Q4 2019 Earnings Call
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Thanks for calling May have been able to be conference are calling me jointly.
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Getting or drew some reduction.
All of this is highly encouraging but it can become significantly more compelling if we're able to reproduce it's an additional patients and increase the confidence in our observations. So for this reason our primary goal. This year is to identify eligible patients enroll them onto the study.
In obtaining permission to remove the enrollments dagger an opening two new clinical trial sites in the U.S. is entirely consistent with an reflection of I was trying to reach the school as quickly as we can't.
At this time, we anticipate our next data update on all Virgin will be in early may.
At that time, we expect to present additional data points from previously treated patients as well as new data from the more recently treated patients.
These data will help inform us with ongoing clinical regulatory and partnership strategies and discussions we have important decisions ahead, such as the size and design for the next study and whether to enter into a strategic partnership. So we will be collecting in interpreting the forthcoming data and share our decisions as they become available.
Moving next door Ob see one program for spinal cord injury.
Acquired this program in early 2019 and by the fall we had successfully moved operational control to lineage and tech transferred all manufacturing responsibilities to our GMP facility.
Well this program has generated extremely positive and promising clinical data.
The manufacturing process, we across acquired was not ready to support a late stage clinical trial. So we immediately went to work to introduce commercially attractive characteristics of the product.
Attributes, which we have been working on include things like better control of the production process for increasing consistency reproducibility and skill.
These are all things we have already successfully achieved with our origin program. So we're optimistic that in time. We also will be successful introducing these similar features to OVC one.
And these are not distant commercial considerations somebody hand enhancements, we're working on well a valuable near term benefits as one example in the prior clinical trial of obesity. One cells were shipped to the trauma Center, one day in advance and had to be flawed and process and re suspended in a clinically acceptable buffer by the onset.
Technical stuff.
As I explained at the moment ago in the context of origin. This is not something that every facility could even do which puts a constraint on the number of clinical sites you can open.
Those might not be an impediment for a phase one study or a pilot study, but it's simply not practical for larger trials.
So we're working on developing exon inject formulation for obesity, one so the surgeon will need to wait for the cells to be process and we won't be limited only the centers with dose preparation capabilities.
If we're successful with this new formulation. It means we will be able to open more sites and finish in rolling trial sooner, which reduces the cost of those trials.
And as a reminder, we were successful doing this for operation and we're using the same stuff in the same facility. So we think we will be equally successful in creating a new thought inject formulation for obesity one.
We also have begun exploring some discussions in connection with a new delivery device for OVC one.
We made a very wise decision to obtain an exclusive option to the gyroscope Sds device and we're now looking at ways, we make copy our origin experience and gain exclusive access to a novel and proprietary delivery device for obesity one.
We don't have anything specific to announced today, but I wanted to just share. This initiative with you because it reflects our commitment to total asset management, which means we don't just make the spinal cord cells were combining the best available component parts upsells production and delivery to assemble and provide an optimal treatment.
Regimen.
By analyzing every piece of the overall care proposition, we intend to outmaneuver, our competition and position ourselves for long term success.
We made excellent progress on these LPC one enhancements and you can expect that we will begin to share some specific updates next quarter.
Our third clinical stage program is back to this is our off the shelf cancer vaccine comprised of mature dendritic cells, which we manufacture from well established pluripotent cell lines, just like our written and spinal cord cells.
We load these dendritic cells with a tumor specific marker called an antigen, which is intended to instruct the body's immune system to attack and eliminate cancer cells.
In this way back to acts like a booster for your immune system by educating your T cells to seek out and destroy cancerous cells.
This immuno oncology program is currently being managed by our partner cancer Research UK.
See our UK is conducting a phase one clinical trial of back to patients.
Excuse me a back to in patients with non small cell lung cancer.
Progress on this program was extremely slow when we acquired it last year, but things are moving much better now and I'm pleased to share that additional patients have been dosed since we last provided an update on this program.
I'd really like to say more about the back to program, but I must explained that see our UK is solely responsible for this trial. So although we don't have to pay for the data, which they are generating we also cannot control the timing of its release and for the most part we're not permitted to discuss data, which we obtained from the collaboration.
I can only say the data does get shared with us from time to time and if it's in our interest do exercise the option regained control at the back to program, we will do so.
However, there are many factors, which will go into that decision and it would not be done without clear and compelling supporting evidence.
In particular, we would want to see evidence that some of the patients have developed the intended immune response to our back to antigen.
If they do we believe there will be a compelling reason to exercise the option and expand our efforts in this exciting area of cancer research.
And in the meantime to prepare for the possibility of exercising the option we have begun to small effort to evaluate a number of clinical development strategies, which we might consider so there's potentially promising product candidate.
No, although our three clinical cell therapy programs are the main drivers for the company. Currently we have a number of other important activities ongoing that I want to mention.
First our facial aesthetics product Renevia was granted a CE mark last year, which allows it to be sold in the E U and other territories, where the CE Mark is recognized.
This approval is further evidence of the strong clinical and regulatory capabilities of lineage team.
Because we do not have operations in the E. U we have engaged in advisory firm to identify a partner to wider launch or further development area in the European market.
That partnership process is ongoing and we have been able to present the opportunity to some of the leading aesthetics firms.
But the European aesthetics market is both competitive and fragmented. So we will continue this process and see what our options are and provide our shareholders with additional information when it becomes available.
Second.
Late last year, we entered into licensing agreements with three separate companies as part of our effort to monetize our extensive intellectual property state.
We also recently hired an in house I P attorney, which will allow us to better seek out opportunities to taking money by entering into additional license agreements as well as to save money by reducing our patent prosecution costs.
And at the same time, we will seek to create new high value IP positions in areas, where we believe there's an opportunity to do so.
For example, we recently were granted patents associated with the manufacturing of our unique cell types, which added further layers of protection to all three of our programs.
We also received additional patent rights, describing the use of induced pluripotent stem cells or IP as sees an alternate option for generating differentiated cells further broadening the potential application of our work.
Third last year, we were awarded more than $3 million and grants from the Israel Innovation authority and the U.S. National institutes with the help.
We intend to continue to seek nondilutive support for our work from these and other entities such as the California Institute for regenerative medicine or serve as well as to publish it presents papers and abstract describing our work.
With that I now, we'll hand things over to Brandy to review, our financials and discuss some additional plans for this year.
Thanks, Brian.
To start by reflecting a bit on my first year at lineage. It was definitely a busy year as Brian mentioned, we've worked hard to transform the company into a leader in cell therapy. We are extremely focused on moving our clinical program forward in the most efficient way possible.
An important component of driving efficiency was to implement a culture of responsible spending.
We took a hard look at everything we spent money on and identified significant cost reductions throughout the year.
We decreased our headcount from a high of 105 at the time of the a serious merger in March 2019 to 52 currently.
When we brought on new employees, we look for people, who were ready to roll up their sleeves and get work done we don't have excessive layers of management and our organization and I'm proud to say that we have a company full of do worse.
We also worked with many of our large service providers to bring down expenses, specifically in the areas of legal patent support and accounting.
In several cases, we've switched to providers that have lower hourly billing rates and comparable services.
We've also implemented new processes like international travel guideline things that individually don't represent a big spend but when added up can become significant.
We also brought activities in house that were historic historically outsourced things like planning for conferences.
We have people already on our staff with skill sets that can effectively manage these activities. In addition to their day to day responsibilities.
These types of broad reaching cost savings cost savings initiatives will continue through 2020, while we work to progress our clinical programs.
As Brian mentioned, we brought down our budget for 2022, a net operational spend of about $16 million based on our current plan.
This is a significant decrease from our 2019 spend of $32 million and 2018 combined spend from a serious and lineage of $43 million.
And let us the uncertainties around cobot 19, I am glad that we implemented cost savings that will enable us to sell conduct our plans operation even if the financial markets remain volatile for some time.
We believe that we can fund our operations with our current cash and cash equivalents position and the Juvin essence note that is due in late August.
I'll highlight that we do have the right to reviewed human and financial statements twice per year. So we have been able to assess their financial stability and ability to pay the note on time and in fall, which as Brian explained earlier would provide substantial operating cash to support our business.
Now, let me get back to 2019 with some highlights of our balance sheet account as well as our financial results for the fourth quarter of 2019 and full year 2019.
I'll start with an update on our cash position.
We ended 2019 was $30.7 million in cash cash equivalents and marketable securities.
We also have the note receivable due to us from do you have in essence the value of the note with accrued interest was $23.6 million at December 30, Onest 2019.
During 2019, we raised about $14.3 million by selling a portion of our positions and onsite HX and how to see bio holding.
In January 2020, we sold an additional 2.4 million shares of office like stock for net proceeds of $5 million.
Accordingly, all of our remaining investment positions are now less than 10% of those companies outstanding shares.
Let's turn to the statement of operations for the fourth quarter of 2019.
Total revenues for the fourth quarter 2019 were $1.2 million, an increase of $400000 as compared to the same period in 2018.
Operating expenses include R&D expenses as well as DNA expenses.
Total operating expenses for the fourth quarter of 2018 were $8 million, a decrease of $2.8 million compared to the same period in 2018.
The decrease was comprised of a $300000 decrease in R&D expenses under $2.5 million decrease in GNS expenses.
I'm also happy to report that our operating expenses of $8 million for the fourth quarter were almost $900000 less than our operating expenses for the third quarter. We have worked hard to continuously bring down our spend throughout 2019.
Our loss from operations for the fourth quarter 2018, it was $6.9 million a reduction of $3.2 million as compared to the same period in 2018.
The net loss attributable to lineage for the fourth quarter of 2019 was $4.5 million or 3.3 cents per share as compared to $45 million or 35 cents per share for the same period in 2018.
I'll now recap full year 2019.
As a reminder, HX was included in our operations through August Thirtyth 2018, the date of the Ajax deconsolidation HX activities, we're no longer incorporated in our financials after that date.
Total revenues for 2019 were $3.5 million, a decrease of $1.5 million as compared to 28 teams.
Total operating expenses for 2019 were $42 million, a decrease of $4.5 million compared to the same period in 2018.
The decrease was comprised of a $3.9 million decrease in R&D expenses and a $700000 decrease in GNS expenses.
It should be noted that about $5 million related to a serious transaction costs were included in our 2019 expenses.
Our loss from operations for 2019 was $38.9 million, a reduction of $2.9 million as compared to 2018.
And our net loss attributable to lineage for 2019 was $11.7 million or eight cents per share as compared to $46 million or 36 cents per share for 2018.
To wrap up I'll end by saying that I'm happy with the progress we made in 2019.
With the funding vehicles, we have in hand, we believe we have the ability to support our operations well into 2021.
Our focus is now to progress our three clinical programs forward to major milestones and drive long term value for our shareholders with that I'll turn the call back to Brian.
Great. Thanks, Brandy, a we're certainly happy with what we have accomplished in 2019 to make 2020, even better our focus is gonna be to accelerate the pace of all of our clinical programs that means an emphasis on completing enrollment in the origin study.
We also expect that 2020 will feature substantial business development activity, because we're making greater efforts than before to identify and obtained development support for all of our assets and we also be evaluating the option to regain majority ownership and control the back platform for oncology if the data supports that decision.
Oh, but again the most important event in the near term will be our next data update for the option program, which we plan to provide in early may.
So with that I'd like to thank everyone for joining us today and let the operator know that the team here is ready for any questions.
Ladies and gentlemen, as a reminder to ask a question you would need to press Star then one or your telephone keypad to withdraw your question Chris the pound could you. Please standby we've compiled the company roster.
Our first question or comment comes from a lot of Joel Engineers from H.C. Wainwright. Your line is open.
Everyone. Good afternoon. Thanks for taking my question, Brian with your comment Sanofi see one I'm just curious with regard to things you might be working on for the new delivery device. So in the past obviously when John first started the program you know there were pioneers and then the stereos. They put a lot of work early work for that matter.
Into the stereotactic surgery and in surgical training of the physicians et cetera. So just curious what kind of major differences or properties you might be looking at as technology has advanced.
Yeah. Thanks, Joe you I think a pioneering is the correct term if memory serves the geron spinal cord I N. D was the first cell therapy idea of its kind of what's really notable is from the time that that I Indy was filed to today some of the tools and tech.
Needs that we have available at our disposal to control and maintain production and cell type a and then think about other aspects like understanding delivery a imaging techniques were just such a much more advanced and and I said, he's a promising place than we were in the past.
In particular for US one of things that we would like to do is that we know that having us fond inject formulation will not only open up additional centers to us and allow us to be able to enroll studies faster.
But that creates a sawn inject formulation that obviates the need for all of that dose preparation, but like many things in load in the world incomplete Balsam to tradeoffs and one of those tradeoffs is that there's an upper limit on how concentrated yourselves can be in the thought inject formulation and when you have a less.
Concentrated formulation it requires more time to administer it so what we're really trying to solve for the most important thing we're trying to solve for as an ability to deliver the cells, while maintaining the patient on the respirator. So when a the original Scistar study study.
Has done the cells were administered I think in fewer than two minutes. So you could actually disconnect respirator, you hadn't immobilized a patient you get administer the cells.
You would be doing this with a lot of stress because you're trying not to push the cells into quickly, but you get the cells in less than two minutes and you're you're not putting the patient adds significant risk.
In contrast, if we need what we expect will be more like four or five minutes to administer the cells were going to need the patient to be connected to the respirators. So we're gonna get rid of respirator risk, but it means we need more of a floating can you love type approach. If you can imagine the needle needs to be able to move up and down with the chest cavity.
The patient so that's one of the real major differences in what we're planning on doing and what was done in the Scistar study.
That's actually really really helpful. Thanks for that Brian and then more towards your I guess your strong financial position, especially with proven essence coming in how what you have your hand I'm sorry, you have your hands full with regard to your clinical programs in and what have you, but I guess behind the scenes what are you doing to further boost.
To your non diluted funding potential, especially through 'em organizations like CIRM.
So we're gonna look everywhere, we've enjoyed tremendous value ER and frankly validation from groups like CIRM from groups like see our UK and the is real innovation fund a these are terrific partners for us and it brings a lot of non dilutive capital.
There are also our discussions that we're having in areas that are more traditional right traditional business development type activities.
And then we have historically been successful with Ah things like grants from the NIH.
The the aggregate of all of these opportunities are things that we're always interested in because anytime we have the opportunity to avoid having to issue lineage common stock and instead funds through other avenues as we have for a long time and we hope to continue to do.
We feel like that puts the company in a very strong position.
If you think about CIRM in particular, they had exhausted the original funding, but they are going back to the voters of California to seek out additional funding and my understanding is that of the $5 billion. That's being requested approximately 1.5 billion is.
Earmarked for neurological indications spinal cord injury would fit into that bucket. So that's one area that if money becomes available I imagine we would want to apply for some of it and we probably apply for more money than we received but we really like that way of trying to maintain our business.
Great. Thanks, a lot Brian.
You bet. Thank you Joe.
Thank you our next question or comment comes from Milan.
Okay Mccarthy from Chardan Your line is open.
Yes. Thank you.
Brian a with respect to the operator Jim.
Good job pieces future with the gyroscope device refers to anything you can tell us about a baseline characteristics of the two patients it may have been.
What I'll do K is all hand that question off to Gary who manages the program and.
Yes. Thanks for the question. Okay. So all of our guard formations have less severe disease than the previous for three cohorts, so smaller areas of GA better vision.
Analysts history of disease.
So in particular, the two over patients, though they had to be worse than 2100 as two person humans.
Orbit.
2.0 version and our options on object. So our 50 committee one of the initial first appears to be worse than 21 hundreds versus 20.
When I went to 25 in the second was 2100.
So no given that both of those went well we can move towards the full per protocol.
20, 64.2 50.
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Okay.
And having had no constraint as the.
Staggered enrollment would move how soon can get more sites up and when should we expect the mix patients to be treated right. So our first we had two sites that we've added on one facility eye Institute and get a little B wells.
Hi, guys, who does already screen the for subject screen Windows eight weeks, so that vision right now is having the images reviewed blood work and we'll see how the Nobel legal.
Eligible.
And we hope will start up shortly as well.
Okay, and then just to have that back to.
I don't blame you talked about things have picked up a little bit but in terms of Ah.
Perhaps a timeframe for you to exercise your option.
Can you know that down a little bit forces out.
No second half 20 or is that something that.
It doesn't occur until sometime in 2021.
Oh, so again with respect to what I'm allowed to say I think I think we've we've said that we expect that decision to occur this year.
I don't think I could narrow with but what I would say in terms of process like how we approach. It there are trade offs you could go sooner with less information you could go leader with more information, but for US our view of it is at some point there maybe a threshold.
And if we meet that threshold, meaning we see enough that we feel good about and we can arrange to exercise an option that's fantastic we'd like to do that so I think what we expect is based on a recent acceleration in that program that that's an assessment or a judgment that we would make this year.
It's possible it could be.
In a subsequent year, but I think we're quite comfortable saying that that's a twentytwenty event.
Okay, and then just finally, maybe for Brandy.
With respect to that did you may ask the snow.
What.
What under what circumstances would you may not be able to capture those funds.
In Q3 initiative.
Yeah. So as I mentioned, we do have the right to review their financial statements. So I get to analyze their cap cash position a few things like make sure that they have than our note on their balance sheet. So those things are the things can be done, but I will note that the their note is convertible and so if an IPO is done by Juvin S.
And with proceeds of at least $50 million that no would convert into those given us and securities. So that's kind of what we look at as being one of the things, where we might not get cash we might get a securities instead.
Wood and again.
Maybe you can't predict this book.
If they did have an IPO would that be you know a lock up period on those shares.
Yeah, I mean, I think it's fairly typical that there would be a lock up I think thats, a pretty normal thing to have but obviously, we're in good discussions with you in essence, we talked to them on a regular basis and so if they were going to go public we would we would have those discussions with them in advance.
Okay. Thank you very much.
Thank you I'm showing no additional questions in the queue at this time I'd like to turn the conference back over to management for any closing remarks.
Alright, thanks, everyone I really appreciate you joining us. This afternoon. We're obviously very excited about our plans we have a lot to look forward to we are we certainly appreciate our shareholder and other folks support as we position lineage too to become a leader in in cell therapy and cell transplant medicine, and we're looking forward to demonstrating what origin can do for people with.
Dry AMD.
Ladies and gentlemen, thank you for this concludes todays conference call. Thank you for participating you may now disconnect everyone have a wonderful day.
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