Lineage Cell Therapeutics : Annual report which provides a comprehensive overview of the company for the past year

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

• ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

OR

• TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from___________ to __________

		Commission file number 001-12830
	Lineage Cell Therapeutics, Inc.
	(Exact name of registrant as specified in its charter)
California						94-3127919
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						Identification No.)
			2173 Salk Avenue, Suite 200
			Carlsbad, California 92008
	(Address of principal executive offices) (Zip Code)
	Registrant's telephone number, including area code [phone]
	Securities registered pursuant to Section 12(b) of the Act
Title of each class			Trading Symbol(s)	Name of each exchange on which registered
Common shares			LCTX			NYSE American LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

The aggregate market value of the registrant's voting and non-voting common equity held by non-affiliates of the registrant, based on the closing price of the registrant's common shares on the NYSE American on June 30, 2023, the last business day of the registrant's most recently completed second fiscal quarter, was $185.6 million.

The number of common shares outstanding as of March 1, 2024 was 188,533,536.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement relating to its 2024 annual meeting of shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.

Lineage Cell Therapeutics, Inc.

Table of Contents

Page

Number

Part I.

Item 1

Business

5

Item 1A

Risk Factors

33

Item 1B

Unresolved Staff Comments

76

Item 1C

Cybersecurity

76

Item 2

Properties

77

Item 3

Legal Proceedings

77

Item 4

Mine Safety Disclosures

77

Part II.

Item 5

Market For Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

78

Item 6

Reserved

78

Item 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

79

Item 7A

Quantitative and Qualitative Disclosures about Market Risk

89

Item 8

Financial Statements and Supplementary Data

90

Item 9

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

127

Item 9A

Controls and Procedures

127

Item 9B

Other Information

128

Item 9C

Disclosure Regarding Foreign Jurisdictions that Present Inspections

128

Part III.

Item 10

Directors, Executive Officers, and Corporate Governance

129

Item 11

Executive Compensation

129

Item 12

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

129

Item 13

Certain Relationships and Related Transactions, and Director Independence

129

Item 14

Principal Accountant Fees and Services

129

Part IV.

Item 15

Exhibits and Financial Statements Schedules

130

Item 16

Form 10-K Summary

133

Signatures

134

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PART I

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that involve substantial risks and uncertainties. The forward-looking statements are contained principally in Part I, Item 1. "Business," Part I, Item 1A. "Risk Factors," and Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations," but are also contained elsewhere in this report. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this report are forward-looking statements. In some cases, you can identify forward-looking statements by the words "may," "might," "will," "could," "would," "should," "expect," "intend," "plan," "objective," "anticipate," "believe," "estimate," "predict," "project," "potential," "continue" and "ongoing," or the negative of these terms, or other comparable terminology intended to identify statements about the future. Forward- looking statements in this report include, but are not limited to, statements about:

• the potential to receive developmental, regulatory, and commercialization milestone and royalty payments under our Collaboration and License Agreement with F. Hoffmann-La Roche Ltd and Genentech, Inc.;
• our plans to research, develop and commercialize our product candidates;
• the initiation, progress, success, cost and timing of our clinical trials and other product development activities;
• the therapeutic potential of our product candidates, and the indications for which we intend to develop our product candidates;
• our ability to successfully manufacture our product candidates for clinical development and, if approved, for commercialization, and the timing and costs of such manufacture;
• the potential of our cell therapy platform;
• our ability to obtain additional capital to fund our operations;
• our expectations and plans regarding existing and potential future collaborations with third parties such as pharmaceutical and biotechnology companies, government agencies, academic laboratories, and research institutes for the discovery, development, and/or commercialization of novel cell therapy products;
• the size and growth of the potential markets for our product candidates and our ability to serve those markets;
• the potential scope and value of our intellectual property rights; and
• the effects on our operations of the Israel-Hamas war, other geopolitical conflicts, political and economic instability, public health emergencies and macroeconomic conditions.

Forward-looking statements reflect our views and expectations as of the date of this report about future events and our future performance and condition, and involve known and unknown risks, uncertainties and other factors that may cause our actual activities, performance, results or condition to be materially different from those expressed or implied by the forward-looking statements. You should refer to Part I, Item 1A. "Risk Factors" of this report for a discussion of important factors that may cause our actual activities, performance, results and condition to differ materially from those expressed or implied by our forward-looking statements. As a result of a variety of factors, including those discussed in Part I, Item 1A. of this report, our forward- looking statements may prove to be inaccurate, and the inaccuracy may be material. Accordingly, you should not place undue reliance on any forward- looking statement. We anticipate that subsequent events and developments may cause our current views and expectations to change. However, while we may elect to update the forward-looking statements in this report at some point in the future, we undertake no obligation to publicly update any forward- looking statements, whether as a result of new information, future events or otherwise, except as required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date after the date of this report.

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You should read this report and the documents that we reference in this report completely and with the understanding that our actual future performance, results and condition may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

This report also contains market data, industry forecasts and other data made by independent parties and by us relating to market size and growth and other data about our industry. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. In addition, projections, assumptions and estimates of our future performance and the future performance of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk.

All brand names or trademarks appearing in this report are the property of their respective owners. Solely for convenience, the trademarks and trade names in this report may be referred to without the symbols ® and TM, but such references should not be construed as any indication that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

Unless otherwise stated or the context requires otherwise, references in this report to "Lineage," the "Company," "our company," "we," "us," and "our" refer collectively to Lineage Cell Therapeutics, Inc. and its consolidated subsidiaries.

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RISK FACTOR SUMMARY

Below is a summary of the material factors that make an investment in our common shares speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading "Risk Factors" in Item 1A of Part I of this report and should be carefully considered, together with other information in this report and our other filings with the Securities and Exchange Commission (the "SEC") before making investment decisions regarding our common shares.

• We have incurred operating losses since inception, and we do not know if or when we will attain profitability.
• Our investigational allogeneic cell therapies represent a novel approach to the treatment of serious medical conditions, which gives rise to significant challenges. Clinical development of our product candidates is a lengthy and expensive process with a high level of uncertainty as to timing and ultimate outcome. We or our collaborators may not succeed in developing or obtaining regulatory approval to market and sell any of our product candidates.
• We will continue to spend a substantial amount of our capital on research and development, but we might not succeed in developing products and technologies that are safe and effective for their target indications or commercially viable.
• We will need to raise substantial additional capital to complete the development and seek regulatory approval of our product candidates and to commercialize products approved for marketing, if any, and capital raising transactions may cause dilution to our existing shareholders, restrict our operations, or require us to relinquish rights to or dilute our economic interest in our product candidates or technology. If we are unable to obtain adequate capital, we may delay, reduce, limit the pace of, suspend or discontinue our product and technology development programs, which could significantly harm our business and prospects and cause the market price of our common shares to decline.
• We are dependent on our third-party collaboration with Roche to develop and commercialize RG6501 (OpRegen®). If Roche is not successful in developing and commercializing OpRegen and/or Roche terminates the collaboration, we will lose a significant source of potential revenue, development and potential regulatory approval of OpRegen may be significantly delayed, and we may not be successful in establishing an alternative strategic collaboration or pursuing independent development and commercialization of OpRegen.
• If we fail to meet our obligations under our in-license agreements, we may lose our rights to key technologies on which our business depends.
• All of our manufacturing operations currently are conducted at our facility in Jerusalem, Israel. Accordingly, political and economic conditions in Israel and war, terrorist attacks or other armed conflicts involving Israel, such as the Israel-Hamas war, could directly affect our business. Any event or condition that significantly disrupts our ordinary course of operations at our Jerusalem facility could harm our business and materially and adversely affect our financial condition and operating results. Further, our operations in Israel expose us to additional business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States.
• Our subsidiary Cell Cure Neurosciences Ltd. has received Israeli government grants for certain of its research and development activities. The terms of these grants may require us to seek approvals and to satisfy specified conditions to manufacture products and transfer or license grant-supported technologies outside of Israel. In the context of such approvals, we will be required to pay penalties in addition to the repayment of the grants.
• We have relied on grant funding from CIRM (defined below) to support clinical development of OPC1 and we may not be able to obtain additional CIRM funding on a timely basis, or at all, which could adversely impact our ability to conduct and complete the DOSED clinical study of OPC1 (described below). In addition, our profits from the sale of products resulting from CIRM-funded development, if any, will be reduced by amounts that we are required to pay CIRM.
• Our business could be materially and adversely affected in the future by the effects of a public health crisis.
• Our business could be adversely affected if we lose the services of the key personnel upon whom we depend or if we fail to attract and retain senior management and key scientific personnel.

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• Taxing authorities could reallocate our taxable income among our subsidiaries, which could increase our overall tax liability.
• Government-imposedbans or restrictions and religious, moral, and ethical concerns about the use of human embryonic stem cells could prevent us from developing and successfully marketing stem cell products.
• Some of our product candidates may be considered combination products by the U.S. Food and Drug Administration ("FDA") and other regulatory authorities, which could increase the complexity, cost and timeline for their development and regulatory approval.
• Legislation and legislative, executive and regulatory proposals and actions intended to contain health care costs may adversely affect our business.
• The FDA granted orphan drug designation to OPC1 for the treatment of acute spinal cord injuries, but there is no guarantee we will be able to maintain, or obtain the benefits associated with, such designation.
• The results of preclinical studies and early clinical trials are not necessarily predictive of future results.
• Interim, topline and preliminary data from clinical trials of our product candidates that we or our collaborators publicly disclose from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in final clinical data that is materially different and unfavorable.
• We have limited experience manufacturing our product candidates on a clinical scale and no experience manufacturing on a commercial scale. Any failure to manufacture our product candidates in sufficient quantities in accordance with applicable quality standards and regulatory requirements and at acceptable costs may result in significant clinical development delays, or impair the ability to obtain approval for or commercialize our product candidates.
• Changes in or disruptions to the manufacturing operations and processes for our product candidates could significantly delay and increase the costs of clinical development and commercialization, if approved.
• The commercial success of any product candidate will depend upon the degree of market acceptance by physicians, patients and third-party payors.
• We face significant competition and the possibility that our competitors may develop therapies that are more effective, safer, more convenient, or less expensive than our product candidates. In addition, competitive products may be approved and successfully commercialized before ours, which may adversely affect our ability, or that of a strategic collaborator, to successfully commercialize our product candidates.
• We face potential product liability claims, and, if successful claims are brought against us, we may incur substantial liability and costs. If the use or misuse of our products or product candidates harm patients or is perceived to harm patients, our regulatory approvals could be revoked, suspended or otherwise negatively affected, and our reputation could suffer.
• We currently have no marketing and sales force or distribution capabilities.
• Our intellectual property may be insufficient to protect our products and we may become subject to claims of infringement of the intellectual property of others.
• We rely on third parties, including strategic collaborators, clinical research organizations, medical institutions, clinical investigators, consultants, sole source suppliers of specialized materials and equipment, to advance the development of our product candidates and we may encounter significant challenges or delays as a result of our lack of control over those third parties, including increased costs and timelines for clinical trials of our product candidates.
• Insiders continue to have substantial influence over our company, which could limit your ability to influence the outcome of key transactions, including a change of control.

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ITEM 1. BUSINESS

Overview

We are a clinical-stage biotechnology company developing novel allogeneic, or "off-the-shelf," cell therapies to address unmet medical needs. Our programs are based on our proprietary cell-based technology platform and associated development and manufacturing capabilities. From this platform, we design, develop, manufacture, and test specialized human cells with anatomical and physiological functions similar or identical to cells found naturally in the human body. The cells we manufacture are created by applying directed differentiation protocols to established, well-characterized, and self-renewing pluripotent cell lines. These protocols generate cells with characteristics associated with specific and desired developmental lineages. Cells derived from such lineages which are relevant to the underlying condition are transplanted into patients in an effort to (a) replace or support cells that are absent or dysfunctional due to degenerative disease, aging, or traumatic injury, and (b) restore or augment the patient's functional activity.

Our business strategy is to efficiently leverage our technology platform and our development, formulation, delivery, and manufacturing capabilities to advance our programs internally or in conjunction with strategic partners to further enhance their value and probability of success.

A significant area of focus is a collaboration we entered into with F. Hoffmann-La Roche Ltd and Genentech, Inc., a member of the Roche Group (collectively or individually, "Roche" or "Genentech"), under which our lead cell therapy program known as OpRegen®, is being developed for the treatment of ocular disorders, including geographic atrophy ("GA") secondary to age-related macular degeneration ("AMD"). OpRegen (also known as RG6501) is a suspension of human allogeneic retinal pigmented epithelial ("RPE") cells and is currently being evaluated in a Phase 2a multicenter clinical trial in patients with GA secondary to AMD. OpRegen subretinal delivery has the potential to counteract RPE cell loss in areas of GA lesions by supporting retinal cell health and improving retinal structure and function. Under the terms of the Collaboration and License Agreement we entered into with Roche in December 2021 (the "Roche Agreement"), we received a $50.0 million upfront payment in January 2022 and are eligible to receive up to an additional $620.0 million in developmental, regulatory, and commercialization milestone payments. We also are eligible to receive tiered double-digit percentage royalties on net sales of OpRegen in the U.S. and other major markets.

Our most advanced unpartnered product candidate is OPC1, an allogeneic oligodendrocyte progenitor cell therapy designed to improve recovery following a spinal cord injury ("SCI"). OPC1 has been tested in two clinical trials to date: a five patient Phase 1 clinical trial in acute thoracic SCI, where all subjects were followed for at least 10 years, and a 25 patient Phase 1/2a multicenter clinical trial in subacute cervical SCI, where all subjects were evaluated for at least two years. Results from both studies have been published in the Journal of Neurosurgery Spine. OPC1 clinical development has been supported in part by a $14.3 million grant from the California Institute for Regenerative Medicine ("CIRM"). In February 2024, we announced the clearance by the FDA of our Investigational New Drug ("IND") amendment for OPC1. Pursuant to the IND amendment, we have initiated activities to open our first clinical site in the DOSED (Delivery of Oligodendrocyte Progenitor Cells for Spinal Cord Injury: Evaluation of a Novel Device) clinical study, to evaluate the safety and utility of a novel spinal cord delivery device to administer OPC1 to the spinal parenchyma in subacute and chronic SCI patients. We expect the initial clinical site opening to occur in the second quarter of 2024.

Our neuroscience focused pipeline of allogeneic, or "off-the-shelf", cell therapy programs currently includes:

• RG6501 (OpRegen), an allogeneic RPE cell replacement therapy currently in a Phase 2a multicenter, open-label, single arm clinical trial, being conducted by Genentech, for the treatment of GA secondary to AMD, also known as atrophic or dry AMD.
• OPC1, an allogeneic oligodendrocyte progenitor cell therapy which will be evaluated in the DOSED clinical study, to test the safety and utility of a novel spinal cord delivery device in both subacute and chronic spinal cord injuries and continues to be evaluated in long-termfollow-up from a Phase 1/2a multicenter clinical trial for subacute cervical spinal cord injuries.
• ANP1, an allogeneic auditory neuron progenitor cell transplant currently in preclinical development for the treatment of debilitating hearing loss.

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• PNC1, an allogeneic photoreceptor cell transplant currently in preclinical development for the treatment of vision loss due to photoreceptor dysfunction or damage.
• RND1, a novel hypoimmune induced pluripotent stem cell ("iPSC") line being developed in collaboration with Eterna Therapeutics Inc. ("Eterna"), which will be evaluated for differentiation into cell transplant product candidates for central nervous system ("CNS") diseases and other neurology indications.

Other Programs

We have additional undisclosed product candidates being considered for development, and we may consider others, which cover a range of therapeutic areas and unmet medical needs. Generally, these product candidates are based on the same platform technology and employ a similar guided cell differentiation and transplant approach as the product candidates detailed above, but in some cases may also include genetic modifications designed to enhance efficacy and/or safety profiles.

Our efforts to broaden the application of our cell therapy platform and support long-term growth include a strategic collaboration we entered into with Eterna. This reflects a portion of our corporate strategy to capitalize on our process development capabilities by combining them with cell engineering and/or editing technologies, to create novel cell therapies with potentially superior product profiles compared to currently marketed therapies, if any.

In addition to seeking to create value for shareholders by developing product candidates and advancing those candidates through clinical development, we also may seek to create value from our non-core intellectual property or related technologies and capabilities, through licensing collaborations and/or other strategic transactions, such as our business development approach to our VAC dendritic cell therapy platform.

2023 Select Business Highlights

We achieved numerous strategic and operational accomplishments during 2023, including advancing our clinical programs and product development in several key programs.

• Continued execution under our collaboration with Roche and Genentech for the development of RG6501 (OpRegen) across multiple functional areas.
• Submitted an IND amendment for OPC1 for the treatment of chronic and subacute spinal cord injury, which was subsequently cleared by the FDA.
• Data from our Phase 1/2a clinical study of OpRegen presented at the Association for Research in Vision and Ophthalmology (ARVO) as well as the 23rd EURETINA Congress and Eyecelerator meetings, demonstrating evidence of rapid improvement of outer retinal structure in OpRegen treated patients with GA secondary to AMD.
• U.S. patent exclusively licensed to us covering proprietary manufacturing and differentiation process for RPE cells issued.
• Organized and hosted the 1st Annual Spinal Cord Injury Investor Symposium in partnership with the Christopher & Dana Reeve Foundation with additional support from CIRM.
• Added to the broad-market Russell 3000® Index.
• Entered into option and license agreement with Eterna to develop iPSC lines for potential neurology indications and initiated development activities.

Business Strategy

Our goal is to address unmet medical needs by developing and advancing allogeneic, or "off-the-shelf," treatments comprised of functional cells delivered to the body. Our biological therapies are derived from the differentiation of pluripotent stem cells from established and self-renewing cell lines. We direct these pluripotent cells to become specific cell types, or combinations of cell types, and use those differentiated cells as treatments to restore

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diseased or diminished functions, such as impaired vision, loss of movement, sensation, and hearing, or to increase immune response to tumors or infectious agents.

To support the furtherance of our product candidates, we aim to generate or have generated in vitro and in vivo data to support human testing where such testing is warranted. In some cases, we may collaborate with strategic partners, external advisors, or consultants to support the development of our cell therapy technology.

One area of focus is our continued execution under our collaboration with Roche and Genentech across multiple functional areas, including support for the ongoing Phase 2a multicenter clinical study of RG6501 (OpRegen) in patients with GA secondary to AMD, as well as in the follow-up portion of our 24-patient Phase 1/2a multicenter clinical study of OpRegen, in patients with dry AMD.

In addition, with the clearance of our IND amendment for OPC1 by the FDA in February 2024, we expect to commence the DOSED clinical study in the second quarter of 2024, which will evaluate the safety and utility of a novel spinal cord delivery device to deliver OPC1, to the spinal parenchyma, in both subacute and chronic spinal cord injuries.

Our preclinical product candidates, ANP1 for hearing loss and PNC1 for vision loss due to photoreceptor dysfunction or damage, will continue to be evaluated for their scientific and commercial merit to determine the suitability of each program to advance into initial human testing.

Our efforts to broaden the application of our cell therapy platform and support long-term growth also include a strategic collaboration with Eterna for the development of RND1, a novel hypoimmune iPSC line, which will be evaluated for differentiation into cell transplant product candidates for CNS diseases and other neurology indications. We believe this collaboration allows us to leverage our expertise to develop innovative cell transplant therapies by capitalizing on the convergence of directed cell differentiation and manufacturing with modern gene editing technology.

VAC2 is a clinical stage dendritic cell product candidate, which was the subject of a Phase 1 clinical trial in advanced non-small cell lung cancer conducted by our partner, Cancer Research UK. Encouraging primary and secondary endpoint results were reported in 2023. Because many different antigens could be employed as part of this allogeneic dendritic cell system, we believe that strategic alliances offer the best alternatives to advance the VAC platform moving forward.

We have identified, and we may seek to develop, additional product candidates based on our cell replacement approach. We may elect to conduct these activities on our own or through various collaborative arrangements. We may utilize various types of pluripotent cell lines as starting material for our product candidates. Presently, our process development and manufacturing activities, including our current good manufacturing practice ("cGMP") production of clinical trial material, are conducted at our facility located in Jerusalem, Israel, but such work may be supplemented or complemented by our additional facility located in Carlsbad, California.

Cell Therapy Technology Platform

We believe we are a leader in pluripotent, cell-based asset development based on proprietary directed differentiation protocols of cellular lineages and our cell manufacturing capabilities. Pluripotent cells, which are widely published as capable of becoming any human cell type, have potential applications in many areas of medicine with large unmet patient needs, including certain age-related degenerative diseases, degenerative conditions, or traumatic injury. We are currently in clinical development for various pluripotent cell-derived product candidates such as RPE cells, oligodendrocyte progenitor cells, and dendritic cells, and preclinical development for auditory neurons and photoreceptor cells. In addition, we are considering the differentiation of pluripotent cells into additional cell types that may have therapeutic benefits in other areas of unmet medical need.

Cellular therapies are often aimed at regenerating or replacing affected cells or tissues and therefore may have more durable, broader, or more suitable applicability than certain traditional pharmaceutical products which seek to influence a single molecular target or a group of biological pathways. Small molecules and biologic therapies that

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require systemic delivery into the body can have unexpected side effects that can limit their usefulness. When cell replacement is locally administered to a specific anatomical compartment, systemic side effects are usually well-tolerated. Lineage's cell therapy approach resembles transplant medicine, as it is focused on whether transplanted cells are retained or rejected by the body and whether the transplanted cells function as expected.

A key advantage of our approach is that it can provide us the opportunity to rapidly develop new programs without the extensive and costly steps traditionally required to develop a small molecule agonist or antagonist. Whereas small molecule product development typically requires selection and validation of a drug target, followed by screening millions of molecules (e.g., a "library" of compounds) to identify hits, followed by chemical modification guided by structure-activity relationship or "SAR" to develop a hit into a more potent lead, the process of developing a new cell therapy from pluripotent lines can be comparatively faster because the target cell type is already known to be "validated", insofar as it is well-established in the literature as being the cell type which is dysfunctional or deficient in the patient. One of the most challenging steps in developing a new cell therapy is the establishment of a controllable and reproducible differentiation protocol which can create the quality and purity of cells needed to support clinical testing and commercial supply. This development process avoids mass screening campaigns and is typically accomplished via the combination of literature reviews and in-house experience with pluripotent cell differentiation. This approach also can facilitate pipeline expansion at a lower cost than traditional methods (Figure 1).

Figure 1. Lineage's Internal cGMP Facility Capabilities

In addition to our corporate headquarters located in Carlsbad, California, in late 2022, we opened a new research and development (R&D) facility also located in Carlsbad. This facility expands our R&D capabilities in the U.S. and may support the development of current and future allogeneic cell transplant programs. We also have a modern and innovative manufacturing facility in the Bio Park on the campus of the Hadassah University Hospital in Jerusalem, Israel. That facility includes process development laboratories and a state-of-the-art, cGMP cell manufacturing facility. It is designed and equipped to run simultaneous cGMP processes as needed, and to produce a range of cell therapy products for human use in clinical trials as well as improve scalability for larger trials or potential commercialization (Figure 1). Currently, all of our cGMP manufacturing processes, including cell banking and product manufacturing for our cell therapy product candidates, are conducted in this facility.

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