Lineage Cell Therapeutics, Inc. 2026 Q2 Earnings Call

Thank you, Jericho. Good afternoon, and thank you for joining us. A press release reporting our second quarter 2026 financial results was issued earlier today, August 6th, 2026, and can be found on the Investors section of our website. Please note that today's remarks and responses to your questions reflect management's views as of today only and will contain forward-looking statements within the meaning of federal securities laws. Statements made during this discussion that are not statements of historical fact should be considered forward-looking statements, which are subject to significant risks and uncertainties. The company's actual results or performance may differ materially from the expectations indicated by such forward-looking statements.

For a discussion of certain factors that could cause the company's results or performance to differ, we refer you to the forward-looking statements sections in today's press release and in the company's SEC filings, including its most recent annual report on Form 10-K and in the Form 10-Q filed today. We caution you not to place undue reliance on any forward-looking statements, which speak only as of today and are qualified by the cautionary statements and risk factors described in our SEC filings. With us today are Brian Culley, our Chief Executive Officer, Jill Howe, our Chief Financial Officer, and Dr. Priyantha Herath, our Senior Vice President and Head of Clinical. I'll now hand the call over to Brian.

Thank you, Ioana. Good afternoon, everyone. We appreciate you taking the time to join us today. As some of you know, from time to time, I like to use these calls to bring investors behind the scenes to better understand how we're advancing our programs and business. Probably everyone on this call knows how important OpRegen is. Based on progress we've made elsewhere, we think this is an opportune time to explain what we've been focusing on while Roche and Genentech continue to conduct optimization activities on our lead program. Insights and milestones from the OpRegen program have allowed us to fuel the growth of a new and significantly more internally owned pipeline of cell therapy assets. I'm not sure that side of our company is as appreciated as it could be. I plan to discuss that today.

Our history of creating multiple new assets from our platform while maintaining a consistent level of annual investment is due to the success we have enjoyed with the AlloSCOPE manufacturing platform. From AlloSCOPE, we believe we will be able to generate off-the-shelf products with commercial-scale production costs in the hundreds of dollars per dose versus the hundreds of thousands of dollars you might expect from autologous products. Purity, potency, and control are all critical parts of a successful cell therapy product, but we believe the highest value proposition for allogeneic programs is found on the supply side, and specifically, the ability to establish low-cost production of consistent and potent material. It's quite easy to make prophetic claims about production costs or process control, but it's quite difficult to do these things in practice. For many reasons, cell therapy manufacturing is materially more difficult than it is for small molecules.

Unlike some of our peers, Lineage does not need to engage in speculation about our manufacturing capabilities. We have already successfully employed the AlloSCOPE platform to generate a 2-tier cGMP banking and cGMP production system, which we believe is credibly capable of generating millions of vials of a product candidate. The material from those banks has been cleared by FDA and used in the OpRegen clinical trial. We think having demonstrated this necessary regulatory manufacturing milestone distinguishes us from those who have not. Moreover, we have successfully made cell banks and cGMP clinical material for other cell types and from other cell lines, demonstrating the application of our technology in the service of several different indications. We highlight our manufacturing achievements because we know how difficult these things are, and we want to invite comparisons to others working in the cell therapy field.

Our success to date with OpRegen means that we have an amazing opportunity to apply the experience, know-how, and intellectual property that we have generated to create new assets. This is a core strategic objective for Lineage, which we internally refer to as Lineage 3.0. We want to broaden awareness of these assets because we believe they highlight potential additional value residing in our company. Importantly, these pipeline assets each possess three key criteria, which I will outline for you now. First, we have and will continue to choose programs for which we believe the AlloSCOPE platform offers a significant competitive advantage, meaning there is a quality and/or a supply issue that we can seek to address through our consistency and scale solutions. Second, we identify programs that may be capable of generating meaningful signals in a relatively small single-arm trial. OpRegen is a great example of this.

At the completion of a first-in-human trial, we secured a collaboration with a $50 million upfront fee and an additional $620 million in potential milestones, which we believe was driven by the fact that GA patients are not known to spontaneously replenish their retinas or durably retain vision gains, yet we showed this outcome in five clinical cases. This evidence was compelling even from a small number of patients because the change deviated from the expected natural course of disease. Similar outcomes can be predicted from diabetes and corneal endothelial cell therapy programs because outcomes such as corneal clarity and insulin independence are not known to occur naturally, making these clinical signals easier to identify, even in relatively small trials. Then third, we want the assets that make up Lineage 3.0 to provide us with superior overall economics, which doesn't mean we won't still consider partnering an asset early.

It just means that the economics for any deals we strike should reflect the value of us mitigating some of the risk associated with scale-up and for the potential or actual generation of convincing data from a first-in-human trial. I'm next going to briefly discuss how we believe the three components of Lineage 3.0 that I just discussed will generate value for us in each of our pipeline programs. I'll start with COR1, our corneal endothelial cell, or CENC, therapy program, which is designed for the treatment of Fuchs' or other corneal endothelial dystrophies. COR1 is a wholly owned preclinical asset, which benefits from our existing ophthalmology and manufacturing expertise and represents a natural next application of our technology platform because it focuses on what we do best: large-scale, high-quality cell manufacturing.

We began exploring CENCs as a potential new program in the second quarter of 2025, and we started doing wet lab work in the third quarter of 2025. Just nine months later, we successfully employed our AlloSCOPE 5D technology to this program. That means we achieved seamless bioreactor-based 5D precursor expansion and differentiation to support CENC production, which we believe together with our proprietary thaw and inject formulation, supports a potentially best-in-class product profile. This work, unsurprisingly, also met our internal criteria for continued advancement into preclinical testing, which is beginning imminently. Thanks to the development precedent that is available for this indication, we are targeting to have initial in vivo data generated by the end of the year.

We think this will be an important data point because we want to show that the cells which we make can perform at least as well as cadaver cells in the applicable and previously established models of efficacy. As to how we see ourselves fixing a supply side issue with COR1, millions of people are potential candidates for corneal transplants, and yet today there's only one donor for every 70 diseased eyes globally. The current supply of CENCs from cadavers is limited by the low availability of donors, as well as by inconsistent yield and quality. Cadaver-sourced transplants have also been demonstrated to be highly effective. Cadaveric sources of CENCs have been approved in Japan to treat corneal endothelial disease, providing strong evidence for cell replacement as an effective mechanism of action.

As an added benefit, unlike the OpRegen program, we don't expect to have any need for delivery optimization because the cornea is a relatively accessible site with a simple injection-based delivery method supporting a long clinical track record of positive outcomes. The COR1 program aims to solve the double deficiencies of supply and shelf life of the current therapy because not only do cadaver-derived cells have variable yield and quality, donor-harvested material is not currently cryopreserved and needs to be used promptly. These deficits highlight the benefits of having a reliable, consistent, and scalable source of these cells that can also be frozen, shipped, and thawed before use. For these reasons, COR1 fits ideally into our ongoing paradigm for rapid pipeline development, and we look forward to providing additional updates on this program as it continues to advance.

As I mentioned, we recently elected to advance COR1 into in vivo animal testing. Initial internal preclinical data is expected to be generated later this year. Moving next to Type 1 diabetes. This is our second case study for Lineage 3.0. As with CEnCs, the clinical data shows that islet cell transplants can be an effective and powerful treatment option. Each year, dozens of patients become insulin independent thanks to islet cells sourced from cadavers. However, islet supply is a major unsolved problem. Expansion of islets from cadaver sources cannot currently meet the commercial needs for these cells. Immunosuppression, patient eligibility, and hypoimmunity are all additional hurdles that need to be overcome. Several companies are making great strides on those problems.

We believe the hurdle with the least amount of progress to date, and also the best fit for our technology, is making islets at the scale required to address the large unmet need. We believe significant value in the islet cell transplant community should accrue to whomever solves the scale problem. One reason for this supply gap is that the required dose of islet cells may be as high as 1 billion cells per patient. In comparison, the dose of OpRegen is up to 200,000 cells, which is 5,000 times smaller. On top of that, the proliferative capacity of RPE cells in our hands is at least 50 times greater than the published capacity of islets, meaning there is an approximately 250,000-fold gap between current technology and what we believe will be needed for commercial-scale islets. This gap will need to be filled somehow.