The following discussion and analysis of financial condition and results of operations should be read in conjunction with our accompanying unaudited condensed consolidated interim financial statements and notes thereto and our audited financial statements and notes thereto for the year ended December 31, 2025 included in the 2025 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 the 2025 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 cell replacement therapies to treat serious medical conditions. Certain diseases and medical events can arise from the loss of critical cellular activity and lead to devastating or difficult-to-treat conditions or impairments. Our work is grounded in the emerging evidence that replacing or supporting those cells that have become dysfunctional or “lost” (destroyed or dead) can restore or replenish normal function and improve treatment and recovery paradigms. We call this approach “Replace and Restore”. We believe cellular therapies aimed at replacing dysfunctional or destroyed cells may have more durable, broader, or suitable applicability than traditional pharmaceutical products, which often seek to affect just a single molecular target or group of biological pathways. Transplantation of replacement cells represents an emerging branch of medicine, and we believe we are uniquely positioned to capitalize on its opportunities by demonstrating the value of administering mature, differentiated cells to patients.
Our development programs are based on our proprietary, in-house, cell-based manufacturing platform, which we call AlloSCOPE™ (Allogeneic, Scalable, Consistent, Off-the-shelf, Pluripotent Cell Engineering), and supported by our associated development, formulation, manufacturing, and delivery capabilities. The AlloSCOPE platform is a proprietary differentiation and production modality from which, i) a single, well-characterized pluripotent cell line can create a stable current Good Manufacturing Practice (cGMP) master cell bank (MCB), ii) a vial from our MCB can create a cGMP working cell bank (WCB), and iii) a vial from our WCB can create several hundred to many thousand vials of a final, allogeneic cell-based product, ready for patient dosing. This process can confer consistent, cost-effective, and scalable cell-based production. Importantly, the AlloSCOPE platform can be applied across multiple programs, which we believe could offer advantages in the pursuit of commercially successful, allogeneic and “off the shelf” cell therapies. In some instances, we also apply a proprietary “thaw-and-inject” formulation into our product profiles, which allows for rapid dosing and “immediate use” of our cells. This formulation technology can greatly reduce the lengthy dose preparation steps often associated with certain cell therapy programs. AlloSCOPE “5D” is an application of our AlloSCOPE platform, with the goal of generating large-scale production of pre-differentiated cells with reduced manipulation and passaging, and has been deployed across selected preclinical programs to date.
Our business strategy aims to efficiently leverage our AlloSCOPE platform and our development and manufacturing expertise to create a pipeline of related but discrete cell-based assets, some of which we may advance internally toward commercialization and some of which we may seek to partner during early or late development, if we believe doing so will enhance their probability of success and add value to Lineage and our shareholders. In some cases, the cells we manufacture or plan to manufacture have a clear clinical precedent from cadaveric sources, such as the use of corneal endothelial cells to improve vision in patients with Fuchs’ corneal dystrophy or the well-established use of islet cells to achieve insulin independence in patients with Type 1 Diabetes, each indication already having approved products or procedures in certain jurisdictions. In other cases, the utility of replacing a specific cell or related cells still needs to be established. All of our product candidates are based on our core AlloSCOPE platform, and utilize our extensive expertise in the directed differentiation and scalable production of pluripotent cells into discrete cell types of the human body.
Our pipeline currently includes:
•OpRegen (RG6501), our most clinically advanced program, an allogeneic retinal pigmented epithelial (RPE) cell replacement therapy currently in Phase 2a development under a worldwide collaboration and license agreement with F. Hoffmann-La Roche Ltd. and Genentech, Inc., a member of the Roche Group (collectively or individually, “Roche” or “Genentech”), for the treatment of geographic atrophy (GA) secondary to dry age-related macular degeneration (dry-AMD).
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•OPC1, an allogeneic oligodendrocyte progenitor cell therapy currently in Phase 1/2a development for the treatment of spinal cord injuries (SCI).
•ReSonanceTM (ANP1), an allogeneic auditory neuron progenitor cell transplant therapy currently in preclinical development under collaboration with William Demant Invest 2 Aps (WDI) for the treatment of auditory neuropathy.
•COR1, an allogeneic corneal endothelial cell (CEnC) transplant therapy currently in preclinical development for the treatment of corneal endothelial disease, with applicable indications expected to include Fuchs Endothelial Corneal Dystrophy (FECD) and Bullous Keratopathy.
•ILT1, a pluripotent cell manufacturing initiative, intended to support the large-scale production of undifferentiated pluripotent cells, which if successful and applied to islet cell differentiation, could support cell transplant treatment candidate for Type 1 Diabetes (T1D).
•RND1, a novel hypoimmune induced pluripotent stem cell line being evaluated under a gene editing partnership with Factor Biosciences Limited (Factor) for the development of a cell transplant candidate for the potential treatment of an undisclosed indication.
•PNC1, an allogeneic photoreceptor cell therapy research initiative for the potential treatment of vision loss due to photoreceptor dysfunction or damage.
For additional information regarding our clinical programs, business strategy, AlloSCOPE platform, pipeline of preclinical programs and research initiatives, our collaborations and the grants we have received from governmental entities, see Item 1. Business in Part I of the 2025 10-K.
Recent Events
Set forth below is a discussion of recent events and developments relating to our business. The following discussion should be read in conjunction with the description of our business set forth in Item 1. Business in Part I of the 2025 10-K.
OpRegen Program for Dry-AMD with Geographic Atrophy
OpRegen is currently being evaluated by Roche and Genentech in a Phase 2a multicenter clinical trial in patients with GA secondary to dry-AMD, the “GAlette” study, which is currently open and active at 17 clinical sites in the U.S. and Israel (ClinicalTrials.gov ID NCT05626114). Our earlier Lineage-sponsored Phase 1/2a study has completed enrollment; we continue to perform certain closeout and data analysis related to that study. In addition, we continue to have some manufacturing and process development activities under the Roche Agreement.
In May 2026, Roche and Genentech presented data from the Phase 1/2a study at Foundation Fighting Blindness’ Retinal Therapeutics Innovation Summit 2026. Highlights include that (i) gains in best corrected visual acuity (BCVA) in patients in Cohort 4 (less advanced GA than in other cohorts) measured at month 12 remain evident through month 36; (ii) improvement in BCVA and outer retinal structure in patients with extensive OpRegen bleb coverage of their GA area was greater than in patients with limited coverage and persisted through month 36; (iii) in those patients who received extensive coverage of OpRegen cell therapy across their GA lesion (n=5), the mean change in BCVA was +9.0 letters for those completing 3-year follow-up (compared to +7.4 letters at 24 months) (Early Treatment Diabetic Retinopathy Study (ETDRS) assessment) and (iv) quantitative analysis of OCT imaging suggest evidence of partial restoration of the retina, including regions with re-appearance of an RPE layer and features associated with recovery of photoreceptors.
As previously reported, in the Phase 1/2a study, OpRegen has demonstrated the potential to slow, stop or reverse disease progression in GA secondary to AMD and these results, which were present at 12 months, have persisted through 24 and 36 months following a single administration of OpRegen. The Phase 1/2a study was an open-label, single-arm, multicenter, dose-escalation trial evaluating a single administration of OpRegen, the investigational product was delivered subretinally in patients with bilateral GA. Patient enrollment completed in November 2020, with 24 patients recruited into four cohorts. The first three cohorts enrolled only legally blind patients with a BCVA of 20/200 or worse. Cohort 4 enrolled 12 patients with impaired vision (BCVA from 20/65 to 20/250 with smaller mean areas of GA). Cohort 4 also included patients treated with a new “thaw-and-inject” formulation of OpRegen, which could be shipped directly to sites and used immediately upon thawing. The primary objective of the study was to evaluate the safety and tolerability of OpRegen as assessed by the incidence and frequency of treatment-emergent adverse events. Secondary objectives evaluated the preliminary activity of OpRegen treatment by assessing the changes in ophthalmological parameters measured by various methods of primary clinical relevance. Long-term follow-up of patients in this study is currently ongoing.
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OPC1 Program for Spinal Cord Injury
In March 2026, the second chronic SCI participant with neurologically complete SCI injury was treated in the DOSED (Delivery of Oligodendrocyte Progenitor Cells for Spinal Cord Injury: Evaluation of a Novel Device) study at UC San Diego Health, and the novel delivery system successfully administered a one-time injection of OPC1. Our DOSED clinical study will evaluate the safety and utility of a novel spinal cord delivery device designed to administer OPC1 to the spinal parenchyma in both subacute (between 21 to 42 days following injury) and chronic (between 1 to 5 years following injury) spinal cord injury.
In July 2026, the first chronic SCI participant treated in the DOSED study was evaluated at their one-year post treatment follow-up appointment, in which neurological stability was observed across motor, sensory and Upper Extremity Motor Score (UEMS) at all measured time points, from baseline through their 1-year assessment.
ReSonance Program for Hearing Loss
Our most advanced preclinical product candidate is ReSonance (ANP1), an allogeneic auditory neuron progenitor cell transplant, currently in preclinical development for the treatment of sensorineural hearing loss. In August 2025, we announced that we entered into the RCA with WDI to advance the preclinical development of ReSonance for the treatment of hearing loss. WDI agreed to fund up to $12 million in research collaboration costs over the approximate three-year term of the agreement, for activities conducted in accordance with a schedule of planned activities and budget agreed to by the parties (the “RCA Budget”). Under the RCA Budget, development activities are being jointly conducted and managed by Lineage and scientists from Eriksholm Research Centre, part of Oticon A/S, which is a subsidiary of the Demant Group and an affiliate of WDI, with approximately 65% of the original budget designated to reimburse Lineage for its allocation of work on the Project. Through June 30, 2026, Lineage has received approximately $2.6 million. The main objective of the agreement is for the parties to complete a preclinical phase achieving readiness to potentially progress to human clinical trials under one or more separate clinical agreements, the terms of which would be negotiated in good faith before the expiration of the agreement. To date, we have successfully completed 3 engineering manufacturing runs, completed the internal technology transfer from our R&D team to our cGMP team, and completed one cGMP manufacturing run which is currently the subject of standard release testing. The parties have also established a novel model of deafening to support ReSonance functional preclinical testing under the collaboration. See Note 13 (Commitments and Contingencies—Collaborations—WDI Collaboration) to our condensed consolidated interim financial statements included in this report for additional information.
COR1 Program for Corneal Endothelial Disease
In March 2026, we announced the launch of our newest cell therapy program, COR1, a corneal endothelial cell (CEnC) therapy in preclinical development for the treatment of corneal endothelial disease. COR1 is a wholly-owned preclinical asset which benefits from our existing ophthalmology and manufacturing expertise and which represents a natural next application of our technology platform.
In July 2026, we reported positive development progress with COR1. Utilizing our AlloSCOPE platform, we successfully achieved seamless precursor bioreactor-based 5D expansion and differentiation to support CEnC production which, together with a thaw-and-inject formulation, can offer a potentially superior product profile and meets our internal criteria for continued preclinical advancement. We recently applied our AlloSCOPE 5D manufacturing process to the COR1 program, which is intended to further reduce production costs. Lineage has also elected to advance the COR1 program into in-vivo animal testing with initial preclinical data expected to be generated in 2026.
Millions of people are potential candidates for corneal transplants for which today there is only one donor for every 70 diseased eyes globally. The current supply of CEnCs from cadaveric sources is further limited by the low availability of organ donors, as well as by inconsistent yield and quality. CEnC therapy from cadaveric sources has already been approved in Japan to treat corneal endothelial disease, providing evidence for the underlying mechanism of action. The cornea is a relatively accessible site for transplantation, with a simple injection-based delivery method and a long clinical track record from donor-based procedures. In addition, the eye offers a degree of immune privilege, potentially reducing the risk of immune rejection.
The COR1 program targets an area where the current fundamental limitation is the supply and shelf life of material, as existing approved CEnC transplant therapy relies heavily on cadaveric tissue donors with variable yield, quality, and durability. This imbalance highlights the need for a reliable, consistent, and scalable source of cells. Importantly, the unmet need is significant and CEnC transplant therapy is already clinically validated, with preclinical models, endpoints, and clinical and regulatory precedents, which are well-established.
Utilizing our AlloSCOPE platform, we are manufacturing CEnCs with identity, morphological, and functional characteristics that meet our initial internal criteria and support further development. Applicable indications for COR1 are expected to include Fuchs Endothelial Corneal Dystrophy (FECD) and Bullous Keratopathy. Fuchs’ corneal dystrophy is a progressive, often hereditary condition where cells on the inner layer of the cornea die, causing cornea swelling and vision loss. In the advanced setting, DMEK (Descemet’s
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membrane endothelial keratoplasty) is a surgical option consisting of replacing the diseased cells with a donor graft, often leading to improved vision. As of 2022, FECD affects about 7.3% of adults over the age of 30 globally, with a projected affected patient population expected to rise to approximately 415 million by 2050.
Islet Cell Transplant Manufacturing Initiative
In September 2025, we announced the launch of ILT1, a new manufacturing initiative employing AlloSCOPE 5D platform technology. AlloSCOPE 5D describes an application of AlloSCOPE with the goal of higher scale production of pre-differentiated cells with reduced manipulation and passaging. ILT1 is initially focused on addressing the challenges of large-scale production and aims to produce highly synchronized pluripotent cells, which if successful at a large scale could thereafter be applied to an islet cell differentiation process to ultimately support the production of allogeneic islet cells for a potential treatment for Type 1 Diabetes (T1D). This initiative is focused initially on expanding our existing AlloSCOPE platform to become capable of significantly greater production of undifferentiated pluripotent cells than our current capability, with the overall goal of establishing a production modality that can be applied to islet cell differentiation to ultimately support an islet cell production process from expansion through differentiation in a dynamic culturing system. We believe that if this approach is successful it could potentially solve a major hurdle to production and commercialization of an islet cell therapy product candidate.
During the first half of 2026, we successfully continued to meet our internal milestones for our ILT1 manufacturing initiative, demonstrating a highly scalable and fully suspension-based process for generating undifferentiated pluripotent cells using one of our proprietary and in house cell lines. This initial work was successful at 0.5 liter scale and in the second quarter of 2026 we demonstrated development into a larger multi-liter format, which supports further and continued development. If successful at larger scale, we may seek to demonstrate AlloSCOPE 5D scalability with one or more internal or partner-sourced hypo-immune or non hypo-immune cell lines, suitable to support potential islet cell differentiation and preclinical testing. We additionally may seek to apply insights and process improvements we have learned or may learn through this process to other cell transplant programs, including programs we may launch in the future.
Other Programs and Technologies
The pluripotent cells underlying our platform are by definition, capable of becoming any cell type of the human body. In some cases, pursuing the development of cell therapies for which a biological precedent exists may enable faster development of future product candidates underlying our platform and pipeline. We therefore maintain a list of additional potential product candidates which we may consider for development or partnership in the future, and which altogether cover a range of therapeutic areas and conditions. Generally, we expect that these potential product candidates will be based on the same AlloSCOPE platform technology and would employ a similar guided cell differentiation and transplant approach as our current product candidates, and in some cases may also include genetic modifications designed to enhance efficacy and/or safety profiles.
Israeli Regional Conflict
All of our manufacturing processes and development, including cell banking and product manufacturing for our cell therapy product candidates, are conducted by our subsidiary, CCN, at its facility in Jerusalem, Israel, and more than two-thirds of our workforce are CCN employees based in that facility. In addition, certain of the clinical trial sites for the OpRegen GAlette study are in Israel.
The 2026 Iran War and the ongoing conflict and hostilities in the Middle East has increased the risk of interruptions to our operations in Jerusalem and to the clinical trial sites for the OpRegen GAlette study in Israel, including due to increased risk of delays in the delivery of supplies and/or equipment, power interruptions, absence of workforce due to military service, cyberattacks, disruptions to transportation and logistics infrastructure, interruption of utility and communications services, and other events beyond our control. As of the date of the filing of this report, our operations in Jerusalem have not been materially or adversely disrupted, and we are not aware of any material disruption to the clinical trial sites for the OpRegen GAlette study in Israel. However, the situation continues to remain volatile, and it is currently not possible to predict the scope, duration or severity of present or future regional instability or its effects on our operations in Jerusalem or on such clinical trial sites. See the risk factor in Item 1A. Risk Factors in Part I of the 2025 10-K titled, “All of our manufacturing operations currently are conducted at our facility in Jerusalem, Israel. Accordingly, political and economic conditions in Israel and war, cyberattacks, terrorist attacks or other armed conflicts involving Israel and the broader region could directly affect our business. Any event or condition that significantly disrupts our ordinary course of operations at our Jerusalem facility could harm our business and materially and adversely affect our financial condition and operating results.”
As a result of safety concerns and in response to government-imposed restrictions on movement and travel and other precautions taken to address the Israeli regional conflict, our operations at our CCN facility in Jerusalem were temporarily impacted in the past. In light of the ongoing conflict and hostilities in the Middle East, similar government-imposed restrictions on movement and travel and other precautions may be implemented, which could materially and adversely affect our operations in Jerusalem. In addition, a number of our CCN employees in Israel are members of the military reserves and subject to immediate call-up in response to regional instability.
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Male Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. Several employees in Israel, including CCN’s chief executive officer, were activated for military duty in the past, and they and other employees may be activated for military duty in the future, which could adversely impact our operations. The general impact on employees operating in a region of conflict could also adversely impact our operations. Although we have business continuity plans in place to address medium- or long-term disruptions that could result from regional instability, those plans are limited and do not account for every possible scenario, and in addition, any long-term closure of our CCN facility, or if that facility were damaged, or if hostilities otherwise disrupt operations at that facility, or if a meaningful number of employees are unable to work for significant portions of time, our operations would be materially and adversely impacted.
Our commercial insurance may not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business.
Macroeconomic, Political, and Regulatory Environment Considerations
Our business, financial condition, operating results, stock price, and our ability to raise additional capital may be adversely affected by evolving macroeconomic, political, and regulatory developments and conditions, such as inflation, trade disruptions and restrictive measures, including tariffs, high interest rates, slowed economic growth or recession, federal spending reductions and sequestration risks, volatility in financial markets, liquidity concerns at financial institutions, supply chain disruptions, changes in the regulatory landscape in the U.S., including due to significant reductions in funding and staffing of federal agencies and changes in leadership, and geopolitical factors. Further, third parties with whom we have business relationships, including clinical sites, financial institutions, and our collaborators, may be adversely affected by the foregoing risks, which could directly impact our ability to achieve our operating goals within planned timelines and budgets.
In addition, there may be significant future effects on the pharmaceutical and biopharmaceutical industries as a result of federal policy and regulatory changes, including in areas relating to regulatory framework and oversight, research and development funding, drug pricing reform, global trade policy and tariffs, and others. Executive branch cost-cutting initiatives have resulted in significant reductions in staffing levels at the FDA and other governmental agencies. These reductions have impacted, and may continue to impact, agencies’ ability to retain key personnel and hire additional personnel, which may disrupt their ability to perform routine activities or function in the normal course. For example, with respect to the FDA, this may result in delays or limitations on our ability to obtain guidance from agency staff and slow review times for applications we submit with respect to clinical studies, any of which could negatively impact the cost and timelines for developing and obtaining regulatory approval of our product candidates. Moreover, the current U.S. presidential administration has taken and may take additional future actions to freeze or reduce federal funding for medical research, which could decrease the ability of facilities that rely on such funding to conduct clinical trials or increase the costs to us of conducting clinical trials at those facilities. Given the rapidly evolving nature of federal policy, enforcement, and regulatory changes, we cannot reasonably predict the potential impact on our business at this time.
Critical Accounting Policies and 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 the discussion under the Critical Accounting Estimates heading in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Result of Operations in the 2025 10-K and our audited financial statements and notes thereto for the year ended December 31, 2025 in Part II, Item 8 of the 2025 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. The estimates and judgments involved in our accounting policies as described in our audited financial statements and notes thereto for the year ended December 31, 2025, continue to be our critical accounting policies and there have been no material changes to our critical accounting policies during the three months ended June 30, 2026.
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Results of Operations
Comparison of Three and Six Months Ended June 30, 2026 and 2025
Revenues
The following table shows our revenues for the periods presented (amounts in thousands except percentages):
Three Months Ended June 30, Dollar Increase Percent Increase Six Months Ended June 30, Dollar Increase Percent Increase
2026 2025 (Decrease) (Decrease) 2026 2025 (Decrease) (Decrease)
Collaboration revenues $ 943 $ 2,532 $ (1,589 ) (63)% $ 2,518 $ 3,802 $ (1,284 ) (34)%
Royalties, license and other revenues 126 233 (107 ) (46)% 276 465 (189 ) (41)%
Total revenues $ 1,069 $ 2,765 $ (1,696 ) (61)% $ 2,794 $ 4,267 $ (1,473 ) (35)%
For the three months ended June 30, 2026, the $1.7 million decrease in total revenues as compared to the prior year was primarily attributable to a $1.6 million decrease in collaboration revenues and a decrease of approximately $0.1 million in royalty revenue. Within the decrease in collaboration revenues, $1.1 million was attributable to the Roche Agreement, reflective of measured progress toward completion of the first performance obligation. The remaining decrease was largely comprised of approximately $0.7 million related to deferred revenue recognized upon the termination of the license agreement with Immunomic Therapeutics, Inc., in the second quarter of 2025, partially offset by a $0.3 million increase in collaboration revenues related to our research collaboration agreement with WDI.
For the six months ended June 30, 2026, the $1.5 million decrease in total revenues as compared to the prior year was primarily attributable to a $1.3 million decrease in collaboration revenues and a decrease of approximately $0.2 million in royalty revenue. Within the decrease in collaboration revenues, $1.4 million was attributable to the Roche Agreement, reflective of measured progress toward completion of the first performance obligation. The remaining decrease was largely comprised of approximately $0.7 million related to deferred revenue recognized in the prior year upon the termination of the license agreement with Immunomic Therapeutics, Inc., partially offset by a $0.9 million increase in collaboration revenues related to our research collaboration agreement with WDI.
Collaboration revenues may fluctuate from period to period based on changes in estimated costs to support the performance obligations. Under the collaboration agreements with Roche and WDI, delivery of goods and services is determined to be over time and revenue is recognized utilizing an input method of costs incurred over total estimated costs to complete the performance obligation. See Note 3 (Revenue) to our condensed consolidated interim financial statements included in this report for additional information.
Operating Expenses
Our operating expenses generally consist of cost of royalties, research and development expenses, and general and administrative expenses.
Cost of royalties. These expenses consist of costs associated with royalty revenue which has resulted from product sales by our sublicensees.
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 costs with no future benefit or alternative use are expensed as incurred. Research and development expenses incurred and reimbursed by grants from third parties approximate the grant income recognized in our condensed consolidated statements of operations. Royalties and sublicensing fees are recorded as research and development expenses, unless they are associated with product royalties, which we classify as cost of royalties in our condensed 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 consist of employee and director compensation and related benefits, including stock-based compensation, 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 expenses.
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The following table shows our operating expenses for the periods presented (amounts in thousands, except percentages):
Three Months Ended June 30, Dollar Increase Percent Increase Six Months Ended June 30, Dollar Increase Percent Increase
2026 2025 (Decrease) (Decrease) 2026 2025 (Decrease) (Decrease)
Cost of royalties $ — $ 39 $ (39 ) (100)% $ — $ 75 $ (75 ) (100)%
Research and development 4,774 3,106 1,668 54% 9,008 6,220 2,788 45%
General and administrative 5,218 4,560 658 14% 10,302 9,417 885 9%
Loss on impairment of intangible asset — 14,840 (14,840 ) (100)% — 14,840 (14,840 ) (100)%
Total operating expenses $ 9,992 $ 22,545 $ (12,553 ) (56)% $ 19,310 $ 30,552 $ (11,242 ) (37)%
The following table shows the amount of our total research and development expenses allocated to our product candidates and potential product candidates for the periods presented (amounts in thousands, except percentages):
Three Months Ended June 30, Six Months Ended June 30,
Amount Percent of Total Amount Percent of Total
2026 2025 2026 2025 2026 2025 2026 2025
OpRegen® $ 832 $ 1,451 17% 47% $ 2,153 $ 2,804 25% 45%
OPC1 987 828 21% 27% 2,290 1,815 25% 29%
ReSonance 1,281 730 26% 23% 2,193 1,473 24% 24%
COR1 599 — 13% 0% 924 — 10% 0%
ILT1 253 — 5% 0% 415 — 5% 0%
RND1 550 — 12% 0% 582 32 6% 1%
Other programs and non-program expenses 272 97 6% 3% 451 96 5% 1%
Total research and development expenses $ 4,774 $ 3,106 100% 100% $ 9,008 $ 6,220 100% 100%
Research and development expenses. For the three months ended June 30, 2026, the $1.7 million increase in research and development expenses as compared to the prior year was primarily driven by $1.6 million for our preclinical programs and other undisclosed programs, $0.5 million for our ReSonance program, and $0.2 million for our OPC1 program, partially offset by a $0.6 million decrease for our OpRegen program.
For the six months ended June 30, 2026, the $2.8 million increase in research and development expenses as compared to the prior year was primarily driven by $2.2 million for our preclinical programs and other undisclosed programs, $0.7 million for our ReSonance program, $0.5 million for our OPC1 program, partially offset by a $0.6 million decrease for our OpRegen program.
General and administrative expenses. For the three months ended June 30, 2026, the $0.7 million increase in general and administrative expenses as compared to the prior year was primarily attributable to $0.3 million for personnel costs and $0.3 million for stock-based compensation expense.
For the six months ended June 30, 2026, the $0.9 million increase in general and administrative expenses as compared to the prior year was primarily attributable to approximately $0.7 million for personnel costs and $0.2 million for stock-based compensation expense.
Loss on impairment of intangible asset. In the second quarter of 2025, we abandoned the VAC platform and its related research and development efforts, and concluded the IPR&D asset had no alternative future use. Consequently, we derecognized the intangible asset and recorded a non-cash pre-tax impairment charge of $14.8 million within total operating expenses of the consolidated statement of operations. See Note 6 (Goodwill and Intangible Assets, net) and Note 13 (Commitments and Contingencies) to our consolidated financial statements included in this report for additional information. No comparable expense was recorded for the six months ended June 30, 2026.
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Other Income and Expenses, Net
The following table shows the amount of other income (expenses), net, for the periods presented (in thousands):
Three Months Ended June 30, Dollar Increase Percent Increase Six Months Ended June 30, Dollar Increase Percent Increase
Other income (expenses) 2026 2025 (Decrease) (Decrease) 2026 2025 (Decrease) (Decrease)
Interest income, net $ 378 $ 454 $ (76 ) (17)% $ 783 $ 932 $ (149 ) (16)%
Gain (loss) on marketable equity securities, net — (2 ) 2 100% 24 (7 ) 31 443%
Change in fair value of warrant liability 9,443 (12,740 ) 22,183 174% 11,767 (10,435 ) 22,202 213%
Foreign currency transaction gain, net 664 1,678 (1,014 ) (60)% 714 1,447 (733 ) (51)%
Other income (expense), net (18 ) 26 (44 ) (169)% (17 ) (159 ) 142 89%
Total other income (expenses) $ 10,467 $ (10,584 ) $ 21,051 199% $ 13,271 $ (8,222 ) $ 21,493 261%
Interest income, net. For both the three and six months ended June 30, 2026, the decrease in interest income, net, was attributable to lower interest rates, despite higher average cash and marketable debt securities balances.
Gain (loss) on marketable equity securities, net. We expect our net gain or loss on marketable equity securities to fluctuate each reporting period based on the changes in the market price of marketable equity securities held by us, which could impact our net income or loss reported in our condensed consolidated statements of operations for a particular reporting period. These marketable equity securities are carried at fair market value on our condensed consolidated balance sheet. See Note 4 (Marketable Securities) to our condensed consolidated interim financial statements included in this report for additional information regarding our marketable equity securities. For the three and six months ended June 30, 2026 and 2025, the change in the values of our marketable equity securities was de minimis and primarily related to changes in the fair market value of such securities during the respective periods.
Change in fair value of warrant liability. The liability-classified warrants issued in connection with the November 2024 registered direct offering (“November 2024 RDO”) are valued at each reporting period end date while the warrants are outstanding, and at the time of each warrant exercise, using a Black-Scholes option pricing model that maximizes the use of observable inputs and minimizes the use of unobservable inputs to the extent possible. A significant increase or decrease in these inputs could result in significantly higher or lower fair value measurements. The changes in fair value of the liability-classified warrants are non-cash adjustments recorded in the condensed consolidated statements of operations and we expect this fair value to fluctuate each reporting period. For the three and six months ended June 30, 2026 and 2025, the change in the fair value of the warrants was primarily driven by fluctuations in the Company’s common share price during these periods.
Foreign currency transaction gain (loss), net. Foreign currency transaction gain (loss), net primarily results from currency fluctuations applied to our subsidiary’s U.S. dollar-denominated intercompany balances with Lineage. The functional currency of our subsidiaries, CCN and ES Cell International Pte. Ltd. (“ESI”), is the Israeli New Shekel (“ILS”) and the Singapore Dollar (“SGD”), respectively. 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 Lineage and its subsidiaries.
Other income (expenses), net. For the three months ended June 30, 2026 and 2025, the change in other income (expenses) as compared to the prior year was de minimis. For the six months ended June 30, 2026 and 2025, the change in other expense as compared to the prior year was related to the allocated transaction costs for warrants issued in connection with the second closing of the November 2024 RDO in January 2025; there was no comparable expense incurred in the six months ending June 30, 2026.
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. As of December 31, 2025, Lineage released the valuation allowance associated with its Israeli subsidiary’s deferred tax assets based on sustained profitability and other positive evidence. Lineage continues to maintain a full valuation allowance against its U.S. and Singapore deferred tax assets due to the uncertainty of realizing future tax benefits from net operating loss carryforwards and other deferred tax assets in those jurisdictions. Lineage did not record a deferred tax benefit or provision expense for either of the three or six months ended June 30, 2026 or 2025.
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Liquidity and Capital Resources
Overview
As of June 30, 2026, we had $50.8 million in cash, cash equivalents and marketable securities, and our accumulated deficit was $470.3 million. For the six months ended June 30, 2026, we incurred a loss from operations of $16.5 million and had negative cash flow from operations of $15.3 million. Since inception, we have incurred significant operating losses and we expect to continue to incur significant operating losses for the foreseeable future.
We have historically funded our operations primarily through proceeds from the sale of our common shares and securities exercisable for or convertible into our common shares, 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.
Cash Flows
Six Months Ended June 30,
(in thousands) 2026 2025
Cash provided by (used in):
Operating activities $ (15,322 ) $ (10,425 )
Investing activities 1,634 1,889
Financing activities 10,027 4,737
Effect of exchange rate changes on cash, cash equivalents and restricted cash 254 220
Net (decrease) increase in cash, cash equivalents, and restricted cash $ (3,407 ) $ (3,579 )
Cash Used In Operating Activities
Net cash used in operating activities for the six months ended June 30, 2026 was $15.3 million and consisted of a net loss of $3.2 million plus the net changes in operating assets and liabilities of approximately $2.5 million and $9.6 million in non-cash adjustments. The net changes in operating assets and liabilities were primarily due to a $2.1 million reduction in accounts payable and accrued liabilities and a $1.7 million reduction in deferred revenues, partially offset by a $1.3 million increase in accounts receivable and prepaid expenses and other current assets. The non-cash adjustments were primarily due to a $11.8 million change in the fair value of the warrant liability, partially offset by $2.8 million for stock based compensation.
Net cash used in operating activities for the six months ended June 30, 2025 was $10.4 million and consisted of a net loss of $34.5 million plus the net changes in operating assets and liabilities of approximately $2.6 million, partially offset by $26.7 million in non-cash adjustments. The net changes in operating assets and liabilities were primarily due to a $3.8 million reduction in deferred revenues, partially offset by a $1.3 million increase in prepaid expenses and other current assets. The non-cash adjustments were primarily due to a $10.4 million change in the fair value of the warrant liability as well as a $14.8 million loss on impairment of our IPR&D intangible asset related to the VAC platform.
Cash Provided by Investing Activities
Cash provided by investing activities for the six months ended June 30, 2026 was $1.6 million and primarily consisted of proceeds from maturities of U.S. Treasury securities, net of cash used to purchase U.S. Treasury securities.
Cash provided by investing activities for the six months ended June 30, 2025 was $1.9 million and primarily consisted of proceeds from maturities of U.S. Treasury securities.
Cash Provided by Financing Activities
Cash provided by financing activities for the six months ended June 30, 2026 was $10.0 million and primarily consisted of net proceeds from the sale of common shares under our at-the-market offering program as well as proceeds from the exercise of options and warrants.
Cash provided by financing activities for the six months ended June 30, 2025 was $4.7 million and primarily consisted of net proceeds from the sale of our common shares and warrants in the November 2024 RDO, partially offset by principal payments against our financed insurance liability.
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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 Israel Innovation Authority (“IIA”), obligations under vendor contracts for research services and other purchase commitments with suppliers.
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, CCN has received a total of $15.4 million from the IIA to support the OpRegen program. We are obligated to pay approximately 24.1% of any future payments we may receive 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. As of June 30, 2026, the aggregate cap amount was approximately $97.2 million. 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. In December 2025, Lineage funded CCN to pay the IIA 24.1% of the $5.0 million received from Roche upon the achievement of the first milestone under the Agreement. As of June 30, 2026, we have not included any future financial obligations due to the IIA under the Innovation Law in the accompanying unaudited condensed 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 13 (Commitments and Contingencies) to our condensed consolidated interim financial statements included in this report for additional information.
Our obligations to licensors under license agreements and to other government entities under the terms of grants we have received require us to make future payments relating to sublicense fees, developmental, regulatory and/or commercial 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-related revenue we receive from sublicensees. Milestone payments are due to licensors or government entities upon future achievement of certain developmental, regulatory and/or commercial milestones. Royalties are payable to licensors or government entities based on a percentage of net sales of licensed products or of products covered by the in-licensed intellectual property, including those related to the Roche Agreement. In January 2026, Lineage funded CCN to pay Hadasit 21.5% of the $5.0 million received from Roche upon the achievement of the first milestone under the Roche Agreement. Patent maintenance costs are payable to licensors as reimbursement for the cost of maintaining licensed patents. Due to the contingent nature of the payments, the amounts and timing of payments to licensors under our in-license agreements and to government entities under the terms of grants we have received are uncertain and may fluctuate significantly from period to period. As of June 30, 2026, we have not included these future commitments on our condensed consolidated balance sheet because the achievement and timing of these events are not fixed and determinable.
As of June 30, 2026, under the terms of the leases for the facilities from which CCN and Lineage operate, a total of $2.0 million of rent payments will become due, of which $0.2 million will become due in the remainder of 2026.
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 and Potential Sources
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.
In March 2026, we received $5.4 million in proceeds from the exercise of warrants issued in our November 2024 RDO. We may receive up to an additional $30.2 million in gross proceeds upon the full cash exercise of the warrants we issued to the investors in the November 2024 RDO. However, no assurances can be given as to the extent to which additional warrants will be exercised. As of June 30, 2026, $55.4 million remained available for sale under our at-the-market offering program. See Note 10 (Shareholders’ Equity) to our condensed consolidated interim financial statements included in this report for additional information regarding our at-the-market offering program.
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We may seek to obtain the additional capital we may need through one or more equity offerings, debt financings, government or other grant funding, or other third-party funding transactions, including potential strategic alliances and licensing or collaboration agreements, or structured financings such as royalty monetization transactions. We cannot provide any assurance 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 or structured financing, we may be required to relinquish rights to our intellectual property, our product candidates or rights to future revenue streams 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 due to external factors beyond our control, such as unfavorable global economic conditions, disruptions to and volatility in the credit and financial markets in the United States and worldwide, political and economic uncertainty, geopolitical conflicts, rising inflation and interest rates, and other macroeconomic factors.
We believe that our $50.8 million in cash, cash equivalents and marketable securities at June 30, 2026, will be sufficient to fund our 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, marketable securities, 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.
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