Lineage Cell Therapeutics Provides End of Year Shareholder Letter

Lineage Cell Therapeutics, Inc. (NYSE American and TASE: LCTX), a clinical-stage biotechnology company developing allogeneic cell therapies for unmet medical needs, today provided a year-end review and an outline of its plans for 2021.

To Our Shareholders,

As we reach the end of an eventful 2020, we are inspired by the many healthcare providers and biopharmaceutical companies that worked to combat the COVID-19 pandemic. This year has been difficult, but it has reinforced the importance of our mission: to treat and potentially even reverse the effects of serious diseases and conditions by advancing our novel cell therapy product candidates through clinical trials and into the hands of physicians. Although our industry has enjoyed many successes lately, those affected by the conditions we are focused on still need better choices.

Following changes to our leadership team in late 2018 and early 2019, we have sought to transform Lineage into the preeminent allogeneic cell transplant company. Our work began modestly, but we hit our stride in 2020 and reached important clinical, manufacturing, and business milestones this year, which created substantial value and advanced us toward our ultimate goal. In parallel, a number of cell therapy milestones were reached by other companies and academic institutions, strengthening our belief that the field has entered a turning point and is poised for explosive growth in the months and years ahead. We want to be prepared for that growth, so we are looking toward 2021 and mapping out additional milestones we want to deliver to our shareholders next year.

We are fortunate to have attracted may new shareholders this past year, so it is important from time to time to outline our basic approach to building a successful company and explain how it differs in advantageous ways from many others working in cell therapy.

Our basic approach is akin to transplant medicine, in which specific cell types are used to replace the ones which have been lost to disease, not unlike a bone marrow transplant. In certain settings, we believe that transplanting whole human cells can offer a more attractive safety profile and predictable behavior than introducing foreign molecules into the body.

Most importantly, our therapeutic products are derived from well-characterized pluripotent stem cell lines. These cells can become any of the cell types in your body, from bone to brain to blood, and starting with pluripotent stem cell lines means we have a virtually unlimited supply of starting material. From these cells we apply proprietary methods to manufacture pure populations of only the cell types which we wish to use in patients. Notably, we never modify the DNA of these cells, which avoids some of the safety concerns that have been reported with certain gene-editing technologies.

Deriving cell therapy products from pluripotent stem cells offers a second critical advantage; it allows our cells to be used as allogeneic or “off the shelf” transplants in patients – an approach which offers major advantages in terms of cost and scale of production, and which may be able to offer additional benefits which traditional therapeutic modalities are unable to achieve, such as restoring lost tissue.

We next make intelligent investments in our manufacturing and delivery methods, to help establish best-in-class products for end-users and strong competitive advantages to protect our products and intellectual property over the long term. As a reminder, there currently is no FDA approval pathway to develop a generic or biosimilar copy of a cell therapy product, which provides a significant barrier-to-entry from generic competition.

Finally, we seek to generate compelling clinical data to support moving into late-stage clinical trials and eventual marketing authorizations. We believe that we already are seeing data that supports advancing all three of our clinical-stage products into additional trials which, in some cases, may be registrational.

Therapeutic product development is a long process, but we’re making great progress. Our goal of building Lineage into the preeminent cell therapy company is ambitious but attainable. We know of no other company that possesses a comparable combination of cell therapy patent breadth, in-house manufacturing capabilities, and encouraging clinical evidence in three distinct disease areas, each with large unmet medical needs and billion-dollar commercial opportunities. The safety and efficacy data we have seen to date encourages us to continue advancing our product candidates closer to late-stage clinical trials and potential corporate partnerships.

In addition to our overall product development strategy, we’ve conducted some transactions which can help build value for Lineage shareholders over the longer term. For example, we have successfully monetized portions of Lineage’s non-core patent portfolio, including through the creation and subsequent sale of businesses like AgeX and OncoCyte, transactions which helped fund our clinical programs without the need for traditional equity financings. It is worth highlighting that we have not needed to conduct a traditional equity financing in more tha