Lineage Cell Therapeutics, Inc. (LCTX) Q2 2026 Earnings Report, Transcript and Summary

Welcome to the Lineage Cell Therapeutics Second Quarter 2026 Conference Call. [Operator Instructions] 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 the copyright and is the property of Lineage and 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 call, Ioana Hone, Head of Investor Relations at Lineage. Ms. Hone, please go ahead.

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 6, 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 section 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 are advancing our programs and business. Probably everyone on this call knows how important OpRegen is. But 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. And I'm not sure that side of our company is as appreciated as it could be. So 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. But 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 GMP banking and GMP 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. And moreover, we have successfully made cell banks and GMP 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. And 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 3 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 5 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. And 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 risks 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 3 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 CEnC as a potential new program in the second quarter of 2025 and we started doing wet lab work in the third quarter of 2025. And just 9 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. And 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 is only 1 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. But 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. And 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 and 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 and several companies are making great strides on those problems. But 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. And 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 5,000x smaller. On top of that, the proliferative capacity of RPE cells in our hands is at least 50x 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. Therein lies the fundamental problem. Islet cells do not readily expand during differentiation or in mature form. So the scale problem needs to be solved prior to differentiation into these cells. Our proposed solution to this problem is employing a modification of our AlloSCOPE platform in what we call AlloSCOPE 5D, which has the goal of generating large-scale production of predifferentiated cells with reduced manipulation and passaging so that you're capturing both 2D synchronization and control of differentiation with 3D environmental control and scalability. We are employing AlloSCOPE 5D to support the ILT1 program because the 5D technology is aimed at not only generating massive numbers of pluripotent cells prior to differentiation, but also ensuring those cells retain their pluripotency and synchronized response to the factors that are needed for efficient differentiation. Yes, it's true that pluripotent cells can maintain long telomeres and self-replicate, but they can still lose genomic integrity and synchrony with every cell cycle or passage, meaning it is necessary, yet very difficult, to maintain homogeneity and control of differentiation as you expand into large numbers of cells. ILT1 is our plan for a cell therapy product candidate that is initially focused on producing a homogenous population of undifferentiated pluripotent cells ready for synchronized differentiation and which could serve as the high feed source material to an islet cell differentiation process for large-scale production. If we can develop a modality that supports an islet cell production process from expansion through differentiation in a dynamic culturing system, we can potentially solve a major hurdle to commercial scale production of an islet cell therapy. This manufacturing-first approach underlies our view of the islet transplant competitive landscape. If we can solve the manufacturing problem, we might have a very successful product with large margins. And even if others are present, we can be nicely positioned against anyone else trying to solve the scale-up problem through less efficient brute force approaches. And with this initiative, we are inverting a traditional development paradigm by focusing on the scale-up of undifferentiated cells first, because as I explained just a moment ago, we believe that once you've shown that you can actually produce your material while maintaining its quality at scale, you may be materially reducing the risk profile for the remainder of the development project. Multiple independent groups have already shown that islets can clear preclinical and clinical testing and be an effective intervention for people with type 1 diabetes. But no one, to our knowledge, has shown that they can scale islets to levels that meaningfully meet the unmet need. For this reason, we think it's appropriate to focus on the unresolved scale problem before performing expensive preclinical and clinical studies. We believe advancing into clinical testing without a robust manufacturing process may prove to be a significant setback for some of the current companies in this space and that there is value in establishing from the beginning a process that can support downstream development, especially when such development has a credible clinical and regulatory precedent. I previously reported that we met our first internal manufacturing milestone for this initiative by demonstrating a fully suspension-based process for undifferentiated pluripotent cells from one of our proprietary cell lines at a 0.5 liter scale. We have since then successfully demonstrated this process in a larger multi-tier format. In parallel, we have applied AlloSCOPE 5D to our COR1 program, showing that we could successfully apply 5D expansion protocols to support the generation of a fully differentiated and specific cell type. Looking ahead, our next goal is to show that cells we expand from the 5D platform can also differentiate into islet precursors, which could demonstrate their ability to be further differentiated into islet cells. I'm hopeful that demonstration will bring more attention to this program and I'm pleased at how quickly this work has progressed. As I said on a prior call, we're happy to take you on this development journey because if it continues to pan out, we believe it could become a very valuable component of our business. Next, I'll spend a few moments on ReSonance. ReSonance is a preclinical auditory neuronal cell transplant to treat hearing loss and is the first internal program built from the beginning on our AlloSCOPE platform. ReSonance is being developed under a partnership with William Demant Invest, or just Demant, where Demant has agreed to fund up to $12 million toward a preclinical development plan, which is intended to support an IND and/or CTA filing. This 3-year alliance is approaching its 1-year anniversary and we are pleased with the progress made to date by the parties. ReSonance is an example of 2 important features of our platform. The first is that we showed we could conceive of and successfully manufacture a completely new cell-based product candidate in a rapid and efficient way. We generated new intellectual property and advanced ReSonance into preclinical testing in about 1 year. The speed and success of that project then led to a partnership with Demant, a world-leading health care -- hearing health care company, which brought us access to specialized technology, auditory expertise and a network of hearing health leaders. The second key feature of ReSonance is it is aligned with our Lineage 3.0 ideals. We believe that if a signal of a treatment effect in hearing loss patients is observed, it would be an important finding in this population, even if it occurs in a small number of patients. That is because, like in dry AMD, patients who suffer from hearing loss from the destruction of a particular type of cell have not been shown to improve spontaneously. If we do see signs of a treatment effect in even a small number of patients with sensorineural hearing loss, we think that could drive value even long before the results of a randomized trial. ReSonance continues to advance in preclinical testing and the goal of our partnership, as I said, is to advance it to an IND. So I look forward to keeping you informed of our progress. In the meantime, I can share an update that we have successfully completed 3 engineering runs of ReSonance and we also recently completed our first GMP run, which is now undergoing release testing. We've also been establishing a novel model of deafening, which will enable us to conduct functional animal testing using the cells we produced under this important partnership. ReSonance represents a novel approach to treating a large underserved market. It doesn't include the cadaver-based treatment precedent of cornea or islet cells, but that's partly why we elected to partner it early and share risk. But at the same time, ReSonance has only one comparable competitor that we can identify and is targeting a very large potential market. So it fits nicely with our Lineage 3.0 strategy. For this reason and more, we're hoping to see ReSonance make it into a clinical trial. Next, as a hybrid to the first 3 examples I've given today, I'm pleased to share some new ideas we have been evaluating for OPC1 development. Implementing these new ideas would more closely align OPC1 into the Lineage 3.0 paradigm. As you likely know, the early efforts with OPC1 were conducted by a different sponsor and focused solely on a subacute patient population. We haven't needed to evaluate the merits of this approach because we've been focused on the more immediate and necessary goals of manufacturing the cells on what we believe will be a commercially viable platform and developing a new delivery device. In the past year, we've more fully evaluated our new manufacturing process and collected some encouraging initial data with the new device. As a result, we've gotten increasingly comfortable that both of those aspects will be successful, which means we can now turn more earnestly to the topic of patient selection. We also recently hired a new Head of Clinical, Dr. Herath, who's on the call today and brings the appropriate resources to evaluate the various possible development paths for OPC1. As a result of that work, which remains ongoing, we anticipate we may decide to prioritize a chronic patient population for future OPC1 development. There are many reasons to consider this adjustment, but I'll review 3 of them for you today. First, and probably the most compelling reason of them all, is that chronic patients have a much more stable neurological baseline compared to subacute patients. The neurological and functional status of chronic patients is typically well established, can be reliably and repeatedly measured and is not likely to change meaningfully without intervention. That means these patients can serve as their own internal treatment control, something that is not possible with a subacute patient population. We think this can help overcome the heterogeneous nature of these injuries and the resulting clinical picture because, as you know, subacute patients experience a great deal of spontaneous improvements during the first 9 months or so. SCI experts we've consulted with acknowledge that it's extremely difficult to tell whether a change in function in a subacute patient is attributable to treatment or to spontaneous improvement, even if you have a well-matched natural historical cohort as a comparison. This issue is mitigated in chronic patients, which is why they fit better into our translational evidence paradigm. Chronic patients are also significantly easier to enroll than subacute patients because they're approximately 10x more prevalent than the subacute population and because the window of eligibility for chronic is measured in months or years, not in just a few weeks. But that is not the only reason to consider focusing on chronic injuries. The change in demographics, the published evidence and the standard of care for subacute patients has advanced and we need to advance with it. Over the years, the average age of an SCI injury has risen from people in their 20s into their 40s. Patients are older, more medically complex and bring different challenges regarding consent and stabilization. Thanks to improved care, the acute and subacute rehab phase, which subacute patients experience in the hospital, has shortened to just a few weeks and AIS conversion rates have risen, which is great for patients. But makes clinical trial data collection and database comparisons in the subacute population more difficult than before. Meanwhile, recent data from various groups have shown that chronic patients, especially those with preserved midsagittal tissue bridges at their injury site, are the ones most likely to show evidence of recovery from cell therapy, especially when the intervention is combined with a rehabilitation protocol. For years, this was not the conventional wisdom. Animal studies from years ago suggested chronic SCI would be a less responsive population. But those studies were conducted, in some cases, 20 years ago, had some design flaws and were never replicated by us or others. We find the recent and modern bodies of work done by both clinical or industrial groups and preclinical and academic groups to be much more convincing and reliable. We appreciate the dedication of these groups to advancing the field because it allows us to proceed into the chronic population with not only a product candidate with the longest published safety profile in the field, but also preexisting evidence of potential activity for this mechanism. Overall, we are excited that chronic patients, a direction and population we have long considered attractive, have been increasingly validated by us and others, giving us a more promising clinical path and the opportunity to adapt the OPC1 program into our model of early trials that can potentially generate meaningful evidence. And so while we continue to enroll the ongoing DOSED study and assess our new way of delivering OPC1 cells to patients, we are simultaneously refining our view of how to best focus on the chronic patient population. Dr. Herath has been collaborating with SCI thought leaders and I expect we will be able to discuss some of our specific plans on a future call. In the meantime, I'll add that the DOSED study, which is designed to demonstrate the safety and performance of the novel spinal cord cell therapy delivery device, to date, has performed as expected with no unexpected procedural, product or device-related adverse events nor does it require any significant design changes. So we are looking forward to enrolling additional patients on that study this year. And now saving the first for last, I will provide a few words on our lead program, OpRegen. I think everyone is well versed on where we stand with this program. Data we initially reported from our OpRegen Phase I/IIa clinical study included improved anatomy of the retina, halting or reversal of atrophic progression and improved vision in patients with dry AMD. These are outcomes not known to occur naturally in human beings. And since we made these initial reports, 3 other companies have reported similar outcomes with their own version of an RPE transplant, providing supporting evidence for this mechanism of action. But importantly, our data indicate that such outcomes are achieved only when the cells are delivered right to the target lesion and there are choices you can make regarding how to conduct delivery to this area. For example, you can access the subretinal space from the front of the eye, transvitreally, or around the back of the eye, suprachoroidally. Like many surgical choices, there are trade-offs. So our partners have undertaken a campaign to evaluate a number of surgical devices and methods, which we believe are intended to improve and simplify clinical outcomes. We believe that this approach may ultimately support a more valuable asset through 3 prongs, a stronger risk-benefit profile, a dominant position over competitors and presumably translating into more revenues attributable to wider adoption by surgeons. This kind of work takes time, but we're encouraged by the progress, for example, reported by the clinical research team at Duke University, which published recently on a novel single-step subretinal injection device that significantly outperformed the current off-the-shelf device in calibrated volume delivery to the subretinal space in a relevant animal model. Overall, as we look at how actively Roche has been culling their pipeline in favor of first and best-in-disease assets and alongside the supportive comments they have made about OpRegen and their commitment to ophthalmology, we remain confident that the OpRegen program is receiving abundant care and attention from our partners and we continue to anticipate a positive future for the program. This, by the way, is aligned with what the Genentech speaker at the ARVO Eyecelerator Conference said a couple of months ago. He noted that transformational outcomes in cell therapies should be defined by a metric of visual function and preserving vision and went on to say that Genentech was investing in surgical development because safe and reliable delivery of OpRegen was key to the outcome that they're looking to achieve for their patients. He also highlighted the 3-year clinical data with OpRegen as evidence of what was possible for the field. We support all of those statements and more. So while we await completion of the ongoing surgical optimization work in the GAlette study, we will continue to closely monitor any relevant activity. As one example, OpRegen was recently registered in the EMA IRIS database, which is something that sponsors need to do before they conduct product-related activities like obtaining scientific advice or running clinical studies in Europe. As a second example, we were very happy to see that Roche expanded the GAlette study from 6 sites to 17 starting last year. And as a third example, Roche dedicated approximately half of its exhibit hall space at the most recent ARVO conference to the OpRegen mechanism of action, which we think is intended to raise awareness of this novel approach to treating dry AMD with an RPE cell transplant. These kinds of actions, along with their continued efforts to discuss the OpRegen program from the podium at medical and scientific conferences, continues to provide us with encouragement that OpRegen is being well supported within the Roche organization. To wrap up, I believe it's important to highlight that we have in the past year demonstrated the ability to rapidly generate additional novel assets with what we believe are differentiated and compelling profiles to create a growing pipeline of cell transplants that we can develop internally or seek to partner where we think it makes sense to do so. Our overall strategy aims to efficiently leverage our AlloSCOPE platform to create, support and manage a broad pipeline of cell-based assets. I'll invite you to keep in mind that our platform assets share certain essential traits so that each dollar we invest in innovation may have impact across multiple programs. We believe this allows us to expand our pipeline without losing the focus required to succeed in each indication and still maintain a manageable and efficient level of capital investment compared to our cell therapy peers. Most of all, we appreciate that the innovative and successful work that created the OpRegen program is giving us the opportunity to generate a portfolio of similar cell-based transplant therapies for many millions of patients around the world and hopefully build a very successful and important company. With that, I will turn things over to Jill for a review of our financials.

Thanks, Brian. I'll begin with an update on our cash runway. As of June 30, 2026, we had $50.8 million in cash, cash equivalents and marketable securities, which we expect will fund planned operations into the third quarter of 2028 and that is 1 quarter longer than the runway we reported on our last call. This extension of our runway reflects our use of the ATM on a single day, June 26, commonly known as Russell Reconstitution Day. By taking advantage of the unusually high trading volume associated with Lineage being added to the Russell 3000 Index, we raised approximately $4.6 million at a weighted average price of $1.28 per share. We were pleased that even with these sales, our stock still closed above its opening price on that day. Beyond our cash currently on hand, we also remain eligible for several other sources of capital. First, we are eligible to receive approximately $32 million from the cash exercise of warrants issued in November 2024, which has a strike price of $0.91. Importantly, those warrants, which have a 3-year maturity date, will accelerate to 90 days if Roche and Genentech publicly disclose their intent to advance OpRegen into a multicenter trial that includes the control or comparator arm. Second, we also remain eligible for up to $615 million in development and commercial milestone payments under the Roche and Genentech collaboration agreement. And third, we continue to evaluate potential partnerships similar to our Roche and Demant collaborations, which we could enter into, into the future. Before reviewing our second quarter results, I'd like to highlight a change from prior periods. We are reporting net income this quarter rather than a net loss. This result primarily reflects a noncash gain from the quarterly remeasurement of our warrant liabilities at fair value. Because our share price declined compared to the prior quarter, the estimated value of these obligations decreased, which creates an accounting gain. This gain was also partially supported by foreign currency effects associated with our international subsidiaries. But I will note that these adjustments affect our reported earnings and reflected normal accounting policies, but do not represent cash received or used during the quarter. Now I will review our second quarter results. Our revenue is generated primarily from collaboration revenues, royalties and other revenues. Total revenues were $1.1 million, a net decrease of $1.7 million as compared to $2.8 million for the same period in 2025. Decrease was primarily driven by lower collaboration revenue recognized under the Roche Agreement, reflective of measured progress towards completion of the first performance obligation as well as lower revenues recognized associated with the prior year termination of the VAC Collaboration Agreement which was partially offset by an increase in revenues related to our research collaboration with WDI. Operating expenses are comprised of research and development expenses and general and administrative expenses. Total operating expenses were $10 million, a decrease of $12.5 million as compared to $22.5 million for the same period in 2025. And the overall decrease was primarily driven by the $14.8 million expense recognized in the prior year for the noncash loss on impairment for an intangible asset related to the VAC platform. R&D expenses were $4.8 million, an increase of $1.7 million compared to $3.1 million for the same period in 2025. The net increase was primarily driven by our preclinical programs and other undisclosed programs. G&A expenses were $5.2 million, an increase of $0.7 million as compared to approximately $4.5 million for the same period in 2025. The net increase was primarily driven by personnel costs and stock-based compensation expenses. Loss from operations were $8.9 million, a decrease of $10.9 million as compared to $19.8 million for the same period in 2025. The decrease was primarily driven by the prior year noncash impairment expense related to the VAC platform of $14.8 million, which is a nonrecurring transaction. Other income and expenses reflected other income of $10.5 million compared to other expense of $10.6 million for the same period in 2025. The net change was primarily attributable to the quarterly fair value noncash remeasurement of the warrant liabilities, driven by a decrease in our share price as compared to an increased share price in the prior year's quarter, which is partially offset by exchange rate fluctuations related to our international subsidiaries. The net income and loss attributable to Lineage was $1.5 million or $0.01 per share for basic and $0.03 loss per diluted compared to a net loss of $30.5 million or $0.13 per share for both basic and diluted for the same period in 2025. The change was primarily driven by the prior year noncash loss on impairment expense related to the 2019 acquisition for the quarterly fair value remeasurement of the warrant liabilities. Overall, our second quarter results reflected our continued focus on disciplined fiscal management and prudent capital allocation. We remain committed to managing expenses carefully while directing resources towards strategic investments that strengthen and advance our pipeline. We believe this balanced approach supports our near-term operating priorities and our long-term growth objectives. With that, I'll turn the call back to Brian for closing remarks.

Thanks, Jill. This will continue to be an exciting year for Lineage. I'll just repeat some key points. First, we continue to remain confident in the potential for OpRegen to advance into a multicenter controlled trial. Second, with that confidence, we have made investments in our AlloSCOPE platform, demonstrating the ability to rapidly and strategically generate additional novel cell transplant assets, all based on our platform technology and utilizing our AlloSCOPE capabilities. And then looking ahead, our approach to product development will seek to take advantage of the power of cell transplantation to swiftly, effectively and strategically develop assets with the potential to generate signals from early clinical trials. We're very proud of our progress to date and also believe there's much more to look forward to from our platform in the months ahead. We appreciate your support and belief in our vision. With that, operator, we are ready for any analyst questions.

[Operator Instructions] Your first question comes from Mayank Mamtani with B. Riley Securities.

Appreciate a lot of detail here. So maybe just first on the islet cell program. If you could comment a little bit on what the multiliter scale you are at right now with working volumes? And if you could maybe talk about your process and protocol, how that contrasts with peers, including, I think, a couple that are in clinical stage and have mentioned recently their excitement about having more patients be exposed to this modality. And then my second question was on the chronic DOSED study where you've had, I believe, a couple of SCI patients on study. And I was just wondering if there's been any update, including a 1-year update, I think you had mentioned before. And maybe just comment on what sort of things to look out for as you advance your regulatory dialogue here, including some clinical data we can get from here.

Thanks, Mayank. So as to your first question, there are many component parts that go into AlloSCOPE 5D. There are biological inputs, physical inputs, engineering inputs. There's know-how. And while one might think that something as simple as the vessel size you're using for any particular stage might not be in and of itself revealing and think that is true, there are a finite number of providers in the space. And so even something as simple as saying what scale we're at will probably not be shared by us anytime in the future because we want to maintain protection across every aspect of what we're doing. It is that important to us. So we're being intentionally unclear about exactly what vessel size, because if there were only one company in the world that makes a 4.4-liter vessel, you would know one of the many component parts and we're just not going to do that. So for now, you're going to have to be satisfied with multiliter. But perhaps Dr. Herath can give you a more satisfying answer to your other question about where we are in the DOSED study.

Mayank, good to meet you here. So as you know, the DOSED study was not designed to assess functional changes in our patients. And therefore, we shouldn't be actually looking for clinical improvements or any such thing in this particular study. What we can tell you, however, is that the patients, both of them -- one of them completed a year, the other one, 90 days. They have both remained adverse events free and completely stable as expected, given they are chronic patients. What we can also tell you is that there has been some anecdotal information that has come through from the family members, which we can't really assess formally, but we can tell you that the patient has reported some improvement, improved breathing and core strength, et cetera. But again, as I said, we are not going to comment on formal neurological changes in these patients until we advance to a proper efficacy study.

Your next question comes from Jack Allen with Baird.

I apologize, I wasn't able to listen to all the prepared remarks. So I'm not sure if some of these have been covered. But I wanted to start off with the COR1 program, which it's great to see is moving forward. I guess I wanted to ask about what your time is as it relates to potentially getting this asset into the clinic and how you think about the partnership opportunity with COR1. I believe some of these indications are fairly high in the number of patients that you could potentially treat. Would you look to bring a partner on ahead of moving into the clinic? Or would you like to provide clinical proof of concept and really derisk the program and then partner the program? And I have a quick follow-up as well.

Thank you for the question, Jack. Always, these are options for us. So there are scenarios that are driven by capabilities where sometimes partnering makes sense. But COR1 probably doesn't rate high on that particular criteria because we can execute a plan. What's really beneficial about COR1 is that others have already established the appropriate animal models, human study designs have been done, leading ultimately to an approved product, in this case, only in Japan to date. So there's a lot of imitation or copycat that we don't have to innovate a whole lot, which I think will allow us to go faster. Ironically, we did a call dedicated solely to COR1, where my main message was that value for a program like this perhaps should be rewarded or granted even as early as just developing the right product profile. Because we know that the way that this works today is that many thousands of individuals provide donor material. We are just another source of donor material. So I think that the risk profile for our corneal endothelial cells is probably very different than if you are pursuing an entirely different approach. A small molecule hitting a target that's not validated is very different than if 40,000 people have already had this procedure and you show up with the [ forty thousand and first ] source of cells. I think that's a very different product profile. So we will be, I think, benefiting in terms of getting into the clinic from the fact that there's a precedent. It probably allows us to do a number of things in parallel. And I think the risk profile would allow us to go confidently down some of those paths in parallel. What we said today is that one of our goals is to generate initial animal model data. If we are in a position to share it before the end of the year, that's even better. That would certainly be a goal for us. But I do want to remind, for everyone who's listening to that question, this program scarcely existed a year ago. And now here I am talking about how quickly we might be able to get into clinical trials. And so that more than anything else, ought to be a good indication because if you tried to do the same thing with a small molecule approach, you could be spending 4 or 5 years screening compounds and working your way through SAR, doing hit-to-lead activities. So the power of this platform is exactly that, that we can generate programs with differentiated risk profiles and differentiated products and features very rapidly without breaking the bank along the way.

Yes, I know. It's been great to see the rapid progress there. And then if I may, just one brief follow-up. You mentioned a regulatory filing around OpRegen in Ireland. I was hoping you could just elaborate a little bit more on what that filing was and what it could mean as it relates to Roche's appetite to starting studies in that geography.

Yes. Thank you for the question. Not Ireland. I did go there for the first time last year, a lovely place, but I was referring to the IRIS database. So the EMA maintains the IRIS database. And so you need to register any material before you talk with the regulatory bodies in Europe about that material. So it's nothing more than an administrative step, but it's an administrative step that's been done 2, 2.5 years, 3 years after licensing the program. So it is nothing more than another tea leaf. But I invite the listeners to consider how many tea leaves start to make you feel that there's some asymmetry in a possible positive outcome here. So it doesn't commit -- to my knowledge, it doesn't commit Roche or Genentech to doing anything in Europe, but it does invite the question why they bother doing that. And I think that's what a lot of the questions are that we have regarding the OpRegen program and all the different activities that seem to point to us that things are going well.

Thanks for the correction on IRIS versus Irish. That's great progress to hear.

Your next question comes from John Newman with Canaccord Genuity.

Congrats on the continued progress. So I'm just wondering, Brian, if you could just remind us on the OpRegen program, what are the commercial -- or sorry, what are the milestones that you're eligible for in that program? And do you maintain commercial rights or maybe some sort of right to opt in? Or is it more of a royalty on the commercialization side?

Yes. Thanks for the question, John. So we remain eligible for $615 million of developmental and commercial milestones. Those are not broken out publicly. There was one milestone that we already met that was in connection with a manufacturing and clinical achievement that we met. So that was obviously another positive indicator that we're doing some good things for our partner. And then it's not a co-promote agreement. It is a plain vanilla royalty agreement. It's a double-digit royalty that has tiers that increase the rate as certain thresholds are met. As with any license, there are also certain conditions where those royalty rates can be going in the opposite direction. But the base case is that is pretty attractive to us, a double-digit base case for that license agreement with Roche and Genentech on a worldwide basis. And I will note that while it is for any eye disorder, it is limited to the RPE cells. So any other cell type that we're working on represents more opportunities for potential partnerships, but the Roche/Genentech one could be deployed into any number of different ophthalmological disorders. They do have the right to do that if they so elect.

One additional question on a different program. Should we expect additional updates this year from your work in diabetes?

I hope so. It's more likely than not. I do tend to provide a lot of in-depth information about what we're doing. And I can frankly tell you that I've been surprised at the rate of progress by the team. So I think the answer is yes, but I'll reserve the right to be wrong in my prediction there. But I have provided an update, I think, 3 consecutive quarters. So I would certainly hope that I would have something interesting to say before year-end.

Your next question comes from Joe Pantginis with H.C. Wainwright.

Two questions, please. So Brian, you started the call by saying you're going to provide some background information behind the scenes and what have you. So I'm really happy that you provided all of the manufacturing types of details. But I want to go even deeper there and that is to get to the final cell that gets into the vial and that's based on all of your expertise and the proprietary nature of what I guess I would call the recipe for these cells where once it makes the vial, like I guess you could provide a little more detail here. It's like you just can't go back into the recipe and say, okay, I'm going to add another tablespoon of sugar. So I was hoping you could just sort of talk about the proprietary nature there that could impact the competitive profile in the future. That's number one. Number two, I'm going to ask, I guess, the 47th version of a proxy question regarding OpRegen. And that is based on your services agreement can you point to anything in your agreement with them with regards to increasing of services, sending them more products or anything of that nature?

Thank you, Joe. I'll answer the second question first. It's shorter. No. There's internal information that we have that is nonpublic. And so of course, we have greater insights and beliefs relative to our investor audience. But all of the service agreement information is, and continues to be confidential. Regarding the recipe, so making a specific cell type, and I should be really clear again here, not just making it, because there's a lot of labs that can make a cell that you choose, but being able to make it reproducibly, have the right control, the purity, the quality, being able to do it on a scalable platform, right, these are all the table stakes to play for a commercial pot. And as soon as you layer in those criteria, it becomes more difficult. So a lot of our intellectual property is in the methods that we utilize in order to make these specific cells with all of these additional criteria. But more than that, and the reason why I continue to figuratively pound the table on how difficult this is and why it's important to do it correct from the beginning, is the regulatory component. If you are making cells, and let's say it takes you randomly 45 days to run a batch of a certain kind of cell and that's good enough to do a Phase I clinical trial, but you know that it's not a commercially viable process and you just say to yourself, well, I'm going to put some steroids in here. I'm going to throw some sugar in here and I'm going to make the process, spit out more cells, I'm going to, i.e., scale it, you are changing your product in the view of the FDA. In a worst-case scenario, your product is different enough that you must start over. So we believe that it is a flawed approach, an unnecessarily risky approach to develop a program that doesn't already, at the beginning, demonstrate the ability to have a high probability of scalability with your process. Build a process that scales on day 1 because none of us want to get into a situation where we celebrate Phase I clinical data and then have to go out to the world and explain and apologize why we can't actually make enough of this product that we're touting as being successful. That sounds like a terrible strategy. So we take more time. We probably invest more money, but we retain in-house the technology so that we feel a very different sense of our ability to scale these products so that if we do show evidence in a clinical trial, we don't have to go back and change anything. We may have some comparability across batches, but we're not changing anything in our methods. And it is a fundamental principle among those who exist within cell therapy manufacturing, not even the cognoscenti, like just general people who are really wise in cell manufacturing, are going to appreciate how important it is to not make any changes to your process. But I think that, that is so different from how we look at small molecules where we just say, look, throw more raw materials in, do some quality control, run your analytics and you're going to have the same stuff. That's true for small molecules. It is violently untrue for cell therapy manufacturing. So we continue to perhaps look and feel a little bit differently. A reason to run a call like the one we're doing today, which is sort of a behind the scenes, get to know us, understand our strategy, is in part specifically because there are principles of cell therapy manufacturing that are not applied to small molecules and not applied to antibodies, but are critical to understand in order to understand how Lineage is building itself to be a successful company in the future. So I thank you for that question because it gives me an opportunity to stand on a soapbox and shout it again.

Your next question comes from Sean McCutcheon with Raymond James.

Brian, just one from us. On OPC1, can you speak to the requisite safety waiting period and challenges identifying and getting patients into the DOSED study? What are your expectations for cadence of new patients enrolled and being treated moving forward now that the second patient has been dosed, that they were dosed about 90 days ago. And should we anticipate only chronic patients being enrolled into the DOSED study moving forward?

Yes. And I'll let Dr. Herath in just a minute answer that. We didn't expect to -- we didn't expect the need to be urgent around chronic because we figured chronic would come in before subacute because subacute, of course, requires an accident or an event. And so we thought that the subacute patients, of which 3 to 5 are planned, would be the lagging population. But now we're starting to have some different thoughts. And so yes, we do retain the optionality of potentially changing the protocol. And maybe instead of those subacute patients, perhaps we'll use those patients as bridging to our new cells. But let me invite Dr. Herath to provide his views on that.

Sean, good to meet you again. So the first 4 patients in the protocol, each will have a 1-month DSMB break before the next patient can be enrolled. So there's that. So until we are done with the fourth patient, we cannot rapidly expand the recruitment. And so that's where things are for the time being. Third patient is currently being assessed. We have several candidates. What I can tell you is that they are all chronic patients right now, just for the reason that Brian mentioned. So then the fourth patient will come. Beyond that, further expansion and how rapidly we can go depends on a number of factors such as finding the patients, initiating more sites and so on and so forth. But I think the anticipation is to try to get the remaining patients relatively quickly, hopefully, within the next 12 months or so overall.

There are no further questions at this time. I will now turn the call back to Brian Culley for closing remarks.

Excellent. Thanks, everyone. Our focus on replacing cells that have become dysfunctional or destroyed might reshape many treatment paradigms in the future and we really thank you for joining us on this mission. Have a great day.

This concludes today's call. Thank you for attending. You may now disconnect.