Ladies and gentlemen welcome to the Lineage Cell Therapeutics' Fourth Quarter and Year End 2020 Conference Call. At this time, all participants are in a listen-only mode. An audio webcast of this call is available on the Investors section of Lineage's website at www.lineagecell.com. This call is subject to copyright and is the property of Lineage. Any recordings, reproduction or transmission of this call without the expressed written consent of Lineage are strictly prohibited. As a reminder, today's call is being recorded. I would now like to introduce your host for today's conference, Ioana Hone, Director of Investor Relations at Lineage. Ms. Hone. Please go ahead.

Thank you, Jeff. Good afternoon, and thank you for joining us. A press release reporting our fourth and full year 2020 financial results was issued earlier today, March 11, 2021, and can be found on the Investors section of our website. Please note that today's conference call and webcast will contain forward-looking statements within the meaning of federal securities laws, including statements regarding our strategy, goals, data updates, product candidates, planned regulatory meetings, clinical trials, planned manufacturing improvements, financing and cash management matters. Such statements are subject to significant risks and uncertainties, including those described in our press release issued on March 11, 2021, and our most recent Form 10-K filing. Actual results or performance may differ materially from the expectations indicated by our forward-looking statements due to those risks and uncertainties. We caution you not to place undue reliance on any of the forward-looking statements, which speak only as of today. Presenting today is our Brian Culley, our Chief Executive Officer. Brian will provide prepared remarks, then take questions from analysts. With that, I'd like to turn the call over to Brian.

Thank you, Ioana, and good afternoon, everyone. We definitely appreciate you joining us on the call today. Before I summarize some recent highlights and our financials, I first just want to remind everyone of three ways in which Lineage differs among the growing number of cell therapy companies you may hear about. I sometimes say that we are pioneering a new branch of medicine, which is one of the many exciting things you've probably heard about the stem cell industry. But Lineage isn't a stem cell company, we don't put stem cells in people, we grow stem cells into great numbers. And then we convert those cells into the specific cell types, which your body uses. We then transplant those differentiated cells into your body to restore or improve function which has been lost due to injury or disease. That means we’re more of a cell transplant company than a stem cell company. I want to begin with that important point today because there are significant biological differences between using our differentiated cells, compared to the undifferentiated stem cells, which some companies and clinics work with. As one example of this, I’m often asked how our approach compares to adult stem cells or mesenchymal cells, which are usually harvested from places like bone marrow, fat, or umbilical cords. And the answer is we are not like them at all, those are undifferentiated cells, which in some cases might be enriched to secrete some proteins or survive in certain environmental conditions. But that's not how we approach the diseases we're working on. We believe that if retina cells are dying, you need to replace and transplant retina cells directly to the eye. If spinal cord cells are missing, you need to transplant replacement cells directly to the spinal cord. For this…

Understood. [Operator Instructions] Your first question comes from the line of Joe Pantginis from H.C. Wainwright. Your line is open.

Hi Brian and Ioana. Thanks for taking the question. Hope the two of you are doing well. Brian, I have three questions. The first one might be a simple yes or no, but I just want to make sure. Regarding your prepared comments on VAC2, you also talked about manufacturing improvements around that as well, but is it safe to assume, and I don't want to put words in your mouth that any manufacturing improvements would really impact the entire VAC platform, as you said, you can have almost a limitless amount of potential assets.

Yes. Thanks for the question, Joe. I think our expectation is the answer is a simple, yes, the dendritic cells are carriers. You can think of them as just being just the messengers. The important part is, and the specific part is the message which they carry. So, if we are able to improve things like scale, purity, reproduction, efficiency of introducing the antigen into the cells, all of those should be applicable to all of the programs, which we might imagine with our own or partnered. So, it is – that's where we see a lot of value in that program is that we can conduct a series of steps that are going to be applicable to everything that we do in oncology, rather than having to go through all of those steps for each and every program. So, I think the answer is, yes, we don't have a reason to think that we would have to do that and make each production or each cell line unique. We think that we can capitalize on the commonality and then the only variable becomes the antigen. And so, what would need to sort out is how does that look to the regulators? Certainly, with autologous approaches, there appears to be a lot of flexibility considering that you've got essentially a different product every single time. So, we would hope to capitalize on some of those economies of scale in our production system.

No, that's helpful. Thanks. And I realized the way I asked the question, might've come across as if it was a congressional hearing was like a yes or no will suffice. Sorry about that. So, my next question is just switching to your finances. You've been very active lately, obviously with different raises, selling some of your OncoCyte et cetera. And you also just filed a new S-3 shelf filing. So obviously the fact that you're well-funded well into 2023 is a good thing to project to investors in my belief. But I guess maybe can you comment on sort of the big picture of your overall financing strategy based on your recent moves and maybe looking towards the future?

Yes, sure. I'm happy to Joe and you probably know, I'm largely incapable of providing just a yes or no answer. So, we did provide a lot of detail in the press release recently, but I realized that most of that content is focused on the actual transactions and doesn't really speak to our strategy and the success that I think we've had with it. I would say there are three big takeaways from recent financing news and events. The first and foremost is that we now have more than two years of runway. And when you look at what we have done in the past two years, you can imagine there are a lot of milestones we expect this capital will help us reach in the next two years including having two separate programs in late-stage clinical trials. The second point is that rather than doing a traditional financing with the higher fees and the discounted pricing, that's often associated with that option, we were able to take advantage of our rising share price and higher trading volume to raise a fairly meaningful amount of money. And that can create leverage, which we can use to oppose talk of financing overhangs, or getting pushed around in partnership negotiations. And third I'd say is that a large amount of the capital that we have raised has come from selling equity in public companies. We originally created like Hadasit and AgeX. And we've been able to create value from non-core assets that way and use that to fund our main business. So, it might be forgotten, but I think it's worth mentioning that we haven't had to do a traditional financing and more than three years. And I don't know how many biotech companies can say that, but I imagine it's a small number. And with our large patent portfolio, we may have additional opportunities to spin out new regenerative medicine businesses. So, from time to time, you're going to see things like the registration statement, which we filed today, because it gives us the flexibility to raise capital and management thinks it’s prudent housekeeping to have the ability to access the capital markets quickly, if and when it makes sense for us to do so. But that we'll invest the money in the right way. And I think overall, we take a creative and diversified approach to funding the business and try to do so in a minimally diluted way, which obviously helps to protect, share price and create value for shareholders.

Got it. That's really helpful. And then my last question is around OpRegen obviously, well, not obviously, but since it's your lead asset and the upcoming data. So, you gave a nice teaser, I think about the upcoming ARVO [ph] data, but I was hoping to get more color, not only around that, but about what kind of expectations we might have for the data updates by the end of this month. With ultimately, I think, you said we might be starting to get to the point with some of these patients of – getting to the time point where we might see additional regeneration. So, I guess that that's like a, the highest anticipation factor, which we might be getting to, but what kind of expectations we have around data this month and in May?

Yes. I'm not surprised for that question. So, I guess a two-part answer. One is that we have for some time now said that we plan to provide a three-month update. So, we enrolled a bunch of patients in the fall and that's going to nearly double the number of cohort four patient data that we have through three months. So, people are going to want to be looking for continued trends with these additional patients three months is early, but if we see any patients starting off, well, I think that's a good sign. We also will report on not one but two patients. That's new. I don't want to give away everything, but we're not one of the two patients that had a modified immunosuppression regimen. We'll have updates on the Orbit device overall safety, but restoration I understand is, what everyone is really keen to hear something about. You're correct that we first saw restoration fairly late. It was at a nine-month visit. But we don't know when it became detectable, only that it was after three months. So, we didn't see it at three months and we did see it at nine months. So, the reason that there's such a big window there is it in our protocol, we don't do every form of imaging at every employment. Too many visits can be onerous for the patients, the sites, and frankly, the GA doesn't change that much month-to-month, and then no one expected that retinal restoration was going to occur. So, there was no reason to put a whole bunch of atypical assessments in place. So, what that means is that any new evidence of restoration could become visible at month four or month six or month eight, but we wouldn't necessarily see it as soon as it's evident, you would have to wait until it gets picked up in one of these routine imaging visits. However, we do know that the timeframe was between three and nine months, and that's the same timeframe we're now in with the additional five patients who were treated in a similar way to the prior patient. So, we'd have to wait and see, and if we do see more restoration evidence, we certainly will report it shortly after it's validated by third parties. So, we're entering the zone of highest interest right now.

Now, that's really encouraging looking forward to it. And thanks for all the color, Brian.

You bet. Thank you, Joe, for the questions.

Your next question comes from the line of Jason McCarthy from Maxim Group. Your line is open.

Hi, Brian. Thanks for taking the questions. A couple of questions. First on the OPC1 program. We've seen positive data signals of efficacy. Thus far you had mentioned that potentially moving towards a Phase 2, which could be a registrational trial in 2022. What do you think the size of that trial and the parameters around that trial could look like? And I'm asking because we're watching AbbVie with [indiscernible] right there in a Phase 2, 50 some odd patient trial. Not sure if that's for a registration or not, but they did get fast track in orphan, and we could see that data while you guys are working up towards your Phase 2 “registration trial.” Can you give us a little bit more color on how you think about that?

Yes, certainly, Jason, it's a very nice question because there is no precedent, right. We don't have anything approved with cell therapy, or the [indiscernible] on growing molecules. So, it's an unknown. However, there are some, I would say, reasonable boundary conditions. So, one rule of thumb is that FDA likes to see at least 100 exposures to a therapy in order to get a good sense of safety in particular. But we also do have examples of various treatments, especially in orphan indications, where a smaller number of patients can provide the basis for an approval. So, I don't know the answer, because we haven't been able to go to the agency and have that discussion. But I think that it is probably capped at 100. And I think it's going to be driven in part by one’s expectation as to the clinical benefit. Now, there's some things that we might think about doing in terms of the balance across the arms, and how we build a statistical plan, and which assessments that we use. So different assessments can, of course, give you different kinds of statistical power, if you are looking at a responders’ analysis, if you are looking at a certain event, compared to, if you are looking at continuous variable, you might have more statistical power, because you are looking at the area under the curve. So, it's really difficult for me to say, it's likely to be x number of patients. But what I can say is, I think, 100 is probably a reasonable feeling that one might expect, but the details of that, really –that's going to be known to us. later than today, we can just project it for now.

And then on the cell therapy side, just in general, you had mentioned in your opening remarks about or very specifically about what Lineage does with differentiated cells that integrate, and go in and actually correct the tissue that's there versus something like MSC. And we have been seeing this tremendous shift in the cell therapy space. And you could look at groups like [indiscernible] and Bayer, and Vertex actually just moved into a Type 1 diabetes study, today or yesterday. How important is it that bigger players are now moving into a space that Lineage is in already and seemingly with the most advanced clinically, assets relative to everybody else in the state, even these bigger players? How does that bode for Lineage going forward?

I love it. There's a little bit of the curves of the front runner here. When you are a little bit ahead of everyone, people who are looking for parallels or comparables, they simply don't have as much data, or evidence, or reference points to evaluate you. So, on one hand, you say, oh there is a paucity of competition. That's great. But on the other hand, how do you value a company like ours, because there aren't a lot of examples? So, I would say that I am delighted to see companies like Blue Rock, and Semma, and Sana, being recognized and rewarded with high valuations, because, I think, now we have greater reference points. And the fact that those companies and maybe some others that we could add to the list, aren't operating in our specific space means that we get all the benefits of technological corollary without the penalty of direct commercial competition. So, I think, it's a good thing for Lineage. And I think that it is ultimately going to be good for the space, because it's going to draw more attention and recognition that there are places, and settings and diseases for which cell therapy is probably a better choice than the traditional small molecules and antibodies.

It’s a great answer we couldn't agree more. Thanks, Brian.

Thank you, Dr. McCarthy.

Your next question comes from the line of Keay Nakae from Chardan. Your line is open

Thanks, Brian. I need to talk about the new delivery device for spinal cord injury. First of all, in terms of its ability to allow the practitioner to lay down both geographically, with more accuracy and the amount of sales, can you talk about those capabilities?

Yes or no, and the no part is that we haven't tried it in a human yet. So, we don't know. But from a design consideration, there are a number of advantages to the new device. So, the assembly itself is smaller, and it uses fewer components, it can provide single hand operation for the x, y, z positioning. So, if you think of three axes, the needle depth, which is a really integral component here, has greater accuracy. And the connections between the component parts, there are fewer of them they are tighter so you've got less, let's say, wiggle to the device. Now, really, the big advantage here is being able to administer cells more slowly. But one of the things that is often underappreciated with cell therapy is it's not just the cells, it's the delivery of the placement is nearly as important as the active agent. So, having a tool that we think can do a better job of placing the cells into the area of injury will be beneficial. But the cells do have the ability to migrate a little bit. So, it's not like landing a rover on Mars, and you got to have it on the bottom of the crater where it's really flat. You do have a little bit of flexibility. But we think that the improvement here reflects the normal evolution of a new technology, and that ultimately, clinical outcomes will be improved, as you get better at not only the quality of the cells that you're putting in, but also how and where you place them. I think we're seeing that with OpRegen and, I think, we're going to see that with OPC1.

And then just in terms of, I guess, the ability or how quickly the practitioner can be facile with the device, are you able to at least start on cadavers? What does that experience like in terms of how quickly the practitioner can get up to speed and feel comfortable using the device.

There's a high degree of familiarity with the device, you've got your X, Y, Z manipulator. And the differences sometimes just come down to how big is the knob, but directionally, the positioning of the syringe and the microdrive assembly, which holds the syringe is very familiar. Ultimately, what you are talking about is your angle of insert, and your depth, those are the two most significant components. So, I think the learning curve for this will be relatively low. But that is one of the things that we are going to be investigating. There's probably a good case to be made to do extensive, first animal and then cadaver testing to demonstrate and get specific answers to your question. And we will be doing exactly that in cooperation, not only with Neurgain, but also the neurosurgeon team at UCSD, which helped to design and develop this new PDI system.

So just a final question to wrap that up. Any sense of what the FDA is going want to know understand about these types of issues before they let you go forward in humans.

Nothing specific. It's different than what we have with, for example, the OpRegen program, because there we know that the device has already been 510(k) cleared. So, we don't have that same status. So, when we think about approaching FDA, one of the things that we are going to want to do in meeting packages is to provide the sort of comfort and experiential data to say that this is a good tool and that it can be well adapted. We don't yet know exactly what the testing expectations or criteria are going to be, which is why we're planning next quarter, which really isn't too far away now, to request an automat meeting, to have a conversation about the device and to see what kind of learnings we need to provide to support its use. And part of that is almost certainly going to include some of the expert, call it, testimony that the device can be readily adapted to this patient population and for the delivery of our cells, that it would be an official to be using something like this as opposed to the original scaffolding equipment, which potentially could lead to errors because it's a little bit more complicated.

Okay, thanks.

You bet. Thank you, Keay.

That was the last question. Ladies and gentlemen this concludes today's conference call. Thank you for your participation. You may now disconnect.