operating expenses | $22,545 | $7,275 | $30,552 | $15,380 | | Loss from operations | $(19,780) | $(5,867) | $(26,285) | $(12,528) | | Change in fair value of warrant liability | $(12,740) | $— | $(10,435) | $— | | NET LOSS ATTRIBUTABLE TO LINEAGE | $(30,464) | $(5,760) | $(34,603) | $(12,302) | | Net loss per common share (basic & diluted) | $(0.13) | $(0.03) | $(0.15) | $(0.07) | - Total revenues increased by 96% for the three months ended June 30, 2025, and by 50% for the six months ended June 30, 2025, primarily driven by higher collaboration revenues[24] - A significant non-cash impairment charge of $14.8 million on an intangible asset (VAC platform) was recorded for both the three and six months ended June 30, 2025[24] - Net loss attributable to Lineage increased substantially to $(30.5) million for the three months and $(34.6) million for the six months ended June 30, 2025, largely due to the intangible asset impairment and a negative change in the fair value of warrant liability[24] Condensed Consolidated Statements of Comprehensive Loss This statement presents the net loss and other comprehensive income (loss) components for the interim periods | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | NET LOSS | $(30,364) | $(5,773) | $(34,507) | $(12,331) | | Foreign currency translation adjustment | $(1,417) | $307 | $(1,217) | $605 | | COMPREHENSIVE LOSS ATTRIBUTABLE TO LINEAGE COMMON SHAREHOLDERS | $(31,881) | $(5,459) | $(35,825) | $(11,704) | - Comprehensive loss attributable to Lineage common shareholders significantly increased to $(31.9) million for the three months and $(35.8) million for the six months ended June 30, 2025, compared to the prior year, primarily driven by the increased net loss and negative foreign currency translation adjustments[26] Condensed Consolidated Statements of Changes in Shareholders' Equity Outlines the changes in the company's equity accounts over the interim periods | (in thousands) | Balance - December 31, 2024 | Shares issued through registered direct financing | Stock-based compensation | Net income (loss) | Balance - June 30, 2025 | | :------------- | :-------------------------- | :---------------------------------------------- | :----------------------- | :---------------- | :---------------------- | | Common Shares | 220,416 | 7,895 | — | — | 228,356 |\ | Amount | $484,722 | $3,795 | $2,455 | — | $490,551 |\ | Accumulated Deficit | $(403,465) | — | — | $(34,603) | $(438,068) |\ | Total Shareholders' Equity | $77,012 | $3,795 | $2,455 | $(34,507) | $47,112 | - Total shareholders' equity decreased from $77.0 million at December 31, 2024, to $47.1 million at June 30, 2025, primarily due to the net loss of $(34.5) million, partially offset by proceeds from registered direct financing and stock-based compensation[29] - Common shares outstanding increased by 7,940 thousand shares during the six months ended June 30, 2025, mainly from registered direct financing[29] Condensed Consolidated Statements of Cash Flows Reports cash flows from operating, investing, and financing activities for the interim periods | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :----------------------------- | :----------------------------- | | Operating activities | $(10,425) | $(10,959) | | Investing activities | $1,889 | $(8,831) | | Financing activities | $4,737 | $14,126 | | Net increase in cash, cash equivalents, and restricted cash | $(3,579) | $(5,822) | | Cash, cash equivalents and restricted cash at end of period | $42,775 | $30,170 | - Net cash used in operating activities decreased slightly to $(10.4) million for the six months ended June 30, 2025, from $(11.0) million in the prior year[32] - Investing activities provided $1.9 million in cash for the six months ended June 30, 2025, a significant improvement from $8.8 million used in the prior year, primarily due to maturities of U.S. Treasury securities[32] - Cash provided by financing activities decreased to $4.7 million for the six months ended June 30, 2025, from $14.1 million in the prior year, reflecting lower proceeds from equity offerings[32] Notes to the Condensed Consolidated Interim Financial Statements Provides additional information and explanations for the figures presented in the financial statements 1. Organization, Basis of Presentation and Liquidity Describes the company's business, financial statement presentation, and liquidity assessment - Lineage is a clinical-stage biotechnology company focused on allogeneic cell therapies for neurological and ophthalmic conditions, leveraging a proprietary cell-based technology platform for scalable and cost-effective manufacturing[34][35][139] - Key product candidates include OpRegen® for geographic atrophy (in Phase 2a with Roche/Genentech), OPC1 for spinal cord injury (initiating DOSED study for subacute and chronic SCI), and preclinical programs like ANP1, PNC1, and RND1[37][39][42] - As of June 30, 2025, the company had $42.3 million in cash, cash equivalents, and marketable securities, which management believes will be sufficient to fund operations for at least the next twelve months[47][190] 2. Summary of Significant Accounting Policies Outlines the key accounting principles and methods used in preparing the financial statements - No changes to significant accounting policies occurred during the six months ended June 30, 2025[53] - The company adopted ASU 2023-07 (Segment Reporting) effective for interim periods within fiscal years beginning after December 15, 2024, which did not have a significant impact[54] - The company is assessing the impact of recently issued ASUs 2024-03 (Disaggregation of Income Statement Expenses) and 2023-09 (Income Taxes) which are effective for fiscal years beginning after December 15, 2026, and 2025, respectively[56][57] 3. Revenue Provides details on the company's revenue recognition policies and disaggregated revenue streams | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Collaboration revenues | $2,532 | $1,098 | $3,802 | $2,285 | | Royalties, license and other revenues | $233 | $310 | $465 | $567 | | Total revenue | $2,765 | $1,408 | $4,267 | $2,852 | - Collaboration revenues increased significantly, with a $1.4 million increase for the three months and $1.5 million for the six months ended June 30, 2025, primarily due to continued progress on the Roche Agreement and recognition of $0.7 million from the termination of the Immunomic Therapeutics, Inc. license agreement[58][157] - The aggregate transaction price allocated to remaining performance obligations as of June 30, 2025, was $19.9 million, with $18.0 million reported as deferred revenues, expected to be converted to revenue by December 2026[59] 4. Marketable Securities Describes the company's investments in marketable debt and equity securities | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Marketable debt securities (within cash & cash equivalents) | $22,853 | $17,432 | | Marketable debt securities (within marketable securities) | $— | $1,992 | | Marketable equity securities (within marketable securities) | $17 | $24 | - The company holds U.S. Treasury securities as available-for-sale debt securities, with all maturing in one year or less as of June 30, 2025[62][63] - Marketable equity securities, classified as trading securities, primarily consist of Hadasit Bio-Holdings Ltd. shares, with a net unrealized loss of $(7) thousand for the six months ended June 30, 2025[64][65] 5. Property and Equipment, Net Details the company's property, plant, and equipment, including depreciation policies | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Equipment, furniture and fixtures | $4,615 | $4,131 | | Leasehold improvements | $2,486 | $2,300 | | Right-of-use assets - finance lease | $214 | $204 | | Accumulated depreciation and amortization | $(5,060) | $(4,384) | | Property and equipment, net | $2,255 | $2,251 | - Property and equipment, net, remained relatively stable at $2.3 million as of June 30, 2025, compared to December 31, 2024[67] - Depreciation and amortization expense for property and equipment was $335 thousand for the six months ended June 30, 2025, an increase from $295 thousand in the prior year[67] 6. Goodwill and Intangible Assets, Net Provides information on the company's goodwill and other intangible assets, including impairment assessments | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Goodwill | $10,672 | $10,672 | | Acquired IPR&D – OPC1 | $31,700 | $31,700 | | Acquired IPR&D – VAC | $— | $14,840 | | Intangible assets, net | $31,700 | $46,540 | - The VAC platform IPR&D intangible asset was deemed abandoned as of June 30, 2025, resulting in a non-cash pre-tax impairment charge of $14.8 million[68][72][164] - Goodwill was assessed qualitatively and no impairment was recognized as of June 30, 2025[69] 7. Accounts Payable and Accrued Liabilities Presents the breakdown of the company's short-term liabilities | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Accounts payable | $1,497 | $1,174 | | Accrued compensation | $2,161 | $3,066 | | Accrued liabilities | $793 | $1,197 | | Total | $4,451 | $5,437 | - Total accounts payable and accrued liabilities decreased to $4.5 million at June 30, 2025, from $5.4 million at December 31, 2024, primarily due to a decrease in accrued compensation and other accrued liabilities[70] 8. Fair Value Measurements Explains the valuation techniques and inputs used for assets and liabilities measured at fair value | (in thousands) | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :------------- | :------------------------- | :----------------------------- | | Money market fund | $12,806 | $21,570 | | Marketable debt securities | $22,853 | $19,424 | | Marketable equity securities | $17 | $24 | | Warrant liabilities | $18,801 | $6,161 | - Warrant liabilities, classified as Level 3, increased significantly from $6.2 million to $18.8 million during the six months ended June 30, 2025, primarily due to a $10.4 million change in fair value recognized in the consolidated statement of operations[74][75] - Key Level 3 inputs for valuing warrant liabilities include expected stock price volatility (71.78%-74.46%), risk-free interest rate (3.68%-4.25%), and expected term (2.89-3.32 years)[75] 9. Related Party Transactions Discloses transactions between the company and its related parties - In January 2025, Lineage sold 7,894,737 common shares and an accompanying warrant to Broadwood Partners, an affiliate of a board member, as part of the November 2024 Registered Direct Offering[77][92] - Broadwood Partners also participated in the February 2024 Registered Direct Offering, purchasing 6,730,770 common shares[76] 10. Shareholders' Equity Provides details on the components of shareholders' equity, including common stock and equity offerings - As of June 30, 2025, Lineage had 228,356,290 common shares issued and outstanding, an increase from 220,416,326 at December 31, 2024[79] - The company completed the November 2024 Registered Direct Offering, issuing 39,473,688 common shares and accompanying warrants, generating $30.0 million in gross proceeds[90][91][92] - As of June 30, 2025, $39.97 million remained available for sale under the at-the-market (ATM) offering program[84] 11. Stock-Based Awards Describes the company's stock option and restricted stock unit plans and related compensation expense | (in thousands, except per share amounts) | Balance at December 31, 2024 | Options granted | Options expired/forfeited/cancelled | Balance at June 30, 2025 | | :------------------------------------- | :--------------------------- | :-------------- | :--------------------------------- | :----------------------- | | Number of Options Outstanding (2021 Plan) | 16,658 | 7,328 | (157) | 23,829 | | Weighted Average Exercise Price (2021 Plan) | $1.30 | $0.53 | $1.12 | $1.07 | | Number of RSUs Outstanding | 501 | — | (167) | 334 | - Total stock-based compensation expense was $2.455 million for the six months ended June 30, 2025, slightly higher than $2.432 million in the prior year[99] - As of June 30, 2025, $8.5 million in unrecognized compensation costs related to unvested stock options and RSUs is expected to be recognized over weighted average periods of 2.8 years and 0.9 years, respectively[99] 12. Income Taxes Explains the company's income tax position, including deferred tax assets and valuation allowances - Lineage established a full valuation allowance as of December 31, 2018, due to the uncertainty of realizing future tax benefits from net operating loss carryforwards and other deferred tax assets[103][170] - No deferred tax benefit or provision expense was recorded for the six months ended June 30, 2025, or 2024[105] - The company is analyzing the tax impacts of the 'One Big Beautiful Bill Act' signed on July 4, 2025, but does not expect a material impact on its financial statements[104] 13. Commitments and Contingencies Outlines the company's contractual obligations, potential liabilities, and legal matters - Lineage has real property leases in Carlsbad, California, and its subsidiary CCN leases office and laboratory space in Jerusalem, Israel, with total future minimum lease commitments of $2.2 million for operating leases and $0.1 million for finance leases as of June 30, 2025[106][109][110][113] - Under the Roche Agreement, Lineage is eligible for up to $620.0 million in developmental, regulatory, and commercialization milestone payments, plus tiered double-digit percentage royalties on net sales of OpRegen[115] - The company is obligated to pay the Israel Innovation Authority (IIA) approximately 24.1% of any milestone and royalty payments received under the Roche Agreement, up to an aggregate cap of approximately $96.4 million as of June 30, 2025[121][182] - The CRT License Agreement for the VAC platform was terminated effective June 30, 2025, leading to an impairment charge of $14.8 million for the VAC platform IPR&D intangible asset[127] - A legal proceeding initiated by Hadasit Bio-Holdings Ltd. (HBL) alleges that an intercompany agreement between Lineage and CCN was not fairly priced; a third-party valuation firm's report in June 2025 stated the consideration was insufficient, and the parties are to advise the Court on settlement by September 7, 2025[130][131] Item 2. Management's Discussion and Analysis of Financial Condition and Result of Operations Management's perspective on financial condition, operations, business developments, performance, and liquidity Company and Business Overview Overview of the company's strategic focus, product pipeline, and operational highlights - Lineage is a clinical-stage biotechnology company developing allogeneic cell therapies for neurological and ophthalmic conditions, utilizing a proprietary cell-based technology platform for scalable and cost-effective manufacturing[139][140] - The lead program, OpRegen®, for geographic atrophy, is being developed under a collaboration with Roche/Genentech, which received RMAT designation in September 2024 and presented positive 36-month visual acuity results in June 2025[142][143] - The most advanced internally owned candidate, OPC1 for spinal cord injury, initiated the DOSED clinical study in February 2025, including chronic SCI patients for the first time, with the first chronic patient treated in July 2025[144] - Operations at the Jerusalem, Israel facility, where all manufacturing is conducted, have not been materially impacted by the Israeli regional conflict as of the filing date, but long-term disruptions remain a risk[149][150][151] Critical Accounting Estimates Discusses accounting policies requiring significant judgment and estimation by management - There have been no material changes to the company's critical accounting policies during the six months ended June 30, 2025[156] Results of Operations Analyzes the company's revenues, expenses, and overall financial performance for the reporting periods Revenue Comparison (in thousands) | Revenue Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Dollar Increase (Decrease) | Percent Increase (Decrease) | | :------------- | :------------------------------- | :------------------------------- | :------------------------- | :-------------------------- | | Collaboration revenues | $2,532 | $1,098 | $1,434 | 131% | | Royalties, license and other revenues | $233 | $310 | $(77) | (25)% | | Total revenues | $2,765 | $1,408 | $1,357 | 96% | | Revenue Type | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Dollar Increase (Decrease) | Percent Increase (Decrease) | | :------------- | :----------------------------- | :----------------------------- | :------------------------- | :-------------------------- | | Collaboration revenues | $3,802 | $2,285 | $1,517 | 66% | | Royalties, license and other revenues | $465 | $567 | $(102) | (18)% | | Total revenues | $4,267 | $2,852 | $1,415 | 50% | Operating Expenses Comparison (in thousands) | Expense Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Dollar Increase (Decrease) | Percent Increase (Decrease) | | :------------- | :------------------------------- | :------------------------------- | :------------------------- | :-------------------------- | | Cost of royalties | $39 | $44 | $(5) | (11)% | | Research and development | $3,106 | $2,868 | $238 | 8% | | General and administrative | $4,560 | $4,363 | $197 | 5% | | Loss on impairment of intangible asset | $14,840 | $— | $14,840 | 100% | | Total operating expenses | $22,545 | $7,275 | $15,270 | 210% | | Expense Type | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Dollar Increase (Decrease) | Percent Increase (Decrease) | | :------------- | :----------------------------- | :----------------------------- | :------------------------- | :-------------------------- | | Cost of royalties | $75 | $142 | $(67) | (47)% | | Research and development | $6,220 | $5,878 | $342 | 6% | | General and administrative | $9,417 | $9,360 | $57 | 1% | | Loss on impairment of intangible asset | $14,840 | $— | $14,840 | 100% | | Total operating expenses | $30,552 | $15,380 | $15,172 | 99% | - Total operating expenses increased by 210% for the three months and 99% for the six months ended June 30, 2025, primarily due to a $14.8 million non-cash impairment charge on the VAC platform intangible asset[162][164] - Research and development expenses increased by 8% and 6% for the three and six months, respectively, driven by preclinical programs[162] - A significant change in fair value of warrant liability resulted in a $(12.7) million loss for the three months and $(10.4) million loss for the six months ended June 30, 2025, compared to no such loss in the prior year, driven by an increase in the company's common share price[165][167] Liquidity and Capital Resources Assesses the company's ability to generate and manage cash flow, and its future funding requirements - As of June 30, 2025, the accumulated deficit was $438.1 million, with a net loss from operations of $26.3 million and negative cash flow from operations of $10.4 million for the six months ended June 30, 2025[171] - The company had $42.3 million in cash, cash equivalents, and marketable securities as of June 30, 2025, and believes this is sufficient to fund planned operations for at least the next twelve months[172][190] - In January 2025, $5.4 million in net proceeds were raised from the second closing of the November 2024 Registered Direct Offering, and up to an additional $36 million in gross proceeds could be received from the full cash exercise of OpRegen clinical milestone-linked warrants[172] - The company expects to incur significant operating losses for the foreseeable future and will require additional capital, which may be sought through equity offerings, debt financings, grants, or strategic alliances[188][189] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Lineage is exempt from market risk disclosures - The company is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a smaller reporting company[191] Item 4. Controls and Procedures Management evaluated disclosure controls and procedures as effective, with no material changes in internal control - Disclosure controls and procedures were evaluated and determined to be effective as of June 30, 2025[192] - No material changes in internal control over financial reporting occurred during the period covered by the report[193] PART II. OTHER INFORMATION Includes legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings The company is not a party to material legal proceedings, referring to Note 13 for specific details - The company is not currently a party to any material legal proceedings, beyond ordinary routine litigation incidental to its business[195] - For details on specific legal proceedings, including the HBL books and records request, refer to Note 13 (Commitments and Contingencies)[195] Item 1A. Risk Factors Investment in common shares involves high risk, particularly regarding consistent, cost-effective cGMP manufacturing - Investment in common shares involves a high degree of risk, with detailed risks outlined in the 2024 10-K[196] - A key risk factor is the uncertainty of consistently manufacturing clinical quantities of product candidates in accordance with cGMP, or at a cost-effective or commercially viable scale[197] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities This item is not applicable to the company for the reporting period - This item is not applicable[198] Item 3. Defaults Upon Senior Securities No defaults upon senior securities occurred during the reporting period - No defaults upon senior securities occurred[199] Item 4. Mine Safety Disclosures This item is not applicable to the company for the reporting period - This item is not applicable[200] Item 5. Other Information No other material information is reported, and no Rule 10b5-1 trading arrangements were adopted or terminated - No directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter[201] Item 6. Exhibits Lists all exhibits filed with the Form 10-Q, including organizational documents, amendments, and certifications - Exhibits include Restated Articles of Incorporation, Certificate of Ownership, Second Amended and Restated Bylaws, Amendment No. 2 to the 2021 Equity Incentive Plan, CEO and CFO certifications (31.1, 31.2, 32.1), and XBRL documents[202][203] Signatures Confirms the official signing and submission of the report by authorized officers - The report was signed on August 12, 2025, by Brian M. Culley, Chief Executive Officer, and Jill Ann Howe, Chief Financial Officer[207]