Lineage Therap (LCTX) Risk Analysis

Our product candidates are derived from pluripotent cell sources, including hES cell lines and an iPSC line, and depend on multi-step processes such as cell expansion, banking, differentiation, purification, cryopreservation and thaw, each of which may contribute to genetic instability, epigenetic changes, or selection of cell subpopulations over time. Pluripotent cells and their differentiated progeny may acquire chromosomal abnormalities (including aneuploidy), copy number variants, structural variants, point mutations, or other alterations during derivation, reprogramming, expansion, or extended culture, including changes that confer a growth advantage and may therefore become enriched in a cell bank or manufacturing process. In addition, even in the absence of detectable genetic abnormalities, cell populations may undergo phenotypic drift (including altered differentiation propensity, maturity state, function, or secretory profile) that could affect product potency, durability, or safety. Certain genetic or phenotypic changes could increase the risk that administered cells proliferate in an uncontrolled manner, form ectopic tissue, or otherwise contribute to tumor formation, and residual undifferentiated pluripotent cells in a final product may present a risk of teratoma or other tumorigenic outcomes. Although we employ qualification, in-process controls, and release testing, no testing strategy can provide absolute assurance that all potentially harmful genetic variants, rare subclonal populations, or tumorigenic cells will be detected, particularly where such variants are present below assay detection limits or arise after testing is performed. If a clinically relevant abnormality or tumorigenic potential were suspected or identified, we or our collaborators could be required to halt manufacturing, place clinical trials on hold, conduct additional preclinical studies (including tumorigenicity assessments), implement new analytical methods, modify dosing or administration, impose additional patient monitoring and long-term follow-up, narrow intended patient populations, implement risk management measures, or discontinue development of an affected product candidate. Because our allogeneic programs generally rely on a limited number of master and working cell banks derived from a single foundational line, the discovery of a material genetic abnormality, phenotypic drift, or tumorigenicity signal in a foundational line or bank could require us to discard existing inventories and cell banks, generate and qualify replacement banks, and demonstrate comparability to prior material. Any such replacement or comparability effort may require additional regulatory submissions and could require new or repeated clinical studies. These events could materially and adversely affect our business, financial condition, results of operations, and development prospects.

OpRegen is currently being evaluated by our partners Roche and Genentech in the GAlette study, which is currently at clinical sites across the U.S. and Israel, and we or our collaborators may in the future conduct one or more of our clinical trials for our product candidates outside the United States. The acceptance of study data from clinical trials conducted outside the United States or another jurisdiction by the FDA or comparable foreign regulatory authority may be subject to certain conditions or may not be accepted at all. In cases where data from foreign clinical trials are intended to serve as the sole basis for regulatory approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless the data are applicable to the United States population and United States medical practice; the trials were performed by clinical investigators of recognized competence and pursuant to GCP regulations; and the data may be considered valid without the need for an on-site inspection by the FDA, or if the FDA considers such inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means. In addition, even where the foreign study data are not intended to serve as the sole basis for approval, if the relevant study was not conducted pursuant to an IND, the FDA will not accept the data as support for a marketing application unless the study was conducted in accordance with GCP requirements and the FDA is able to validate the data from the study through an onsite inspection if deemed necessary. Many foreign regulatory authorities have similar requirements for clinical data gathered outside of their respective jurisdictions. There can be no assurance the FDA will accept data from clinical trials conducted outside of the United States. If the FDA does not accept data from our clinical trials of our product candidates, it would likely result in the need for additional clinical trials, which would be costly and time-consuming and delay or permanently halt our development of our product candidates. A party conducting a clinical trial outside the United States also exposes such party to additional risks, including risks associated with: additional foreign regulatory requirements; foreign exchange fluctuations; compliance with foreign manufacturing, customs, shipment, and storage requirements; inconsistent standards for reporting and evaluating clinical data and adverse events; diminished protection of intellectual property in some countries; public health concerns or political instability, civil unrest, war, or similar events that may jeopardize our ability to commence, conduct, or complete a clinical trial and evaluate resulting data; challenges with enrolling enrolled patients in foreign countries to adhere to clinical protocols as a result of differences in healthcare services or cultural customs; and political and economic risks, including war, relevant to such foreign countries.

We are developing a pipeline of allogeneic cell therapy product candidates with cells that we create by applying proprietary directed differentiation processes to established pluripotent cell lines. The cells we manufacture must be transplanted into patients in an effort to replace or support cells that are absent or dysfunctional due to degenerative disease, aging, or traumatic injury, and restore or enhance the patient's functional activity. Allogeneic cell therapy is still an emerging area of therapeutic medical intervention, and as such, it is difficult to accurately predict the type and scope of challenges we and our collaborators may face during the identification and development of our product candidates. To date, there is only one FDA-approved allogeneic RPE cell-based product and it is an encapsulated cell-based gene therapy; it does not integrate into the retina. Although there are clinical trials of other pluripotent stem cell-derived therapeutic candidates ongoing, we do not believe that the FDA has granted marketing approval to any pluripotent stem cell-based therapeutic product, and we are not aware of any regulatory approvals of any iPSC-derived therapeutic candidate anywhere in the world other than conditional and time-limited approvals granted in February 2026 by a committee of Japan's Ministry of Health, Labor and Welfare's Pharmaceutical Affairs Council for Reheart and Amchepry. Those conditional and time-limited approvals were based on the likelihood of the efficacy of these candidate therapeutics, allowing them to be sold provisionally; further testing will be needed to demonstrate safety and efficacy. These candidate therapeutics were only presumed to be effective by the committee of Japan's Ministry of Health, Labor and Welfare's Pharmaceutical Affairs Council, with trials observing symptom improvement in four of six Parkinson's patients and in all eight heart failure patients, but with no comparisons against patients who did not receive the treatments. Accordingly, these conditional approvals should not be construed as establishing confirmed safety or efficacy of iPSC-derived therapies, and the framework under which they were granted is not equivalent to the full marketing authorization process that our product candidates would need to satisfy to be commercialized in the United States or other major markets, including generating substantially more clinical data-including from large, controlled trials with direct comparator arms. If any cell therapies that have received conditional, accelerated, or other non-traditional regulatory approvals in Japan or other jurisdictions subsequently experience serious adverse events ("SAEs") or adverse events ("AEs"), clinical trial halts, regulatory enforcement actions, product withdrawals, or the imposition of additional restrictions, such developments could have significant negative consequences for us, even if our product candidates are not implicated in the underlying events. For example, adverse safety events in other conditionally approved or investigational cell therapies could cause the FDA or other regulatory authorities to adopt more conservative regulatory positions, impose additional preclinical requirements, increase evidentiary expectations for clinical development, require more extensive manufacturing controls or long-term follow-up studies, or impose additional post-marketing conditions for cell therapy programs broadly. Any such changes could increase our development costs, extend our development timelines, or reduce the likelihood or timing of approval for our product candidates. In addition, negative developments involving cell therapies - whether our product candidates or those of third parties - can reduce investor confidence in the cell therapy sector broadly, adversely affect the market price of cell therapy companies' securities, and impair the ability of companies in our industry to access capital, and adverse safety signals or negative public perception arising from SAEs in other cell therapy programs could cause potential collaboration partners to reduce their interest in cell therapy programs more broadly, demand more extensive safety data before entering into collaborations, or seek more favorable terms reflecting perceived sector-wide risk. Because cell therapy remains a nascent and rapidly evolving field, and the regulatory framework for the approval of pluripotent stem cell-derived and iPSC-derived therapies has limited established precedent in major markets, we and our collaborators face heightened challenges and uncertainties and potentially a longer regulatory approval process for our product candidates compared with therapeutic candidates with more established clinical development and regulatory approval pathways. We and our collaborators face significant challenges and uncertainties associated with the identification, manufacture, preclinical and clinical development, regulatory approval pathway, and third-party payor coverage and reimbursement of our product candidates required for successful commercialization, including: - successfully identifying potential product candidates;- manufacturing our product candidates to our internal standards and those of our collaborators, as applicable, as well as to applicable regulatory specifications, in a timely manner, and on the scale necessary to support larger-scale clinical trials, and, if approved, commercialization;- understanding and addressing variability in our cell manufacturing processes, which could affect our ability, or the ability of our collaborators, as applicable, to produce clinical trial material and, if approved, commercial product in a reliable and consistent manner;- designing and completing clinical trials of our product candidates that will demonstrate their safe and effective use to treat the targeted disease or other medical condition;- sourcing clinical and, if approved, commercial supplies of key components required for the manufacture of our product candidates;- developing formulations of our cells that reduce or eliminate dose preparation or other complexities of handling and administration of our product candidates at the point of care;- identifying and developing the appropriate hypoimmune strategies to prevent or reduce immune rejection of our cell-based product candidates;- identifying, developing and validating delivery systems and methods for successful surgical transplantation of our cells;- obtaining regulatory approval, as the regulatory frameworks for approval of potential allogeneic cell therapy products and products created with gene-editing technology in and outside of the U.S. are evolving;- establishing sales, marketing, and compliance capabilities to gain acceptance of a novel therapy, if approved;- obtaining sufficient product coverage and reimbursement from third-party payors such as government healthcare administration authorities and private healthcare insurers for any approved product to enable the product to compete in the marketplace and become commercially profitable; and - obtaining and maintaining meaningful intellectual property protection for our product candidates, the process used to manufacture them and the methods for using them in order to prevent third parties from making, using, selling, offering to sell or importing our product candidates or otherwise exploiting our cell manufacturing processes. If we and our collaborators are not successful in addressing key challenges in development and commercialization of our cell therapy product candidates, or if our product candidates and technologies do not prove to be safe or effective for the indications for which they are being developed, our business prospects and revenue opportunities will be materially limited.

We have multiple cell therapy programs in development and limited resources. In addition, we maintain a list of additional undisclosed product candidates which may be considered for development or partnership in the future, and which altogether cover a range of therapeutic areas and conditions. We have and may continue to expand our research and development efforts into therapeutic areas and conditions outside of our initial focus in neurology and ophthalmology and where we have limited experience. We also have contractual commitments to conduct certain manufacturing and development activities, and do not have unilateral discretion to vary from such efforts. As a result,we may forego or delay pursuit of existing or new development opportunities that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. For example, we may invest our resources in a limited number of more advanced programs in the shorter term and reduce our investment in promising earlier stage programs. Such decisions would require us to limit the breadth and diversity of our product candidate pipeline, which could potentially limit the long-term growth of our product portfolio and subject us to greater risk that the failure of any such programs would harm our prospects. Alternately, we may delay or abandon more advanced programs to increase investment in promising earlier stage programs. Our spending on current and future research and development programs, manufacturing technology, and product candidates may not yield any commercially viable products. If we do not accurately evaluate the clinical or commercial potential or target market for a particular product candidate, we may focus our resources on product candidates that do not demonstrate successful preclinical or clinical results or commercial viability at the expense of other programs that may have had greater success, or relinquish valuable rights to that product candidate through future collaborations, licenses and other arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

The clinical development of OPC1 has been supported in part by $14.3 million of funding from CIRM, a state agency established to fund stem cell research and development of new stem cell-based treatments. In June 2025, we applied for approximately $7.0 million of additional funding from CIRM to support continued clinical development of OPC1 for the treatment of SCI. In November 2025, we elected to withdraw that application following comments we received from CIRM to the application. There were no specific content deficiencies identified by CIRM in the application. We submitted a revised application in January 2026, which we believe responds to feedback we received from CIRM in November 2025. However, CIRM may determine not to accept our application for review or, even if our application is accepted, CIRM may decline to award any additional funding or may award significantly less additional funding than we applied for. Moreover, we expect that any CIRM funding will only be applicable to expenses we incur after the date of receipt of an appliable grant and that expenses incurred by us prior to the receipt of any such grant will not be eligible for CIRM funding. If we are unable to timely obtain another CIRM grant or if the amount of grant funding we receive from CIRM, if any, is significantly less than we applied for , the timeline for the DOSED clinical study may be adversely affected and we may be unable to complete the study or we may need to raise funds through other means to continue clinical development of OPC1, which could have a higher cost of capital, cause dilution to our shareholders, restrict our operations or require us to relinquish rights on unfavorable terms. In addition, the terms of our grant award from CIRM require, and we expect the terms of any future grant from CIRM, if any, will require, royalty payments to CIRM based on sales of products developed with CIRM funding, if any, which will reduce our profits on sales of such products. See Item 1. "Business-Grants from Government Entities," above for additional information.

Our research and development activities are costly, time consuming, and their results are uncertain. We incurred research and development expenses amounting to approximately $17.7 million and $12.5 million during the fiscal years ended December 31, 2025 and 2024, respectively, and we expect to continue to incur substantial research and development expenses. If we successfully identify and develop a new technology or product candidates, refinement of the new technology or product and definition of the practical applications and limitations of the technology or product may take years and require large sums of money. Clinical trials of new therapeutic products, particularly those products that are regulated as biologics, drugs, or devices, such as our product candidates, are very expensive and take years to complete. Only a small percentage of therapeutic product candidates that enter the development process ever receive marketing approval. Even with substantial spending on research and development of our product candidates, they might not prove to be safe or efficacious in the human medical applications for which they are being developed, or they may prove too expensive to manufacture or otherwise fail to gain sufficient market acceptance to be commercially viable.

We received RMAT designation from the FDA for OPC1 for the treatment of subacute SCIs and Genentech received RMAT designation from the FDA for OpRegen for the treatment of GA secondary to AMD, and we or our partners may seek RMAT designation for other product candidates. There is no assurance that we or our partners will obtain RMAT designation for any other current or future product candidates. RMAT designation does not change the FDA's standards for product approval, and there is no assurance that such designation will result in expedited review or approval or that the approved indication will not be narrower than the indication covered by the RMAT designation. Additionally, RMAT designation can be revoked if the criteria for eligibility cease to be met as clinical data emerges.

All of our product candidates will require substantial additional development, and no assurances can be given that the development of any of our product candidates will ultimately be successful, whether development activities are conducted by us or a strategic collaborator. Results from preclinical testing and clinical studies of our product candidates, may support continued development and we or a collaborator may spend significant time and resources on development of a potential product based on results of such early studies, but product candidates in later stages of development may fail to demonstrate safety and efficacy results necessary for regulatory approval or commercial viability. Many companies in our industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy, insufficient durability of efficacy or unacceptable safety issues, notwithstanding promising results in earlier trials. Most product candidates that commence clinical trials are never approved as products. A failure of one or more clinical studies can occur at any stage of development, including in a post-approval study. In later clinical studies, our product candidates may not demonstrate the efficacy, durability of efficacy, or safety achieved in preclinical and earlier clinical studies for a variety of reasons, including: - changes to the manufacturing process or facility for a product candidate in an effort to improve, standardize, and scale up the manufacturing or transfer manufacturing to a third party, and any resulting changes to the product candidate that adversely affects the safety, purity, potency or efficacy of such product candidate;- differences in delivery systems or other methods of transplant or administration of our cell formulations;- differences in trial design, including number of subjects, controls (type and number), eligibility criteria, patient populations, and endpoints;- the complexity of our product candidates;- advancements in the standard of care, including newly approved and/or marketed products, may affect our ability or that of a collaborator to demonstrate efficacy or achieve trial endpoints in current or future clinical trials of our product candidates; and - variability in interpretation and analysis of study data. For example, positive data from the Phase 1/2a clinical trial of OpRegen are not necessarily predictive of results that may be seen from the ongoing Phase 2a clinical trial of RG6501 (OpRegen) being conducted by Roche. We do not yet know how OpRegen will perform in that Phase 2a trial or future clinical trials. Even if prior, current and planned clinical trials of our product candidates are successful, additional clinical trials, which may include registrational trials, trials in additional patient populations or under different treatment conditions, and trials using different manufacturing protocols, processes, materials or facilities or under different manufacturing conditions, will be necessary before we or our collaborators are able to seek approvals for our product candidates from the FDA and regulatory authorities outside the United States to market and sell these product candidates. Our failure, or that of our collaborators, to meet the requirements to support marketing approval for our product candidates in ongoing and future clinical trials would substantially harm our business and prospects. If clinical trials of our product candidates are not successful, our business, financial condition and results of operations could be materially harmed, and the price of our common shares may decline significantly following announcement of an unsuccessful clinical trial.