Welcome to the Lineage Cell Therapeutics’ Second Quarter 2021 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 web site at www.Lineagecell.com. This call is subject to copyright and is the property of Lineage. Any recordings, reproductions or transmissions 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.

Good afternoon and thank you for joining us. A press release reporting our second quarter 2021 financial results was issued earlier today, August 12, 2021, and can be found on the Investors section of our website. Please note that today's discussion will contain forward-looking statements within the meaning of federal securities laws, including statements regarding our strategy, goals, product candidates, clinical trials, data announcement and update, anticipated regulatory meetings and interactions, planned manufacturing improvements, financing, cash management and runway, anticipated collaboration opportunities and benefits and commercial potential. Statements made during this discussion that are not statements of historical facts should be considered forward-looking statements, which are subject to significant risks and uncertainties. Actual results or performance may differ materially from the expectations indicated by our forward-looking statements due to known and unknown risks and uncertainties. We caution you not to place undue reliance on any forward-looking statements, which speaks only as of today and are qualified by the cautionary statements and risk factors in our filings with the SEC, including in our quarterly report on Form 10-Q filed today August 12 and our annual report on Form 10-K for the year ended December 31, 2020. Presenting today is Brian Culley, our Chief Executive Officer; Kevin Cook, our Chief Financial Officer. Brian and Kevin will provide some prepared remarks, then take questions from analysts. With that, I'd like to turn the call over to Brian.

Thanks, Ioana, and good afternoon, everyone. We always appreciate you joining us on our quarterly calls. The Lineage team continued to execute on its aggressive business plan, making significant operational and clinical progress during the second quarter. Most notably we delivered additional positive clinical data from our OpRegen program to treat dry age-related macular degeneration with geographic atrophy. We made substantial progress moving our spinal cord injury program towards further clinical testing. We generated revenue from the first milestone payment under our new VAC-based cancer alliance and we even monetized some of our non-core assets. I'm also very happy that we have strengthened our leadership team through the appointment of Kevin Cook as our new Chief Financial Officer. And as Ioana just mentioned, Kevin is joining on the call today and I appreciate the immediate impact he has had on our organization. As I say each, call Lineage is pioneering a new branch of medicine. Our approach is to manufacture differentiated cell types and transplant those cells into the body to restore or improve function, which has been lost due to injury or disease. Simply put, we believe that if retina cells or spinal cord cells are dying off or dysfunctional, you need to replace those specific types of cells. This regenerative medicine platform, which we own, is both broad and powerful, not only for the value of our current indications, but also because our cell transplants approach might someday be applicable to a large number of different cell types and it trusts many different unmet needs. Manufacturing different cell types and demonstrating their safe use in clinical trials, so that they can be commercialized and reach patients is vital to our long-term goal of becoming the leading cell therapy company. All of our cell therapy programs use cells, which…

Thank you, Brian, and good afternoon, everyone. I'm excited to be here, and I look forward to connecting with many of you more closely in the months ahead. In the meantime, let's talk about some of our recent financial results. Total revenues for the second quarter were approximately $500,000, a $100,000 increase from the same period in 2020. The increase was due primarily to a $200,000 increase in booked collaboration revenues from the new Immunomic therapeutics licensing agreement, plus $100,000 increase in royalties offset by a reduction in grant revenues resulting from the completion of NIH grant-activities in the prior year. Total operating expenses for the second quarter of 2021 were approximately $7.5 million, an increase of approximately $800,000 as compared to the same period. In 2020, the increase was primarily related to an increase in general and administrative expenses due to higher investor relations expenses, Asterias merger related expenses and other legal costs. Our lost from operations for the second quarter was approximately $7.1 million, an increase of $700,000 as compared to the same period in 2020. This increase was mostly due to higher G&A expenses incurred in the second quarter of 2021. The net loss to Lineage for the second quarter of 2021 was $4.8 million or $0.03 per share as compared to $6.5 million net loss or $0.04 per share for the same period in 2020. It's important to remind investors that the variance between our loss from operations and our overall net loss is impacted by changes in the value of our investments in OncoCyte and Hadasit as well as foreign currency exchange rate fluctuations related to Lineage's international subsidiaries. Additionally, in the second quarter, we recognized a gain of $0.5 million related to the extinguishment of debt for our paycheck protection program loan, which was forgiven in full. While these non-operational fluctuations are important we tend to utilize loss from operations as a more relevant measure of performance with regards to moving our clinical programs forward. Turning to the balance sheet, the company ended the quarter with approximately $68.7 million in cash, cash equivalents and marketable securities. Accordingly we continue to feel that our liquidity level provides us flexibility and funding to reach additional value creating milestones in the months and years ahead. That that wraps-up the financial section. So I thank you for your time and we'll now turn the call back over to Brian.

Thanks, Kevin. We believe that the field of cell therapy is poised for explosive growth and that scalable allogeneic or off-the-shelf approaches have the ability to provide significant commercial advantages over autologous or patient derived methods. And Lineage's objective is to be positioned for the rapid growth of this emerging branch of medicine by providing evidence that off-the-shelf cells can generate safety and efficacy data in large commercial opportunities where small molecules have not succeeded. Some of the events and milestones, which shareholders can look forward to include with respect to the OpRegen program, the presentation of additional interim data from the Phase 1/2a study, which is anticipated during this quarter and the next quarter of this year. We also plan to meet with FDA to discuss further clinical development and that is anticipated in the fourth quarter of this year. With respect to the OPC1 program and spinal cord injury, we will be evaluating the Neurgain PSD device in both preclinical and then clinical testing. We are conducting GMP production of OPC1 via an improved manufacturing process, and we'll be conducting release testing to support a late-stage clinical trial. And we have an FDA interaction to discuss manufacturing improvements, which is anticipated around the end of this year or maybe early next year. And then just to wrap up again on the VAC program, we're looking for the completion of enrollment in the ongoing Phase 1 study on non-small cell lung cancer, and then of course reporting results from that study and we will continue to evaluate new opportunities for VAC product candidates based either on internally identified or partnered tumor antigens. And overall, we will look – continue to look and evaluate partnership opportunities and ways to expand either existing collaborations or identification of new collaborations to fully enjoy the benefits of our platform. Here at Lineage, we're immensely proud to have the opportunity and responsibility to advance this new and exciting branch of medicine and we aim to make a profound impact on the millions of people who serves our inspiration. So for those of you who would like to understand better about what it means on a personal level, I really encourage you to check out the media section of our website, where you can hear directly from the same patients that we aim to help. So thank you very much for joining us this afternoon. We appreciate your support as we positioned Lineage to become a leader in cell therapy and transplant medicine. And with that operator, we are definitely ready to respond to any analyst questions, which we may have.

For our first question we have Kristen Kluska from Cantor Fitzgerald. Your line is open.

Hi, good afternoon everyone. Thanks for taking my question.

Hi, Kristen.

The first one I have – hi. The first one I have is on OPC1. So, with your recent announcement that chronic spinal cord injury patients will be eligible for enrollment in the study, could you discuss if there will be any different clinical parameters in measuring the effect for these patients or perhaps what would be considered a meaningful result for them? And then how do you anticipate the inclusion of these patients could change the addressable market opportunity?

Thank you, Kristen, for the question. So the study that we will – that we're planning to conduct next in – for OPC1 is the device study. And so the objective of that study is to demonstrate – not just the safety of that device, but its ability to be able to successfully deliver cells into the correct location in the spinal cord. We intend to collect some efficacy data in that study, but that's not the purpose of the study. So it won't be large enough to have a lot of statistical findings. But what I like in particular about the design and the inclusion of chronic patients is that chronic patients are typically plateau. You don't often see meaningful spontaneous recovery in a chronic patient. So we have what I think is a very asymmetric setup to this study extensively, we're there to make sure that we can deliver the cells to the right place in the spinal cord. However, if we see some sort of signal in – even a non-statistical signal in a chronic patient, I think that opens up an incredible new and exciting area for us, which would certainly have a large impact on the addressable commercial opportunity because our current expectation for this therapy is that you would want to administer it between 21 and 42 days after an injury. But if we can have some benefit, even a small benefit in patients that were injured three months ago, three years ago, 33 years ago, now you get to not just include the incidents of a condition, but also the prevalence of a condition. So it would be multiples larger if we were able to treat and provide a benefit to chronic patients, but the real advantage for us on its face is that we can – we're just trying to make sure that the new system is effective and safe at delivering the cells and that we can do that in a chronic patient, because it really is more of an anatomical question that we're getting an answer to rather than an efficacy question. Does that make sense?

Yes, it does. Thank you for that. And then on OpRegen, one of the potential benefits you've cited outside of efficacy and safety is on durability and convenience as this treatment doesn't entail frequent injections, we've seen for other trials. So wanted to ask how long you intend to follow up with these patients in Cohort 4 to determine how long the effects could be maintained in order to determine if future procedures will be needed on a couple years basis, or do you think this is really going to have to be evaluated more on an individual patient basis?

So what we plan to do with the current protocol is follow these patients for five years. If we decide to make a change at some point in the future and follow them for longer, that's fine. I think we would like to eventually answer the question as to what is the mean length of benefit, how durable is the therapy. Now, when you do get out to five years, you're kind of assuming its lifetime, but at present we would follow these patients for five years. We don't that – that obviously is not a clinically fungible period of time from which to build a study for the purposes of approval. So, thankfully, the FDA has conveyed to a number of sponsors that a 12 month observation period would be appropriate in the setting of dry AMD. So we intend to continue to collect anatomical and functional data on patients, which started monthly and then it's going through quarterly and eventually it'll become an annual assessment, but ultimately reaching out for five years. But we don't intend to use five years as a clinical trial endpoint. I would expect completely that we would follow the standard path of a 12 month observation periods. So, we'll collect the data. I expect that we'll continue to report that long-term data, but for people who are wondering, which data point they should pay the most attention to the six month and 12 month data points are the ones that are the most well-established as being relevant to a regulatory process.

Thank you. And just on that note, now that you've observed a number of patients beyond six months, and you have long-term follow-up for many others. Were there any other important takeaways or observations that you think will be important as you look to meet with the FDA to discuss the next steps around this program? I know, of course, you've highlighted the placement of the cells and the importance there and how this is translated for the cases of retinal tissue restoration, but anything else that you've found to be notable?

Yes. You mentioned placement, I think that's really important. The other one that I think is very important is how you image the patients. So the traditional way which I think is going away is to use FAF, which is sort of like an aerial picture. The future and certainly our intended future is to use OCT because you're getting a cross-section. You can see all of the layers, almost at the level of histology, you can see the cross-section. So for us having the ability to deliver tissue and be looking to measure the functional activity of that tissue in areas where it wasn't present, you actually can't see that using FAF. We cannot see that using FAF because our cells do not fluoresce under FAF. So we feel that we are in a – we are aligned with the future, and it's not a distant future, it's more present, but we are aligned with the future of how to measure and evaluate geographic atrophy. And that would be to use Optical Coherence Tomography, or OCT rather than FAF. So that's an important consideration for us going forward. And I think where it's most striking is some data. We have one slide that we shared not too long ago, where it shows about a 30% benefit for a patient, it reduces their area of atrophy by about 30% when you look at it using FAF, but again, that's sort of an imperfect aerial view. When you look at the same patient at the same time points using OCT, you can see that their area of atrophy is unchanged. That's 100% of stopping or ceasing of growth of atrophy. So clearly there's more information to be learned from using OCT. So I think placement of cells and I think that the measurement tool, the assessment tool are really important ones. Other ones like the frequency of assessment, some of the characteristics of patients, those are a little bit more straightforward and conventional.

Great. Thank you, Brian.

You bet. Thank you, Kristen.

Next question, we have Joe Pantginis from H.C. Wainwright. Your line is open.

Hey, guys. Good afternoon. Thanks for taking the question. Got a couple of questions on OpRegen and a shorter question on a VAC2. So first on OpRegen, I guess I wanted to focus on, do you have some feedback you can provide as to KOL feedback or physician feedback that you've had now that you have three patients that have shown restoration, which has been unheard of up until this point, that you're using for feedback ahead of your upcoming FDA meeting. And this is beyond, say, the physicians that you've had on your recent KOL events. And then secondly, with regard to OpRegen. I guess, as you're looking to your FDA meeting, your wishlist – what kind of endpoints are you looking for, for a primary endpoint? There's been a lot of evolution from the FDA with regard to ocular endpoints. You mentioned microperimetry before, the FDA is focusing on that more and more, say, versus BCVA, which has been in a lot of the wet AMD study. So how do you think it might play out or what's your wishlist around that?

Great. Hi, Joe, and thank you for the question. So with respect to therapeutic area experts and their input, we've been delighted with what we have heard and in some cases it's sort of extraordinary comments. We're not planning to build a meeting package for FDA around their extraordinary comments, we'll build that around the data, but the benefit for us is that this is heavily anatomical data. So going in and bringing visual acuity data or patient reported outcomes data, that's fine, that's useful and informative, but everybody knows that those assessments, the tools and how they're collected, they tend to be a little bit more subjective. But anatomy does not change, but for the fact that you've got this right in the back of your eye getting bigger, you can take images, collect images and you can line them up exactly the same based on where vessels are, and you can really see these changes. And so you're able to separate from some of the, let's say, placebo effects of clinical assessments, or separate away from some of the more subjective factors. You have one data collector who lets the patient lean forward a few inches when they're reading the eye chart. You're not allowed to do that. So it can be difficult to get really clean data when you have some of these subjective assessments, which is what puts us in such a good place with respect to going to the FDA with an emphasis around restoration because it's an anatomical observation for which the individual has no ability to influence. You cannot regenerate retinal tissue by wishing for it, praying for it, et cetera. So I think that although we have heard some really wonderful, I'm reluctant to even restate some of them because they're almost…

No, no, I really appreciate that, and it's been nice to see the evolution of these answers. So thanks for that. And I said, my question on VAC2 would be a little bit shorter because I think you might be a little circumspect with regard to your answer. Obviously as you alluded to in your prepared comments and in prior calls, this really is a platform type of technology. So I guess I wanted, and you've already shown your ability to attract business development activities. So I guess with that said I know you can't be qualitative. Can you, or I'm sorry, you can't quantify per se, but maybe some qualitative type comments as to any potential additional inbounds you've been having on the platform?

I will be evasive about that only because – only because I prefer. You can always be close to deals and sometimes they can go away. So we will communicate any additional VAC2 deals after they are signed, but I think it represents a very compelling growth area not only because it's oncology for which there's a lot more precedent in cell therapy and a lot of activity and interest and investor enthusiasm. I mean ecology there are a lot of reasons why that's an attractive area for us. But also because it does allow, as I said in my previous remarks, it does allow us to be able to increase our development pipeline by fractional ownership or partial ownership or joint ownership, or even majority ownership with a bunch of other companies, because there are literally billions of potential antigens. And one of the great challenges in our field is trying to figure out which antigens would actually be the ones that are most selective and the most antigenic and so forth, and their whole company's built around trying to figure out what's a good thing to stick in front of a patient's immune system to get a response. So our ability to use the dendritic cells as carriers, I'm delighted that we have the first case of this that we've got a partner that – from which we are generating revenues and delivering against that partnership, and I would be really happy to have a bunch of those. So it's not the Number 1 priority at the company by any means, but it is an really exciting area of growth where we can capitalize on prior investments to spin-out flywheel style, a bunch of new programs and maybe the others will do the development, maybe we'll do the development. I don't know, I'd love to see a combination of different structures. You could even create a whole new company just around the oncology side of what we do. So really the sky's the limit. It comes out of the conversations that we have with various parties.

Look, I really appreciate the color despite yourself described evasiveness, Brian. But thanks a lot, I appreciate it.

Thank you for the space, Joe. Thank you.

Next question, sir, we have Dane Leone for RJF. Your line is open,

Hi. Thanks for taking the questions and congrats on all the progress. Just one question from me. Can you just maybe detail what the interactions with the FDA have been around OpRegen and what the next meeting is planned for and what's going to be discussed in that meeting? Thank you.

Yes. Of course, Dane. Thanks for the question. There haven't been many that the interactions that occurred shortly after I joined the company tended to be protocol amendments. We introduced the new thaw and inject formulation. We introduced the Orbit Subretinal Delivery System into the protocol. So we've not had a formal end of Phase 2 meeting. So that's something for everyone to look forward to and its planned for Q4 of this year, because it would be the first time that we would have frank discussions around end point study design, et cetera. So the Phase 1/2a study, which has now completed enrollment is essentially a trigger to go onto this next higher level of discussion. So that is – that's where we are, and I think it's actually a pretty important event because it will speak to what the questions are that we will ask next from a regulatory perspective. And of course from that the size of the study, the cost of the study, the duration of the study, the importance and significance of the study, all of that will precipitate out of that meeting, right? I hope it will. So it's an important meeting for us to look forward to and prepare for.

Is that, I'm sorry, one follow-up. Is that meeting has a set date as of now?

We have not called the meeting and we have not said what category sure you're familiar, there's type ABC. There's different categories under which you can request meetings that is work that is ongoing. We're preparing our side before we set our day. But we would presumably once we have a meeting confirmed and on the calendar, we would presumably make everyone aware of when that will occur so that people can anticipate that we would have some up from minutes, et cetera, from that meeting.

Okay. So as it stands now 4Q is your internal target, not something actually on the calendar with the FDA?

That is correct. And as you know, but maybe some listeners don't know there's also a waiting period between when you request the meeting and when the meeting is actually granted, it can be 30 to 60 days. It can be in between that. It really varies according to a number of different parameters. I won't go into, but just so that people know you don't just pick-up the phone and say, hey, can I come see you tomorrow over lunch?

Perfect. Thank you so much.

You bet. Thank you, Dane.

I am showing no further questions at this time. I would now like to turn the conference back to Mr. Brian Culley for closing remarks.

Well, thank you and thank you everyone for joining. I think we had a great quarter. I'm very happy about it; I'm excited about rejoining in our next quarterly update. In the meantime, we'll get back to work and keep moving the company forward. Thank you all very much and enjoy your afternoons and evenings.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.