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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2023

 

OR

 

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

 

For the transition period from _________ to ________

 

Commission file number 001-12830

 

Lineage Cell Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

 

California   94-3127919

(State or other jurisdiction of

incorporation or organization)

  

(IRS Employer

Identification No.)

 

2173 Salk Avenue, Suite 200

Carlsbad, California 92008

(Address of principal executive offices) (Zip code)

 

(Registrant’s telephone number, including area code) (442) 287-8990

 

Securities registered pursuant to Section 12(b) of the Act

 

Title of each class   Trading Symbol   Name of exchange on which registered
Common shares no par value   LCTX   NYSE American

 

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

 

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

 

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

 

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

 

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

 

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

 

The number of common shares outstanding as of August 4, 2023 was 174,986,671.

 

 

 

 

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are subject to substantial risks and uncertainties. The forward-looking statements are contained principally in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report, but are also continued elsewhere in this report. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this report are forward-looking statements. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. Forward-looking statements in this report include, but are not limited to, statements about:

 

  ● the potential to receive developmental, regulatory, and commercialization milestone and royalty payments under our Collaboration and License Agreement with F. Hoffmann-La Roche Ltd and Genentech, Inc.;
     
  ● our plans to research, develop and commercialize our product candidates;
     
  ● the initiation, progress, success, cost and timing of our clinical trials and other product development activities;
     
  ● the therapeutic potential of our product candidates, and the indications for which we intend to develop our product candidates;
     
  ● our ability to successfully manufacture our product candidates for clinical development and, if approved, for commercialization, and the timing and costs of such manufacture;
     
  ● the potential of our cell therapy platform;
     
  ● our expectations and plans regarding existing and potential future collaborations with third parties such as pharmaceutical and biotechnology companies, government agencies, academic laboratories, and research institutes for the discovery, development, and/or commercialization of novel cell therapy products;
     
  ● the size and growth of the potential markets for our product candidates and our ability to serve those markets;
     
  ● the potential scope and value of our intellectual property rights; and
     
  ● the effects on our operations of pandemics, including the recent COVID-19 pandemic, geopolitical conflicts, political and economic instability, and rising inflation and interest rates.

 

2 | Page

 

 

Forward-looking statements reflect our views and expectations as of the date of this report about future events and our future performance and condition, and involve known and unknown risks, uncertainties and other factors that may cause our actual activities, performance, results or condition to be materially different from those expressed or implied by the forward-looking statements. You should refer to “Item 1A. Risk Factors” in Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 10-K”) as filed with the Securities and Exchange Commission on March 9, 2023, for a discussion of important factors that may cause our actual activities, performance, results and condition to differ materially from those expressed or implied by our forward-looking statements. As a result of a variety of factors, including those discussed in Part I, Item 1A of the 2022 10-K, our forward-looking statements may prove to be inaccurate, and the inaccuracy may be material. Accordingly, you should not place undue reliance on any forward-looking statement. We anticipate that subsequent events and developments may cause our current views and expectations to change. However, while we may elect to update the forward-looking statements in this report at some point in the future, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date after the date of this report.

 

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

 

MARKET DATA AND TRADEMARKS

 

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

 

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

 

******

 

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

 

3 | Page

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

 

   June 30, 2023   December 31, 
   (Unaudited)   2022 
ASSETS          
CURRENT ASSETS          
Cash and cash equivalents  $33,886   $11,355 
Marketable securities   12,039    46,520 
Accounts receivable, net (Note 3)   443    297 
Prepaid expenses and other current assets   2,123    1,828 
Total current assets   48,491    60,000 
           
NONCURRENT ASSETS          
Property and equipment, net (Notes 6 and 14)   5,310    5,673 
Deposits and other long-term assets   588    627 
Goodwill   10,672    10,672 
Intangible assets, net   46,627    46,692 
TOTAL ASSETS  $111,688   $123,664 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
CURRENT LIABILITIES          
Accounts payable and accrued liabilities  $4,685   $8,608 
Lease liabilities, current portion (Note 14)   933    916 
Financing lease, current portion (Note 14)   54    36 
Deferred revenues (Note 3)   10,379    9,421 
Other current liabilities   1    - 
Total current liabilities   16,052    18,981 
           
LONG-TERM LIABILITIES          
Deferred tax liability   273    2,076 
Deferred revenues, net of current portion (Note 3)   21,688    27,725 
Lease liability, net of current portion (Note 14)   2,304    2,860 
Financing lease, net of current portion (Note 14)   113    84 
Other long-term liabilities   -    2 
TOTAL LIABILITIES   40,430    51,728 
           
Commitments and contingencies (Note 14)   -    - 
           
SHAREHOLDERS’ EQUITY          
Preferred shares, no par value, authorized 2,000 shares; none issued and
outstanding as of June 30, 2023 and December 31, 2022		   -    - 
Common shares, no par value, 250,000 shares authorized; 174,439 and
170,093 shares issued and outstanding as of June 30, 2023 and
December 31, 2022, respectively		   448,249    440,280 
Accumulated other comprehensive loss   (2,611)   (3,571)
Accumulated deficit   (372,971)   (363,370)
Lineage Cell Therapeutics, Inc. shareholders’ equity   72,667    73,339 
Noncontrolling deficit   (1,409)   (1,403)
Total shareholders’ equity   71,258    71,936 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY  $111,688   $123,664 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

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LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 

   2023   2022   2023   2022 
   Three Months ended June 30,   Six Months ended June 30, 
   2023   2022   2023   2022 
REVENUES:                
Collaboration revenues  $2,871   $4,148   $4,992   $9,013 
Royalties and license fees   354    405    619    777 
Total revenues   3,225    4,553    5,611    9,790 
                     
Cost of sales   (127)   (215)   (246)   (391)
                     
Gross profit   3,098    4,338    5,365    9,399 
                     
OPERATING EXPENSES:                    
Research and development   3,873    3,302    8,058    6,290 
General and administrative   4,249    5,270    8,973    13,739 
Total operating expenses   8,122    8,572    17,031    20,029 
Loss from operations   (5,024)   (4,234)   (11,666)   (10,630)
OTHER INCOME (EXPENSES):                    
Interest income, net   382    51    792    51 
Unrealized loss on marketable equity securities, net   (150)   (709)   (110)   (1,444)
Gain on revaluation of warrant liability   -    2    1    223 
Other expenses, net   (411)   (1,892)   (427)   (2,075)
Total other income (expenses), net   (179)   (2,548)   256    (3,245)
LOSS BEFORE INCOME TAXES   (5,203)   (6,782)   (11,410)   (13,875)
                     
Deferred income tax benefit   -    -    1,803    - 
                     
NET LOSS   (5,203)   (6,782)   (9,607)   (13,875)
                     
Net (income) loss attributable to noncontrolling interest   (26)   19    6    25 
                     
NET LOSS ATTRIBUTABLE TO LINEAGE CELL THERAPEUTICS, INC.  $(5,229)  $(6,763)  $(9,601)  $(13,850)
                     
NET LOSS PER COMMON SHARE:                    
BASIC  $(0.03)  $(0.04)  $(0.06)  $(0.08)
DILUTED  $(0.03)  $(0.04)  $(0.06)  $(0.08)
                     
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:                    
BASIC   170,592    169,731    170,361    169,689 
DILUTED   170,592    169,731    170,361    169,689 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

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LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(IN THOUSANDS)

(UNAUDITED)

 

   2023   2022   2023   2022 
   Three Months ended June 30,   Six Months ended June 30, 
   2023   2022   2023   2022 
NET LOSS  $(5,203)  $(6,782)  $(9,607)  $(13,875)
Other comprehensive income, net of tax:                    
Foreign currency translation adjustment   446    1,730    819    1,854 
Unrealized gain on marketable debt securities   50    -    141    - 
COMPREHENSIVE LOSS   (4,707)   (5,052)   (8,647)   (12,021)
Less: Comprehensive (income) loss attributable to noncontrolling interest   (26)   19    6    25 
COMPREHENSIVE LOSS ATTRIBUTABLE TO LINEAGE COMMON SHAREHOLDERS  $(4,733)  $(5,033)  $(8,641)  $(11,996)

 

See accompanying notes to the condensed consolidated interim financial statements.

 

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LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)

 

   2023   2022 
   Six Months ended June 30, 
   2023   2022 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss attributable to Lineage Cell Therapeutics, Inc.  $(9,601)  $(13,850)
Net loss allocable to noncontrolling interest   (6)   (25)
Adjustments to reconcile net loss attributable to Lineage Cell Therapeutics, Inc. to net cash (used in) provided by operating activities:          
Accretion of income on marketable debt securities   (516)   - 
Unrealized loss on marketable equity securities, net   110    1,444 
Depreciation expense, including amortization of leasehold improvements   276    296 
Change in right-of-use assets and liabilities   81    (7)
Amortization of intangible assets   65    65 
Stock-based compensation   2,311    2,341 
Gain on revaluation of warrant liability   (1)   (223)
Deferred income tax benefit   (1,803)   - 
Foreign currency remeasurement and other gain   1,012    2,331 
Changes in operating assets and liabilities:          
Accounts receivable, net (Note 3)   (147)   50,111 
Prepaid expenses and other current assets   (270)   594 
Accounts payable and accrued liabilities (Note 7)   (3,941)   (19,230)
Deferred revenue and other liabilities (Note 3)   (5,080)   (9,005)
Net cash (used in) provided by operating activities   (17,510)   14,842 
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchases of marketable debt securities   (12,635)   - 
Maturities of marketable debt securities   47,664    - 
Purchase of equipment and other assets, net   (444)   (143)
Net cash provided by (used in) investing activities   34,585    (143)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from employee options exercised   80    388 
Common shares received and retired for employee taxes paid   (37)   (17)
Proceeds from exercise of subsidiary warrants, net   -    99 
Proceeds from sale of common shares   5,789    148 
Payments for offering costs   (174)   (57)
Repayment of financing lease liability   (29)   (15)
Net cash provided by financing activities   5,629    546 
Effect of exchange rate changes on cash, cash equivalents and restricted cash   (192)   (161)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH   22,512    15,084 
           
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:          
At beginning of the period   11,936    56,277 
At end of the period  $34,448   $71,361 
           
Reconciliation of cash, cash equivalents and restricted cash, end of period:          
Cash and cash equivalents  $33,886   $70,857 
Restricted cash included in deposits and other long-term assets (see Note 14 (Commitments and Contingencies))   562    504 
Total cash, cash equivalents, and restricted cash  $34,448   $71,361 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

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LINEAGE CELL THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED)

 

1. Organization and Business Overview

 

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

 

Our strategy is to efficiently leverage our technology platform and our development, formulation, delivery, and manufacturing capabilities to advance our programs internally or in conjunction with strategic partners to further enhance their value and probability of success. As one example, in December 2021 we entered into a Collaboration and License Agreement (the “Roche Agreement”) with F. Hoffmann-La Roche Ltd and Genentech, Inc., a member of the Roche Group (collectively or individually, “Roche” or “Genentech”), wherein we granted to Roche exclusive worldwide rights to develop and commercialize retinal pigment epithelium (“RPE”) cell therapies, including our proprietary cell therapy program known as OpRegen®, for the treatment of ocular disorders, including geographic atrophy (GA) secondary to age-related macular degeneration (AMD). Under the terms of the Roche Agreement, Lineage received a $50.0 million upfront payment and is eligible to receive up to $620.0 million in certain developmental, regulatory, and commercialization milestone payments. Lineage also is eligible to receive tiered double-digit percentage royalties on net sales of OpRegen in the U.S. and other major markets. See Note 14 (Commitments and Contingencies) for additional information regarding the Roche Agreement.

 

As of June 30, 2023, we have five allogeneic, or “off-the-shelf,” cell therapy programs in development, of which three have reached human clinical testing:

 

Product Candidates

 

  ● OpRegen®, an allogeneic RPE cell replacement therapy currently in a Phase 2a multicenter clinical trial, being conducted by Roche, for the treatment of GA secondary to AMD, also known as atrophic or dry AMD. A previous Phase 1/2a trial we conducted enrolled individuals with dry AMD with GA. In December 2021, this program was partnered with Roche for further clinical development and commercialization.
     
  ● OPC1, an allogeneic oligodendrocyte progenitor cell therapy currently in long-term follow-up from a Phase 1/2a multicenter clinical trial for cervical spinal cord injuries (“SCI”). To date, five patients with thoracic spinal cord injuries and 25 patients with cervical SCI have been enrolled in clinical trials of OPC1. We recently received a response from the U.S. Food and Drug Administration to our Type B meeting submission which will help guide our next regulatory interactions. The clinical development of OPC1 has been partially funded by $14.3 million received under a grant from the California Institute for Regenerative Medicine (“CIRM”). Additional clinical trials are being planned.
     
  ●

ANP1, an allogeneic auditory neuron progenitor cell transplant currently in preclinical development for the treatment of debilitating hearing loss (“DHL”).

 

  ● PNC1, an allogeneic photoreceptor cell transplant currently in preclinical development for the treatment of vision loss due to photoreceptor dysfunction or damage.
     
  ● VAC, an allogeneic cancer immunotherapy comprised of antigen-presenting dendritic cells. A Phase 1 clinical trial in non-small cell lung cancer (“NSCLC”) of one of the VAC product candidates, VAC2, was recently completed. This clinical trial was funded and conducted by Cancer Research UK (“CRUK”), one of the world’s largest independent cancer research charities. Another VAC-based product candidate is in preclinical development with our partner, Immunomic Therapeutics, Inc. (“ITI”), for the treatment of glioblastoma multiforme (“GBM”).

 

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Other Programs

 

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

 

In addition to seeking to create value for shareholders by developing product candidates and advancing those candidates through clinical development, we also may seek to create value from our intellectual property and additional related technologies and capabilities, through partnering and/or strategic transactions.

 

2. Basis of Presentation, Liquidity and Summary of Significant Accounting Policies

 

The accompanying unaudited condensed consolidated interim financial statements were prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. In accordance with those rules and regulations, certain information and footnote disclosures normally included in comprehensive consolidated financial statements have been condensed or omitted. The condensed consolidated balance sheet as of December 31, 2022 was derived from the audited consolidated financial statements at that date but does not include all the information and footnotes required by GAAP. These unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the 2022 10-K.

 

The accompanying unaudited condensed consolidated interim financial statements, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our financial condition and results of operations. The condensed consolidated results of operations are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

 

Principles of consolidation

 

The accompanying unaudited condensed consolidated interim financial statements include the accounts of our subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. The following table sets out Lineage’s ownership, directly or indirectly, of the outstanding shares of its subsidiaries as of June 30, 2023.

 

Subsidiary  Field of Business 

Lineage

Ownership

    Country 
Cell Cure Neurosciences Ltd.  Manufacturing of Lineage’s product candidates   94%(1)(2)    Israel 
ES Cell International Pte. Ltd.  Research and clinical grade cell lines   100%    Singapore 

 

(1) Includes shares owned by Lineage and ES Cell International Pte. Ltd.
   
(2) As of December 31, 2021 our ownership percentage of Cell Cure Neurosciences Ltd. (“Cell Cure”) was approximately 99%. In July 2022, Hadasit Bio-Holdings Ltd exercised warrants to purchase 21,999 ordinary shares of Cell Cure. Lineage’s ownership percentage of Cell Cure decreased as a result.

 

As of June 30, 2023, Lineage consolidated its direct and indirect wholly-owned or majority-owned subsidiaries because Lineage has the ability to control their operating and financial decisions and policies through its ownership, and the noncontrolling interest is reflected as a separate element of shareholders’ equity on Lineage’s condensed consolidated balance sheets.

 

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Liquidity

 

At June 30, 2023, we had $45.9 million of cash, cash equivalents and marketable securities. Based on our current operating plan, we believe that our cash, cash equivalents and marketable securities, together with our projected cash flows, will be sufficient to enable us to carry out our planned operations through at least twelve months from the issuance date of the accompanying condensed consolidated interim financial statements.

 

Capital Resources

 

Since inception we have incurred significant operating losses and have funded our operations primarily through the issuance of equity securities, the sale of common stock of our former subsidiaries, OncoCyte and AgeX, receipt of proceeds from research grants, revenues from collaborations, royalties from product sales, and sales of research products and services.

 

As of June 30, 2023, $58.0 million remained available for sale under our at the market offering program (“ATM”). See Note 11 (Shareholders’ Equity) for additional information.

 

We may use our marketable securities for liquidity as necessary and as market conditions allow. The market value of our marketable securities may not represent the amount that could be realized in a sale of such securities due to various market and regulatory factors, including trading volume, prevailing market conditions and prices at the time of any sale and subsequent sales of securities by the entities. In addition, the value of our marketable securities may be significantly and adversely impacted by deteriorating global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the recent pandemics, including the COVID-19 pandemic, geopolitical conflicts, rising inflation and interest rates, and other macroeconomic factors.

 

Additional Capital Requirements

 

Our financial obligations primarily consist of obligations to licensors under license agreements, obligations related to grants received from government entities, including the Israel Innovation Authority (“IIA”), obligations under contracts with vendors who provide research services and purchase commitments with suppliers.

 

Our obligations to licensors under license agreements and our obligations related to grants received from government entities require us to make future payments, such as sublicense fees, milestone payments, redemption fees, royalties and patent maintenance costs. Sublicense fees are payable to licensors or government entities when we sublicense the applicable intellectual property to third parties; the fees are based on a percentage of the license fees we receive from sublicensees. Milestone payments, including those related to the Roche Agreement, are due to licensors or government entities upon achievement of commercial, development and regulatory milestones. Redemption fees due to the IIA under the Innovation Law are due upon receipt of milestone payments and royalties received under the Roche Agreement. See Note 14 (Commitment and Contingencies) for additional information. Royalties, including those related to royalties we may receive under the Roche Agreement, are payable to licensors or government entities based on a percentage of net sales of licensed products. Patent maintenance costs are payable to licensors as reimbursement for the cost of maintaining license patents. Due to the contingent nature of the payments, the amounts and timing of payments to licensors under our in-license agreements are uncertain and may fluctuate significantly from period to period. As of June 30, 2023, we have not included these commitments on our condensed consolidated balance sheet because the achievement of events that would trigger our payment obligations and the timing thereof are not fixed and determinable.

 

In the normal course of business, we enter into services agreements with contract research organizations, contract manufacturing organizations and other third parties. Generally, these agreements provide for termination upon notice, with specified amounts due upon termination based on the timing of termination and the terms of the agreement. The amounts and timing of payments under these agreements are uncertain and contingent upon the initiation and completion of the services to be provided.

 

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Significant Accounting Policies

 

We describe our significant accounting policies in Note 2 to the consolidated financial statements in Item 8 of the 2022 10-K. There have been no changes to our significant accounting policies during the six months ended June 30, 2023.

 

Recently Issued and Recently Adopted Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. The Company has evaluated recently issued accounting pronouncements and does not believe any will have a material impact on the Company’s condensed consolidated financial statements or related financial statement disclosures.

 

3. Revenue

 

Our disaggregated revenues were as follows for the periods presented (in thousands):

  

   2023   2022   2023   2022 
   Three Months ended June 30,   Six Months ended June 30, 
   2023   2022   2023   2022 
Royalties and license fees  $354   $405   $619   $777 
                     
Revenues under collaborative agreements                    
Upfront license fees  $2,871   $4,148   $4,992   $9,013 
Total revenues under collaborative agreements  $2,871   $4,148   $4,992   $9,013 
                     
Total revenue  $3,225   $4,553   $5,611   $9,790 

 

During the three and six months ended June 30, 2023, we recognized $3.2 million and $5.6 million in total revenue, respectively, of which $2.9 million and $5.0 million, respectively, was recognized in collaboration revenues related to the $50.0 million upfront payment from Roche, which was included in deferred revenues at December 31, 2022.

 

During the three and six months ended June 30, 2022, we recognized $4.6 million and $9.8 million in total revenue, respectively, of which $4.1 million and $9.0 million, respectively, was recognized in collaboration revenues related to the $50.0 million upfront payment from Roche, which was included in deferred revenues at December 31, 2021.

 

We are recognizing the $50.0 million upfront payment under the Roche Agreement utilizing an input method of costs incurred over total estimated costs to be incurred. At each reporting period, we update our total estimated collaboration costs, and any resulting adjustments are recorded on a cumulative basis which would affect revenue and net income (loss) in the period of adjustment. We believe the input methodology represents the most appropriate measure of progress towards satisfaction of the identified performance obligations.

 

Accounts receivable, net, and deferred revenues (contract liabilities) from contracts with customers, including collaboration partners, consisted of the following (in thousands):

  

  

June 30,

2023

   December 31, 2022 
Accounts receivable, net (1)  $406   $297 
Deferred revenues   32,067    37,146 

 

(1) Excludes government grants as Lineage has determined government grants are outside the scope of ASU 2014-09 – Revenue from Contracts with Customers (Topic 606).

 

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As of June 30, 2023, the amounts included in the transaction price of our contracts with customers (ASU 2014-09 – Revenue from Contracts with Customers (Topic 606)), including collaboration partners, and allocated goods and services not yet provided were $33.7 million, of which $32.1 million has been collected and is reported as deferred revenues, and $1.6 million relates to unfulfilled commitments related to the ITI collaboration (see Note 14 (Commitments and Contingencies) for additional information), the latter is currently estimated to be delivered by the end of the second quarter of 2024. Of the total deferred revenues of $32.1 million, approximately $10.4 million is expected to be recognized within the next 12 months.

 

4. Marketable Debt Securities

 

The following tables are a summary of available-for-sale debt securities in cash and cash equivalents or marketable securities in the Company’s condensed consolidated balance sheet as of June 30, 2023 and December 31, 2022 (in thousands):

 

   June 30, 2023 (Unaudited) 
Financial Assets:  Amortized Cost   Unrealized Gaines   Unrealized Losses   Fair Value 
U.S. Treasury securities  $11,735   $-   $(8)  $11,727 
Total  $11,735   $-   $(8)  $11,727 

 

   December 31, 2022 
Financial Assets:  Amortized Cost   Unrealized Gaines   Unrealized Losses   Fair Value 
U.S. Treasury securities  $46,247   $2   $(152)  $46,097 
Total  $46,247   $2   $(152)  $46,097 

 

The Company has not recognized an allowance for credit losses on any securities in an unrealized loss position as of June 30, 2023. We believe that the individual unrealized losses represent temporary declines resulting from changes in interest rates, and we intend to hold these marketable securities to their maturity. The Company currently does not intend to sell these securities prior to maturity and does not consider these investments to be other-than-temporarily impaired at June 30, 2023.

 

As of June 30, 2023, the amortized cost and estimated fair value of the Company’s available-for-sale debt securities by contractual maturity are shown below (in thousands):

 

Available-for-sale debt securities maturing:  Amortized Cost   Estimated Fair Value 
In one year or less  $11,735   $11,727 
Total available-for-sale debt securities  $11,735   $11,727 

 

We did not have any marketable debt securities classified as cash equivalents on the condensed consolidated balance sheets as of June 30, 2023 or December 31, 2022.

 

5. Marketable Equity Securities

 

As of June 30, 2023, Lineage owned 1.1 million shares of OncoCyte common stock, which had a fair value of $0.3 million as of that date, based on the closing price of OncoCyte common stock of $0.23 per share on that date.

 

As of December 31, 2022, Lineage owned 1.1 million shares of OncoCyte common stock, which had a fair value of $0.4 million as of that date, based on the closing price of OncoCyte common stock of $0.32 per share on that date.

 

For the three and six months ended June 30, 2023, Lineage recorded a net unrealized loss on marketable equity securities of $150,000 and $110,000, respectively, primarily related to changes in the fair market value of OncoCyte common stock price during the respective periods.

 

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For the three and six months ended June 30, 2022, Lineage recorded a net unrealized loss on marketable equity securities of $0.7 million and $1.4 million, respectively, related to changes in the fair market value of OncoCyte’s common stock price during the respective periods.

 

All share prices are determined based on the closing price of OncoCyte common stock on the last day of the applicable quarter, or the last trading day of the applicable quarter, if the last day of a quarter fell on a day that was not a trading day.

 

6. Property and Equipment, Net

 

At June 30, 2023 and December 31, 2022 property and equipment, net was comprised of the following (in thousands):

  

   June 30, 2023   December 31, 
   (Unaudited)   2022 
Equipment, furniture and fixtures  $3,421   $3,264 
Leasehold improvements   2,266    2,150 
Right-of-use assets   6,006    6,109 
Accumulated depreciation and amortization   (6,383)   (5,850)
Property and equipment, net  $5,310   $5,673 

 

Property and equipment for financing leases was $196,000 and $121,000 on June 30, 2023 and December 31, 2022, respectively.

 

Depreciation and amortization expense was $138,000 and $146,000 for the three months ended June 30, 2023 and 2022, respectively, and $276,000 and $296,000 for the six months ended June 30, 2023 and 2022, respectively.

 

7. Goodwill and Intangible Assets, Net

 

At June 30, 2023 and December 31, 2022 goodwill and intangible assets, net consisted of the following (in thousands):

 

   June 30, 2023   December 31, 
   (Unaudited)   2022 
Goodwill (1)  $10,672   $10,672 
           
Intangible assets:          
Acquired IPR&D – OPC1 (from the Asterias Merger) (2)  $31,700   $31,700 
Acquired IPR&D – VAC (from the Asterias Merger) (2)   14,840    14,840 
Intangible assets subject to amortization:          
Acquired patents   18,953    18,953 
Acquired royalty contracts (3)   650    650 
Total intangible assets   66,143    66,143 
Accumulated amortization (4)   (19,516)   (19,451)
Intangible assets, net  $46,627   $46,692 

 

(1) Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in the Asterias Merger, see Note 14 (Commitment and Contingencies) for further discussion on the Asterias Merger.

 

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(2)

Asterias had two in-process research and development (“IPR&D”) intangible assets that were valued at $46.5 million as part of the purchase price allocation performed in connection with the Asterias Merger. The fair value of these assets consisted of $31.7 million pertaining to the OPC1 program and $14.8 million pertaining to the VAC platform.

 

(3)

Asterias had royalty cash flows under patent families it acquired from Geron Corporation (“Geron”). Such patent families are expected to continue to generate revenue, are not used in the OPC1 or the VAC platform, and are considered to be separate long-lived intangible assets under Accounting Standards Codifications (“ASC”) Topic 805, Business Combinations.

 

(4) As of June 30, 2023 acquired patents were fully amortized and the acquired royalty contracts had a remaining unamortized balance of approximately $87,000.

 

Lineage amortizes its intangible assets over an estimated period of 5 to 10 years on a straight-line basis. Lineage recognized approximately $32,000 in amortization expense of intangible assets during each of the three months ended June 30, 2023 and 2022, and $65,000 during each of the six months ended June 30, 2023 and 2022.

 

Amortization of intangible assets for periods subsequent to June 30, 2023 is as follows (in thousands):

 

Year Ending December 31,  Amortization Expense 
2023  $65 
2024   22 
Total  $87 

 

 

8. Accounts Payable and Accrued Liabilities

 

At June 30, 2023 and December 31, 2022 accounts payable and accrued liabilities consisted of the following (in thousands):

 

   June 30, 2023   December 31, 
   (Unaudited)   2022 
Accounts payable  $2,187   $2,393 
Accrued compensation   1,917    2,382 
Accrued liabilities (1)   581    3,833 
Total  $4,685   $8,608 

 

(1) The decrease in accrued liabilities was due to a payment made in connection with the settlement of litigation in February 2023 related to the Asterias Merger. See Note 14 (Commitment and Contingencies) for additional information.

 

9. Fair Value Measurements

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value (ASC 820-10-50), Fair Value Measurements and Disclosures:

 

  ● Level 1 – Inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
     
  ●

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

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  ● Level 3 – Inputs to the valuation methodology are unobservable; that reflect management’s own assumptions about the assumptions market participants would make and significant to the fair value.

 

We have not transferred any instruments between the three levels of the fair value hierarchy.

 

We measure our money market fund, marketable securities and our liability classified warrants at fair value on a recurring basis. The fair values of such assets and liabilities were as follows for June 30, 2023 and December 31, 2022 (in thousands):

 

       Fair Value Measurements Using 
   Balance at June 30, 2023  

Quoted Prices in Active Markets for Identical Assets

(Level 1)

  

Significant Other Observable Inputs

(Level 2)

  

Significant Unobservable Inputs

(Level 3)

 
Assets:                             
Money market fund (1)  $25,641   $25,641   $-   $- 
Marketable debt securities   11,727    11,727    -    - 
Marketable equity securities   312    312    -    - 
Total assets measured at fair value  $37,680   $37,680   $-   $- 
Liabilities:                    
Warrants to purchase Cell Cure ordinary shares (2)  $1   $-   $-   $1 
Total liabilities measured at fair value  $1   $-   $-   $1 

 

       Fair Value Measurements Using 
   Balance at December 31, 2022  

Quoted Prices in Active Markets for Identical Assets

(Level 1)

  

Significant Other Observable Inputs

(Level 2)

  

Significant Unobservable Inputs

(Level 3)

 
Assets:                    
Money market fund (1)  $4,102   $4,102   $-   $- 
Marketable debt securities   46,097    46,097    -    - 
Marketable equity securities   423    423    -    - 
Total assets measured at fair value  $50,622   $50,622   $-   $- 
Liabilities:                    
Warrants to purchase Cell Cure ordinary shares (2)  $2   $-   $-   $2 
Total liabilities measured at fair value  $2   $-   $-   $2 

 

(1) Included in cash and cash equivalents in the accompanying condensed consolidated balance sheet.
(2) Included in other current liabilities and/or long-term liabilities in the accompanying condensed consolidated balance sheet.

 

Lineage’s marketable equity securities includes the shares of stock of OncoCyte and Hadasit Bio-Holdings Ltd (“HBL”). Both securities have readily determinable fair values and are measured at fair value and reported as current assets on the accompanying condensed consolidated balance sheets based on the closing trading price of the security as of the date being presented.

 

The carrying value of cash, restricted cash, accounts receivable, accounts payable, and accrued liabilities approximate their respective fair values due to their relative short maturities.

 

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10. Related Party Transactions

 

In connection with the putative shareholder class action lawsuits filed in February 2019 and October 2019 challenging the Asterias Merger (see Note 14), Lineage agreed to pay the expenses for the legal defense of Neal Bradsher, a member of the Lineage board of directors, Broadwood Partners, L.P., a shareholder of Lineage, and Broadwood Capital, Inc., which serves as the general partner of Broadwood Partners, L.P., all of which were named defendants in the lawsuits, prior to being dismissed. Through June 30, 2023, Lineage has incurred approximately $625,000 in legal expenses on behalf of the foregoing parties.

 

11. Shareholders’ Equity

 

Preferred Shares

 

Lineage is authorized to issue 2,000,000 preferred shares, no par value. The preferred shares may be issued in one or more series as the Lineage board of directors may determine by resolution. The Lineage board of directors is authorized to fix the number of shares of any series of preferred shares and to determine or alter the rights, preferences, privileges, and restrictions granted to or imposed on the preferred shares as a class, or upon any wholly unissued series of any preferred shares. The Lineage board of directors may, by resolution, increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series of preferred shares subsequent to the issue of shares of that series. As of June 30, 2023 and December 31, 2022, there were no preferred shares issued or outstanding.

 

Common Shares

 

Lineage is authorized to issue 250,000,000 common shares, no par value. As of June 30, 2023 and December 31, 2022, there were 174,439,434 and 170,093,114 common shares issued and outstanding, respectively.

 

At The Market Offering Program

 

In May 2020, Lineage entered into a Controlled Equity OfferingSM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co., as sales agent (“Cantor Fitzgerald”), pursuant to which Lineage may sell its common shares from time to time through an “at the market offering” program under the Sales Agreement.

 

In March 2021, Lineage filed a prospectus supplement with the SEC in connection with the offer and sale of $25.0 million of common shares through the ATM program under the Sales Agreement (“March 2021 Prospectus Supplement”).

 

In December 2021, Lineage filed a prospectus supplement with the SEC in connection with the offer and sale of up to $64.1 million of common shares (which included $14.1 million of its common shares which then remained unsold under the March 2021 Prospectus Supplement) through the ATM program under the Sales Agreement (“December 2021 Prospectus Supplement”). Following the filing of the December 2021 Prospectus Supplement, no further sales were made or will be made under the March 2021 Prospectus Supplement. The December 2021 Prospectus Supplement was updated, amended and supplemented by a prospectus supplement filed with the SEC on May 18, 2023.

 

As of June 30, 2023, Lineage had sold 4,345,596 common shares under the December 2021 Prospectus Supplement at a weighted average price per share of $1.41 for gross proceeds of $6.1 million. As of June 30, 2023, $58.0 million remained available for sale under the December 2021 Prospectus Supplement. During the three months ended June 30, 2023, 4,237,396 shares were sold under the December 2021 Prospectus Supplement for gross proceeds of $5.8 million and net proceeds of $5.7 million. No shares were sold in the three months ended March 31, 2023, or the six months ended June 30, 2022.

 

The shares offered under the December 2021 Prospectus Supplement are registered pursuant to Lineage’s effective shelf registration statement on Form S-3 (File No. 333-254167), which was filed with the SEC on March 5, 2021 and declared effective on March 19, 2021.

 

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Lineage agreed to pay Cantor Fitzgerald a commission of 3.0% of the aggregate gross proceeds from the sale of shares under the Sales Agreement, reimburse its legal fees and disbursements, and provide Cantor Fitzgerald with customary indemnification and contribution rights. The Sales Agreement may be terminated by Cantor Fitzgerald or Lineage at any time upon notice to the other party, or by Cantor Fitzgerald at any time in certain circumstances, including the occurrence of a material and adverse change in Lineage’s business or financial condition that makes it impractical or inadvisable to market the shares or to enforce contracts for the sale of the shares.

 

Reconciliation of Changes in Shareholders’ Equity

 

The following tables document the changes in shareholders’ equity for the three and six months ended June 30, 2023 and 2022 (unaudited and in thousands):

 

   Shares   Amount   Shares   Amount   Deficit   Deficit   Income / (Loss)   Equity 
                           Accumulated     
   Preferred   Common           Other   Total 
   Shares   Shares   Accumulated   Noncontrolling   Comprehensive   Shareholders’ 
   Shares   Amount   Shares   Amount   Deficit   Deficit   Income / (Loss)   Equity 
BALANCE - December 31, 2022   -   $-    170,093   $440,280   $(363,370)  $(1,403)  $(3,571)  $71,936 
Shares issued upon vesting of
restricted stock units, net of shares
retired to pay employees’ taxes		   -    -    53    (37)   -    -    -    (37)
Shares issued upon exercise of
stock options		   -    -    28    25    -    -    -    25 
Stock-based compensation   -    -    -    1,031    -    -    -    1,031 
Unrealized gain on marketable securities   -    -    -    -    -    -    91    91 
Foreign currency translation gain   -    -    -    -    -    -    373    373 
Net loss   -    -    -    -    (4,372)   (32)   -    (4,404)
BALANCE - March 31, 2023   -    -    170,174    441,299    (367,742)   (1,435)   (3,107)   69,015 
Shares issued through ATM   -    -    4,237    5,841    -    -    -    5,841 
Financing related fees   -    -    -    (193)   -    -    -    (193)
Shares issued upon exercise of
stock options		   -    -    28    22    -    -    -    22 
Stock-based compensation   -    -    -    1,280    -    -    -    1,280 
Unrealized gain on marketable securities   -    -    -    -    -    -    50    50 
Foreign currency translation gain   -    -    -    -    -    -    446    446 
Net income (loss)   -    -    -    -    (5,229)   26    -    (5,203)
BALANCE - June 30, 2023   -   $-    174,439   $448,249   $(372,971)  $(1,409)  $(2,611)  $71,258 

 

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                           Accumulated     
   Preferred   Common           Other   Total 
   Shares   Shares   Accumulated   Noncontrolling   Comprehensive   Shareholders’ 
   Shares   Amount   Shares   Amount   Deficit   Deficit   Income / (Loss)   Equity 
BALANCE - December 31, 2021   -   $-    169,477   $434,529   $(337,097)  $(1,323)  $(5,211)  $90,898 
Shares issued upon vesting of
restricted stock units, net of shares retired to pay employees’ taxes		   -    -    10    (8)   -    -    -    (8)
Shares issued upon exercise of
stock options		   -    -    240    189    -    -    -    189 
Subsidiary warrant exercise   -    -    -    2    -    -    -    2 
Stock-based compensation   -    -    -    1,106    -    -    -    1,106 
Foreign currency translation gain   -    -    -    -    -    -    124    124 
Net loss   -    -    -    -    (7,087)   (6)   -    (7,093)
BALANCE - March 31, 2021   -    -    169,727    435,818    (344,184)   (1,329)   (5,087)   85,218 
Shares issued upon vesting of
restricted stock units, net of shares
retired to pay employees’ taxes		   -    -    10    (9)   -    -    -    (9)
Shares issued upon exercise of
stock options		   -    -    11    10    -    -    -    10 
Subsidiary warrant exercise, net   -    -    -    97    -    -    -    97 
Stock-based compensation   -    -    -    1,235    -    -    -    1,235 
Foreign currency translation gain   -    -    -    -    -    -    1,730    1,730 
Net loss   -    -    -    -    (6,763)   (19)   -    (6,782)
BALANCE - June 30, 2022   -   $-    169,748   $437,151   $(350,947)  $(1,348)  $(3,357)  $81,499 

 

12. Stock-Based Awards

 

Equity Incentive Plan Awards

 

In September 2021, our shareholders approved the Lineage Cell Therapeutics, Inc. 2021 Equity Incentive Plan (the “2021 Plan”), which became effective upon such approval. The 2021 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), and other stock awards. All of our employees (including those of our affiliates), non-employee directors and consultants are eligible to participate in the 2021 Plan.

 

Subject to adjustment for certain changes in our capitalization, the aggregate number of our common shares that may be issued under the 2021 Plan will not exceed the sum of (i) 15,000,000 shares and (ii) the number of shares subject to awards granted under the Lineage Cell Therapeutics Inc. 2012 Equity Incentive Plan (the “2012 Plan”) that were outstanding when the 2021 Plan became effective and are not issued because such awards expire or otherwise terminate. As of June 30, 2023, there were 6,269,022 shares available for grant under the 2021 Plan.

 

As a result of the approval of the 2021 Plan by our shareholders, no additional awards will be granted under the 2012 Plan.

 

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A summary of activity under the 2021 Plan is as follows (in thousands, except per share amounts):

 

  

Number

of Options

Outstanding

  

Weighted

Average

Exercise Price

 
Balance at December 31, 2022   6,001   $1.40 
Options granted   5,271   $1.46 
Options expired/forfeited/cancelled   (160)  $1.43 
Balance at June 30, 2023   11,112   $1.43 
Options exercisable at June 30, 2023   1,373   $1.39 

 

  

Number

of RSUs

Outstanding

 
Balance at December 31, 2022   939 
RSUs forfeited   (100)
RSUs vested   (80)
Balance at June 30, 2023   759 

 

A summary of activity of the 2012 Plan, and the 2018 inducement option (which was issued to a Lineage executive outside of all equity plans), is as follows (in thousands, except per share amounts):

 

  

Number

of Options

Outstanding

  

Weighted

Average

Exercise Price

 
December 31, 2022   12,172   $1.83 
Options exercised   (56)  $0.84 
Options expired/forfeited/cancelled   (382)  $1.83 
June 30, 2023   11,734   $1.83 
Options exercisable at June 30, 2023   9,437   $1.79 

 

Stock-based compensation expense

 

The fair value of each option award is estimated on the date of grant using a Black-Scholes option pricing model applying the weighted-average assumptions noted in the following table:

   Six Months ended June 30, (unaudited) 
   2023   2022 
Expected life (in years)   6.25    6.25 
Risk-free interest rates   4.2%   2.0%
Volatility   74.5%   73.4%
Dividend yield   -    - 

 

 

Operating expenses include stock-based compensation expense as follows (in thousands):

 

   Three Months ended June 30, (unaudited)  

Six Months ended

June 30, (unaudited)

 
   2023   2022   2023   2022 
Research and development  $264   $141   $469   $356 
General and administrative   1,016    1,094    1,842    1,985 
Total stock-based compensation expense  $1,280   $1,235   $2,311   $2,341 

 

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As of June 30, 2023, total unrecognized compensation costs related to unvested stock options and unvested RSUs under all equity plans (including the 2018 inducement option), were $11.5 million, which is expected to be recognized as expense over a weighted average period of approximately 2.9 years.

 

Basic and diluted net income (loss) per share attributable to common shareholders

 

Basic earnings per share is calculated by dividing net income or loss attributable to Lineage common shareholders by the weighted average number of common shares outstanding, net of unvested restricted stock or RSUs, subject to repurchase by Lineage, if any, during the period. Diluted earnings per share is calculated by dividing the net income or loss attributable to Lineage common shareholders by the weighted average number of common shares outstanding, adjusted for the effects of potentially dilutive common shares issuable under outstanding stock options, restricted stock awards and warrants, using the treasury-stock method, convertible preferred stock, if any, using the if-converted method, and treasury stock held by subsidiaries, if any.

 

For the three and six months ended June 30, 2023 and 2022, respectively, Lineage reported a net loss attributable to common shareholders, and therefore, all potentially dilutive common shares were considered antidilutive for those periods.

 

The following common share equivalents were excluded from the computation of diluted net loss per common share for the periods presented because including them would have been antidilutive (in thousands):

 Schedule Of Computation Of Diluted Net Loss Per Common Share

   Three Months ended June 30,   Six Months ended June 30, 
   2023   2022   2023   2022 
Stock options   22,846    18,832    22,846    18,832 
Restricted stock units   759    967    759    967 

 

13. Income Taxes

 

The provision for income taxes for interim periods is generally determined using an estimated annual effective tax rate as prescribed by ASC 740-270, Income Taxes, Interim Reporting. The effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as valuation allowances and changes in valuation allowances against deferred tax assets, the recognition or de-recognition of tax benefits related to uncertain tax positions, if any, and changes in or the interpretation of tax laws in jurisdictions where Lineage conducts business. ASC 740-270 also states that if an entity is unable to reliably estimate some or a part of its ordinary income or loss, the income tax provision or benefit applicable to the item that cannot be estimated shall be reported in the interim period in which the item is reported. For items that Lineage cannot reliably estimate on an annual basis, Lineage uses the actual year to date effective tax rate rather than an estimated annual effective tax rate to determine the tax effect of each item, including the use of all available net operating losses and other credits or deferred tax assets.

 

Under ASC 740, a valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. Lineage established a full valuation allowance as of December 31, 2018 due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets, including foreign net operating losses generated by its subsidiaries.

 

For the tax years beginning on or after January 1, 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated the option to currently deduct research and development expenses and requires taxpayers to capitalize and amortize them over five years for research activities performed in the United States and 15 years for research activities performed outside the United States pursuant to IRC Section 174. Although Congress is considering legislation that would repeal or defer this capitalization and amortization requirement, it is not certain that this provision will be repealed or otherwise modified. If the requirement is not repealed or replaced, it will decrease our tax deduction for research and development expenses in future years.

 

The 2017 Tax Act subjects a U.S. stockholder to Global Intangible Low-Taxed Income (“GILTI”) earned by certain foreign subsidiaries. In general, GILTI is the excess of a U.S. stockholder’s total net foreign income over a deemed return on tangible assets. The provision further allows a deduction of 50% of GILTI: however, this deduction is limited to the company’s pre-GILTI U.S. income. Lineage incurred GILTI income during the years 2021 and 2022. For the three and six months ended June 30, 2023, no GILTI income was included in the Company’s tax provision.

 

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Lineage recorded a $1.8 million deferred tax benefit for the six months ended June 30, 2023, due to the ability to offset certain deferred tax assets against the deferred tax liability associated with IPR&D, and the related release of the valuation allowance. It was determined that a portion of the deferred tax liability related to the indefinite lived assets may be realized prior to the expiration of certain pre 2018 net operating losses. Lineage did not record a deferred tax benefit for the three months ended June 30, 2023, and did not record a deferred tax benefit for the three and six months ended June 30, 2022.

 

14. Commitments and Contingencies

 

Real Property Leases

 

Carlsbad Lease

 

In May 2019, Lineage entered into a lease for approximately 8,841 square feet of rentable space in an office park in Carlsbad, California. The lease was amended in December 2022 and the term was extended for a period of thirty-seven months (the “Extended Term”) commencing on March 1, 2023 (the “Extended Term Commencement Date”). The lease expires on March 31, 2026, and rent was abated for months two through four of the Extended Term. The monthly base rent was $24,666 through the Extended Term Commencement Date, after which it increased to $25,197. As security for the performance of its obligations under the lease, Lineage provided the landlord a security deposit of $17,850, which is included in deposits and other long-term assets on the condensed consolidated balance sheet as of June 30, 2023.

 

In addition to base rent, Lineage pays a pro-rata portion of increases in certain expenses, including real property taxes, utilities (to the extent not separately metered to the leased space) and the landlord’s operating expenses, over the amounts of those expenses incurred by the landlord. These pro-rata charges are expensed as incurred and excluded from the calculation of the ROU assets and lease liabilities.

 

Carlsbad Sublease

 

In September 2022, Lineage entered into a sublease for approximately 4,500 square feet of rentable industrial space in Carlsbad, California for a term that commenced on October 1, 2022 and expires on March 31, 2024. As security for the performance of its obligations under the sublease, Lineage provided the landlord with a security deposit of $22,500. Base rent is $22,500 per month until the sublease expires.

 

Cell Cure Leases

 

Cell Cure leases 728.5 square meters (approximately 7,842 square feet) of office and laboratory space in Jerusalem, Israel under a lease that expires December 31, 2027, with an option to extend the lease for five years. Base monthly rent is NIS 39,776 (approximately $12,200 per month). In addition to base rent, Cell Cure pays a pro-rata share of real property taxes and certain costs related to the operation and maintenance of the building in which the leased premises are located. These pro-rata charges are expensed as incurred and excluded from the calculation of the ROU assets and lease liabilities.

 

In January 2018, Cell Cure entered into a lease for an additional 934 square meters (approximately 10,054 square feet) of office space in the same facility that expires on December 31, 2027, with an option to extend the lease for five years. Base rent and construction allowance payments are NIS 93,827 per month (approximately $26,000 per month). Cell Cure has a security deposit denominated in NIS with the landlord held as restricted cash during the term of its facility lease. The value of this security deposit in USD fluctuates based upon currency exchange rates and was $439,000 as of June 30, 2023, which is included in deposits and other long-term assets on the condensed consolidated balance sheet.

 

In November 2021, Cell Cure entered into a lease for an additional 133 square meters (approximately 1,432 square feet) of office space in the same facility that commenced on December 1, 2021, and expires on December 31, 2027, with an option to extend the lease for five years. The base monthly rent was NIS 11,880 (approximately US $3,757) through October 31, 2022 and increased to NIS 12,494 (approximately US $3,951) on November 1, 2022.

 

In August 2022, Cell Cure entered into a lease for 300 square meters (approximately 3,229 square feet) of office and laboratory space in Jerusalem, Israel that expires on December 31, 2027, with an option to extend the lease for five years. Base monthly rent is 16,350 NIS (approximately $4,800 per month). When executing this lease, Cell Cure modified the expiration dates and options terms for the leases identified above to align with this lease.

 

Supplemental Information – Leases

 

Supplemental cash flow information related to leases is as follows (in thousands):

         
   Six Months ended June 30, 
   2023   2022 
Cash paid for amounts included in the measurement of lease liabilities:          
Operating cash flows from operating leases  $538   $508 
Operating cash flows from financing leases  $5   $9 
Financing cash flows from financing leases  $29   $15 
           
Right-of-use assets obtained in exchange for lease obligations:          
Operating leases  $-   $33 
Finance leases  $79   $- 

 

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Supplemental balance sheet information related to leases was as follows (in thousands, except lease term and discount rate):

 

   June 30, 2023   December 31, 
   (Unaudited)   2022 
Operating leases          
Right-of-use assets, net  $2,940   $3,517 
           
Right-of-use lease liabilities, current  $933   $916 
Right-of-use lease liabilities, noncurrent   2,304    2,860 
Total operating lease liabilities  $3,237   $3,776 
           
Financing leases          
Right-of-use assets, net  $157   $105 
           
Lease liabilities, current  $54   $29 
Lease liabilities, noncurrent   113    84 
Total finance lease liabilities   167    113 
           
Other current liabilities   -    7 
Total finance lease liabilities  $167   $120 
           
Weighted average remaining lease term          
           
Operating leases   3.9 years    

4.3 years

 
Finance leases   3.4 years    4.1 years 
Weighted average discount rate          
Operating leases   6.4%   6.3%
Finance leases   6.8%   6.9%

 

Future minimum lease commitments are as follows as of June 30, 2023 (in thousands):

   (Unaudited) 
   Operating
Leases		   Finance
Leases		 
Year Ending December 31,          
2023  $564   $32 
2024   942    61 
2025   872    50 
2026   637    26 
2027   675    19 
Total lease payments   3,690    188 
Less imputed interest   (453)   (21)
Total  $3,237   $167 

 

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Collaborations

 

Roche Agreement

 

In December 2021, Lineage entered into the Roche Agreement, wherein Lineage granted to Roche exclusive worldwide rights to develop and commercialize RPE cell therapies, including Lineage’s proprietary cell therapy known as OpRegen, for the treatment of ocular disorders, including GA secondary to AMD.

 

Under the terms of the Roche Agreement, Roche paid Lineage a $50.0 million upfront payment and Lineage is eligible to receive up to an additional $620.0 million in certain developmental, regulatory and commercialization milestone payments. Lineage also is eligible for tiered double-digit percentage royalties on net sales of OpRegen in the U.S and other major markets. All regulatory and commercial milestone payments and royalty payments are subject to the existence of certain intellectual property rights that cover OpRegen at the time such payments would otherwise become due, and the royalty payments on net sales of OpRegen are subject to financial offsets based on the existence of competing products. Roche assumed responsibility for further clinical development and commercialization of OpRegen. Lineage is responsible for completing activities related to the ongoing clinical study, for which enrollment is complete, and performing certain manufacturing and process development activities.

 

Unless earlier terminated by either party, the Roche Agreement will expire on a product-by-product and country-by-country basis upon the expiration of all of Roche’s payment obligations under the agreement. Roche may terminate the agreement in its entirety, or on a product-by-product or country-by-country basis, at any time with advance written notice. Either party may terminate the agreement in its entirety with written notice for the other party’s material breach if such party fails to cure the breach or upon certain insolvency events involving the other party.

 

In January 2022, Lineage received the $50.0 million upfront payment from Roche. Subsequently, Lineage, via Cell Cure, paid $12.1 million to the IIA, and $8.9 million to Hadasit Medical Research Services and Development Ltd. (“Hadasit’). Such payments were made in accordance with obligations under the Innovation Law (as discussed below) and under the terms of Cell Cure’s agreements with Hadasit (as discussed below). The payment to Hadasit was reduced by $1.9 million in accordance with the provisions of such agreements discussed below that reduce the sublicensing fee payable to Hadasit for costs related to Lineage’s performance obligations under the Roche Agreement. To the extent such costs are not incurred within five years after the execution of the Roche Agreement, Cell Cure will be required to pay Hadasit 21.5% of the amount of costs not incurred.

 

ITI Collaboration Agreement

 

Under Lineage’s collaborative agreement with Immunomic Therapeutics, Inc. (“ITI”), Lineage agreed to perform up to approximately $2.2 million worth of certain research, development, manufacturing, and oversight activities related to the development of an allogeneic VAC-CMV product candidate. ITI will reimburse Lineage for these costs and full-time employee costs for the manufacturing of the VAC-CMV product candidate. As of June 30, 2023, Lineage has a remaining performance obligation of approximately $1.6 million for the aforementioned activities. Upon execution of the agreement in April 2021, $0.5 million was paid by ITI to Lineage. Upon delivery of research-grade VAC-CMV product generated by Lineage, ITI paid an additional $0.5 million in August 2021. ITI is currently evaluating its next step under the agreement.

 

Agreements with Hadasit and IIA

 

The OpRegen program was supported in part with licenses to technology obtained from Hadasit, the technology transfer company of Hadassah Medical Center, and through a series of research grants from the IIA, an independent agency created to address the needs of global innovation ecosystems. A subset of the intellectual property underlying OpRegen was originally generated at Hadassah Medical Center and licensed to Cell Cure for further development.

 

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Under the Encouragement of Research, Development and Technological Innovation in the Industry Law 5744, and the regulations, guidelines, rules, procedures and benefit tracks thereunder (collectively, the “Innovation Law”), annual research and development programs that meet specified criteria and were approved by a committee of the IIA were eligible for grants. The grants awarded were typically up to 50% of the project’s expenditures, as determined by the IIA committee and subject to the benefit track under which the grant was awarded.

 

The terms of the grants under the Innovation Law generally require that the products developed as part of the programs under which the grants were given be manufactured in Israel. The know-how developed thereunder may not be transferred outside of Israel unless prior written approval is received from the IIA. Transfer of IIA-funded know-how outside of Israel is subject to approval and payment of a redemption fee to the IIA calculated according to formulas provided under the Innovation Law. In November 2021, the IIA research committee approved an application made by Cell Cure with respect to the grant of an exclusive license and transfer of the technological know-how for OpRegen to Roche. Under the provisions for the redemption fee, Lineage is obligated to pay the IIA approximately 24.3% of the upfront, milestone, and royalty payments which may be received under the Roche Agreement, up to an aggregate cap on all payments, such cap growing over time via interest accrual until paid in full. As of June 30, 2023, the aggregate cap amount was approximately $92.1 million.

 

Pursuant to the Second Amended and Restated License Agreement, dated June 15, 2017, between Cell Cure and Hadasit, and a certain letter agreement entered into on December 17, 2021, Hadasit was entitled to, and was paid, a sublicensing fee of 21.5% of the $50.0 million upfront payment under the Roche Agreement (subject to certain reductions, including for costs related to Lineage’s performance obligations under the Roche Agreement) and of any milestone payments, and up to 50% of all royalty payments (subject to a maximum payment of 5% of net sales of products), Lineage receives under the Roche Agreement. The letter agreement generally terminates upon the termination of the Roche Agreement.

 

Second Amendment to Clinical Trial and Option Agreement and License Agreement with Cancer Research UK

 

In May 2020, Lineage and Asterias entered into a Second Amendment to Clinical Trial and Option Agreement (the “CTOA Amendment”) with CRUK and Cancer Research Technology (“CRT”), which amends the Clinical Trial and Option Agreement entered into between Asterias, CRUK and CRT dated September 8, 2014, as amended September 8, 2014. Pursuant to the CTOA Amendment, Lineage assumed all obligations of Asterias and exercised early its option to acquire data generated in the Phase 1 clinical trial of VAC2 in non-small cell lung cancer being conducted by CRUK.

 

Lineage and CRT effectuated the option by simultaneously entering into a license agreement (the “CRT License Agreement”) pursuant to which Lineage paid a signature fee of £1,250,000 (approximately $1.6 million). For the primary licensed product for the first indication, the CRT License Agreement provides for milestone fees of up to £8,000,000 based upon initiation of a Phase 3 clinical trial and the filing for regulatory approval and up to £22,500,000 in sales-based milestones payments. Additional milestone fees and sales-based milestone payments would be payable for other products or indications, and mid-single-digit royalty payments are payable on sales of commercial products.

 

Either party may terminate the CRT License Agreement for the uncured material breach of the other party. CRT may terminate the CRT License Agreement in the case of Lineage’s insolvency or if Lineage ceases all development and commercialization of all products under the CRT License Agreement.

 

Other Contingent Obligations

 

We have obligations under license agreements and grants received from government entities to make future payments to third parties, which become due and payable on the achievement of certain development, regulatory and commercial milestones or on the sublicense of our rights to another party. These commitments include sublicense fees, milestone payments, redemption fees and royalties. Sublicense fees are payable to licensors or government entities when we sublicense underlying intellectual property to third parties; the fees are based on a percentage of the license fees we receive from sublicensees. Milestone payments are due to licensors or government entities upon the future achievement of certain development and regulatory milestones. Redemption fees due to the IIA under the Innovation Law are due upon receipt of any milestone and royalties received under the Roche Agreement. Royalties are payable to licensors or government entities based on a percentage of net sales of licensed products. As of June 30, 2023, we have not included these commitments on our condensed consolidated balance sheet because the achievement and timing of these events are not fixed and determinable.

 

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Litigation – General

 

From time to time, we are subject to legal proceedings and claims in the ordinary course of business. While management presently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, cash flows, or overall trends in results of operations, legal proceedings are subject to inherent uncertainties, and unfavorable rulings or outcomes could occur that have individually or in aggregate, a material adverse effect on our business, financial condition or operating results. We are not currently subject to any pending material litigation, other than ordinary routine litigation incidental to our business.

 

Asterias Merger

 

In November 2018, Lineage, Asterias Biotherapeutics, Inc. (“Asterias”), and Patrick Merger Sub, Inc., a wholly owned subsidiary of Lineage, entered into an Agreement and Plan of Merger pursuant to which Lineage agreed to acquire all of the outstanding common stock of Asterias in a stock-for-stock transaction (the “Asterias Merger”). The Asterias Merger closed in March 2019. In October 2019, a putative class action lawsuit was filed against the company and certain other named defendants challenging the Asterias Merger.

 

In February 2023, the court approved a Stipulation and Agreement of Compromise and Settlement pursuant to which, Lineage and certain insurers of the defendants paid $10.65 million (the “Settlement Amount”) into a fund created for the benefit of the purported class and in consideration for the full and final release, settlement and discharge of all claims. Approximately $7.12 million of the Settlement Amount was funded by certain insurers and approximately $3.53 million was paid by Lineage in cash.

 

Lineage and all defendants have denied, and continue to deny, the claims alleged in the lawsuit and the settlement does not reflect or constitute any admission, concession, presumption, proof, evidence or finding of any liability, fault, wrongdoing or injury or damages, or of any wrongful conduct, acts or omissions on the part any defendant.

 

Premvia Litigation Settlement

 

In July 2019, the Company, along with other named defendants, was sued in the Superior Court of the State of California in a matter captioned Gonzalez v. Aronowitz, M.D., et al. The plaintiff asserted medical negligence and product liability causes of action relating to the 2017 and 2018 use in a clinical trial of a product candidate, Premvia, that the Company is no longer developing and has no plans to pursue, and that is not related to the cell therapy candidates the Company currently is developing. In February 2023, the Company and the other defendants each entered into settlement agreements with the plaintiff pursuant to which the defendants without admitting any liability, which the defendants expressly denied, each agreed to pay specified amounts to the plaintiff in exchange for a full settlement and release and discharge of claims. The Company’s insurance covered the full amount paid by the Company excluding the $25,000 insurance deductible.

 

HBL Books and Records Request

 

On April 17, 2023, Cell Cure Neurosciences Ltd. (“Cell Cure”), Lineage’s subsidiary, received a motion for disclosure of documents pursuant to Section 198A of the Israeli Companies Law 5759-1999. The motion was filed in the district court in Tel Aviv-Yafo by HBL Hadasit Bio-Holdings Ltd. (“HBL”), currently an approximately 5% shareholder of Cell Cure. According to the motion, the requested production of documents is intended to allow HBL to examine the possibility of pursuing a derivative action related to, among other things, the validity of an intercompany Collaboration and License Agreement (the “Intercompany Agreement”) entered into between Lineage and Cell Cure pursuant to which Cell Cure conveyed certain rights and other assets to Lineage, and Lineage agreed to undertake certain liabilities and obligations of Cell Cure relating to the OpRegen® program. In its motion, HBL alleges, among other things, that Lineage, in its capacity as Cell Cure’s controlling shareholder, and members of Cell Cure’s board of directors caused damage to Cell Cure because the Intercompany Agreement was an interested party transaction that was not fairly priced and exploits Cell Cure’s resources for the benefit of Lineage. The motion seeks an order to compel Cell Cure to disclose and deliver to HBL the documents described in the motion, such additional, cumulative, or alternative relief as the court deems appropriate, and reimbursement of HBL’s expenses, including attorneys’ fees. Cell Cure filed an opposition to the motion on July 9, 2023. It is impossible at this time to assess whether the outcome of this proceeding will have a material adverse effect on Lineage’s consolidated results of operations, cash flows or financial position. Therefore, in accordance with ASC 450, Contingencies, Lineage has not recorded any accrual for a contingent liability associated with this legal proceeding based on its belief that a liability, while possible, is not probable nor estimable, and any range of potential contingent liability amounts cannot be reasonably estimated at this time. Lineage records legal expenses as incurred.

 

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Employment Contracts

 

Lineage has employment agreements with all of its executive officers. Under the provisions of the agreements, Lineage may be required to incur severance obligations for matters relating to changes in control, as defined in the agreements, and involuntary terminations.

 

Indemnification

 

In the normal course of business, Lineage may agree to indemnify and reimburse other parties, typically Lineage’s clinical research organizations, investigators, clinical sites, and suppliers, for losses and expenses suffered or incurred by the indemnified parties arising from claims of third parties in connection with the use or testing of Lineage’s products and services. Indemnification could also cover third party infringement claims with respect to patent rights, copyrights, or other intellectual property pertaining to Lineage products and services. The term of these indemnification agreements generally continue in effect after the termination or expiration of the particular research, development, services, or license agreement to which they relate. The potential future payments Lineage could be required to make under these indemnification agreements will generally not be subject to any specified maximum amount. Generally, Lineage has not been subject to any material claims or demands for indemnification. Lineage maintains liability insurance policies that limit its financial exposure under the indemnification agreements. Accordingly, Lineage has not recorded any liabilities for these agreements as of June 30, 2023 or December 31, 2022.

 

Royalty Obligations and License Fees

 

We have licensing agreements with research institutions, universities and other parties providing us with certain rights to use intellectual property in conducting research and development activities in exchange for the payment of royalties on future product sales, if any. In addition, in order to maintain these licenses and other rights, we must comply with various conditions including the payment of patent related costs and annual minimum maintenance fees.

 

As part of the Asterias Merger, Lineage acquired certain royalty revenues for cash flows generated under patent families that Asterias acquired from Geron Corporation. Lineage continues to make royalty payments to Geron from royalties generated from these patents.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Result of Operations

 

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated interim financial statements and notes thereto included in this report and our audited financial statements and notes thereto for the year ended December 31, 2022 included in the 2022 10-K. Past operating results are not necessarily indicative of results that may occur in future periods.

 

The following discussion includes forward-looking statements. See “Special Note Regarding Forward-Looking Statements,” above. Forward-looking statements are not guarantees of future performance and our actual results may differ materially from those currently anticipated and from historical results depending upon a variety of factors, including, but not limited to, those discussed in Part I, Item 1A. Risk Factors of our 2022 10-K, and in our subsequent filings with the SEC, including any discussed in Part II, Item 1A of this report under the heading “Risk Factors.”

 

All information presented in this report is based on our fiscal year. Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years ending December 31 and the associated quarters, months and periods of those fiscal years.

 

Company and Business Overview

 

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

 

Our strategy is to efficiently leverage our technology platform and our development, formulation, delivery, and manufacturing capabilities to advance our programs internally or in conjunction with strategic partners to further enhance their value and probability of success. As one example, in December 2021 we entered into a Collaboration and License Agreement (the “Roche Agreement”) with F. Hoffmann-La Roche Ltd and Genentech, Inc., a member of the Roche Group (collectively or individually, “Roche” or “Genentech”), wherein we granted to Roche exclusive worldwide rights to develop and commercialize retinal pigment epithelium (“RPE”) cell therapies, including our proprietary cell therapy program known as OpRegen®, for the treatment of ocular disorders, including geographic atrophy (GA) secondary to age-related macular degeneration (AMD). Under the terms of the Roche Agreement, Lineage received a $50.0 million upfront payment and is eligible to receive up to $620.0 million in certain developmental, regulatory, and commercialization milestone payments. Lineage also is eligible to receive tiered double-digit percentage royalties on net sales of OpRegen in the U.S. and other major markets. See Note 14 (Commitments and Contingencies) for additional information regarding the Roche Agreement.

 

As of June 30, 2023, we have five allogeneic, or “off-the-shelf,” cell therapy programs in development, of which three have reached human clinical testing:

 

Product Candidates

 

  ● OpRegen®, an allogeneic RPE cell replacement therapy currently in a Phase 2a multicenter clinical trial, being conducted by Roche, for the treatment of GA secondary to AMD, also known as atrophic or dry AMD. A previous Phase 1/2a trial we conducted enrolled individuals with dry AMD with GA. In December 2021, this program was partnered with Roche for further clinical development and commercialization.
     
  ● OPC1, an allogeneic oligodendrocyte progenitor cell therapy currently in long-term follow-up from a Phase 1/2a multicenter clinical trial for cervical spinal cord injuries (“SCI”). To date, five patients with thoracic spinal cord injuries and 25 patients with cervical SCI have been enrolled in clinical trials of OPC1. We recently received a response from the U.S. Food and Drug Administration to our Type B meeting submission which will help guide our next regulatory interactions. The clinical development of OPC1 has been partially funded by $14.3 million received under a grant from the California Institute for Regenerative Medicine (“CIRM”). Additional clinical trials are being planned.

 

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  ● ANP1, an allogeneic auditory neuron progenitor cell transplant currently in preclinical development for the treatment of debilitating hearing loss (“DHL”).
     
  ● PNC1, an allogeneic photoreceptor cell transplant currently in preclinical development for the treatment of vision loss due to photoreceptor dysfunction or damage.
     
  ● VAC, an allogeneic cancer immunotherapy comprised of antigen-presenting dendritic cells. A Phase 1 clinical trial in non-small cell lung cancer (“NSCLC”) of one of the VAC product candidates, VAC2, was recently completed. This clinical trial was funded and conducted by Cancer Research UK (“CRUK”), one of the world’s largest independent cancer research charities. Another VAC-based product candidate is in preclinical development with our partner, Immunomic Therapeutics, Inc. (“ITI”), for the treatment of glioblastoma multiforme (“GBM”).

 

Other Programs

 

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

 

In addition to seeking to create value for shareholders by developing product candidates and advancing those candidates through clinical development, we also may seek to create value from our intellectual property and additional related technologies and capabilities, through partnering and/or strategic transactions.

 

Critical Accounting Estimates

 

An accounting policy is deemed critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably likely to occur could materially impact the financial statements. See Part II, Item 7 – Critical Accounting Estimates and our consolidated financial statements and related notes in Part II, Item 8 of our 2022 10-K for accounting policies and related estimates we believe are the most critical to understanding our condensed consolidated interim financial statements, financial condition and results of operations and which require complex management judgment and assumptions or involve uncertainties. There have not been any changes to our significant accounting policies or their application since we filed our 2022 10-K.

 

Results of Operations

 

Comparison of Three and Six Months Ended June 30, 2023 and 2022

 

Revenues and Cost of Sales

 

The amounts in the table below show our consolidated revenues, by source, and cost of sales for the periods presented (in thousands).

 

   Three Months ended June 30, (unaudited)         
   2023   2022   $ change   % change 
Collaboration revenues  $2,871   $4,148   $(1,277)   (31)%
Royalties and license fees   354    405    (51)   (13)%
Total revenues   3,225    4,553    (1,328)   (29)%
Cost of sales   (127)   (215)   88    (41)%
Gross profit  $3,098   $4,338   $(1,240)   (29)%

 

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   Six Months ended June 30, (unaudited)         
   2023   2022   $ change   % change 
Collaboration revenues  $4,992   $9,013   $(4,021)   (45)%
Royalties and license fees   619    777    (158)   (20)%
Total revenues   5,611    9,790    (4,179)   (43)%
Cost of sales   (246)   (391)   145    (37)%
Gross profit  $5,365   $9,399   $(4,034)   (43)%

 

For the three months ended June 30, 2023, the $1.3 million decrease in total revenues was due to a $1.3 million decrease in collaboration revenues related to less current period recognition of the $50.0 million upfront licensing payment from Roche, resulting from an updated collaboration forecast. The collaboration revenue was included in deferred revenues at December 31, 2022 (see Note 3 for further discussion).

 

For the six months ended June 30, 2023, the $4.2 million decrease in total revenues was primarily due to a $4.0 million decrease in collaboration revenues related to less current period recognition of the $50.0 million upfront licensing payment from Roche, resulting from an updated collaboration forecast. The collaboration revenue was included in deferred revenues at December 31, 2022 (see Note 3 for further discussion).

 

Operating expenses

 

Our operating expenses consist of research and development expenses and general and administrative expenses.

 

Research and development expenses. These expenses consist of costs incurred for company-sponsored, collaborative and contracted research and development activities. These costs include direct expenses and indirect research-related overhead expenses including compensation and related benefits, stock-based compensation, consulting fees, research and laboratory fees, rent of research facilities, amortization of intangible assets, and license fees paid to third parties to acquire patents or licenses to use patents and other technology. Research and development expenses that have an alternative future use will be capitalized as tangible assets, and costs with no future benefit or alternative use will be expensed as incurred. Research and development expenses incurred and reimbursed by grants from third parties approximate the grant income recognized in our consolidated statements of operations. Royalties and sublicensing fees are recorded as research and development expenses, unless they are associated with royalties from product sales, which we classify as cost of sales in our consolidated statements of operations. We expect our total research and development expenses to fluctuate each reporting period based on several factors including (i) the stage of development for each cell therapy program, (ii) the availability of resources to work on each program, and (iii) the timing of contractual obligations.

 

General and administrative expenses. These expenses include employee and director compensation and related benefits, including stock-based compensation, for executive and corporate personnel, professional and consulting fees, and allocated overhead such as facilities rent and equipment rent and maintenance, insurance costs allocated to general and administrative expenses, costs of patent applications, prosecution and maintenance, stock exchange-related costs, depreciation expense, marketing costs, legal and accounting costs, and other miscellaneous.

 

The amounts in the table below are our consolidated operating expenses for the periods presented (in thousands).

 

   Three Months ended June 30, (unaudited)         
   2023   2022   $ change   % change 
Research and development  $3,873   $3,302   $571    17%
General and administrative   4,249    5,270    (1,021)   (19)%
Total  $8,122   $8,572   $(450)   (5)%

 

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   Six Months ended June 30, (unaudited)         
   2023   2022   $ change   % change 
Research and development  $8,058   $6,290   $1,768    28%
General and administrative   8,973    13,739    (4,766)   (35)%
Total  $17,031   $20,029   $(2,998)   (15)%

 

The following table shows the amount of our total research and development expenses by program for the periods presented (in thousands).

 

   Three Months ended June 30, (unaudited) 
   Amount   Percent of Total 
   2023   2022   2023   2022 
OpRegen®  $1,580   $1,137    41%   34%
OPC1   1,432    1,139    36%   35%
ANP1   697    173    18%   5%
PNC1   75    130    2%   4%
VAC platform   20    703    1%   21%
All other programs   69    20    2%   1%
Total research and development expenses  $3,873   $3,302    100%   100%

 

   Six Months ended June 30, (unaudited) 
   Amount   Percent of Total 
   2023   2022   2023   2022 
OpRegen®  $3,100   $2,290    38%   36%
OPC1   2,833    2,065    35%   33%
ANP1   1,140    235    14%   4%
PNC1   233    245    3%   4%
VAC platform   306    1,430    4%   23%
All other programs   446    25    6%   0%
Total research and development expenses  $8,058   $6,290    100%   100%

 

Research and development expenses. For the three months ended June 30, 2023, the $0.6 million increase in total research and development expenses is mainly attributable to: (i) a $0.4 million net increase in expenses related to our OpRegen program; (ii) a $0.3 million net increase in expenses related to our OPC1 program, primarily related to nonclinical activities; (iii) a $0.5 million increase in expenses related to our ANP1 program, primarily related to nonclinical development activities. These increases were partially offset by a $0.7 million decrease in expense related to our VAC program, primarily related to reduced manufacturing activities.

 

For the six months ended June 30, 2023, the $1.8 million increase in total research and development expenses is mainly attributable to: (i) a $0.8 million net increase in expenses related to our OpRegen program, which includes the work being performed on the Roche collaboration; (ii) a $0.8 million net increase in expenses related to our OPC1 program, primarily related to nonclinical activities; (iii) a $0.9 million increase in expenses related to our ANP1 program, primarily related to nonclinical development activities; and (iv) a $0.4 million increase in expenses related to other programs. These increases were partially offset by a $1.1 million decrease in expense related to our VAC program, primarily related to reduced manufacturing activities.

 

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General and administrative expenses. For the three months ended June 30, 2023, the $1.0 million year-over-year decrease in general and administrative expenses was primarily attributable to (i) a $0.5 million decrease in legal and litigation expense, primarily related to the Asterias litigation settlement, and an (ii) overall reduction in costs incurred for services provided by third parties, consulting costs and stock-based compensation expense.

 

For the six months ended June 30, 2023, the $4.8 million year-over-year decrease in general and administrative expenses was primarily attributable to (i) a $4.0 million decrease in legal and litigation expense, primarily related to the Asterias litigation settlement, and an (ii) overall reduction in costs incurred for services provided by third parties, consulting costs and stock-based compensation expense.

 

Other income and (expenses), net

 

The following table shows the amount of other income and (expense), net, for the periods presented (in thousands):

 

   Three Months ended June 30, (unaudited)         
Other income (expenses), net  2023   2022   $ change   % change 
Interest income, net  $382   $51   $331    649%
Unrealized loss on marketable
equity securities, net		   (150)   (709)   559    (79)%
Gain on revaluation of warrant liability   -    2    (2)   (100)%
Other expenses, net   (411)   (1,892)   1,481    (78)%
Total  $(179)  $(2,548)  $2,369    (93)%

 

   Six Months ended June 30, (unaudited)         
Other income (expenses), net  2023   2022   $ change   % change 
Interest income, net  $792   $51   $741    1453%
Unrealized loss on marketable
equity securities, net		   (110)   (1,444)   1,334    (92)%
Gain on revaluation of warrant liability   1    223    (222)   (100)%
Other expenses, net   (427)   (2,075)   1,648    (79)%
Total  $256   $(3,245)  $3,501    (108)%

 

Interest income, net. During the third quarter of 2022, we began to invest our excess cash in short-term U.S. Treasury securities resulting in an increase in interest income. See Note 4 (Marketable Debt Securities) to our condensed consolidated interim financial statements included in this report for additional information regarding our marketable debt securities.

 

Unrealized loss on marketable equity securities, net. We expect our total other income (expenses), net, to fluctuate each reporting period based on the changes in the market price of the common stock of OncoCyte Corporation (“OncoCyte”), which could impact our net income or loss reported in our condensed consolidated statements of operations for a particular reporting period. We also account for the shares we hold in HBL as marketable equity securities. These shares are carried at fair market value on our consolidated balance sheets. The accounting transactions for these shares were not material for either of the three and six months ended June 30, 2023. The accounting transactions for these shares were $0.7 million and $1.4 million for the three and six months ended June 30, 2022. See Note 5 (Marketable Equity Securities) to our condensed consolidated interim financial statements included in this report for additional information regarding our marketable equity securities.

 

Other expenses, net. Other expenses, net, for each of the three and six months ended June 30, 2023 and 2022 consisted of net foreign currency transaction gains and losses recognized by our subsidiaries Cell Cure and ES Cell International Pte. Ltd and an employee retention credit payroll tax refund (discussed below). Foreign currency transaction gains and losses for the periods presented are principally related to the remeasurement of the U.S. dollar denominated notes payable and notes receivable between Cell Cure and Lineage.

 

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Under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Company is eligible for an employee retention credit subject to certain criteria. The employee retention credit is a payroll tax refund per employee, which was designed by the U.S. Treasury Department to assist businesses that retained employees during the COVID pandemic. For the six months ended June 30, 2023, we recorded an employee retention credit of $0.5 million, due to a decline in the quarterly revenue during 2020 and 2021 as compared to the same quarterly period in 2019. We recorded the transaction within other expenses, net on the condensed consolidated statement of operations and as a receivable within prepaid expenses and other current assets on the condensed consolidated balance sheet. We accounted for the employee retention credit by analogy to International Accounting Standards (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance, of International Financial Reporting Standards (IFRS).

 

Income Taxes

 

Under ASC 740, Income Taxes, a valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. We established a full valuation allowance as of December 31, 2018, due to the uncertainty of realizing future tax benefits from the net operating loss carryforwards and other deferred tax assets, including foreign net operating losses generated by its subsidiaries.

 

For the six months ended June 30, 2023, Lineage recorded a $1.8 million deferred tax benefit due to the ability to offset certain deferred tax assets against the deferred tax liability associated with IPR&D, and the related release of the valuation allowance. It was determined that a portion of the deferred tax liability related to the indefinite lived assets may be realized prior to the expiration of certain pre 2018 net operating losses. Lineage did not record a deferred tax benefit for the three months ended June 30, 2023, and did not record a deferred tax benefit for the three and six months ended June 30, 2022. See Note 13 (Income Taxes) to our condensed consolidated interim financial statements included in this report for additional information.

 

Liquidity and Capital Resources

 

Sources of Liquidity

 

We have historically funded our operations primarily through proceeds from the sale of shares of our common stock, the sale of common stock of our former subsidiaries, research grants, revenues from collaborations, and royalties from product sales that are unrelated to our current cell therapy product candidates.

 

As of June 30, 2023, $58.0 million remained available for sale under our at the market offering program and we owned marketable securities with a fair value of $12.0 million based on the closing price of such securities on that date. See Note 4 (Marketable Debt Securities), Note 5 (Marketable Equity Securities) and Note 11 (Shareholders’ Equity) to our condensed consolidated interim financial statements included in this report for additional information regarding the marketable securities we own and our at the market offering program, respectively. We may sell shares of our common stock and the marketable securities we own for liquidity. However, when we can effect such sales and the amount of shares we can sell depends on a variety of factors to be determined by us from time to time, including, among others, market conditions, the trading price and volume of our common stock and of the marketable securities we own. The market value of marketable securities we own may not represent the amount that could be realized in a sale of such securities due to various market factors, including prevailing market conditions and prices at the time of any sale. In addition, the market value of marketable securities we own may be significantly and adversely impacted by deteriorating global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the recent pandemics, including the COVID-19 pandemic, geopolitical conflicts, rising inflation and interest rates, and other macroeconomic factors.

 

Cash Flows

 

Cash flows (used in) provided by operating activities

 

Net cash used in operating activities was $17.5 million for the six months ended June 30, 2023, which primarily reflects the loss from operations of $11.7 million plus the changes in operating assets and liabilities of $9.4 million. These items were offset by the non-cash expenses of $2.3 million for stock-based compensation and $0.3 million for depreciation and amortization. The unrealized loss on marketable securities, foreign currency remeasurement and deferred tax benefit had no effect on cash flows.

 

32 | Page

 

 

Net cash provided by operating activities was $14.8 million for the six months ended June 30, 2022, which primarily reflects the net changes in assets and liabilities of $22.5 million, plus the $2.7 million in non-cash expenses for stock-based compensation and depreciation and amortization, less the loss from operations of $10.6 million. The change in assets and liabilities was impacted by the receipt of the $50.0 million upfront payment under the Roche Agreement, and subsequent related payments to the IIA and Hadasit (see Note 14 (Commitments and Contingencies) to the condensed consolidated interim financial statements included in this report for additional information), partially offset by the accrual of the litigation settlement described in Note 14 (Commitments and Contingencies) to the condensed consolidated interim financial statements included in this report. The unrealized loss on marketable equity securities and foreign currency remeasurement had no effect on the cash flows.

 

Cash flows provided by (used in) investing activities

 

Cash provided by investing activities for the six months ended June 30, 2023 was $34.6 million and consisted of $47.7 million in U.S. Treasury securities which matured during the period, partially offset by $12.6 million used to purchase U.S. Treasury securities and $0.4 million used to purchase equipment.

 

Cash used by investing activities for the six months ended June 30, 2022 consisted of $0.1 million used to purchase equipment.

 

Cash flows provided by financing activities

 

Cash provided by financing activities for the three months ended June 30, 2023 was $5.6 million and primarily consisted of net proceeds from the sale of our common shares under our at the market offering program.

 

Cash provided by financing activities for the six months ended June 30, 2022 was $0.5 million and consisted of $0.4 million of proceeds from the exercise of employee stock options, $0.1 million of proceeds from the sale of our common shares under our at the market offering program, and $0.1 million of proceeds from the exercise of warrants to purchase shares of Cell Cure. These proceeds were partially offset by $0.1 million in financing costs.

 

Financial Obligations

 

Our financial obligations primarily consist of obligations to our licensors under license agreements, obligations related to grants received from government entities, including the IIA, obligations under vendor contracts to provide research services and other purchase commitments with suppliers.

 

Our obligations to licensors under license agreements and related to grants received from government entities require us to make future payments relating to sublicense fees, milestone payments, redemption fees, royalties and patent maintenance costs. Sublicense fees are payable to licensors or government entities when we sublicense underlying intellectual property to third parties; the fees are based on a percentage of the license fees we receive from sublicensees. Milestone payments, including those related to the Roche Agreement, are due to licensors or government entities upon future achievement of certain commercial, development and regulatory milestones. Redemption fees due to the IIA under the Innovation Law are due upon receipt of any milestone and royalties received under the Roche Agreement, see Note 14 (Commitment and Contingencies) for additional information. Royalties, including those related to royalties we may receive under the Roche Agreement, are payable to licensors or government entities based on a percentage of net sales of licensed products. Patent maintenance costs are payable to licensors as reimbursement for the cost of maintaining license patents. Due to the contingent nature of the payments, the amounts and timing of payments to licensors under our in-license agreements are uncertain and may fluctuate significantly from period to period. As of June 30, 2023, we have not included these commitments on our consolidated balance sheet because the achievement and timing of these events are not fixed and determinable.

 

33 | Page

 

 

As discussed above, we have received grants under the Innovation Law and are required to pay royalties to the IIA from the revenues generated from the sale of product candidates and related services developed, in whole or in part pursuant to, or as a result of, a research and development program funded by the IIA. Under the Innovation Law, we are also required to pay redemption fees to the IIA. To date, through a series of separate grants beginning in 2007, Cell Cure has received a total of $15.4 million from the IIA to support the OpRegen program. We are obligated to pay approximately 24.3% of any future payments received under the Roche Agreement to the IIA, up to an aggregate cap on all payments to IIA, such cap growing over time via interest accrual until paid in full, which was approximately $92.1 million as of June 30, 2023. Redemption fees due to the IIA under the Innovation Law are due upon receipt of any milestone payments and royalties received under the Roche Agreement. As of June 30, 2023, we have not included any future financial obligations due to the IIA under the Innovation Law in our consolidated balance sheet because the achievement and timing of the events that would require future payments to the IIA under the Innovation Law is not fixed and determinable. See Note 14 (Commitments and Contingencies) to our condensed consolidated interim financial statements included in this report for additional information.

 

Under the terms of the leases for the facilities from which Cell Cure and Lineage operate, a total of $3.8 million of rent payments will become due, of which $0.6 million will become due in 2023.

 

In the normal course of business, we enter into services agreements with contract research organizations, contract manufacturing organizations and other third parties. Generally, these agreements provide for termination upon notice, with specified amounts due upon termination based on the timing of termination and the terms of the agreement. The amounts and timing of payments under these agreements are uncertain and contingent upon the initiation and completion of the services to be provided.

 

Future Funding Requirements

 

At June 30, 2023, we had an accumulated deficit of approximately $373.0 million. We expect to continue to incur losses for at least the next several years. We expect that our operating expenses will continue to increase for the foreseeable future as we continue the development of, and seek regulatory approval for, our product candidates. As a result, we will need significant additional capital to fund our operations. Our determination as to when we will seek additional capital and the amount of additional capital that we will need will be based on our evaluation of the progress we make in our research and development programs, changes to the scope and focus of those programs, changes in grant funding for certain of those programs, and projection of future costs, revenues, and rates of expenditure. If we are unable to raise additional capital when and as needed, we may be required to delay, postpone, or cancel our clinical trials or limit the number of clinical trial sites.

 

We may seek to obtain the additional capital we may need through one or more equity offerings, debt financings or other third-party funding, including potential strategic alliances and licensing or collaboration agreements. We cannot assure that adequate additional capital will be available on favorable terms, if at all. The issuance of additional securities, whether equity or debt, or the possibility of such issuance, may cause the market price of our common shares to decline, and the issuance of additional equity securities could result in the dilution of the interests of our current shareholders. If we obtain additional capital through strategic alliances and licensing or collaboration agreements, we may be required to relinquish rights to our intellectual property, our product candidates or otherwise agree to terms unfavorable to us. The unavailability or inadequacy of additional capital to meet future capital needs could force us to modify, curtail, delay, or suspend some or all aspects of our current planned operations. Our ability to raise additional capital may be adversely impacted by deteriorating global economic conditions and the disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the recent pandemics, including the COVID-19 pandemic, the conflict in Ukraine, rising inflation and interest rates, and other macroeconomic factors.

 

We believe that our $45.9 million in cash, cash equivalents and marketable securities at June 30, 2023, provide sufficient liquidity to carry out our current planned operations through at least twelve months from the issuance date of our condensed consolidated interim financial statements included elsewhere in this report. We believe we will meet our longer-term expected future cash requirements and obligations with our current cash and cash equivalents, milestone and other payments we expect to receive under our collaboration agreements, and proceeds we receive from sales of our common shares under our at the market offering program.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Under SEC rules and regulations, as a smaller reporting company, we are not required to provide the information required by this item.

 

34 | Page

 

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

It is management’s responsibility to establish and maintain adequate internal control over all financial reporting pursuant to Rule 13a-15 under the Exchange Act. Our management, including our Chief Executive Officer and our Chief Financial Officer, reviewed and evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Following this review and evaluation, management collectively determined that our disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act: (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (ii) is accumulated and communicated to management, including our chief executive officer and our chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not currently a party to any material legal proceedings. From time-to-time we may be involved in a variety of legal proceedings. Such proceedings may initially be viewed as immaterial but could later prove to be material. Legal proceedings are inherently unpredictable and excessive verdicts do occur. Given the inherent uncertainties in litigation, even when we can reasonably estimate the amount of possible loss or range of loss and reasonably estimable loss contingencies, the actual outcome may change in the future due to new developments or changes in approach. In addition, legal proceedings could involve significant expense and diversion of management’s attention and resources from other matters. For a discussion of legal proceedings in which we are involved, see Note 14 (Commitments and Contingencies) in the Notes to the Condensed Consolidated Financial Statements in Part I, Item 1 of this report.

 

Item 1A. Risk Factors

 

An investment in our common shares involves a high degree of risk. You should carefully consider the risks and uncertainties described in the 2022 10-K, in addition to other information in this report, when evaluating our business and before deciding whether to purchase, hold or sell our common shares. Each of these risks and uncertainties, as well as additional risks and uncertainties not presently known to us or that we currently consider immaterial, could harm our business, financial condition, results of operations and/or growth prospects, as well as adversely affect the market price of our common shares, in which case you may lose all or part of your investment. There have been no material changes from the risk factors disclosed in Part I, Item 1A. Risk Factors in the 2022 10-K.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Not applicable.

 

Item 3. Default Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

35 | Page

 

 

Item 5. Other Information

 

(a) None.

(b) None.

(c) Under SEC rules and regulations, as a smaller reporting company, we are not required to provide the information required by this item in this report

 

Item 6. Exhibits

 

        Incorporation by Reference

Exhibit

Number

   Description  

Exhibit

Number

   Filing   Filing Date   File No.
3.1   Restated Articles of Incorporation, as amended   3.1   10-Q   May 10, 2018   001-12830
3.2   Certificate of Ownership   3.1   8-K   August 12, 2019   001-12830
3.3   Amended and Restated Bylaws   3.2   8-K   August 12, 2019   001-12830
31.1*   Certification of Chief Executive Officer and Chief Financial Officer pursuant to Form of Rule 13a-14(a), as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002                
32.1#   Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                
101*   Interactive Data File                
101.INS*   XBRL Instance Document                
101.SCH*   XBRL Taxonomy Extension Schema                
101.CAL*   XBRL Taxonomy Extension Calculation Linkbase                
101.DEF*   XBRL Taxonomy Extension Definition Document                
101.LAB*   XBRL Taxonomy Extension Label Linkbase                
101.PRE*   XBRL Taxonomy Extension Presentation Linkbase                
104*   Cover Page Interactive Data File (embedded within the Inline XBRL document)                

 

* Filed herewith

# Furnished herewith

 

36 | Page

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  LINEAGE CELL THERAPEUTICS, INC.
   
Date: August 10, 2023 /s/ Brian M. Culley
  Brian M. Culley
 

Chief Executive Officer

 

Date: August 10, 2023 /s/ Jill Ann Howe
  Jill Ann Howe
  Chief Financial Officer

 

37 | Page

 

 

Exhibit 31.1

 

CERTIFICATIONS

 

I, Brian M. Culley, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Lineage Cell Therapeutics, Inc.
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 10, 2023

 

/s/ Brian M. Culley  
Brian M. Culley  

Chief Executive Officer

(Principal Executive Officer)

  

 

 

 

 

Exhibit 31.2

 

CERTIFICATIONS

 

I, Jill Ann Howe, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Lineage Cell Therapeutics, Inc.
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 10, 2023

 

/s/ Jill Ann Howe  
Jill Ann Howe  

Chief Financial Officer

(Principal Financial Officer)

  

 

 

 

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the quarterly report on Form 10-Q of Lineage Cell Therapeutics, Inc. (the “Company”) for the quarter ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Brian M. Culley, Chief Executive Officer of the Company, and Jill Ann Howe, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
   
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 10, 2023

 

/s/ Brian M. Culley  
Brian M. Culley  

Chief Executive Officer

(Principal Executive Officer)

  

 

/s/ Jill Ann Howe  
Jill Ann Howe

Chief Financial Officer

(Principal Financial Officer)

 

A signed original of this written statement required by Section 906 has been provided to Lineage Cell Therapeutics, Inc. and will be retained by Lineage Cell Therapeutics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 

 

 

v3.23.2
Cover - shares
 6 Months Ended
Jun. 30, 2023
Aug. 04, 2023
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Jun. 30, 2023  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2023  
Current Fiscal Year End Date --12-31  
Entity File Number 001-12830  
Entity Registrant Name Lineage Cell Therapeutics, Inc.  
Entity Central Index Key 0000876343  
Entity Tax Identification Number 94-3127919  
Entity Incorporation, State or Country Code CA  
Entity Address, Address Line One 2173 Salk Avenue  
Entity Address, Address Line Two Suite 200  
Entity Address, City or Town Carlsbad  
Entity Address, State or Province CA  
Entity Address, Postal Zip Code 92008  
City Area Code 442  
Local Phone Number 287-8990  
Title of 12(b) Security Common shares no par value  
Trading Symbol LCTX  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   174,986,671
v3.23.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
CURRENT ASSETS    
Cash and cash equivalents $ 33,886 $ 11,355
Marketable securities 12,039 46,520
Accounts receivable, net (Note 3) 443 297
Prepaid expenses and other current assets 2,123 1,828
Total current assets 48,491 60,000
NONCURRENT ASSETS    
Property and equipment, net (Notes 6 and 14) 5,310 5,673
Deposits and other long-term assets 588 627
Goodwill [1] 10,672 10,672
Intangible assets, net 46,627 46,692
TOTAL ASSETS 111,688 123,664
CURRENT LIABILITIES    
Accounts payable and accrued liabilities 4,685 8,608
Lease liabilities, current portion (Note 14) 933 916
Financing lease, current portion (Note 14) 54 36
Deferred revenues (Note 3) 10,379 9,421
Other current liabilities 1
Total current liabilities 16,052 18,981
LONG-TERM LIABILITIES    
Deferred tax liability 273 2,076
Deferred revenues, net of current portion (Note 3) 21,688 27,725
Lease liability, net of current portion (Note 14) 2,304 2,860
Financing lease, net of current portion (Note 14) 113 84
Other long-term liabilities 2
TOTAL LIABILITIES 40,430 51,728
Commitments and contingencies (Note 14)
SHAREHOLDERS’ EQUITY    
Preferred shares, no par value, authorized 2,000 shares; none issued and outstanding as of June 30, 2023 and December 31, 2022
Common shares, no par value, 250,000 shares authorized; 174,439 and 170,093 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively 448,249 440,280
Accumulated other comprehensive loss (2,611) (3,571)
Accumulated deficit (372,971) (363,370)
Lineage Cell Therapeutics, Inc. shareholders’ equity 72,667 73,339
Noncontrolling deficit (1,409) (1,403)
Total shareholders’ equity 71,258 71,936
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 111,688 $ 123,664
[1] Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in the Asterias Merger, see Note 14 (Commitment and Contingencies) for further discussion on the Asterias Merger.
v3.23.2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 30, 2023
Dec. 31, 2022
Statement of Financial Position [Abstract]    
Preferred stock, no par value $ 0 $ 0
Preferred stock, shares authorized 2,000,000 2,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, no par value $ 0 $ 0
Common stock, shares authorized 250,000,000 250,000,000
Common stock, shares issued 174,439,000 170,093,000
Common stock, shares outstanding 174,439,434 170,093,114
v3.23.2
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
REVENUES:        
Collaboration revenues $ 2,871 $ 4,148 $ 4,992 $ 9,013
Royalties and license fees 354 405 619 777
Total revenues 3,225 4,553 5,611 9,790
Cost of sales (127) (215) (246) (391)
Gross profit 3,098 4,338 5,365 9,399
OPERATING EXPENSES:        
Research and development 3,873 3,302 8,058 6,290
General and administrative 4,249 5,270 8,973 13,739
Total operating expenses 8,122 8,572 17,031 20,029
Loss from operations (5,024) (4,234) (11,666) (10,630)
OTHER INCOME (EXPENSES):        
Interest income, net 382 51 792 51
Unrealized loss on marketable equity securities, net (150) (709) (110) (1,444)
Gain on revaluation of warrant liability 2 1 223
Other expenses, net (411) (1,892) (427) (2,075)
Total other income (expenses), net (179) (2,548) 256 (3,245)
LOSS BEFORE INCOME TAXES (5,203) (6,782) (11,410) (13,875)
Deferred income tax benefit 1,803
NET LOSS (5,203) (6,782) (9,607) (13,875)
Net (income) loss attributable to noncontrolling interest (26) 19 6 25
NET LOSS ATTRIBUTABLE TO LINEAGE CELL THERAPEUTICS, INC. $ (5,229) $ (6,763) $ (9,601) $ (13,850)
NET LOSS PER COMMON SHARE:        
BASIC $ (0.03) $ (0.04) $ (0.06) $ (0.08)
DILUTED $ (0.03) $ (0.04) $ (0.06) $ (0.08)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:        
BASIC 170,592 169,731 170,361 169,689
DILUTED 170,592 169,731 170,361 169,689
v3.23.2
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Income Statement [Abstract]        
NET LOSS $ (5,203) $ (6,782) $ (9,607) $ (13,875)
Other comprehensive income, net of tax:        
Foreign currency translation adjustment 446 1,730 819 1,854
Unrealized gain on marketable debt securities 50 141
COMPREHENSIVE LOSS (4,707) (5,052) (8,647) (12,021)
Less: Comprehensive (income) loss attributable to noncontrolling interest (26) 19 6 25
COMPREHENSIVE LOSS ATTRIBUTABLE TO LINEAGE COMMON SHAREHOLDERS $ (4,733) $ (5,033) $ (8,641) $ (11,996)
v3.23.2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss attributable to Lineage Cell Therapeutics, Inc. $ (5,229) $ (6,763) $ (9,601) $ (13,850)
Net loss allocable to noncontrolling interest 26 (19) (6) (25)
Adjustments to reconcile net loss attributable to Lineage Cell Therapeutics, Inc. to net cash (used in) provided by operating activities:        
Accretion of income on marketable debt securities     (516)
Unrealized loss on marketable equity securities, net     110 1,444
Depreciation expense, including amortization of leasehold improvements     276 296
Change in right-of-use assets and liabilities     81 (7)
Amortization of intangible assets     65 65
Stock-based compensation 1,280 1,235 2,311 2,341
Gain on revaluation of warrant liability     (1) (223)
Deferred income tax benefit (1,803)
Foreign currency remeasurement and other gain     1,012 2,331
Changes in operating assets and liabilities:        
Accounts receivable, net (Note 3)     (147) 50,111
Prepaid expenses and other current assets     (270) 594
Accounts payable and accrued liabilities (Note 7)     (3,941) (19,230)
Deferred revenue and other liabilities (Note 3)     (5,080) (9,005)
Net cash (used in) provided by operating activities     (17,510) 14,842
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of marketable debt securities     (12,635)
Maturities of marketable debt securities     47,664
Purchase of equipment and other assets, net     (444) (143)
Net cash provided by (used in) investing activities     34,585 (143)
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from employee options exercised     80 388
Common shares received and retired for employee taxes paid     (37) (17)
Proceeds from exercise of subsidiary warrants, net     99
Proceeds from sale of common shares 5,800   5,789 148
Payments for offering costs     (174) (57)
Repayment of financing lease liability     (29) (15)
Net cash provided by financing activities     5,629 546
Effect of exchange rate changes on cash, cash equivalents and restricted cash     (192) (161)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH     22,512 15,084
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:        
At beginning of the period     11,936 56,277
At end of the period 34,448 71,361 34,448 71,361
Reconciliation of cash, cash equivalents and restricted cash, end of period:        
Cash and cash equivalents 33,886 70,857 33,886 70,857
Restricted cash included in deposits and other long-term assets (see Note 14 (Commitments and Contingencies)) 562 504 562 504
Total cash, cash equivalents, and restricted cash $ 34,448 $ 71,361 $ 34,448 $ 71,361
v3.23.2
Organization and Business Overview
 6 Months Ended
Jun. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Business Overview

1. Organization and Business Overview

 

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

 

Our strategy is to efficiently leverage our technology platform and our development, formulation, delivery, and manufacturing capabilities to advance our programs internally or in conjunction with strategic partners to further enhance their value and probability of success. As one example, in December 2021 we entered into a Collaboration and License Agreement (the “Roche Agreement”) with F. Hoffmann-La Roche Ltd and Genentech, Inc., a member of the Roche Group (collectively or individually, “Roche” or “Genentech”), wherein we granted to Roche exclusive worldwide rights to develop and commercialize retinal pigment epithelium (“RPE”) cell therapies, including our proprietary cell therapy program known as OpRegen®, for the treatment of ocular disorders, including geographic atrophy (GA) secondary to age-related macular degeneration (AMD). Under the terms of the Roche Agreement, Lineage received a $50.0 million upfront payment and is eligible to receive up to $620.0 million in certain developmental, regulatory, and commercialization milestone payments. Lineage also is eligible to receive tiered double-digit percentage royalties on net sales of OpRegen in the U.S. and other major markets. See Note 14 (Commitments and Contingencies) for additional information regarding the Roche Agreement.

 

As of June 30, 2023, we have five allogeneic, or “off-the-shelf,” cell therapy programs in development, of which three have reached human clinical testing:

 

Product Candidates

 

  ● OpRegen®, an allogeneic RPE cell replacement therapy currently in a Phase 2a multicenter clinical trial, being conducted by Roche, for the treatment of GA secondary to AMD, also known as atrophic or dry AMD. A previous Phase 1/2a trial we conducted enrolled individuals with dry AMD with GA. In December 2021, this program was partnered with Roche for further clinical development and commercialization.
     
  ● OPC1, an allogeneic oligodendrocyte progenitor cell therapy currently in long-term follow-up from a Phase 1/2a multicenter clinical trial for cervical spinal cord injuries (“SCI”). To date, five patients with thoracic spinal cord injuries and 25 patients with cervical SCI have been enrolled in clinical trials of OPC1. We recently received a response from the U.S. Food and Drug Administration to our Type B meeting submission which will help guide our next regulatory interactions. The clinical development of OPC1 has been partially funded by $14.3 million received under a grant from the California Institute for Regenerative Medicine (“CIRM”). Additional clinical trials are being planned.
     
  ●

ANP1, an allogeneic auditory neuron progenitor cell transplant currently in preclinical development for the treatment of debilitating hearing loss (“DHL”).

 

  ● PNC1, an allogeneic photoreceptor cell transplant currently in preclinical development for the treatment of vision loss due to photoreceptor dysfunction or damage.
     
  ● VAC, an allogeneic cancer immunotherapy comprised of antigen-presenting dendritic cells. A Phase 1 clinical trial in non-small cell lung cancer (“NSCLC”) of one of the VAC product candidates, VAC2, was recently completed. This clinical trial was funded and conducted by Cancer Research UK (“CRUK”), one of the world’s largest independent cancer research charities. Another VAC-based product candidate is in preclinical development with our partner, Immunomic Therapeutics, Inc. (“ITI”), for the treatment of glioblastoma multiforme (“GBM”).

 

 

Other Programs

 

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

 

In addition to seeking to create value for shareholders by developing product candidates and advancing those candidates through clinical development, we also may seek to create value from our intellectual property and additional related technologies and capabilities, through partnering and/or strategic transactions.

 
v3.23.2
Basis of Presentation, Liquidity and Summary of Significant Accounting Policies
 6 Months Ended
Jun. 30, 2023
Accounting Policies [Abstract]  
Basis of Presentation, Liquidity and Summary of Significant Accounting Policies

2. Basis of Presentation, Liquidity and Summary of Significant Accounting Policies

 

The accompanying unaudited condensed consolidated interim financial statements were prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. In accordance with those rules and regulations, certain information and footnote disclosures normally included in comprehensive consolidated financial statements have been condensed or omitted. The condensed consolidated balance sheet as of December 31, 2022 was derived from the audited consolidated financial statements at that date but does not include all the information and footnotes required by GAAP. These unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the 2022 10-K.

 

The accompanying unaudited condensed consolidated interim financial statements, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our financial condition and results of operations. The condensed consolidated results of operations are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

 

Principles of consolidation

 

The accompanying unaudited condensed consolidated interim financial statements include the accounts of our subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. The following table sets out Lineage’s ownership, directly or indirectly, of the outstanding shares of its subsidiaries as of June 30, 2023.

 

Subsidiary  Field of Business 

Lineage

Ownership

    Country 
Cell Cure Neurosciences Ltd.  Manufacturing of Lineage’s product candidates   94%(1)(2)    Israel 
ES Cell International Pte. Ltd.  Research and clinical grade cell lines   100%    Singapore 

 

(1) Includes shares owned by Lineage and ES Cell International Pte. Ltd.
   
(2) As of December 31, 2021 our ownership percentage of Cell Cure Neurosciences Ltd. (“Cell Cure”) was approximately 99%. In July 2022, Hadasit Bio-Holdings Ltd exercised warrants to purchase 21,999 ordinary shares of Cell Cure. Lineage’s ownership percentage of Cell Cure decreased as a result.

 

As of June 30, 2023, Lineage consolidated its direct and indirect wholly-owned or majority-owned subsidiaries because Lineage has the ability to control their operating and financial decisions and policies through its ownership, and the noncontrolling interest is reflected as a separate element of shareholders’ equity on Lineage’s condensed consolidated balance sheets.

 

 

Liquidity

 

At June 30, 2023, we had $45.9 million of cash, cash equivalents and marketable securities. Based on our current operating plan, we believe that our cash, cash equivalents and marketable securities, together with our projected cash flows, will be sufficient to enable us to carry out our planned operations through at least twelve months from the issuance date of the accompanying condensed consolidated interim financial statements.

 

Capital Resources

 

Since inception we have incurred significant operating losses and have funded our operations primarily through the issuance of equity securities, the sale of common stock of our former subsidiaries, OncoCyte and AgeX, receipt of proceeds from research grants, revenues from collaborations, royalties from product sales, and sales of research products and services.

 

As of June 30, 2023, $58.0 million remained available for sale under our at the market offering program (“ATM”). See Note 11 (Shareholders’ Equity) for additional information.

 

We may use our marketable securities for liquidity as necessary and as market conditions allow. The market value of our marketable securities may not represent the amount that could be realized in a sale of such securities due to various market and regulatory factors, including trading volume, prevailing market conditions and prices at the time of any sale and subsequent sales of securities by the entities. In addition, the value of our marketable securities may be significantly and adversely impacted by deteriorating global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the recent pandemics, including the COVID-19 pandemic, geopolitical conflicts, rising inflation and interest rates, and other macroeconomic factors.

 

Additional Capital Requirements

 

Our financial obligations primarily consist of obligations to licensors under license agreements, obligations related to grants received from government entities, including the Israel Innovation Authority (“IIA”), obligations under contracts with vendors who provide research services and purchase commitments with suppliers.

 

Our obligations to licensors under license agreements and our obligations related to grants received from government entities require us to make future payments, such as sublicense fees, milestone payments, redemption fees, royalties and patent maintenance costs. Sublicense fees are payable to licensors or government entities when we sublicense the applicable intellectual property to third parties; the fees are based on a percentage of the license fees we receive from sublicensees. Milestone payments, including those related to the Roche Agreement, are due to licensors or government entities upon achievement of commercial, development and regulatory milestones. Redemption fees due to the IIA under the Innovation Law are due upon receipt of milestone payments and royalties received under the Roche Agreement. See Note 14 (Commitment and Contingencies) for additional information. Royalties, including those related to royalties we may receive under the Roche Agreement, are payable to licensors or government entities based on a percentage of net sales of licensed products. Patent maintenance costs are payable to licensors as reimbursement for the cost of maintaining license patents. Due to the contingent nature of the payments, the amounts and timing of payments to licensors under our in-license agreements are uncertain and may fluctuate significantly from period to period. As of June 30, 2023, we have not included these commitments on our condensed consolidated balance sheet because the achievement of events that would trigger our payment obligations and the timing thereof are not fixed and determinable.

 

In the normal course of business, we enter into services agreements with contract research organizations, contract manufacturing organizations and other third parties. Generally, these agreements provide for termination upon notice, with specified amounts due upon termination based on the timing of termination and the terms of the agreement. The amounts and timing of payments under these agreements are uncertain and contingent upon the initiation and completion of the services to be provided.

 

 

Significant Accounting Policies

 

We describe our significant accounting policies in Note 2 to the consolidated financial statements in Item 8 of the 2022 10-K. There have been no changes to our significant accounting policies during the six months ended June 30, 2023.

 

Recently Issued and Recently Adopted Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. The Company has evaluated recently issued accounting pronouncements and does not believe any will have a material impact on the Company’s condensed consolidated financial statements or related financial statement disclosures.

 
v3.23.2
Revenue
 6 Months Ended
Jun. 30, 2023
Revenue from Contract with Customer [Abstract]  
Revenue

3. Revenue

 

Our disaggregated revenues were as follows for the periods presented (in thousands):

  

   2023   2022   2023   2022 
   Three Months ended June 30,   Six Months ended June 30, 
   2023   2022   2023   2022 
Royalties and license fees  $354   $405   $619   $777 
                     
Revenues under collaborative agreements                    
Upfront license fees  $2,871   $4,148   $4,992   $9,013 
Total revenues under collaborative agreements  $2,871   $4,148   $4,992   $9,013 
                     
Total revenue  $3,225   $4,553   $5,611   $9,790 

 

During the three and six months ended June 30, 2023, we recognized $3.2 million and $5.6 million in total revenue, respectively, of which $2.9 million and $5.0 million, respectively, was recognized in collaboration revenues related to the $50.0 million upfront payment from Roche, which was included in deferred revenues at December 31, 2022.

 

During the three and six months ended June 30, 2022, we recognized $4.6 million and $9.8 million in total revenue, respectively, of which $4.1 million and $9.0 million, respectively, was recognized in collaboration revenues related to the $50.0 million upfront payment from Roche, which was included in deferred revenues at December 31, 2021.

 

We are recognizing the $50.0 million upfront payment under the Roche Agreement utilizing an input method of costs incurred over total estimated costs to be incurred. At each reporting period, we update our total estimated collaboration costs, and any resulting adjustments are recorded on a cumulative basis which would affect revenue and net income (loss) in the period of adjustment. We believe the input methodology represents the most appropriate measure of progress towards satisfaction of the identified performance obligations.

 

Accounts receivable, net, and deferred revenues (contract liabilities) from contracts with customers, including collaboration partners, consisted of the following (in thousands):

  

  

June 30,

2023

   December 31, 2022 
Accounts receivable, net (1)  $406   $297 
Deferred revenues   32,067    37,146 

 

(1) Excludes government grants as Lineage has determined government grants are outside the scope of ASU 2014-09 – Revenue from Contracts with Customers (Topic 606).

 

 

As of June 30, 2023, the amounts included in the transaction price of our contracts with customers (ASU 2014-09 – Revenue from Contracts with Customers (Topic 606)), including collaboration partners, and allocated goods and services not yet provided were $33.7 million, of which $32.1 million has been collected and is reported as deferred revenues, and $1.6 million relates to unfulfilled commitments related to the ITI collaboration (see Note 14 (Commitments and Contingencies) for additional information), the latter is currently estimated to be delivered by the end of the second quarter of 2024. Of the total deferred revenues of $32.1 million, approximately $10.4 million is expected to be recognized within the next 12 months.

 
v3.23.2
Marketable Debt Securities
 6 Months Ended
Jun. 30, 2023
Cash and Cash Equivalents [Abstract]  
Marketable Debt Securities

4. Marketable Debt Securities

 

The following tables are a summary of available-for-sale debt securities in cash and cash equivalents or marketable securities in the Company’s condensed consolidated balance sheet as of June 30, 2023 and December 31, 2022 (in thousands):

 

   June 30, 2023 (Unaudited) 
Financial Assets:  Amortized Cost   Unrealized Gaines   Unrealized Losses   Fair Value 
U.S. Treasury securities  $11,735   $-   $(8)  $11,727 
Total  $11,735   $-   $(8)  $11,727 

 

   December 31, 2022 
Financial Assets:  Amortized Cost   Unrealized Gaines   Unrealized Losses   Fair Value 
U.S. Treasury securities  $46,247   $2   $(152)  $46,097 
Total  $46,247   $2   $(152)  $46,097 

 

The Company has not recognized an allowance for credit losses on any securities in an unrealized loss position as of June 30, 2023. We believe that the individual unrealized losses represent temporary declines resulting from changes in interest rates, and we intend to hold these marketable securities to their maturity. The Company currently does not intend to sell these securities prior to maturity and does not consider these investments to be other-than-temporarily impaired at June 30, 2023.

 

As of June 30, 2023, the amortized cost and estimated fair value of the Company’s available-for-sale debt securities by contractual maturity are shown below (in thousands):

 

Available-for-sale debt securities maturing:  Amortized Cost   Estimated Fair Value 
In one year or less  $11,735   $11,727 
Total available-for-sale debt securities  $11,735   $11,727 

 

We did not have any marketable debt securities classified as cash equivalents on the condensed consolidated balance sheets as of June 30, 2023 or December 31, 2022.

 
v3.23.2
Marketable Equity Securities
 6 Months Ended
Jun. 30, 2023
Investments, Debt and Equity Securities [Abstract]  
Marketable Equity Securities

5. Marketable Equity Securities

 

As of June 30, 2023, Lineage owned 1.1 million shares of OncoCyte common stock, which had a fair value of $0.3 million as of that date, based on the closing price of OncoCyte common stock of $0.23 per share on that date.

 

As of December 31, 2022, Lineage owned 1.1 million shares of OncoCyte common stock, which had a fair value of $0.4 million as of that date, based on the closing price of OncoCyte common stock of $0.32 per share on that date.

 

For the three and six months ended June 30, 2023, Lineage recorded a net unrealized loss on marketable equity securities of $150,000 and $110,000, respectively, primarily related to changes in the fair market value of OncoCyte common stock price during the respective periods.

 

 

For the three and six months ended June 30, 2022, Lineage recorded a net unrealized loss on marketable equity securities of $0.7 million and $1.4 million, respectively, related to changes in the fair market value of OncoCyte’s common stock price during the respective periods.

 

All share prices are determined based on the closing price of OncoCyte common stock on the last day of the applicable quarter, or the last trading day of the applicable quarter, if the last day of a quarter fell on a day that was not a trading day.

 
v3.23.2
Property and Equipment, Net
 6 Months Ended
Jun. 30, 2023
Property, Plant and Equipment [Abstract]  
Property and Equipment, Net

6. Property and Equipment, Net

 

At June 30, 2023 and December 31, 2022 property and equipment, net was comprised of the following (in thousands):

  

   June 30, 2023   December 31, 
   (Unaudited)   2022 
Equipment, furniture and fixtures  $3,421   $3,264 
Leasehold improvements   2,266    2,150 
Right-of-use assets   6,006    6,109 
Accumulated depreciation and amortization   (6,383)   (5,850)
Property and equipment, net  $5,310   $5,673 

 

Property and equipment for financing leases was $196,000 and $121,000 on June 30, 2023 and December 31, 2022, respectively.

 

Depreciation and amortization expense was $138,000 and $146,000 for the three months ended June 30, 2023 and 2022, respectively, and $276,000 and $296,000 for the six months ended June 30, 2023 and 2022, respectively.

 
v3.23.2
Goodwill and Intangible Assets, Net
 6 Months Ended
Jun. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets, Net

7. Goodwill and Intangible Assets, Net

 

At June 30, 2023 and December 31, 2022 goodwill and intangible assets, net consisted of the following (in thousands):

 

   June 30, 2023   December 31, 
   (Unaudited)   2022 
Goodwill (1)  $10,672   $10,672 
           
Intangible assets:          
Acquired IPR&D – OPC1 (from the Asterias Merger) (2)  $31,700   $31,700 
Acquired IPR&D – VAC (from the Asterias Merger) (2)   14,840    14,840 
Intangible assets subject to amortization:          
Acquired patents   18,953    18,953 
Acquired royalty contracts (3)   650    650 
Total intangible assets   66,143    66,143 
Accumulated amortization (4)   (19,516)   (19,451)
Intangible assets, net  $46,627   $46,692 

 

(1) Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in the Asterias Merger, see Note 14 (Commitment and Contingencies) for further discussion on the Asterias Merger.

 

 

(2)

Asterias had two in-process research and development (“IPR&D”) intangible assets that were valued at $46.5 million as part of the purchase price allocation performed in connection with the Asterias Merger. The fair value of these assets consisted of $31.7 million pertaining to the OPC1 program and $14.8 million pertaining to the VAC platform.

 

(3)

Asterias had royalty cash flows under patent families it acquired from Geron Corporation (“Geron”). Such patent families are expected to continue to generate revenue, are not used in the OPC1 or the VAC platform, and are considered to be separate long-lived intangible assets under Accounting Standards Codifications (“ASC”) Topic 805, Business Combinations.

 

(4) As of June 30, 2023 acquired patents were fully amortized and the acquired royalty contracts had a remaining unamortized balance of approximately $87,000.

 

Lineage amortizes its intangible assets over an estimated period of 5 to 10 years on a straight-line basis. Lineage recognized approximately $32,000 in amortization expense of intangible assets during each of the three months ended June 30, 2023 and 2022, and $65,000 during each of the six months ended June 30, 2023 and 2022.

 

Amortization of intangible assets for periods subsequent to June 30, 2023 is as follows (in thousands):

 

Year Ending December 31,  Amortization Expense 
2023  $65 
2024   22 
Total  $87 

 

 
v3.23.2
Accounts Payable and Accrued Liabilities
 6 Months Ended
Jun. 30, 2023
Payables and Accruals [Abstract]  
Accounts Payable and Accrued Liabilities

8. Accounts Payable and Accrued Liabilities

 

At June 30, 2023 and December 31, 2022 accounts payable and accrued liabilities consisted of the following (in thousands):

 

   June 30, 2023   December 31, 
   (Unaudited)   2022 
Accounts payable  $2,187   $2,393 
Accrued compensation   1,917    2,382 
Accrued liabilities (1)   581    3,833 
Total  $4,685   $8,608 

 

(1) The decrease in accrued liabilities was due to a payment made in connection with the settlement of litigation in February 2023 related to the Asterias Merger. See Note 14 (Commitment and Contingencies) for additional information.

 
v3.23.2
Fair Value Measurements
 6 Months Ended
Jun. 30, 2023
Fair Value Disclosures [Abstract]  
Fair Value Measurements

9. Fair Value Measurements

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value (ASC 820-10-50), Fair Value Measurements and Disclosures:

 

  ● Level 1 – Inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
     
  ●

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

 

  ● Level 3 – Inputs to the valuation methodology are unobservable; that reflect management’s own assumptions about the assumptions market participants would make and significant to the fair value.

 

We have not transferred any instruments between the three levels of the fair value hierarchy.

 

We measure our money market fund, marketable securities and our liability classified warrants at fair value on a recurring basis. The fair values of such assets and liabilities were as follows for June 30, 2023 and December 31, 2022 (in thousands):

 

       Fair Value Measurements Using 
   Balance at June 30, 2023  

Quoted Prices in Active Markets for Identical Assets

(Level 1)

  

Significant Other Observable Inputs

(Level 2)

  

Significant Unobservable Inputs

(Level 3)

 
Assets:                             
Money market fund (1)  $25,641   $25,641   $-   $- 
Marketable debt securities   11,727    11,727    -    - 
Marketable equity securities   312    312    -    - 
Total assets measured at fair value  $37,680   $37,680   $-   $- 
Liabilities:                    
Warrants to purchase Cell Cure ordinary shares (2)  $1   $-   $-   $1 
Total liabilities measured at fair value  $1   $-   $-   $1 

 

       Fair Value Measurements Using 
   Balance at December 31, 2022  

Quoted Prices in Active Markets for Identical Assets

(Level 1)

  

Significant Other Observable Inputs

(Level 2)

  

Significant Unobservable Inputs

(Level 3)

 
Assets:                    
Money market fund (1)  $4,102   $4,102   $-   $- 
Marketable debt securities   46,097    46,097    -    - 
Marketable equity securities   423    423    -    - 
Total assets measured at fair value  $50,622   $50,622   $-   $- 
Liabilities:                    
Warrants to purchase Cell Cure ordinary shares (2)  $2   $-   $-   $2 
Total liabilities measured at fair value  $2   $-   $-   $2 

 

(1) Included in cash and cash equivalents in the accompanying condensed consolidated balance sheet.
(2) Included in other current liabilities and/or long-term liabilities in the accompanying condensed consolidated balance sheet.

 

Lineage’s marketable equity securities includes the shares of stock of OncoCyte and Hadasit Bio-Holdings Ltd (“HBL”). Both securities have readily determinable fair values and are measured at fair value and reported as current assets on the accompanying condensed consolidated balance sheets based on the closing trading price of the security as of the date being presented.

 

The carrying value of cash, restricted cash, accounts receivable, accounts payable, and accrued liabilities approximate their respective fair values due to their relative short maturities.

 

 
v3.23.2
Related Party Transactions
 6 Months Ended
Jun. 30, 2023
Related Party Transactions [Abstract]  
Related Party Transactions

10. Related Party Transactions

 

In connection with the putative shareholder class action lawsuits filed in February 2019 and October 2019 challenging the Asterias Merger (see Note 14), Lineage agreed to pay the expenses for the legal defense of Neal Bradsher, a member of the Lineage board of directors, Broadwood Partners, L.P., a shareholder of Lineage, and Broadwood Capital, Inc., which serves as the general partner of Broadwood Partners, L.P., all of which were named defendants in the lawsuits, prior to being dismissed. Through June 30, 2023, Lineage has incurred approximately $625,000 in legal expenses on behalf of the foregoing parties.

 
v3.23.2
Shareholders’ Equity
 6 Months Ended
Jun. 30, 2023
Equity [Abstract]  
Shareholders’ Equity

11. Shareholders’ Equity

 

Preferred Shares

 

Lineage is authorized to issue 2,000,000 preferred shares, no par value. The preferred shares may be issued in one or more series as the Lineage board of directors may determine by resolution. The Lineage board of directors is authorized to fix the number of shares of any series of preferred shares and to determine or alter the rights, preferences, privileges, and restrictions granted to or imposed on the preferred shares as a class, or upon any wholly unissued series of any preferred shares. The Lineage board of directors may, by resolution, increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series of preferred shares subsequent to the issue of shares of that series. As of June 30, 2023 and December 31, 2022, there were no preferred shares issued or outstanding.

 

Common Shares

 

Lineage is authorized to issue 250,000,000 common shares, no par value. As of June 30, 2023 and December 31, 2022, there were 174,439,434 and 170,093,114 common shares issued and outstanding, respectively.

 

At The Market Offering Program

 

In May 2020, Lineage entered into a Controlled Equity OfferingSM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co., as sales agent (“Cantor Fitzgerald”), pursuant to which Lineage may sell its common shares from time to time through an “at the market offering” program under the Sales Agreement.

 

In March 2021, Lineage filed a prospectus supplement with the SEC in connection with the offer and sale of $25.0 million of common shares through the ATM program under the Sales Agreement (“March 2021 Prospectus Supplement”).

 

In December 2021, Lineage filed a prospectus supplement with the SEC in connection with the offer and sale of up to $64.1 million of common shares (which included $14.1 million of its common shares which then remained unsold under the March 2021 Prospectus Supplement) through the ATM program under the Sales Agreement (“December 2021 Prospectus Supplement”). Following the filing of the December 2021 Prospectus Supplement, no further sales were made or will be made under the March 2021 Prospectus Supplement. The December 2021 Prospectus Supplement was updated, amended and supplemented by a prospectus supplement filed with the SEC on May 18, 2023.

 

As of June 30, 2023, Lineage had sold 4,345,596 common shares under the December 2021 Prospectus Supplement at a weighted average price per share of $1.41 for gross proceeds of $6.1 million. As of June 30, 2023, $58.0 million remained available for sale under the December 2021 Prospectus Supplement. During the three months ended June 30, 2023, 4,237,396 shares were sold under the December 2021 Prospectus Supplement for gross proceeds of $5.8 million and net proceeds of $5.7 million. No shares were sold in the three months ended March 31, 2023, or the six months ended June 30, 2022.

 

The shares offered under the December 2021 Prospectus Supplement are registered pursuant to Lineage’s effective shelf registration statement on Form S-3 (File No. 333-254167), which was filed with the SEC on March 5, 2021 and declared effective on March 19, 2021.

 

 

Lineage agreed to pay Cantor Fitzgerald a commission of 3.0% of the aggregate gross proceeds from the sale of shares under the Sales Agreement, reimburse its legal fees and disbursements, and provide Cantor Fitzgerald with customary indemnification and contribution rights. The Sales Agreement may be terminated by Cantor Fitzgerald or Lineage at any time upon notice to the other party, or by Cantor Fitzgerald at any time in certain circumstances, including the occurrence of a material and adverse change in Lineage’s business or financial condition that makes it impractical or inadvisable to market the shares or to enforce contracts for the sale of the shares.

 

Reconciliation of Changes in Shareholders’ Equity

 

The following tables document the changes in shareholders’ equity for the three and six months ended June 30, 2023 and 2022 (unaudited and in thousands):

 

   Shares   Amount   Shares   Amount   Deficit   Deficit   Income / (Loss)   Equity 
                           Accumulated     
   Preferred   Common           Other   Total 
   Shares   Shares   Accumulated   Noncontrolling   Comprehensive   Shareholders’ 
   Shares   Amount   Shares   Amount   Deficit   Deficit   Income / (Loss)   Equity 
BALANCE - December 31, 2022   -   $-    170,093   $440,280   $(363,370)  $(1,403)  $(3,571)  $71,936 
Shares issued upon vesting of
restricted stock units, net of shares
retired to pay employees’ taxes		   -    -    53    (37)   -    -    -    (37)
Shares issued upon exercise of
stock options		   -    -    28    25    -    -    -    25 
Stock-based compensation   -    -    -    1,031    -    -    -    1,031 
Unrealized gain on marketable securities   -    -    -    -    -    -    91    91 
Foreign currency translation gain   -    -    -    -    -    -    373    373 
Net loss   -    -    -    -    (4,372)   (32)   -    (4,404)
BALANCE - March 31, 2023   -    -    170,174    441,299    (367,742)   (1,435)   (3,107)   69,015 
Shares issued through ATM   -    -    4,237    5,841    -    -    -    5,841 
Financing related fees   -    -    -    (193)   -    -    -    (193)
Shares issued upon exercise of
stock options		   -    -    28    22    -    -    -    22 
Stock-based compensation   -    -    -    1,280    -    -    -    1,280 
Unrealized gain on marketable securities   -    -    -    -    -    -    50    50 
Foreign currency translation gain   -    -    -    -    -    -    446    446 
Net income (loss)   -    -    -    -    (5,229)   26    -    (5,203)
BALANCE - June 30, 2023   -   $-    174,439   $448,249   $(372,971)  $(1,409)  $(2,611)  $71,258 

 

 

                           Accumulated     
   Preferred   Common           Other   Total 
   Shares   Shares   Accumulated   Noncontrolling   Comprehensive   Shareholders’ 
   Shares   Amount   Shares   Amount   Deficit   Deficit   Income / (Loss)   Equity 
BALANCE - December 31, 2021   -   $-    169,477   $434,529   $(337,097)  $(1,323)  $(5,211)  $90,898 
Shares issued upon vesting of
restricted stock units, net of shares retired to pay employees’ taxes		   -    -    10    (8)   -    -    -    (8)
Shares issued upon exercise of
stock options		   -    -    240    189    -    -    -    189 
Subsidiary warrant exercise   -    -    -    2    -    -    -    2 
Stock-based compensation   -    -    -    1,106    -    -    -    1,106 
Foreign currency translation gain   -    -    -    -    -    -    124    124 
Net loss   -    -    -    -    (7,087)   (6)   -    (7,093)
BALANCE - March 31, 2021   -    -    169,727    435,818    (344,184)   (1,329)   (5,087)   85,218 
Shares issued upon vesting of
restricted stock units, net of shares
retired to pay employees’ taxes		   -    -    10    (9)   -    -    -    (9)
Shares issued upon exercise of
stock options		   -    -    11    10    -    -    -    10 
Subsidiary warrant exercise, net   -    -    -    97    -    -    -    97 
Stock-based compensation   -    -    -    1,235    -    -    -    1,235 
Foreign currency translation gain   -    -    -    -    -    -    1,730    1,730 
Net loss   -    -    -    -    (6,763)   (19)   -    (6,782)
BALANCE - June 30, 2022   -   $-    169,748   $437,151   $(350,947)  $(1,348)  $(3,357)  $81,499 

 
v3.23.2
Stock-Based Awards
 6 Months Ended
Jun. 30, 2023
Share-Based Payment Arrangement [Abstract]  
Stock-Based Awards

12. Stock-Based Awards

 

Equity Incentive Plan Awards

 

In September 2021, our shareholders approved the Lineage Cell Therapeutics, Inc. 2021 Equity Incentive Plan (the “2021 Plan”), which became effective upon such approval. The 2021 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), and other stock awards. All of our employees (including those of our affiliates), non-employee directors and consultants are eligible to participate in the 2021 Plan.

 

Subject to adjustment for certain changes in our capitalization, the aggregate number of our common shares that may be issued under the 2021 Plan will not exceed the sum of (i) 15,000,000 shares and (ii) the number of shares subject to awards granted under the Lineage Cell Therapeutics Inc. 2012 Equity Incentive Plan (the “2012 Plan”) that were outstanding when the 2021 Plan became effective and are not issued because such awards expire or otherwise terminate. As of June 30, 2023, there were 6,269,022 shares available for grant under the 2021 Plan.

 

As a result of the approval of the 2021 Plan by our shareholders, no additional awards will be granted under the 2012 Plan.

 

 

A summary of activity under the 2021 Plan is as follows (in thousands, except per share amounts):

 

  

Number

of Options

Outstanding

  

Weighted

Average

Exercise Price

 
Balance at December 31, 2022   6,001   $1.40 
Options granted   5,271   $1.46 
Options expired/forfeited/cancelled   (160)  $1.43 
Balance at June 30, 2023   11,112   $1.43 
Options exercisable at June 30, 2023   1,373   $1.39 

 

  

Number

of RSUs

Outstanding

 
Balance at December 31, 2022   939 
RSUs forfeited   (100)
RSUs vested   (80)
Balance at June 30, 2023   759 

 

A summary of activity of the 2012 Plan, and the 2018 inducement option (which was issued to a Lineage executive outside of all equity plans), is as follows (in thousands, except per share amounts):

 

  

Number

of Options

Outstanding

  

Weighted

Average

Exercise Price

 
December 31, 2022   12,172   $1.83 
Options exercised   (56)  $0.84 
Options expired/forfeited/cancelled   (382)  $1.83 
June 30, 2023   11,734   $1.83 
Options exercisable at June 30, 2023   9,437   $1.79 

 

Stock-based compensation expense

 

The fair value of each option award is estimated on the date of grant using a Black-Scholes option pricing model applying the weighted-average assumptions noted in the following table:

   Six Months ended June 30, (unaudited) 
   2023   2022 
Expected life (in years)   6.25    6.25 
Risk-free interest rates   4.2%   2.0%
Volatility   74.5%   73.4%
Dividend yield   -    - 

 

 

Operating expenses include stock-based compensation expense as follows (in thousands):

 

   Three Months ended June 30, (unaudited)  

Six Months ended

June 30, (unaudited)

 
   2023   2022   2023   2022 
Research and development  $264   $141   $469   $356 
General and administrative   1,016    1,094    1,842    1,985 
Total stock-based compensation expense  $1,280   $1,235   $2,311   $2,341 

 

 

As of June 30, 2023, total unrecognized compensation costs related to unvested stock options and unvested RSUs under all equity plans (including the 2018 inducement option), were $11.5 million, which is expected to be recognized as expense over a weighted average period of approximately 2.9 years.

 

Basic and diluted net income (loss) per share attributable to common shareholders

 

Basic earnings per share is calculated by dividing net income or loss attributable to Lineage common shareholders by the weighted average number of common shares outstanding, net of unvested restricted stock or RSUs, subject to repurchase by Lineage, if any, during the period. Diluted earnings per share is calculated by dividing the net income or loss attributable to Lineage common shareholders by the weighted average number of common shares outstanding, adjusted for the effects of potentially dilutive common shares issuable under outstanding stock options, restricted stock awards and warrants, using the treasury-stock method, convertible preferred stock, if any, using the if-converted method, and treasury stock held by subsidiaries, if any.

 

For the three and six months ended June 30, 2023 and 2022, respectively, Lineage reported a net loss attributable to common shareholders, and therefore, all potentially dilutive common shares were considered antidilutive for those periods.

 

The following common share equivalents were excluded from the computation of diluted net loss per common share for the periods presented because including them would have been antidilutive (in thousands):

 Schedule Of Computation Of Diluted Net Loss Per Common Share

   Three Months ended June 30,   Six Months ended June 30, 
   2023   2022   2023   2022 
Stock options   22,846    18,832    22,846    18,832 
Restricted stock units   759    967    759    967 

 
v3.23.2
Income Taxes
 6 Months Ended
Jun. 30, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

13. Income Taxes

 

The provision for income taxes for interim periods is generally determined using an estimated annual effective tax rate as prescribed by ASC 740-270, Income Taxes, Interim Reporting. The effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as valuation allowances and changes in valuation allowances against deferred tax assets, the recognition or de-recognition of tax benefits related to uncertain tax positions, if any, and changes in or the interpretation of tax laws in jurisdictions where Lineage conducts business. ASC 740-270 also states that if an entity is unable to reliably estimate some or a part of its ordinary income or loss, the income tax provision or benefit applicable to the item that cannot be estimated shall be reported in the interim period in which the item is reported. For items that Lineage cannot reliably estimate on an annual basis, Lineage uses the actual year to date effective tax rate rather than an estimated annual effective tax rate to determine the tax effect of each item, including the use of all available net operating losses and other credits or deferred tax assets.

 

Under ASC 740, a valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. Lineage established a full valuation allowance as of December 31, 2018 due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets, including foreign net operating losses generated by its subsidiaries.

 

For the tax years beginning on or after January 1, 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated the option to currently deduct research and development expenses and requires taxpayers to capitalize and amortize them over five years for research activities performed in the United States and 15 years for research activities performed outside the United States pursuant to IRC Section 174. Although Congress is considering legislation that would repeal or defer this capitalization and amortization requirement, it is not certain that this provision will be repealed or otherwise modified. If the requirement is not repealed or replaced, it will decrease our tax deduction for research and development expenses in future years.

 

The 2017 Tax Act subjects a U.S. stockholder to Global Intangible Low-Taxed Income (“GILTI”) earned by certain foreign subsidiaries. In general, GILTI is the excess of a U.S. stockholder’s total net foreign income over a deemed return on tangible assets. The provision further allows a deduction of 50% of GILTI: however, this deduction is limited to the company’s pre-GILTI U.S. income. Lineage incurred GILTI income during the years 2021 and 2022. For the three and six months ended June 30, 2023, no GILTI income was included in the Company’s tax provision.

 

 

Lineage recorded a $1.8 million deferred tax benefit for the six months ended June 30, 2023, due to the ability to offset certain deferred tax assets against the deferred tax liability associated with IPR&D, and the related release of the valuation allowance. It was determined that a portion of the deferred tax liability related to the indefinite lived assets may be realized prior to the expiration of certain pre 2018 net operating losses. Lineage did not record a deferred tax benefit for the three months ended June 30, 2023, and did not record a deferred tax benefit for the three and six months ended June 30, 2022.

 
v3.23.2
Commitments and Contingencies
 6 Months Ended
Jun. 30, 2023
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

14. Commitments and Contingencies

 

Real Property Leases

 

Carlsbad Lease

 

In May 2019, Lineage entered into a lease for approximately 8,841 square feet of rentable space in an office park in Carlsbad, California. The lease was amended in December 2022 and the term was extended for a period of thirty-seven months (the “Extended Term”) commencing on March 1, 2023 (the “Extended Term Commencement Date”). The lease expires on March 31, 2026, and rent was abated for months two through four of the Extended Term. The monthly base rent was $24,666 through the Extended Term Commencement Date, after which it increased to $25,197. As security for the performance of its obligations under the lease, Lineage provided the landlord a security deposit of $17,850, which is included in deposits and other long-term assets on the condensed consolidated balance sheet as of June 30, 2023.

 

In addition to base rent, Lineage pays a pro-rata portion of increases in certain expenses, including real property taxes, utilities (to the extent not separately metered to the leased space) and the landlord’s operating expenses, over the amounts of those expenses incurred by the landlord. These pro-rata charges are expensed as incurred and excluded from the calculation of the ROU assets and lease liabilities.

 

Carlsbad Sublease

 

In September 2022, Lineage entered into a sublease for approximately 4,500 square feet of rentable industrial space in Carlsbad, California for a term that commenced on October 1, 2022 and expires on March 31, 2024. As security for the performance of its obligations under the sublease, Lineage provided the landlord with a security deposit of $22,500. Base rent is $22,500 per month until the sublease expires.

 

Cell Cure Leases

 

Cell Cure leases 728.5 square meters (approximately 7,842 square feet) of office and laboratory space in Jerusalem, Israel under a lease that expires December 31, 2027, with an option to extend the lease for five years. Base monthly rent is NIS 39,776 (approximately $12,200 per month). In addition to base rent, Cell Cure pays a pro-rata share of real property taxes and certain costs related to the operation and maintenance of the building in which the leased premises are located. These pro-rata charges are expensed as incurred and excluded from the calculation of the ROU assets and lease liabilities.

 

In January 2018, Cell Cure entered into a lease for an additional 934 square meters (approximately 10,054 square feet) of office space in the same facility that expires on December 31, 2027, with an option to extend the lease for five years. Base rent and construction allowance payments are NIS 93,827 per month (approximately $26,000 per month). Cell Cure has a security deposit denominated in NIS with the landlord held as restricted cash during the term of its facility lease. The value of this security deposit in USD fluctuates based upon currency exchange rates and was $439,000 as of June 30, 2023, which is included in deposits and other long-term assets on the condensed consolidated balance sheet.

 

In November 2021, Cell Cure entered into a lease for an additional 133 square meters (approximately 1,432 square feet) of office space in the same facility that commenced on December 1, 2021, and expires on December 31, 2027, with an option to extend the lease for five years. The base monthly rent was NIS 11,880 (approximately US $3,757) through October 31, 2022 and increased to NIS 12,494 (approximately US $3,951) on November 1, 2022.

 

In August 2022, Cell Cure entered into a lease for 300 square meters (approximately 3,229 square feet) of office and laboratory space in Jerusalem, Israel that expires on December 31, 2027, with an option to extend the lease for five years. Base monthly rent is 16,350 NIS (approximately $4,800 per month). When executing this lease, Cell Cure modified the expiration dates and options terms for the leases identified above to align with this lease.

 

Supplemental Information – Leases

 

Supplemental cash flow information related to leases is as follows (in thousands):

         
   Six Months ended June 30, 
   2023   2022 
Cash paid for amounts included in the measurement of lease liabilities:          
Operating cash flows from operating leases  $538   $508 
Operating cash flows from financing leases  $5   $9 
Financing cash flows from financing leases  $29   $15 
           
Right-of-use assets obtained in exchange for lease obligations:          
Operating leases  $-   $33 
Finance leases  $79   $- 

 

 

Supplemental balance sheet information related to leases was as follows (in thousands, except lease term and discount rate):

 

   June 30, 2023   December 31, 
   (Unaudited)   2022 
Operating leases          
Right-of-use assets, net  $2,940   $3,517 
           
Right-of-use lease liabilities, current  $933   $916 
Right-of-use lease liabilities, noncurrent   2,304    2,860 
Total operating lease liabilities  $3,237   $3,776 
           
Financing leases          
Right-of-use assets, net  $157   $105 
           
Lease liabilities, current  $54   $29 
Lease liabilities, noncurrent   113    84 
Total finance lease liabilities   167    113 
           
Other current liabilities   -    7 
Total finance lease liabilities  $167   $120 
           
Weighted average remaining lease term          
           
Operating leases   3.9 years    

4.3 years

 
Finance leases   3.4 years    4.1 years 
Weighted average discount rate          
Operating leases   6.4%   6.3%
Finance leases   6.8%   6.9%

 

Future minimum lease commitments are as follows as of June 30, 2023 (in thousands):

   (Unaudited) 
   Operating
Leases		   Finance
Leases		 
Year Ending December 31,          
2023  $564   $32 
2024   942    61 
2025   872    50 
2026   637    26 
2027   675    19 
Total lease payments   3,690    188 
Less imputed interest   (453)   (21)
Total  $3,237   $167 

 

 

Collaborations

 

Roche Agreement

 

In December 2021, Lineage entered into the Roche Agreement, wherein Lineage granted to Roche exclusive worldwide rights to develop and commercialize RPE cell therapies, including Lineage’s proprietary cell therapy known as OpRegen, for the treatment of ocular disorders, including GA secondary to AMD.

 

Under the terms of the Roche Agreement, Roche paid Lineage a $50.0 million upfront payment and Lineage is eligible to receive up to an additional $620.0 million in certain developmental, regulatory and commercialization milestone payments. Lineage also is eligible for tiered double-digit percentage royalties on net sales of OpRegen in the U.S and other major markets. All regulatory and commercial milestone payments and royalty payments are subject to the existence of certain intellectual property rights that cover OpRegen at the time such payments would otherwise become due, and the royalty payments on net sales of OpRegen are subject to financial offsets based on the existence of competing products. Roche assumed responsibility for further clinical development and commercialization of OpRegen. Lineage is responsible for completing activities related to the ongoing clinical study, for which enrollment is complete, and performing certain manufacturing and process development activities.

 

Unless earlier terminated by either party, the Roche Agreement will expire on a product-by-product and country-by-country basis upon the expiration of all of Roche’s payment obligations under the agreement. Roche may terminate the agreement in its entirety, or on a product-by-product or country-by-country basis, at any time with advance written notice. Either party may terminate the agreement in its entirety with written notice for the other party’s material breach if such party fails to cure the breach or upon certain insolvency events involving the other party.

 

In January 2022, Lineage received the $50.0 million upfront payment from Roche. Subsequently, Lineage, via Cell Cure, paid $12.1 million to the IIA, and $8.9 million to Hadasit Medical Research Services and Development Ltd. (“Hadasit’). Such payments were made in accordance with obligations under the Innovation Law (as discussed below) and under the terms of Cell Cure’s agreements with Hadasit (as discussed below). The payment to Hadasit was reduced by $1.9 million in accordance with the provisions of such agreements discussed below that reduce the sublicensing fee payable to Hadasit for costs related to Lineage’s performance obligations under the Roche Agreement. To the extent such costs are not incurred within five years after the execution of the Roche Agreement, Cell Cure will be required to pay Hadasit 21.5% of the amount of costs not incurred.

 

ITI Collaboration Agreement

 

Under Lineage’s collaborative agreement with Immunomic Therapeutics, Inc. (“ITI”), Lineage agreed to perform up to approximately $2.2 million worth of certain research, development, manufacturing, and oversight activities related to the development of an allogeneic VAC-CMV product candidate. ITI will reimburse Lineage for these costs and full-time employee costs for the manufacturing of the VAC-CMV product candidate. As of June 30, 2023, Lineage has a remaining performance obligation of approximately $1.6 million for the aforementioned activities. Upon execution of the agreement in April 2021, $0.5 million was paid by ITI to Lineage. Upon delivery of research-grade VAC-CMV product generated by Lineage, ITI paid an additional $0.5 million in August 2021. ITI is currently evaluating its next step under the agreement.

 

Agreements with Hadasit and IIA

 

The OpRegen program was supported in part with licenses to technology obtained from Hadasit, the technology transfer company of Hadassah Medical Center, and through a series of research grants from the IIA, an independent agency created to address the needs of global innovation ecosystems. A subset of the intellectual property underlying OpRegen was originally generated at Hadassah Medical Center and licensed to Cell Cure for further development.

 

 

Under the Encouragement of Research, Development and Technological Innovation in the Industry Law 5744, and the regulations, guidelines, rules, procedures and benefit tracks thereunder (collectively, the “Innovation Law”), annual research and development programs that meet specified criteria and were approved by a committee of the IIA were eligible for grants. The grants awarded were typically up to 50% of the project’s expenditures, as determined by the IIA committee and subject to the benefit track under which the grant was awarded.

 

The terms of the grants under the Innovation Law generally require that the products developed as part of the programs under which the grants were given be manufactured in Israel. The know-how developed thereunder may not be transferred outside of Israel unless prior written approval is received from the IIA. Transfer of IIA-funded know-how outside of Israel is subject to approval and payment of a redemption fee to the IIA calculated according to formulas provided under the Innovation Law. In November 2021, the IIA research committee approved an application made by Cell Cure with respect to the grant of an exclusive license and transfer of the technological know-how for OpRegen to Roche. Under the provisions for the redemption fee, Lineage is obligated to pay the IIA approximately 24.3% of the upfront, milestone, and royalty payments which may be received under the Roche Agreement, up to an aggregate cap on all payments, such cap growing over time via interest accrual until paid in full. As of June 30, 2023, the aggregate cap amount was approximately $92.1 million.

 

Pursuant to the Second Amended and Restated License Agreement, dated June 15, 2017, between Cell Cure and Hadasit, and a certain letter agreement entered into on December 17, 2021, Hadasit was entitled to, and was paid, a sublicensing fee of 21.5% of the $50.0 million upfront payment under the Roche Agreement (subject to certain reductions, including for costs related to Lineage’s performance obligations under the Roche Agreement) and of any milestone payments, and up to 50% of all royalty payments (subject to a maximum payment of 5% of net sales of products), Lineage receives under the Roche Agreement. The letter agreement generally terminates upon the termination of the Roche Agreement.

 

Second Amendment to Clinical Trial and Option Agreement and License Agreement with Cancer Research UK

 

In May 2020, Lineage and Asterias entered into a Second Amendment to Clinical Trial and Option Agreement (the “CTOA Amendment”) with CRUK and Cancer Research Technology (“CRT”), which amends the Clinical Trial and Option Agreement entered into between Asterias, CRUK and CRT dated September 8, 2014, as amended September 8, 2014. Pursuant to the CTOA Amendment, Lineage assumed all obligations of Asterias and exercised early its option to acquire data generated in the Phase 1 clinical trial of VAC2 in non-small cell lung cancer being conducted by CRUK.

 

Lineage and CRT effectuated the option by simultaneously entering into a license agreement (the “CRT License Agreement”) pursuant to which Lineage paid a signature fee of £1,250,000 (approximately $1.6 million). For the primary licensed product for the first indication, the CRT License Agreement provides for milestone fees of up to £8,000,000 based upon initiation of a Phase 3 clinical trial and the filing for regulatory approval and up to £22,500,000 in sales-based milestones payments. Additional milestone fees and sales-based milestone payments would be payable for other products or indications, and mid-single-digit royalty payments are payable on sales of commercial products.

 

Either party may terminate the CRT License Agreement for the uncured material breach of the other party. CRT may terminate the CRT License Agreement in the case of Lineage’s insolvency or if Lineage ceases all development and commercialization of all products under the CRT License Agreement.

 

Other Contingent Obligations

 

We have obligations under license agreements and grants received from government entities to make future payments to third parties, which become due and payable on the achievement of certain development, regulatory and commercial milestones or on the sublicense of our rights to another party. These commitments include sublicense fees, milestone payments, redemption fees and royalties. Sublicense fees are payable to licensors or government entities when we sublicense underlying intellectual property to third parties; the fees are based on a percentage of the license fees we receive from sublicensees. Milestone payments are due to licensors or government entities upon the future achievement of certain development and regulatory milestones. Redemption fees due to the IIA under the Innovation Law are due upon receipt of any milestone and royalties received under the Roche Agreement. Royalties are payable to licensors or government entities based on a percentage of net sales of licensed products. As of June 30, 2023, we have not included these commitments on our condensed consolidated balance sheet because the achievement and timing of these events are not fixed and determinable.

 

 

Litigation – General

 

From time to time, we are subject to legal proceedings and claims in the ordinary course of business. While management presently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, cash flows, or overall trends in results of operations, legal proceedings are subject to inherent uncertainties, and unfavorable rulings or outcomes could occur that have individually or in aggregate, a material adverse effect on our business, financial condition or operating results. We are not currently subject to any pending material litigation, other than ordinary routine litigation incidental to our business.

 

Asterias Merger

 

In November 2018, Lineage, Asterias Biotherapeutics, Inc. (“Asterias”), and Patrick Merger Sub, Inc., a wholly owned subsidiary of Lineage, entered into an Agreement and Plan of Merger pursuant to which Lineage agreed to acquire all of the outstanding common stock of Asterias in a stock-for-stock transaction (the “Asterias Merger”). The Asterias Merger closed in March 2019. In October 2019, a putative class action lawsuit was filed against the company and certain other named defendants challenging the Asterias Merger.

 

In February 2023, the court approved a Stipulation and Agreement of Compromise and Settlement pursuant to which, Lineage and certain insurers of the defendants paid $10.65 million (the “Settlement Amount”) into a fund created for the benefit of the purported class and in consideration for the full and final release, settlement and discharge of all claims. Approximately $7.12 million of the Settlement Amount was funded by certain insurers and approximately $3.53 million was paid by Lineage in cash.

 

Lineage and all defendants have denied, and continue to deny, the claims alleged in the lawsuit and the settlement does not reflect or constitute any admission, concession, presumption, proof, evidence or finding of any liability, fault, wrongdoing or injury or damages, or of any wrongful conduct, acts or omissions on the part any defendant.

 

Premvia Litigation Settlement

 

In July 2019, the Company, along with other named defendants, was sued in the Superior Court of the State of California in a matter captioned Gonzalez v. Aronowitz, M.D., et al. The plaintiff asserted medical negligence and product liability causes of action relating to the 2017 and 2018 use in a clinical trial of a product candidate, Premvia, that the Company is no longer developing and has no plans to pursue, and that is not related to the cell therapy candidates the Company currently is developing. In February 2023, the Company and the other defendants each entered into settlement agreements with the plaintiff pursuant to which the defendants without admitting any liability, which the defendants expressly denied, each agreed to pay specified amounts to the plaintiff in exchange for a full settlement and release and discharge of claims. The Company’s insurance covered the full amount paid by the Company excluding the $25,000 insurance deductible.

 

HBL Books and Records Request

 

On April 17, 2023, Cell Cure Neurosciences Ltd. (“Cell Cure”), Lineage’s subsidiary, received a motion for disclosure of documents pursuant to Section 198A of the Israeli Companies Law 5759-1999. The motion was filed in the district court in Tel Aviv-Yafo by HBL Hadasit Bio-Holdings Ltd. (“HBL”), currently an approximately 5% shareholder of Cell Cure. According to the motion, the requested production of documents is intended to allow HBL to examine the possibility of pursuing a derivative action related to, among other things, the validity of an intercompany Collaboration and License Agreement (the “Intercompany Agreement”) entered into between Lineage and Cell Cure pursuant to which Cell Cure conveyed certain rights and other assets to Lineage, and Lineage agreed to undertake certain liabilities and obligations of Cell Cure relating to the OpRegen® program. In its motion, HBL alleges, among other things, that Lineage, in its capacity as Cell Cure’s controlling shareholder, and members of Cell Cure’s board of directors caused damage to Cell Cure because the Intercompany Agreement was an interested party transaction that was not fairly priced and exploits Cell Cure’s resources for the benefit of Lineage. The motion seeks an order to compel Cell Cure to disclose and deliver to HBL the documents described in the motion, such additional, cumulative, or alternative relief as the court deems appropriate, and reimbursement of HBL’s expenses, including attorneys’ fees. Cell Cure filed an opposition to the motion on July 9, 2023. It is impossible at this time to assess whether the outcome of this proceeding will have a material adverse effect on Lineage’s consolidated results of operations, cash flows or financial position. Therefore, in accordance with ASC 450, Contingencies, Lineage has not recorded any accrual for a contingent liability associated with this legal proceeding based on its belief that a liability, while possible, is not probable nor estimable, and any range of potential contingent liability amounts cannot be reasonably estimated at this time. Lineage records legal expenses as incurred.

 

 

Employment Contracts

 

Lineage has employment agreements with all of its executive officers. Under the provisions of the agreements, Lineage may be required to incur severance obligations for matters relating to changes in control, as defined in the agreements, and involuntary terminations.

 

Indemnification

 

In the normal course of business, Lineage may agree to indemnify and reimburse other parties, typically Lineage’s clinical research organizations, investigators, clinical sites, and suppliers, for losses and expenses suffered or incurred by the indemnified parties arising from claims of third parties in connection with the use or testing of Lineage’s products and services. Indemnification could also cover third party infringement claims with respect to patent rights, copyrights, or other intellectual property pertaining to Lineage products and services. The term of these indemnification agreements generally continue in effect after the termination or expiration of the particular research, development, services, or license agreement to which they relate. The potential future payments Lineage could be required to make under these indemnification agreements will generally not be subject to any specified maximum amount. Generally, Lineage has not been subject to any material claims or demands for indemnification. Lineage maintains liability insurance policies that limit its financial exposure under the indemnification agreements. Accordingly, Lineage has not recorded any liabilities for these agreements as of June 30, 2023 or December 31, 2022.

 

Royalty Obligations and License Fees

 

We have licensing agreements with research institutions, universities and other parties providing us with certain rights to use intellectual property in conducting research and development activities in exchange for the payment of royalties on future product sales, if any. In addition, in order to maintain these licenses and other rights, we must comply with various conditions including the payment of patent related costs and annual minimum maintenance fees.

 

As part of the Asterias Merger, Lineage acquired certain royalty revenues for cash flows generated under patent families that Asterias acquired from Geron Corporation. Lineage continues to make royalty payments to Geron from royalties generated from these patents.
v3.23.2
Basis of Presentation, Liquidity and Summary of Significant Accounting Policies (Policies)
 6 Months Ended
Jun. 30, 2023
Accounting Policies [Abstract]  
Principles of consolidation

Principles of consolidation

 

The accompanying unaudited condensed consolidated interim financial statements include the accounts of our subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. The following table sets out Lineage’s ownership, directly or indirectly, of the outstanding shares of its subsidiaries as of June 30, 2023.

 

Subsidiary  Field of Business 

Lineage

Ownership

    Country 
Cell Cure Neurosciences Ltd.  Manufacturing of Lineage’s product candidates   94%(1)(2)    Israel 
ES Cell International Pte. Ltd.  Research and clinical grade cell lines   100%    Singapore 

 

(1) Includes shares owned by Lineage and ES Cell International Pte. Ltd.
   
(2) As of December 31, 2021 our ownership percentage of Cell Cure Neurosciences Ltd. (“Cell Cure”) was approximately 99%. In July 2022, Hadasit Bio-Holdings Ltd exercised warrants to purchase 21,999 ordinary shares of Cell Cure. Lineage’s ownership percentage of Cell Cure decreased as a result.

 

As of June 30, 2023, Lineage consolidated its direct and indirect wholly-owned or majority-owned subsidiaries because Lineage has the ability to control their operating and financial decisions and policies through its ownership, and the noncontrolling interest is reflected as a separate element of shareholders’ equity on Lineage’s condensed consolidated balance sheets.

 

 
Liquidity

Liquidity

 

At June 30, 2023, we had $45.9 million of cash, cash equivalents and marketable securities. Based on our current operating plan, we believe that our cash, cash equivalents and marketable securities, together with our projected cash flows, will be sufficient to enable us to carry out our planned operations through at least twelve months from the issuance date of the accompanying condensed consolidated interim financial statements.

 
Capital Resources

Capital Resources

 

Since inception we have incurred significant operating losses and have funded our operations primarily through the issuance of equity securities, the sale of common stock of our former subsidiaries, OncoCyte and AgeX, receipt of proceeds from research grants, revenues from collaborations, royalties from product sales, and sales of research products and services.

 

As of June 30, 2023, $58.0 million remained available for sale under our at the market offering program (“ATM”). See Note 11 (Shareholders’ Equity) for additional information.

 

We may use our marketable securities for liquidity as necessary and as market conditions allow. The market value of our marketable securities may not represent the amount that could be realized in a sale of such securities due to various market and regulatory factors, including trading volume, prevailing market conditions and prices at the time of any sale and subsequent sales of securities by the entities. In addition, the value of our marketable securities may be significantly and adversely impacted by deteriorating global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the recent pandemics, including the COVID-19 pandemic, geopolitical conflicts, rising inflation and interest rates, and other macroeconomic factors.

 
Additional Capital Requirements

Additional Capital Requirements

 

Our financial obligations primarily consist of obligations to licensors under license agreements, obligations related to grants received from government entities, including the Israel Innovation Authority (“IIA”), obligations under contracts with vendors who provide research services and purchase commitments with suppliers.

 

Our obligations to licensors under license agreements and our obligations related to grants received from government entities require us to make future payments, such as sublicense fees, milestone payments, redemption fees, royalties and patent maintenance costs. Sublicense fees are payable to licensors or government entities when we sublicense the applicable intellectual property to third parties; the fees are based on a percentage of the license fees we receive from sublicensees. Milestone payments, including those related to the Roche Agreement, are due to licensors or government entities upon achievement of commercial, development and regulatory milestones. Redemption fees due to the IIA under the Innovation Law are due upon receipt of milestone payments and royalties received under the Roche Agreement. See Note 14 (Commitment and Contingencies) for additional information. Royalties, including those related to royalties we may receive under the Roche Agreement, are payable to licensors or government entities based on a percentage of net sales of licensed products. Patent maintenance costs are payable to licensors as reimbursement for the cost of maintaining license patents. Due to the contingent nature of the payments, the amounts and timing of payments to licensors under our in-license agreements are uncertain and may fluctuate significantly from period to period. As of June 30, 2023, we have not included these commitments on our condensed consolidated balance sheet because the achievement of events that would trigger our payment obligations and the timing thereof are not fixed and determinable.

 

In the normal course of business, we enter into services agreements with contract research organizations, contract manufacturing organizations and other third parties. Generally, these agreements provide for termination upon notice, with specified amounts due upon termination based on the timing of termination and the terms of the agreement. The amounts and timing of payments under these agreements are uncertain and contingent upon the initiation and completion of the services to be provided.

 

 

Significant Accounting Policies

 

We describe our significant accounting policies in Note 2 to the consolidated financial statements in Item 8 of the 2022 10-K. There have been no changes to our significant accounting policies during the six months ended June 30, 2023.

 
Recently Issued and Recently Adopted Accounting Pronouncements

Recently Issued and Recently Adopted Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. The Company has evaluated recently issued accounting pronouncements and does not believe any will have a material impact on the Company’s condensed consolidated financial statements or related financial statement disclosures.
v3.23.2
Basis of Presentation, Liquidity and Summary of Significant Accounting Policies (Tables)
 6 Months Ended
Jun. 30, 2023
Accounting Policies [Abstract]  
Schedule of Lineage’s Ownership of Outstanding Shares of its Subsidiaries

 

Subsidiary  Field of Business 

Lineage

Ownership

    Country 
Cell Cure Neurosciences Ltd.  Manufacturing of Lineage’s product candidates   94%(1)(2)    Israel 
ES Cell International Pte. Ltd.  Research and clinical grade cell lines   100%    Singapore 

 

(1) Includes shares owned by Lineage and ES Cell International Pte. Ltd.
   
(2) As of December 31, 2021 our ownership percentage of Cell Cure Neurosciences Ltd. (“Cell Cure”) was approximately 99%. In July 2022, Hadasit Bio-Holdings Ltd exercised warrants to purchase 21,999 ordinary shares of Cell Cure. Lineage’s ownership percentage of Cell Cure decreased as a result.
v3.23.2
Revenue (Tables)
 6 Months Ended
Jun. 30, 2023
Revenue from Contract with Customer [Abstract]  
Schedule of Disaggregated Revenues

Our disaggregated revenues were as follows for the periods presented (in thousands):

  

   2023   2022   2023   2022 
   Three Months ended June 30,   Six Months ended June 30, 
   2023   2022   2023   2022 
Royalties and license fees  $354   $405   $619   $777 
                     
Revenues under collaborative agreements                    
Upfront license fees  $2,871   $4,148   $4,992   $9,013 
Total revenues under collaborative agreements  $2,871   $4,148   $4,992   $9,013 
                     
Total revenue  $3,225   $4,553   $5,611   $9,790 
Schedule of Contract with Customer Contract Liability and Receivable

Accounts receivable, net, and deferred revenues (contract liabilities) from contracts with customers, including collaboration partners, consisted of the following (in thousands):

  

  

June 30,

2023

   December 31, 2022 
Accounts receivable, net (1)  $406   $297 
Deferred revenues   32,067    37,146 

 

(1) Excludes government grants as Lineage has determined government grants are outside the scope of ASU 2014-09 – Revenue from Contracts with Customers (Topic 606).
v3.23.2
Marketable Debt Securities (Tables)
 6 Months Ended
Jun. 30, 2023
Cash and Cash Equivalents [Abstract]  
Summary of Available for Sale Debt Securities

The following tables are a summary of available-for-sale debt securities in cash and cash equivalents or marketable securities in the Company’s condensed consolidated balance sheet as of June 30, 2023 and December 31, 2022 (in thousands):

 

   June 30, 2023 (Unaudited) 
Financial Assets:  Amortized Cost   Unrealized Gaines   Unrealized Losses   Fair Value 
U.S. Treasury securities  $11,735   $-   $(8)  $11,727 
Total  $11,735   $-   $(8)  $11,727 

 

   December 31, 2022 
Financial Assets:  Amortized Cost   Unrealized Gaines   Unrealized Losses   Fair Value 
U.S. Treasury securities  $46,247   $2   $(152)  $46,097 
Total  $46,247   $2   $(152)  $46,097 
Schedule of Amortized cost And Estimated fair Value

As of June 30, 2023, the amortized cost and estimated fair value of the Company’s available-for-sale debt securities by contractual maturity are shown below (in thousands):

 

Available-for-sale debt securities maturing:  Amortized Cost   Estimated Fair Value 
In one year or less  $11,735   $11,727 
Total available-for-sale debt securities  $11,735   $11,727 
v3.23.2
Property and Equipment, Net (Tables)
 6 Months Ended
Jun. 30, 2023
Property, Plant and Equipment [Abstract]  
Schedule of Property and Equipment, Net

At June 30, 2023 and December 31, 2022 property and equipment, net was comprised of the following (in thousands):

  

   June 30, 2023   December 31, 
   (Unaudited)   2022 
Equipment, furniture and fixtures  $3,421   $3,264 
Leasehold improvements   2,266    2,150 
Right-of-use assets   6,006    6,109 
Accumulated depreciation and amortization   (6,383)   (5,850)
Property and equipment, net  $5,310   $5,673 
v3.23.2
Goodwill and Intangible Assets, Net (Tables)
 6 Months Ended
Jun. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of Goodwill and Intangible Assets Net

At June 30, 2023 and December 31, 2022 goodwill and intangible assets, net consisted of the following (in thousands):

 

   June 30, 2023   December 31, 
   (Unaudited)   2022 
Goodwill (1)  $10,672   $10,672 
           
Intangible assets:          
Acquired IPR&D – OPC1 (from the Asterias Merger) (2)  $31,700   $31,700 
Acquired IPR&D – VAC (from the Asterias Merger) (2)   14,840    14,840 
Intangible assets subject to amortization:          
Acquired patents   18,953    18,953 
Acquired royalty contracts (3)   650    650 
Total intangible assets   66,143    66,143 
Accumulated amortization (4)   (19,516)   (19,451)
Intangible assets, net  $46,627   $46,692 

 

(1) Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in the Asterias Merger, see Note 14 (Commitment and Contingencies) for further discussion on the Asterias Merger.

 

 

(2)

Asterias had two in-process research and development (“IPR&D”) intangible assets that were valued at $46.5 million as part of the purchase price allocation performed in connection with the Asterias Merger. The fair value of these assets consisted of $31.7 million pertaining to the OPC1 program and $14.8 million pertaining to the VAC platform.

 

(3)

Asterias had royalty cash flows under patent families it acquired from Geron Corporation (“Geron”). Such patent families are expected to continue to generate revenue, are not used in the OPC1 or the VAC platform, and are considered to be separate long-lived intangible assets under Accounting Standards Codifications (“ASC”) Topic 805, Business Combinations.

 

(4) As of June 30, 2023 acquired patents were fully amortized and the acquired royalty contracts had a remaining unamortized balance of approximately $87,000.
Schedule of Intangible Assets Future Amortization Expenses

Amortization of intangible assets for periods subsequent to June 30, 2023 is as follows (in thousands):

 

Year Ending December 31,  Amortization Expense 
2023  $65 
2024   22 
Total  $87 
v3.23.2
Accounts Payable and Accrued Liabilities (Tables)
 6 Months Ended
Jun. 30, 2023
Payables and Accruals [Abstract]  
Schedule of Accounts Payable and Accrued Liabilities

At June 30, 2023 and December 31, 2022 accounts payable and accrued liabilities consisted of the following (in thousands):

 

   June 30, 2023   December 31, 
   (Unaudited)   2022 
Accounts payable  $2,187   $2,393 
Accrued compensation   1,917    2,382 
Accrued liabilities (1)   581    3,833 
Total  $4,685   $8,608 

 

(1) The decrease in accrued liabilities was due to a payment made in connection with the settlement of litigation in February 2023 related to the Asterias Merger. See Note 14 (Commitment and Contingencies) for additional information.
v3.23.2
Fair Value Measurements (Tables)
 6 Months Ended
Jun. 30, 2023
Fair Value Disclosures [Abstract]  
Schedule of Fair Value of Assets and Liabilities Valued on Recurring Basis

We measure our money market fund, marketable securities and our liability classified warrants at fair value on a recurring basis. The fair values of such assets and liabilities were as follows for June 30, 2023 and December 31, 2022 (in thousands):

 

       Fair Value Measurements Using 
   Balance at June 30, 2023  

Quoted Prices in Active Markets for Identical Assets

(Level 1)

  

Significant Other Observable Inputs

(Level 2)

  

Significant Unobservable Inputs

(Level 3)

 
Assets:                             
Money market fund (1)  $25,641   $25,641   $-   $- 
Marketable debt securities   11,727    11,727    -    - 
Marketable equity securities   312    312    -    - 
Total assets measured at fair value  $37,680   $37,680   $-   $- 
Liabilities:                    
Warrants to purchase Cell Cure ordinary shares (2)  $1   $-   $-   $1 
Total liabilities measured at fair value  $1   $-   $-   $1 

 

       Fair Value Measurements Using 
   Balance at December 31, 2022  

Quoted Prices in Active Markets for Identical Assets

(Level 1)

  

Significant Other Observable Inputs

(Level 2)

  

Significant Unobservable Inputs

(Level 3)

 
Assets:                    
Money market fund (1)  $4,102   $4,102   $-   $- 
Marketable debt securities   46,097    46,097    -    - 
Marketable equity securities   423    423    -    - 
Total assets measured at fair value  $50,622   $50,622   $-   $- 
Liabilities:                    
Warrants to purchase Cell Cure ordinary shares (2)  $2   $-   $-   $2 
Total liabilities measured at fair value  $2   $-   $-   $2 

 

(1) Included in cash and cash equivalents in the accompanying condensed consolidated balance sheet.
(2) Included in other current liabilities and/or long-term liabilities in the accompanying condensed consolidated balance sheet.
v3.23.2
Shareholders’ Equity (Tables)
 6 Months Ended
Jun. 30, 2023
Equity [Abstract]  
Schedule of Shareholder’s Equity

The following tables document the changes in shareholders’ equity for the three and six months ended June 30, 2023 and 2022 (unaudited and in thousands):

 

   Shares   Amount   Shares   Amount   Deficit   Deficit   Income / (Loss)   Equity 
                           Accumulated     
   Preferred   Common           Other   Total 
   Shares   Shares   Accumulated   Noncontrolling   Comprehensive   Shareholders’ 
   Shares   Amount   Shares   Amount   Deficit   Deficit   Income / (Loss)   Equity 
BALANCE - December 31, 2022   -   $-    170,093   $440,280   $(363,370)  $(1,403)  $(3,571)  $71,936 
Shares issued upon vesting of
restricted stock units, net of shares
retired to pay employees’ taxes		   -    -    53    (37)   -    -    -    (37)
Shares issued upon exercise of
stock options		   -    -    28    25    -    -    -    25 
Stock-based compensation   -    -    -    1,031    -    -    -    1,031 
Unrealized gain on marketable securities   -    -    -    -    -    -    91    91 
Foreign currency translation gain   -    -    -    -    -    -    373    373 
Net loss   -    -    -    -    (4,372)   (32)   -    (4,404)
BALANCE - March 31, 2023   -    -    170,174    441,299    (367,742)   (1,435)   (3,107)   69,015 
Shares issued through ATM   -    -    4,237    5,841    -    -    -    5,841 
Financing related fees   -    -    -    (193)   -    -    -    (193)
Shares issued upon exercise of
stock options		   -    -    28    22    -    -    -    22 
Stock-based compensation   -    -    -    1,280    -    -    -    1,280 
Unrealized gain on marketable securities   -    -    -    -    -    -    50    50 
Foreign currency translation gain   -    -    -    -    -    -    446    446 
Net income (loss)   -    -    -    -    (5,229)   26    -    (5,203)
BALANCE - June 30, 2023   -   $-    174,439   $448,249   $(372,971)  $(1,409)  $(2,611)  $71,258 

 

 

                           Accumulated     
   Preferred   Common           Other   Total 
   Shares   Shares   Accumulated   Noncontrolling   Comprehensive   Shareholders’ 
   Shares   Amount   Shares   Amount   Deficit   Deficit   Income / (Loss)   Equity 
BALANCE - December 31, 2021   -   $-    169,477   $434,529   $(337,097)  $(1,323)  $(5,211)  $90,898 
Shares issued upon vesting of
restricted stock units, net of shares retired to pay employees’ taxes		   -    -    10    (8)   -    -    -    (8)
Shares issued upon exercise of
stock options		   -    -    240    189    -    -    -    189 
Subsidiary warrant exercise   -    -    -    2    -    -    -    2 
Stock-based compensation   -    -    -    1,106    -    -    -    1,106 
Foreign currency translation gain   -    -    -    -    -    -    124    124 
Net loss   -    -    -    -    (7,087)   (6)   -    (7,093)
BALANCE - March 31, 2021   -    -    169,727    435,818    (344,184)   (1,329)   (5,087)   85,218 
Shares issued upon vesting of
restricted stock units, net of shares
retired to pay employees’ taxes		   -    -    10    (9)   -    -    -    (9)
Shares issued upon exercise of
stock options		   -    -    11    10    -    -    -    10 
Subsidiary warrant exercise, net   -    -    -    97    -    -    -    97 
Stock-based compensation   -    -    -    1,235    -    -    -    1,235 
Foreign currency translation gain   -    -    -    -    -    -    1,730    1,730 
Net loss   -    -    -    -    (6,763)   (19)   -    (6,782)
BALANCE - June 30, 2022   -   $-    169,748   $437,151   $(350,947)  $(1,348)  $(3,357)  $81,499 
v3.23.2
Stock-Based Awards (Tables)
 6 Months Ended
Jun. 30, 2023
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]  
Schedule of Weighted Average Assumptions to Calculate Fair Value of Stock Options

The fair value of each option award is estimated on the date of grant using a Black-Scholes option pricing model applying the weighted-average assumptions noted in the following table:

   Six Months ended June 30, (unaudited) 
   2023   2022 
Expected life (in years)   6.25    6.25 
Risk-free interest rates   4.2%   2.0%
Volatility   74.5%   73.4%
Dividend yield   -    - 
Schedule of Stock Based Compensation Expense

Operating expenses include stock-based compensation expense as follows (in thousands):

 

   Three Months ended June 30, (unaudited)  

Six Months ended

June 30, (unaudited)

 
   2023   2022   2023   2022 
Research and development  $264   $141   $469   $356 
General and administrative   1,016    1,094    1,842    1,985 
Total stock-based compensation expense  $1,280   $1,235   $2,311   $2,341 
Schedule Of Computation Of Diluted Net Loss Per Common Share

The following common share equivalents were excluded from the computation of diluted net loss per common share for the periods presented because including them would have been antidilutive (in thousands):

 Schedule Of Computation Of Diluted Net Loss Per Common Share

   Three Months ended June 30,   Six Months ended June 30, 
   2023   2022   2023   2022 
Stock options   22,846    18,832    22,846    18,832 
Restricted stock units   759    967    759    967 
2021 Equity Incentive Plan [Member]  
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]  
Schedule of Share-based Compensation, Employee Stock Purchase Plan, Activity

A summary of activity under the 2021 Plan is as follows (in thousands, except per share amounts):

 

  

Number

of Options

Outstanding

  

Weighted

Average

Exercise Price

 
Balance at December 31, 2022   6,001   $1.40 
Options granted   5,271   $1.46 
Options expired/forfeited/cancelled   (160)  $1.43 
Balance at June 30, 2023   11,112   $1.43 
Options exercisable at June 30, 2023   1,373   $1.39 

 

  

Number

of RSUs

Outstanding

 
Balance at December 31, 2022   939 
RSUs forfeited   (100)
RSUs vested   (80)
Balance at June 30, 2023   759 
Stock Option Plan of 2012 and 2018 [Member]  
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]  
Schedule of Share-based Compensation, Employee Stock Purchase Plan, Activity

A summary of activity of the 2012 Plan, and the 2018 inducement option (which was issued to a Lineage executive outside of all equity plans), is as follows (in thousands, except per share amounts):

 

  

Number

of Options

Outstanding

  

Weighted

Average

Exercise Price

 
December 31, 2022   12,172   $1.83 
Options exercised   (56)  $0.84 
Options expired/forfeited/cancelled   (382)  $1.83 
June 30, 2023   11,734   $1.83 
Options exercisable at June 30, 2023   9,437   $1.79 
v3.23.2
Commitments and Contingencies (Tables)
 6 Months Ended
Jun. 30, 2023
Commitments and Contingencies Disclosure [Abstract]  
Schedule of Supplemental Cash Flow Information Related to Leases

Supplemental cash flow information related to leases is as follows (in thousands):

         
   Six Months ended June 30, 
   2023   2022 
Cash paid for amounts included in the measurement of lease liabilities:          
Operating cash flows from operating leases  $538   $508 
Operating cash flows from financing leases  $5   $9 
Financing cash flows from financing leases  $29   $15 
           
Right-of-use assets obtained in exchange for lease obligations:          
Operating leases  $-   $33 
Finance leases  $79   $- 
Schedule of Supplemental Balance Sheet Information Related to Leases

Supplemental balance sheet information related to leases was as follows (in thousands, except lease term and discount rate):

 

   June 30, 2023   December 31, 
   (Unaudited)   2022 
Operating leases          
Right-of-use assets, net  $2,940   $3,517 
           
Right-of-use lease liabilities, current  $933   $916 
Right-of-use lease liabilities, noncurrent   2,304    2,860 
Total operating lease liabilities  $3,237   $3,776 
           
Financing leases          
Right-of-use assets, net  $157   $105 
           
Lease liabilities, current  $54   $29 
Lease liabilities, noncurrent   113    84 
Total finance lease liabilities   167    113 
           
Other current liabilities   -    7 
Total finance lease liabilities  $167   $120 
           
Weighted average remaining lease term          
           
Operating leases   3.9 years    

4.3 years

 
Finance leases   3.4 years    4.1 years 
Weighted average discount rate          
Operating leases   6.4%   6.3%
Finance leases   6.8%   6.9%
Schedule of Future Minimum Lease Commitments

Future minimum lease commitments are as follows as of June 30, 2023 (in thousands):

   (Unaudited) 
   Operating
Leases		   Finance
Leases		 
Year Ending December 31,          
2023  $564   $32 
2024   942    61 
2025   872    50 
2026   637    26 
2027   675    19 
Total lease payments   3,690    188 
Less imputed interest   (453)   (21)
Total  $3,237   $167 
v3.23.2
Organization and Business Overview (Details Narrative) - USD ($)
$ in Millions
 1 Months Ended 6 Months Ended
Jan. 31, 2022
Dec. 31, 2021
Jun. 30, 2023
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]      
Amount of grants received $ 50.0 $ 50.0 $ 14.3
Roche Agreement [Member]      
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]      
Upfront payment received     50.0
Collaboration License Agreement [Member]      
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]      
Maximum milestone payments to be received upon performance conditions     $ 620.0
v3.23.2
Schedule of Lineage’s Ownership of Outstanding Shares of its Subsidiaries (Details)
 6 Months Ended
Jun. 30, 2023
Cell Cure Neurosciences Ltd [Member]  
Field of business description Manufacturing of Lineage’s product candidates [1],[2]
Noncontrolling interest, ownership percentage by parent 94.00% [1],[2]
Es CellInternational Pte Ltd [Member]  
Field of business description Research and clinical grade cell lines
Noncontrolling interest, ownership percentage by parent 100.00%
[1] As of December 31, 2021 our ownership percentage of Cell Cure Neurosciences Ltd. (“Cell Cure”) was approximately 99%. In July 2022, Hadasit Bio-Holdings Ltd exercised warrants to purchase 21,999 ordinary shares of Cell Cure. Lineage’s ownership percentage of Cell Cure decreased as a result.
[2] Includes shares owned by Lineage and ES Cell International Pte. Ltd.
v3.23.2
Schedule of Lineage's Ownership of Outstanding Shares of its Subsidiaries (Details) (Parenthetical) - shares
Jul. 31, 2022
Dec. 31, 2021
Cell Cure Neurosciences Ltd [Member]    
Ownership percentage   99.00%
Hadasit Bio-Holdings Ltd. [Member]    
Class of warrant or right, number of securities called by warrants or rights 21,999  
v3.23.2
Basis of Presentation, Liquidity and Summary of Significant Accounting Policies (Details Narrative)
$ in Millions
Jun. 30, 2023
USD ($)
Accounting Policies [Abstract]  
Cash and cash equivalents and marketable securities $ 45.9
Amount reserved for future issuance $ 58.0
v3.23.2
Schedule of Disaggregated Revenues (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Disaggregation of Revenue [Line Items]        
Total revenues under collaborative agreements $ 2,871 $ 4,148 $ 4,992 $ 9,013
Total revenue 3,225 4,553 5,611 9,790
Royalty [Member]        
Disaggregation of Revenue [Line Items]        
Royalties and license fees 354 405 619 777
Upfront License Fees [Member]        
Disaggregation of Revenue [Line Items]        
Total revenues under collaborative agreements $ 2,871 $ 4,148 $ 4,992 $ 9,013
v3.23.2
Schedule of Contract with Customer Contract Liability and Receivable (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Revenue from Contract with Customer [Abstract]    
Accounts receivable, net [1] $ 406 $ 297
Deferred revenues $ 32,067 $ 37,146
[1] Excludes government grants as Lineage has determined government grants are outside the scope of ASU 2014-09 – Revenue from Contracts with Customers (Topic 606).
v3.23.2
Revenue (Details Narrative) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2022
Dec. 31, 2021
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]            
Total revenue $ 3,225 $ 4,553 $ 5,611 $ 9,790    
Collaboration revenues 2,871 4,148 4,992 9,013    
Upfront payment     50,000      
Transaction price for good and service 33,700   33,700      
Deferred revenues 32,067   32,067   $ 37,146  
Unfulfilled commitments 1,600   1,600      
Total deferred revenue 32,100   32,100      
Deferred revenue - current 10,400   10,400      
Roche and Immunomic Therapeutics Collaboration Agreement [Member]            
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]            
Collaboration revenues $ 2,900 $ 4,100 $ 5,000 $ 9,000    
Roche Collaboration Agreement [Member]            
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]            
Upfront payment         $ 50,000 $ 50,000
v3.23.2
Summary of Available for Sale Debt Securities (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Cash and Cash Equivalents [Line Items]    
Amortized cost $ 11,735 $ 46,247
Unrealized gains 2
Unrealized losses (8) (152)
Fair value 11,727 46,097
US Treasury Securities [Member]    
Cash and Cash Equivalents [Line Items]    
Amortized cost 11,735 46,247
Unrealized gains 2
Unrealized losses (8) (152)
Fair value $ 11,727 $ 46,097
v3.23.2
Schedule of Amortized cost And Estimated fair Value (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Cash and Cash Equivalents [Abstract]    
Amortized cost, In one year or less $ 11,735  
Estimated fair value, In one year or less 11,727  
Amortized cost, Total available-for-sale debt securities 11,735 $ 46,247
Estimated fair value, Total available-for-sale debt securities $ 11,727 $ 46,097
v3.23.2
Marketable Equity Securities (Details Narrative) - USD ($)
$ / shares in Units, shares in Millions
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2022
Net unrealized gain/loss on marketable equity securities $ 50,000 $ 141,000  
OncoCyte Corporation [Member]          
Investment owned balance, shares 1.1   1.1   1.1
Investment owned, at fair value $ 300,000   $ 300,000   $ 400,000
Share price per share $ 0.23   $ 0.23   $ 0.32
Net unrealized gain/loss on marketable equity securities $ 150,000 $ 700,000 $ 110,000 $ 1,400,000  
v3.23.2
Schedule of Property and Equipment, Net (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Property, Plant and Equipment [Line Items]    
Accumulated depreciation and amortization $ (6,383) $ (5,850)
Property and equipment, net 5,310 5,673
Equipment Furniture and Fixtures [Member]    
Property, Plant and Equipment [Line Items]    
Right-of-use assets 3,421 3,264
Leasehold Improvements [Member]    
Property, Plant and Equipment [Line Items]    
Right-of-use assets 2,266 2,150
Right of Use Assets [Member]    
Property, Plant and Equipment [Line Items]    
Right-of-use assets $ 6,006 $ 6,109
v3.23.2
Property and Equipment, Net (Details Narrative) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2022
Property, Plant and Equipment [Abstract]          
Financing leases related to property and equipment $ 196,000   $ 196,000   $ 121,000
Depreciation and amortization $ 138,000 $ 146,000 $ 276,000 $ 296,000  
v3.23.2
Schedule of Goodwill and Intangible Assets Net (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Finite-Lived Intangible Assets [Line Items]    
Goodwill [1] $ 10,672 $ 10,672
Total intangible assets 66,143 66,143
Accumulated amortization [2] (19,516) (19,451)
Intangible assets, net 46,627 46,692
IPR&D - OPC1 [Member]    
Finite-Lived Intangible Assets [Line Items]    
Total intangible assets [3] 31,700 31,700
IPR&D - VAC [Member]    
Finite-Lived Intangible Assets [Line Items]    
Total intangible assets [3] 14,840 14,840
Patents [Member]    
Finite-Lived Intangible Assets [Line Items]    
Total intangible assets 18,953 18,953
Royalty Contracts [Member]    
Finite-Lived Intangible Assets [Line Items]    
Total intangible assets [4] $ 650 $ 650
[1] Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in the Asterias Merger, see Note 14 (Commitment and Contingencies) for further discussion on the Asterias Merger.
[2] As of June 30, 2023 acquired patents were fully amortized and the acquired royalty contracts had a remaining unamortized balance of approximately $87,000.
[3] Asterias had two in-process research and development (“IPR&D”) intangible assets that were valued at $46.5 million as part of the purchase price allocation performed in connection with the Asterias Merger. The fair value of these assets consisted of $31.7 million pertaining to the OPC1 program and $14.8 million pertaining to the VAC platform.
[4] Asterias had royalty cash flows under patent families it acquired from Geron Corporation (“Geron”). Such patent families are expected to continue to generate revenue, are not used in the OPC1 or the VAC platform, and are considered to be separate long-lived intangible assets under Accounting Standards Codifications (“ASC”) Topic 805, Business Combinations.
v3.23.2
Schedule of Goodwill and Intangible Assets Net (Details) (Parenthetical) - USD ($)
$ in Thousands
 6 Months Ended
Jun. 30, 2023
Dec. 31, 2022
Finite-Lived Intangible Assets [Line Items]    
Intangible assets acquired $ 46,500  
Fair value of intangible assets 66,143 $ 66,143
Unamortized remaining balance 87,000  
IPR&D - OPC1 [Member]    
Finite-Lived Intangible Assets [Line Items]    
Fair value of intangible assets [1] 31,700 31,700
IPR&D - VAC [Member]    
Finite-Lived Intangible Assets [Line Items]    
Fair value of intangible assets [1] $ 14,840 $ 14,840
[1] Asterias had two in-process research and development (“IPR&D”) intangible assets that were valued at $46.5 million as part of the purchase price allocation performed in connection with the Asterias Merger. The fair value of these assets consisted of $31.7 million pertaining to the OPC1 program and $14.8 million pertaining to the VAC platform.
v3.23.2
Schedule of Intangible Assets Future Amortization Expenses (Details)
$ in Thousands
Jun. 30, 2023
USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]  
2023 $ 65
2024 22
Total $ 87
v3.23.2
Goodwill and Intangible Assets, Net (Details Narrative) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Finite-Lived Intangible Assets [Line Items]        
Amortization of intangible assets $ 32,000 $ 32,000 $ 65,000 $ 65,000
Minimum [Member]        
Finite-Lived Intangible Assets [Line Items]        
Estimated useful life 5 years   5 years  
Maximum [Member]        
Finite-Lived Intangible Assets [Line Items]        
Estimated useful life 10 years   10 years  
v3.23.2
Schedule of Accounts Payable and Accrued Liabilities (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Payables and Accruals [Abstract]    
Accounts payable $ 2,187 $ 2,393
Accrued compensation 1,917 2,382
Accrued liabilities [1] 581 3,833
Total $ 4,685 $ 8,608
[1] The decrease in accrued liabilities was due to a payment made in connection with the settlement of litigation in February 2023 related to the Asterias Merger. See Note 14 (Commitment and Contingencies) for additional information.
v3.23.2
Schedule of Fair Value of Assets and Liabilities Valued on Recurring Basis (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets $ 37,680 $ 50,622
Liabilities 1 2
Marketable Debt Securities [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 11,727 46,097
Marketable Equity Securities [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 312 423
Cell Cure Warrants [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Liabilities [1] 1 2
Fair Value, Inputs, Level 1 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 37,680 50,622
Liabilities  
Fair Value, Inputs, Level 1 [Member] | Marketable Debt Securities [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 11,727 46,097
Fair Value, Inputs, Level 1 [Member] | Marketable Equity Securities [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 312 423
Fair Value, Inputs, Level 1 [Member] | Cell Cure Warrants [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Liabilities [1]
Fair Value, Inputs, Level 2 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets
Liabilities
Fair Value, Inputs, Level 2 [Member] | Marketable Debt Securities [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets
Fair Value, Inputs, Level 2 [Member] | Marketable Equity Securities [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets
Fair Value, Inputs, Level 2 [Member] | Cell Cure Warrants [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Liabilities [1]
Fair Value, Inputs, Level 3 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets  
Liabilities 1 2
Fair Value, Inputs, Level 3 [Member] | Marketable Debt Securities [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets
Fair Value, Inputs, Level 3 [Member] | Marketable Equity Securities [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets
Fair Value, Inputs, Level 3 [Member] | Cell Cure Warrants [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets  
Liabilities [1] 1 2
Money Market Funds [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets [2] 25,641 4,102
Money Market Funds [Member] | Fair Value, Inputs, Level 1 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets [2] 25,641 4,102
Money Market Funds [Member] | Fair Value, Inputs, Level 2 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets [2]
Money Market Funds [Member] | Fair Value, Inputs, Level 3 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets [2]
[1] Included in other current liabilities and/or long-term liabilities in the accompanying condensed consolidated balance sheet.
[2] Included in cash and cash equivalents in the accompanying condensed consolidated balance sheet.
v3.23.2
Related Party Transactions (Details Narrative)
 6 Months Ended
Jun. 30, 2023
USD ($)
Neal Bradsher [Member] | Broadwood Partners, L.P [Member]  
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]  
Legal expenses $ 625,000
v3.23.2
Schedule of Shareholder’s Equity (Details) - USD ($)
shares in Thousands, $ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Mar. 31, 2023
Jun. 30, 2022
Mar. 31, 2022
Jun. 30, 2023
Jun. 30, 2022
Accumulated Other Comprehensive Income (Loss) [Line Items]            
BALANCE - March 31, 2021 $ 69,015 $ 71,936 $ 85,218 $ 90,898 $ 71,936 $ 90,898
Shares issued upon vesting of restricted stock units, net of shares retired to pay employees’ taxes   (37) (9) (8)    
Shares issued upon exercise of stock options 22 25 10 189    
Stock-based compensation 1,280 1,031 1,235 1,106    
Unrealized gain on marketable securities 50 91        
Foreign currency translation gain 446 373 1,730 124 819 1,854
Net loss (5,203) (4,404) (6,782) (7,093) (9,607) (13,875)
Shares issued through ATM 5,841          
Financing related fees (193)          
BALANCE - June 30, 2022 71,258 69,015 81,499 85,218 71,258 81,499
Subsidiary warrant exercise, net     97 2    
Preferred Stock [Member]            
Accumulated Other Comprehensive Income (Loss) [Line Items]            
BALANCE - March 31, 2021
Beginning Balance, shares
Shares issued upon vesting of restricted stock units, net of shares retired to pay employees’ taxes      
Shares issued upon exercise of stock options    
Stock-based compensation    
Unrealized gain on marketable securities        
Foreign currency translation gain    
Net loss    
Shares issued through ATM          
Financing related fees          
BALANCE - June 30, 2022
Ending Balance, shares
Subsidiary warrant exercise, net        
Common Stock [Member]            
Accumulated Other Comprehensive Income (Loss) [Line Items]            
BALANCE - March 31, 2021 $ 441,299 $ 440,280 $ 435,818 $ 434,529 $ 440,280 $ 434,529
Beginning Balance, shares 170,174 170,093 169,727 169,477 170,093 169,477
Shares issued upon vesting of restricted stock units, net of shares retired to pay employees’ taxes   $ (37) $ (9) $ (8)    
Shares issued upon vesting of restricted stock units, net of shares retired to pay employees' taxes, shares   53 10 10    
Shares issued upon exercise of stock options $ 22 $ 25 $ 10 $ 189    
Shares issued upon exercise of stock options, shares 28 28 11 240    
Stock-based compensation $ 1,280 $ 1,031 $ 1,235 $ 1,106    
Unrealized gain on marketable securities        
Foreign currency translation gain    
Net loss    
Shares issued through ATM $ 5,841          
Shares issued through ATM, shares 4,237          
Financing related fees $ (193)          
BALANCE - June 30, 2022 $ 448,249 $ 441,299 $ 437,151 $ 435,818 $ 448,249 $ 437,151
Ending Balance, shares 174,439 170,174 169,748 169,727 174,439 169,748
Subsidiary warrant exercise, net     $ 97 $ 2    
Retained Earnings [Member]            
Accumulated Other Comprehensive Income (Loss) [Line Items]            
BALANCE - March 31, 2021 $ (367,742) $ (363,370) (344,184) (337,097) $ (363,370) $ (337,097)
Shares issued upon vesting of restricted stock units, net of shares retired to pay employees’ taxes      
Shares issued upon exercise of stock options    
Stock-based compensation    
Unrealized gain on marketable securities        
Foreign currency translation gain    
Net loss (5,229) (4,372) (6,763) (7,087)    
Shares issued through ATM          
Financing related fees          
BALANCE - June 30, 2022 (372,971) (367,742) (350,947) (344,184) (372,971) (350,947)
Subsidiary warrant exercise, net        
Noncontrolling Interest [Member]            
Accumulated Other Comprehensive Income (Loss) [Line Items]            
BALANCE - March 31, 2021 (1,435) (1,403) (1,329) (1,323) (1,403) (1,323)
Shares issued upon vesting of restricted stock units, net of shares retired to pay employees’ taxes      
Shares issued upon exercise of stock options    
Stock-based compensation    
Unrealized gain on marketable securities        
Foreign currency translation gain    
Net loss 26 (32) (19) (6)    
Shares issued through ATM          
Financing related fees          
BALANCE - June 30, 2022 (1,409) (1,435) (1,348) (1,329) (1,409) (1,348)
Subsidiary warrant exercise, net        
AOCI Attributable to Parent [Member]            
Accumulated Other Comprehensive Income (Loss) [Line Items]            
BALANCE - March 31, 2021 (3,107) (3,571) (5,087) (5,211) (3,571) (5,211)
Shares issued upon vesting of restricted stock units, net of shares retired to pay employees’ taxes      
Shares issued upon exercise of stock options    
Stock-based compensation    
Unrealized gain on marketable securities 50 91        
Foreign currency translation gain 446 373 1,730 124    
Net loss    
Shares issued through ATM          
Financing related fees          
BALANCE - June 30, 2022 $ (2,611) $ (3,107) (3,357) (5,087) $ (2,611) $ (3,357)
Subsidiary warrant exercise, net        
v3.23.2
Shareholders’ Equity (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
 1 Months Ended 3 Months Ended 6 Months Ended
Dec. 31, 2021
Mar. 31, 2021
Jun. 30, 2023
Mar. 31, 2023
Mar. 30, 2023
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2022
Subsidiary or Equity Method Investee [Line Items]                
Preferred stock, shares authorized     2,000,000     2,000,000   2,000,000
Preferred stock, no par value     $ 0     $ 0   $ 0
Preferred stock, shares outstanding     0     0   0
Preferred stock, shares outstanding     0     0   0
Common stock, shares authorized     250,000,000     250,000,000   250,000,000
Common stock, shares outstanding     174,439,434     174,439,434   170,093,114
Net proceeds     $ 5,700          
Sale of stock         0   0  
Proceeds from issuance of common stock     $ 5,800     $ 5,789 $ 148  
Sales Agreement [Member] | Parent Company [Member]                
Subsidiary or Equity Method Investee [Line Items]                
Net proceeds $ 64,100 $ 25,000            
Common stock unsold   $ 14,100            
Sale of stock           4,345,596    
Sale of Stock, Price Per Share     $ 1.41     $ 1.41    
Proceeds from issuance of common stock           $ 6,100    
Equity Securities, FV-NI     $ 58,000     $ 58,000    
December Twenty Twenty Two Prospectus Supplement [Member]                
Subsidiary or Equity Method Investee [Line Items]                
Sale of stock     4,237,396          
2017 Sales Agreement [Member] | Cantor Fitzgerald and Co Member [Member]                
Subsidiary or Equity Method Investee [Line Items]                
Percentage of commission payable       3.00%        
v3.23.2
Schedule of Share-based Compensation, Employee Stock Purchase Plan, Activity (Details)
shares in Thousands
 6 Months Ended
Jun. 30, 2023
$ / shares
shares
Stock Option Plan of 2021 [Member]  
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]  
Number of Options Outstanding, Beginning balance 6,001
Weighted Average Exercise Price of Options Outstanding, beginning balance | $ / shares $ 1.40
Number of Options Outstanding, Options granted 5,271
Weighted Average Exercise Price of Options Outstanding, Options granted | $ / shares $ 1.46
Number of Options Outstanding, Options expired/forfeited/cancelled (160)
Weighted Average Exercise Price of Options Outstanding, Options expired/forfeited/cancelled | $ / shares $ 1.43
Number of Options Outstanding, Ending balance 11,112
Weighted Average Exercise Price of Options Outstanding, Ending | $ / shares $ 1.43
Number of Options exercisable 1,373
Weighted Average Exercise Price of Options exercisable | $ / shares $ 1.39
Number of RSUs Outstanding, Beginning balance 939
Number of RSUs Outstanding, RSUs forfeited (100)
Number of RSUs Outstanding, Rsu vested (80)
Number of RSUs Outstanding, Ending balance 759
Stock Option Plan of 2012 and 2018 [Member]  
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]  
Number of Options Outstanding, Beginning balance 12,172
Weighted Average Exercise Price of Options Outstanding, beginning balance | $ / shares $ 1.83
Number of Options Outstanding, Options expired/forfeited/cancelled (382)
Weighted Average Exercise Price of Options Outstanding, Options expired/forfeited/cancelled | $ / shares $ 1.83
Number of Options Outstanding, Ending balance 11,734
Weighted Average Exercise Price of Options Outstanding, Ending | $ / shares $ 1.83
Number of Options exercisable 9,437
Weighted Average Exercise Price of Options exercisable | $ / shares $ 1.79
Number of Options Outstanding, Options exercised (56)
Weighted Average Exercise Price of Options, Options exercised | $ / shares $ 0.84
v3.23.2
Schedule of Weighted Average Assumptions to Calculate Fair Value of Stock Options (Details) - 2012 Plan [Member]
 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Expected life (in years) 6 years 3 months 6 years 3 months
Risk-free interest rates 4.20% 2.00%
Volatility 74.50% 73.40%
Dividend yield (0.00%) (0.00%)
v3.23.2
Schedule of Stock Based Compensation Expense (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]        
Total stock-based compensation expense $ 1,280 $ 1,235 $ 2,311 $ 2,341
Research and Development Expense [Member]        
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]        
Total stock-based compensation expense 264 141 469 356
General and Administrative Expense [Member]        
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]        
Total stock-based compensation expense $ 1,016 $ 1,094 $ 1,842 $ 1,985
v3.23.2
Schedule Of Computation Of Diluted Net Loss Per Common Share (Details) - shares
shares in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Stock Options [Member]        
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]        
Antidilutive securities, shares 22,846 18,832 22,846 18,832
Restricted Stock Units (RSUs) [Member]        
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]        
Antidilutive securities, shares 759 967 759 967
v3.23.2
Stock-Based Awards (Details Narrative) - USD ($)
$ in Millions
 6 Months Ended
Jun. 30, 2023
Sep. 13, 2021
2021 Equity Incentive Plan [Member]    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Number of shares available to be granted 6,269,022 15,000,000
2012 and 2018 Equity Incentive Plan [Member]    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Unvested stock options $ 11.5  
Expected recognized expense over weighted average period 2 years 10 months 24 days  
v3.23.2
Income Taxes (Details Narrative) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Income Tax Disclosure [Abstract]        
Deferred income tax expense (benefit) $ 1,803
v3.23.2
Schedule of Supplemental Cash Flow Information Related to Leases (Details) - USD ($)
$ in Thousands
 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Commitments and Contingencies Disclosure [Abstract]    
Operating cash flows from operating leases $ 538 $ 508
Operating cash flows from financing leases 5 9
Financing cash flows from financing leases 29 15
Operating leases 33
Finance leases $ 79
v3.23.2
Schedule of Supplemental Balance Sheet Information Related to Leases (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Right-of-use lease liabilities, current $ 933 $ 916
Right-of-use lease liabilities, noncurrent 2,304 2,860
Lease liabilities, current 54 36
Lease liabilities, noncurrent 113 84
Operating Lease [Member]    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Right-of-use assets, net 2,940 3,517
Right-of-use lease liabilities, current 933 916
Right-of-use lease liabilities, noncurrent 2,304 2,860
Total operating lease liabilities $ 3,237 $ 3,776
Operating Lease, Weighted Average Remaining Lease Term 3 years 10 months 24 days 4 years 3 months 18 days
Operating Lease, Weighted Average Discount Rate, Percent 6.40% 6.30%
Financing Leases [Member]    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Financing leases, Right-of-use assets, net $ 157 $ 105
Lease liabilities, current 54 29
Lease liabilities, noncurrent 113 84
Total finance lease liabilities 167 113
Other current liabilities 7
Total finance lease liabilities $ 167 $ 120
Finance Lease, Weighted Average Remaining Lease Term 3 years 4 months 24 days 4 years 1 month 6 days
Finance Lease, Weighted Average Discount Rate, Percent 6.80% 6.90%
v3.23.2
Schedule of Future Minimum Lease Commitments (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Operating Lease [Member]    
Lessee, Operating Lease, Liability, to be Paid, Fiscal Year Maturity [Abstract]    
2023 $ 564  
2024 942  
2025 872  
2026 637  
2027 675  
Total lease payments 3,690  
Less imputed interest (453)  
Total 3,237 $ 3,776
Financing Leases [Member]    
Finance Lease, Liability, to be Paid, Fiscal Year Maturity [Abstract]    
2023 32  
2024 61  
2025 50  
2026 26  
2027 19  
Total lease payments 188  
Less imputed interest (21)  
Total $ 167  
v3.23.2
Commitments and Contingencies (Details Narrative)
 1 Months Ended 6 Months Ended
Nov. 01, 2022
USD ($)
Nov. 01, 2022
ILS (₪)
Aug. 01, 2022
USD ($)
Aug. 01, 2022
ILS (₪)
Dec. 17, 2021
USD ($)
Nov. 30, 2021
USD ($)
ft²
m²
May 06, 2020
GBP (£)
Feb. 28, 2023
USD ($)
Sep. 30, 2022
ft²
Aug. 31, 2022
ft²
m²
Jan. 31, 2022
USD ($)
Dec. 31, 2021
USD ($)
May 31, 2020
USD ($)
May 31, 2020
GBP (£)
May 31, 2019
USD ($)
ft²
Jan. 31, 2018
USD ($)
ft²
m²
Jan. 31, 2018
ILS (₪)
ft²
m²
Jun. 30, 2023
USD ($)
ft²
m²
Jun. 30, 2023
ILS (₪)
ft²
m²
Nov. 30, 2021
ILS (₪)
ft²
m²
Jun. 15, 2017
Loss Contingencies [Line Items]                                          
Upfront payment                     $ 50,000,000.0 $ 50,000,000.0           $ 14,300,000      
Additional milestone payments                       $ 620,000,000.0                  
Grants awarded percentage                                   50.00% 50.00%    
Royalty payment percentage           24.30%                           24.30% 50.00%
Aggregate cap amount                                   $ 92,100,000      
Sublicensing fee percentage         21.50%                                
Payments for Advance to Affiliate         $ 50,000,000.0                                
Insurance deductable               $ 25,000                          
ITI Collaboration Agreement [Member]                                          
Loss Contingencies [Line Items]                                          
Upfront payment                                   500,000      
Budgetary commitment amount                                   2,200,000      
Purchase obligation                                   1,600,000      
Milestone payment received                                   500,000      
License Agreement [Member]                                          
Loss Contingencies [Line Items]                                          
Agreed signature fee amount                         $ 1,600,000                
Settlement Agreement [Member]                                          
Loss Contingencies [Line Items]                                          
Litigation settlement amount               10,650,000                          
Settlement Agreement [Member] | Insurers [Member]                                          
Loss Contingencies [Line Items]                                          
Litigation settlement amount               7,120,000                          
Settlement Agreement [Member] | Parent Company [Member]                                          
Loss Contingencies [Line Items]                                          
Litigation settlement amount               $ 3,530,000                          
Israel Innovation Authority [Member]                                          
Loss Contingencies [Line Items]                                          
Loss contingency accrual, payments                     12,100,000                    
Hadasit Medical Research Services and Development Ltd [Member]                                          
Loss Contingencies [Line Items]                                          
Loss contingency accrual, payments                     $ 8,900,000                    
Pay costs percentage                     21.50%                    
Hadasit Medical Research Services and Development Ltd [Member] | Maximum [Member]                                          
Loss Contingencies [Line Items]                                          
Contingency withheld amount                     $ 1,900,000                    
GBP [Member] | License Agreement [Member]                                          
Loss Contingencies [Line Items]                                          
Agreed signature fee amount | £                           £ 1,250,000              
Clinical regulatory milestone | £             £ 8,000,000                            
Sales related milestones | £             £ 22,500,000                            
Cell Cure [Member]                                          
Loss Contingencies [Line Items]                                          
Rentable area | ft²           1,432                   10,054 10,054     1,432  
Base rent           $ 3,757                              
Land subject to ground leases | m²           133                   934 934     133  
Lessee operating lease renewal term description           option to extend the lease for five years                   option to extend the lease for five years option to extend the lease for five years        
Base rent and construction allowance per month                               $ 26,000          
Payments for rent $ 3,951 ₪ 12,494                                      
Cell Cure [Member] | NIS [Member]                                          
Loss Contingencies [Line Items]                                          
Base rent | ₪                                       ₪ 1,880  
Base rent and construction allowance per month | ₪                                 ₪ 93,827        
Carlsbad Lease [Member]                                          
Loss Contingencies [Line Items]                                          
Rentable area | ft²                             8,841            
Lease expiration date                             Mar. 31, 2026            
Base rent                             $ 24,666            
Increased rent amount                             $ 25,197            
Secuirty deposit                                   17,850      
Carlsbad Sub Lease [Member]                                          
Loss Contingencies [Line Items]                                          
Rentable area | ft²                 4,500                        
Lease expiration date                 Mar. 31, 2024                        
Base rent                                   22,500      
Secuirty deposit                                   22,500      
Lease commencement date                 Oct. 01, 2022                        
Office and Laboratory Space, Jerusalem, Israel [Member] | NIS [Member]                                          
Loss Contingencies [Line Items]                                          
Base rent | ₪                                     ₪ 39,776    
Office and Laboratory Space, Jerusalem, Israel [Member] | December 31, 2018 Exchange Rate [Member]                                          
Loss Contingencies [Line Items]                                          
Base rent                                   $ 12,200      
Office and Laboratory Space, Jerusalem, Israel [Member] | Cell Cure [Member]                                          
Loss Contingencies [Line Items]                                          
Rentable area | ft²                   3,229               7,842 7,842    
Lease expiration date                   Dec. 31, 2027               Dec. 31, 2027      
Land subject to ground leases | m²                   300               728.5 728.5    
Base monthly rent     $ 4,800 ₪ 16,350                                  
January 2018 Lease [Member]                                          
Loss Contingencies [Line Items]                                          
Deposit assets                                   $ 439,000      
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