Note 14– Subsequent Events
In April 2023, the Company entered into a securities purchase agreement, or the SSI Securities Purchase Agreement, with two affiliates of SSI Strategy Holdings LLC, or SSI, named therein, or the SSI Investors, pursuant to which the Company agreed to issue and sell to the SSI Investors in a private placement, or the SSI Private Placement, 705,218 shares of its common stock, or the SSI Shares, and warrants, or the SSI Warrants, to purchase an aggregate of 525,000 shares of the Company's common stock, or the Warrant Shares. SSI provides certain consulting services to the Company. Each SSI Warrant has an exercise price of $0.7090 per Warrant Share, which was the closing price of the Company's common stock on the Nasdaq Global Market on April 4, 2023. The SSI Warrants issued in the SSI Private Placement provide that the holder of the SSI Warrants will not have the right to exercise any portion of its SSI Warrants until the achievement of certain clinical and regulatory milestones related to the Company's clinical programs. The SSI Private Placement closed on April 5, 2023. Gross proceeds of the SSI Private Placement were $500,000. The shares of common stock issued by the Company pursuant to the SSI Securities Purchase Agreement were not initially registered under the Securities Act. The Company relied on the exemption from the registration requirements of the Securities Act under Section 4(a)(2) thereof.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 20212022 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2021,2022, or Annual Report, filed with the Securities and Exchange Commission, or the SEC, on March 31, 2022.28, 2023. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us,” and “our” refer to Taysha Gene Therapies, Inc. together with its consolidated subsidiaries.
Forward-Looking Statements
The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and Part II, Item 1A, “Risk Factors” in our Annual Report. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.
Note Regarding Trademarks
All brand names or trademarks appearing in this report are the property of their respective holders. Unless the context requires otherwise, references in this report to the “Company,” “we,” “us,” and “our” refer to Taysha Gene Therapies, Inc.
Overview
We are a patient-centric gene therapy company focused on developing and commercializing AAV-based gene therapies for the treatment of monogenic diseases of the central nervous system, or CNS, in both rare and large patient populations.CNS. We were founded in partnership with The University of Texas Southwestern Medical Center, or UT Southwestern, to develop and commercialize transformative gene therapy treatments. Together with UT Southwestern, we are advancingpossess a deep and sustainable product portfolio of gene therapy product candidates, with exclusive options to acquire several additional development programs at no cost. By combining our management team’s proven experience in gene therapy drug development and commercialization with UT Southwestern’s world-class gene therapy research capabilities, we believe we have created a powerful engine to develop transformative therapies to dramatically improve patients’ lives. In March 2022, we announced strategic pipeline prioritization initiatives focused on giant axonal neuropathy, or GAN, and Rett syndrome. We will conduct small proof-of-concept studies in CLN1 diseasesyndrome, and SLC13A5 deficiency. Development of the CLN7 program will continue in collaboration with existing partners with future clinical development to focus on the first-generation construct. Substantiallywe have subsequently further paused substantially all other research and development activities have been paused to increase operational efficiency.
In April 2021, we acquired exclusive worldwide rights to TSHA-120, a clinical-stage, intrathecally dosed AAV9 gene therapy program for the treatment of giant axonal neuropathy, or GAN. A Phase 1/2 clinical trial of TSHA-120 is being conducted by the National Institutes of Health, or NIH, under an accepted investigational new drug application, or IND. We reported clinical safety and functional MFM32, a validated 32-item scale for motor function measurement developed for neuromuscular diseases, data from this trial for the highest dose cohort of 3.5E14 3.5x1014 total vg (by dot blot) and 1.0x1014 total vg (by ddPCR) in January 2022, where we saw continued clinically meaningful slowing of disease progression similar to that achieved with the lower dose cohorts, which we considered confirmatory of disease modification. We recently completed a commercially representative Good Manufacturing Practices, or GMP, batch of TSHA-120, which demonstrated that the pivotal lots from the commercial grade material were generally analytically comparable to the original clinical trial material. Release testing for this batch is currently underway and expected to bewas completed in the fourth quarter of 2022. In September 2022, we submitted a meeting request to the U.S. Food and Drug Administration, or the FDA, and were granted a Type B end-of-Phase 2 meeting via teleconference on December 13, 2022. Additional discussionsIn January 2023, we reported feedback from the Type B end-of-Phase 2 meeting with Health Authorities arethe FDA following receipt of the formal meeting minutes. The FDA provided additional clarity for TSHA-120 where MFM32 was acknowledged as an acceptable endpoint with a recommendation to dose additional patients in a double-blind, placebo-controlled design to support a Biologics License Application, or BLA. The FDA acknowledged that our overall approach to manufacturing of commercial material was appropriate pending review of a planned Chemistry, Manufacturing and Controls, or CMC, data package for
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TSHA-120. Subsequently, we submitted follow up questions in response to discuss thesethe formal meeting minutes. The FDA clarified MFM32 as a relevant primary endpoint in the setting of a randomized, double-blind, placebo controlled trial and acknowledged Taysha's challenge in designing such study due to the ultra-rare nature of GAN. The FDA was open to acceptance of more uncertainty due to difficulty in enrolling a sufficient number of patients and regulatory flexibility in a controlled trial setting. In addition, the FDA indicated it was willing to consider alternative study designs utilizing objective measurements to demonstrate a relatively large treatment effect that is self-evident and clinically meaningful. The FDA acknowledged that the size of the safety database will be a review issue and acceptance of the existing safety data from treated patients will depend on demonstration of product comparability. We have completed the CMC module 3 amendment submission detailing drug comparability data and a potential registration pathway with feedback anticipated byare awaiting FDA feedback.
We are evaluating TSHA-102 in the end of 2022. For Rett syndrome, we submitted a Clinical Trial Application, or CTA, filing to Health Canada in November 2021REVEAL Phase 1/2 clinical trial, which is an open-label, dose escalation, randomized, multicenter study that is examining the safety and announced initiation of clinical developmentefficacy of TSHA-102 under the approved CTA in March 2022.adult female patients with Rett syndrome. We expect to dose the first adult patient with Rett syndrome in the first half of 2023 and to report preliminaryinitial available clinical data in the first half of 2023, with planned quarterly updates on available clinical data, primarily on safety, from the adult study thereafter. We anticipate submission of a clinical trial application, or CTA, to the United Kingdom’s Medicines and Healthcare Products Regulatory Agency, or MHRA, for TSHA-102 in pediatric patients with Rett syndrome by year-end 2022.in mid-2023. We recently executedplan to submit an exclusive option from UT SouthwesternIND application for Rett syndrome to license worldwide rights to a clinical-stage CLN7 program. The CLN7 program is currentlythe FDA in a Phase 1 clinical
proof-of-concept trial run by UT Southwestern, and we reported preliminary clinical safety data for the first patient in history to be intrathecally dosed at 1.0x1015 total vg with the first-generation construct in December 2021. Developmentsecond half of the CLN7 program will continue in collaboration with existing partners with future clinical development to focus on the first-generation construct. We will conduct small proof-of-concept studies in CLN1 disease and SLC13A5 deficiency that we believe can further validate our platform.2023.
We have a limited operating history. Since our inception, our operations have focused on organizing and staffing our company, business planning, raising capital and entering into collaboration agreements for conducting preclinical research and development activities for our product candidates. AllBoth of our lead product candidates are still in the clinical or preclinical development stage. We do not have any product candidates approved for sale and have not generated any revenue from product sales. We have funded our operations primarily throughthrough: (i) the sale of equity, raising an aggregate of $319.0$438.5 million of gross proceeds from our initial public offering, and private placements of our convertible preferred stock as well asor the IPO, sales of common stock pursuant to our Sales Agreement (as defined below). In addition, we drew down $30.0 million and $10.0 million in term loans on August 12, 2021our October 2022 follow-on offering; (ii) pre-IPO private placements of our convertible preferred stock; (iii) our Term Loan Agreement (as defined below); and December 29, 2021, respectively.(iv) the Astellas Transactions.
On August 12, 2021, or the Closing Date, we entered into a Loan and Security Agreement, or the Term Loan Agreement, with the lenders party thereto from time to time, or the Lenders and Silicon Valley Bank, as administrative agent and collateral agent for the Lenders, or the Agent. The Term Loan Agreement provides for (i) on the Closing Date, $40.0 million aggregate principal amount of term loans available through December 31, 2021, (ii) from January 1, 2022 until September 30, 2022, an additional $20.0 million term loan facility available at the Company’s option upon having three distinct and active clinical stage programs, determined at the discretion of the Agent, at the time of draw, (iii) from October 1, 2022 until March 31, 2023, an additional $20.0 million term loan facility available at our option upon having three distinct and active clinical stage programs, determined at the discretion of the Agent, at the time of draw and (iv) from April 1, 2023 until December 31, 2023, an additional $20.0 million term loan facility available upon approval by the Agent and the Lenders, or, collectively, the Term Loans. We drew $30.0 million in term loans on the Closing Date and drew an additional $10.0 million term loan on December 29, 2021. We did not draw any of the additional $20.0 million tranches prior to their expiration on September 30, 2022 and March 31, 2023. The loan repayment schedule provides for interest only payments until August 31, 2024, followed by consecutive monthly payments of principal and interest. All unpaid principal and accrued and unpaid interest with respect to each term loan is due and payable in full on August 1, 2026.
Since our inception, we have incurred significant operating losses. Our net losses were $84.0$17.6 million for the sixthree months ended June 30, 2022March 31, 2023 and $73.0$50.3 million for the sixthree months ended June 30, 2021.March 31, 2022. As of June 30, 2022,March 31, 2023, we had an accumulated deficit of $319.6$419.1 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:
| • continue to advance the clinical development of our product candidates and, if we determine to do so in the future, reprioritize the advancement of our preclinical and discovery programs; • conduct our ongoing clinical trials of TSHA-102, TSHA-120 and any other future product candidates that we advance; • seek regulatory approval for any product candidates that successfully complete clinical trials; • continue to develop our gene therapy product candidate pipeline; • scale up our clinical and regulatory capabilities; • work with CMOs for the manufacture current Good Manufacturing Practice, or cGMP material for clinical trials or potential commercial sales; • establish a commercialization infrastructure and scale up internal and external manufacturing and distribution capabilities to commercialize any product candidates for which we may obtain regulatory approval; 22 • adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products; • maintain, expand and protect our intellectual property portfolio; • hire additional clinical, manufacturing quality control, regulatory, manufacturing and scientific and administrative personnel; • add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; and • incur additional legal, accounting and other expenses in operating as a public company.
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Our Pipeline
We are advancingpossess a deep and sustainable product portfolio of gene therapy product candidates for monogenic diseases of the CNS in both rare and large patient populations, with exclusive options to acquire several additional development programs at no cost. Our portfolio of gene therapy candidates targets broad neurological indications across three distinct therapeutic categories: neurodegenerative diseases, neurodevelopmental disorders and genetic epilepsies. Our current pipeline, including the stage of development of each of our product candidates, is represented in the table below:
Clinical Programs
TSHA-120 for Giant Axonal Neuropathy (GAN)
In March 2021, we acquired the exclusive worldwide rights to a clinical-stage, intrathecally dosed AAV9 gene therapy program, now known as TSHA-120, for the treatment of giant axonal neuropathy, or GAN, pursuant to a license agreement with Hannah’s Hope Fund for Giant Axonal Neuropathy, Inc., or HHF. Under the terms of the agreement, HHF received an upfront payment of $5.5 million and will be eligible to receive clinical, regulatory and commercial milestones totaling up to $19.3 million, as well as a low, single-digit royalty on net sales upon commercialization of TSHA-120.
GAN is a rarean ultra-rare autosomal recessive, progressive neurodegenerative disease of the central, peripheral and peripheralautonomic nervous systems caused by deficiency or complete loss-of-function of gigaxonin gene mutations. There and the accumulation of intermediate filaments. Epidemiology studies indicate there are an estimated 5,000 affectedbetween 1,000 and 1,500 treatable GAN patients in addressable markets.the United States, European Union and United Kingdom.
There is an early (classical) and late-onset (non-classical) phenotype associated with the disease, with shared pathophysiology due to accumulation of intermediate filaments. Symptoms and features of children with classical GAN usually develop aroundbefore the age of five years with distal muscle weakness and include ansensory loss due to axonal sensory motor neuropathy, manifesting as bilateral foot drop and difficulties with fine motor coordination. An abnormal, wide based, unsteady gait weaknessdue to central nervous system and some sensory loss. Therecerebellar involvement is often associatedalso a common initial clinical manifestation. Children with the classical phenotype typically have dull, tightly curled, coarse hair giant(“kinky” hair), “giant” axons seenpathognomonic on a nerve biopsy due to accumulation of intermediate filaments, and progressive spinal cord atrophy and white matter abnormality seenabnormalities, initially around the cerebellar dentate nucleus, on MRI.MRI images. Symptoms progress and, as the children grow older, they develop progressive proximal muscle weakness, resulting in difficulties raising their arms and standing from the floor or a chair, scoliosis, distal contractures, progressive gait and contractures, their weakness progresseslimb ataxia, leading to loss of ambulation by the point where they will needsecond decade. Progressive optic nerve atrophy, seen early in the disease, results in increasing deterioration of visual acuity in later stages and has been more recently described. Indeed, decreased visual acuity was seen at baseline in approximately half of GAN patients aged 3-21 years, enrolled in a wheelchair for mobility,natural history study [Brain. 2021 Nov 29;144(10):3239-3250]. Due to increased respiratory muscle strength diminishes to the point where the child will needweakness and restrictive respiratory failure as a ventilator (usuallyresult of severe scoliosis, assisted ventilation is required in the early to mid-teens) and the childrenadolescents. GAN patients often die during their late teens or early twenties, typically due to respiratory failure. There is an early- and
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The late-onset, phenotype associated with the disease, with shared physiology. The late-onsetor non-classical, phenotype is often categorized as Charcot-Marie-Tooth Type 2, or CMT2, withas it presents as a lack of tightly curledtypical early onset axonal sensory motor neuropathy without the typical kinky hair and CNS symptoms withinvolvement of the classical phenotype and has a relatively slow progression of disease.progression. This phenotype representsmight represent up to 6% of all CMT2 diagnosis. In the late-onset population, patients have poor quality of life but theand significantly compromised activities of daily living. The disease is life limiting but not life-limiting.as severely as classic GAN. In early-onset disease,classic GAN, symptomatic treatments attempt to maximize physical development and minimize the rate of deterioration. Currently, there are no approved disease-modifying treatments available.therapies available, only palliative treatments.
TSHA-120 is an AAV9 self-complementary viral vector with an engineered transgene encoding the full length human gigaxonin protein. The construct was invented by Dr. Steven Gray and is the first AAV9 gene therapy candidate to deliver a codon optimized, functional copy of the GAN gene with optimal tropism and rapid expression under the control of a JeT promoter that drives ubiquitous expression.
We have received orphan drug designation and rare pediatric disease designation from the U.S. Food and Drug Administration, or the FDA for TSHA-120 for the treatment of GAN. In April 2022, we received orphan drug designation from the European Commission for TSHA-120 for the treatment of GAN.
There is an ongoing longitudinal prospective natural history study being led by the NIH, that has already identified and followed a number of patients with GAN for over five years with disease progression characterized by a number of clinical assessments. The GANThis is a basket natural history study, where GAN was initiated in 2013 and includedone of the rare diseases to be included. The baseline characteristics of the first 45 GAN patients, with GAN, aged 3 to 21 years.years have been published. Imaging data from this study have demonstrated that there are distinctive increased T2 signal abnormalities within the cerebellar white matter surrounding the dentate nucleus of the cerebellum, which represent one of the earliest brain imaging findings in individuals with GAN. These findings precede the more widespread periventricular and deep white matter signal abnormalities associated with advanced disease. In addition, cortical and spinal cord atrophy appeared to correspond to more advanced disease severity and older age. Impaired pulmonary function in patients with GAN also was observed, with forced vital capacity correlating well with several functional outcomes such as the MFM32, a validated 32-item scale for motor function measurement developed for neuromuscular diseases.MFM32. Nocturnal hypoventilation and sleep apnea progressed over time, with sleep apnea worsening as ambulatory function deteriorated.
deteriorated. 24
Total MFM32 score also correlated with ambulatory status, where independently ambulant individuals performed better and had higher MFM32 scores than the non-ambulant group, as shown in the graph below.
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Patients also reported significant autonomic dysfunction based on the COMPASS 31 self-assessment questionnaire. In addition, nerve conduction function demonstrated progressive sensorimotor polyneuropathy with age. As would be expected for a neurodegenerative disease, younger patients have higher baseline MFM32 scores. However,Other composite scores evaluating neuropathy severity, Neuropathy Impairment Score, or NIS, and ataxia, Friedreich’s Ataxia Rating Scale, or FARS, showed a highly significant correlation with age in the classic GAN patients, as well as MFM32, with all three composite scores tracking well with ambulatory status. These three clinically relevant composite scores are therefore relevant markers of function for the classic GAN phenotype.
In preliminary data and analysis from longitudinal follow up, ten patients have had at least a second timepoint at different time intervals. The rate of decline in the MFM32 scores demonstrated some consistency across patients of all ages, with most demonstrating ana calculated annualized average 8-point decline per year regardless of age and/or baseline MFM32 score, as shown in the natural history plot below.
A 4-point score change in the MFM32 is considered clinically meaningful in other pediatric neuromuscular disorders, such as Spinal Muscular Atrophy, suggesting that patients with GAN lose significant function annually. To date, we have up to eight years of robust data from this study.
Preclinical Data
TSHA-120 performed well across in vitro and in vivo studies, and demonstrated improved motor function and nerve pathology, and long-term safety across several animal models. Of note, improved dorsal root ganglia, or DRG, pathology was demonstrated in TSHA-120-treated GAN knockout, or KO, mice. These preclinical results have been published in a number of peer-reviewed journals.
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Additional preclinical data from a GAN knockoutKO rodent model that had received AAV9-mediated GAN gene therapy demonstrated that GAN rodents treated at 16 months performed significantly better than 18-month old untreated GAN rodents and equivalently to controls. These rodents were evaluated using a rotarod performance test which is designed to evaluate endurance, balance, grip strength and motor coordination in rodents. The time to fall off the rotarod, known as latency, was also evaluated and the data below demonstrated the clear difference in latency in treated versus untreated GAN rodents.
Source: Unpublished rotarod performance data of a rat model of GAN (homozygous A49E variant) from Dr Steven Gray
A result is considered statistically significant when the probability of the result occurring by random chance, rather than from the efficacy of the treatment, is sufficiently low. The conventional method for determining the statistical significance of a result is known as the “p-value,” which represents the probability that random chance caused the result (e.g., a p-value = 0.01 means that there is a 1% probability that the difference between the control group and the treatment group is purely due to random chance). Generally, a p-value less than 0.05 is considered statistically significant.
With respect to DRG inflammation, a topic of considerable interest within the gene therapy arena, the DRG have a significantly abnormal histological appearance and function as a consequence of underlying disease pathophysiology. Treatment with TSHA-120 resulted in considerable improvements in the pathological appearance of the DRG in the GAN knockoutKO mice. Shown below is tissue from a GAN knockoutKO mouse model with numerous abnormal neuronal inclusions containing aggregates of damaged neurofilament in the DRG as indicated by the yellow arrows. On image C, tissue from the GAN knockoutKO mice treated with an intrathecal, (IT)or IT, injection of TSHA-120 had a notable improvement in the reduction of these neuronal inclusions in the DRG.
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Source: Variant of Fig 6 A-C from Bailey RM, Armao D, Kalburgi SN, Gray SJ (2018) Development of Intrathecal Aav9 Gene Therapy for Giant Axonal Neuropathy. Molecular Therapy-Methods & Clinical Development 9160-171.
When a quantitative approach to reduce inclusions in the DRG was applied, it was observed that TSHA-120 treated mice experienced a statistically significant reduction in the average number of neuronal inclusions versus the GAN knockoutKO mice that received vehicle as illustrated below.
Source: Variant of Fig 6 D from Bailey RM, Armao D, Kalburgi SN, Gray SJ (2018) Development of Intrathecal Aav9 Gene Therapy for Giant Axonal Neuropathy. Molecular Therapy-Methods & Clinical Development 9160-171.
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Additionally, TSHA-120 demonstrated improved pathology of the sciatic nerve in the GAN knockoutKO mice as shown below.
Source: variant of Fig 7 A and B from Bailey RM, Armao D, Kalburgi SN, Gray SJ (2018) Development of Intrathecal Aav9 Gene Therapy for Giant Axonal Neuropathy. Molecular Therapy-Methods & Clinical Development 9160-171.
Results of Ongoing Phase 1/2 Clinical Trial
A Phase 1/2 clinical trial of TSHA-120 is being conducted by the NIH under an accepted IND. The ongoing trial is a single-site, open-label, non-randomized, dose-escalation trial, in which patients are intrathecally dosed with one of 4four dose levels of TSHA-120 – 3.5E133.5x1013 total vg, 1.2E14 1.2x1014 total vg, 1.8E141.8x1014 total vg or 3.5E143.5x1014 total vg.vg (by dot blot). The primary endpoint is to assess safety, with secondary endpoints measuring efficacy using pathologic, physiologic, functional, and clinical markers. To date, 14 patients have been intrathecally dosed and twelve12 patients have at leastup to three years’ worth of long-term follow up data. The pre-treatment period interval between visits in these patients ranged from 3.7 to 31.5 months, with patients having at least two visits before being treated. A calculated yearly natural history decline was based on this data and served as a comparison for all post-treatment analysis.
At 1-year post-gene transfer, a clinically meaningful and statistically significant slowing or halting of disease progression was seen with TSHA-120 at the highest dose of 3.5E143.5x1014 total vg (n=3). The change in the rate of decline in the MFM32 score improved by 5 points in the 3.5E143.5x1014 total vg cohort compared to an 8-point decline in natural history.
AlthoughThe primary Bayesian efficacy analysis for MFM32 was conducted in the per protocol population, by dose group, at Year 1 post-dosing interval. Hierarchical models for repeated measures were used to estimate posterior distributions for change in slope of the total MFM32 score was clinically meaningful, we might have expected a greater change in the MFM32percent score compared to natural history in the first year but one patient in the high dose cohort was a delayed responder. At the 12-month follow-up visit, the patient had a 7-pointpre-treatment decline in thetrial participants. Frequentist analysis of change from baseline in total MFM32 totalpercent score that was similar to the slope of the natural history curve as shown below. Notably, from Year 1 post gene transfer to Year 2, this patient’s change in the MFM32 score remained unchanged suggesting stabilization of disease at 2 years post-treatment. At that 2-year post treatment timepoint, there was a 9-point improvement in the patient’s MFM32 score compared to the estimated natural history decline of 16 points. The annualized estimate of natural history over time assumes the same rate of decline as in Year 1.also performed, by dose group, using linear mixed models.
An additional analysis was performed to examine theThe change in the rate of decline in the MFM32 score of all therapeutic doses combined (n=12). As shown below, showed the change in the rate of decline in the MFM32 score improvedslowed by 75.20% points by Year 1(p=0.0022), compared towith the natural historyannualized pre-gene transfer rate of decline in the MFM32 score of 87.73% points. This result was clinically meaningful and statistically significant.
Source: Preliminary analysis with a data cut as of July 2022
A Bayesian analysis was conducted on the 1.2E14 1.2x1014 total vg, 1.8E141.8x1014 total vg and 3.5E143.5x1014 total vg dose cohorts at Year 1 to assess the probability of clinically meaningful slowing of disease progression as compared to natural history. This type of statistical analysis enables direct probability statements to be made and is both useful and accepted by regulatory agencies in interventional studies of rare diseases and small patient populations. As shown in the table below, for all therapeutic dose cohorts, there was nearly 100% probability of any slowing of disease and a 96.7%79.4% probability of clinically meaningful slowing of 50% or more following treatment with TSHA-120 compared to natural history data.
Source: Variant of Table 12 from Appendix 3 of the Type B End-of-Phase 2 Meeting package submitted to the FDA in Oct-2022 and held Dec2022.
There remained consistent improvement in TSHA-120’s effect over time on the mean change from baseline in the MFM32 score for all patients in the therapeutic dose cohorts compared to thetheir estimated natural history decline over the years. By Year 3, as depicted below, there was a 10-point improvementyears in the mean change from baseline in MFM32pre-treatment period.
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Analysis of long-term MFM total (%) scores showed slowing of disease progression by 2.49% (p=0.0065) points on the MFM% total score, for all patientsas seen in the therapeutic dose cohorts.chart below.
Source: Preliminary analysis with a data cut as of July 2022
In addition to the compelling three-year data, there was one patient at Year 5 whose MFM32 change from baseline improved by nearly 26-points in the 1.2E14 total vg dose cohort compared to the estimated natural history decline of 40 points by this timepoint.
Below is an additional analysis of the mean change from baseline in MFM32 score for the therapeutic dose cohorts compared to natural history at patients’ last visit. As shown, TSHA-120 demonstrated increasing improvement in the mean change in MFM32 score from baseline over time.
Additional Endpoints
SensoryMany additional endpoints have been collected in this clinical trial pre-and post-treatment and long-term follow up data is being collected. Most data transfer from NIH have been recently completed and we have been performing quality control and additional analyses on the data. Other endpoints are being analyzed, including objective measures such as nerve action potential, or SNAP, was assessed throughfiber density in skin biopsies, brain and spine MRI white matter and volumetric measures, sensory and motor nerve conduction studies, in patients with GAN. Natural history data from the NIH suggest rapidelectro impedance myography, and irreversible decline in sensory function early in life in patients with GAN. SNAPs are within normal limits early in life and rapid reduction in SNAP amplitude occurs around the age of symptom presentation. As demonstrated below, all patients with classic GAN have an abnormally low SNAP by the age of 4, reflective of compromised sensory neuronal function. By age 9, all patients had an irreversibly absent SNAP. The results from these nerve conduction studies reflect the clinical progression of patients with GAN.
TSHA-120-treated patients demonstratedbiopsies; as well as clinically relevant effort-dependent measures such as FARS (ataxia scale), NIS (neuropathy scale). We will submit a durable improvement in SNAP response compared to natural history. Five of the twelve patients treated demonstratedrequest for a response. One patient demonstrated near complete recoverability to normal from zero at the time of treatment.
Once SNAP reaches zero, natural history suggests sensory function is presumed non-recoverable. Among patients treated with 1.2E14 total vg or greater of TSHA-120, the three patients with a positive value at baseline maintained a positive SNAP at last study visitformal meeting with the longest span of 3 years to date and continue to improve.
Below are individual patient SNAP change from baseline from treated patients who showed a positive response including their run-in natural history.
Biopsies of TSHA-120-treated patients confirmed presence of regenerative nerve clusters. Below is pathology data from biopsies of the superficial radial sensory nerve in 11 out of 11 patient samples analyzed. The remaining two samples were unable to be assessed due to biopsy limitations. Peripheral nerve biopsies from the superficial radial sensory nerve were obtained at baseline and at 1 year post gene therapy transfer. Data consistently generated an increaseFDA in the numbersecond quarter of regenerative clusters observed at Year 1 compared to baseline, indicating active regeneration of nerve fibers following treatment with TSHA-120. Data also indicated improvement in disease pathology, providing evidence that the peripheral nervous system can respond to treatment.
Loss of vision has been frequently cited by patients2023 and caregivers asanticipate a symptom they find particularly debilitating and would like to see improvement in following treatment. Patients were analyzed for visual acuity using a standard Logarithm of the Minimum Angle of Resolution, or LogMAR. An increase in LogMAR score represents a decrease in visual acuity. A LogMAR score of 0 means normal vision, approximately 0.3 reflects the need for eyeglasses, and a score value of 1.0 reflects blindness. Based on natural history,
individuals with GAN experience a progressive loss in visual function as indicated by an increasemeeting in the LogMAR score. Ophthalmologic assessments following treatment with TSHA-120 demonstrated preservationthird quarter of visual acuity over time compared2023 to the loss of visual acuity observed in natural history. Stabilization of visual acuity was observed following treatment with TSHA-120 as demonstrated below.
The thickness of the retinal nerve fiber layer or RNFL was also examined as an objective biomarker of visual system involvement and overall nervous system degeneration in GAN. Treatment with TSHA-120 resulted in stabilization of RNFL thickness and prevention of axonal nerve degeneration compared to diffuse thinning of RNFL observed in natural history as measured by optical coherence tomography, or OCT. Analysis by individual dose groups, as seeninform us on the graph below, demonstrated relatively stable RNFL thickness which isnext steps in contrast to the natural history of GAN, where RNFL decreases. Overall, these data provide new evidence of TSHA-120’s ability to generate nerve fibers and preserve visual acuity.regulatory pathway on GAN.
Safety and Tolerability
As of January 2022, there were 53 patient-years of clinical data to support TSHA-120’s favorable safety and tolerability profile. TSHA-120 has been well-tolerated at multiple doses with no signs of significant acute or subacute inflammation, no sudden sensory changes and no drug-related or persisting transaminitis. Adverse events related to immunosuppression or study procedures were similar to what has been seen with other gene therapies and transient in nature. There was no increase in incidence of adverse events with increased dose. Importantly, TSHA-120 was safely dosed in the presence of neutralizing antibodies as a result of the combination of route of administration, dosing and immunosuppression regimen.
Source: NIH
We currently have up to six years of longitudinal data in individual patients with GAN and collectively 53-patient years of clinical safety and efficacy data from our ongoing clinical study. Treatment with TSHA-120 was well-tolerated with no significant safety issues. There was no increase in incidence of adverse events with increased dose, no dose-limiting toxicity, no signs of acute or subacute inflammation, no sudden sensory changes and no drug-related or persistent elevation of transaminases. Adverse events related to immunosuppression or study procedures were similar to what was seen with other gene therapies and transient in nature.
We believe the comprehensive set of evidence generated across disease manifestations, depicted in the table below, support a robust clinical package for TSHA-120 in GAN.
In order to deliver a robust chemistry, manufacturing, and controls, or CMC data package to support licensure discussions, we have successfully completed six development and GMP lots of TSHA-120 with our contract development and manufacturing organization, or CDMO, partner. We have also completed a comprehensive side-by-side biochemical and biophysical analysis of
current and previous clinical lots. Our CDMO utilizes the same Pro10TMPro10TM manufacturing platform used to produce the original GAN lots, therefore reducing which is intended to reduce comparability risk. Five development lots ranging from 2L to 250L scale and one full-scale 500L GMP lot were analyzed side-by-side with the current TSHA-120 clinical lot using a comprehensive analytical panel that meetsis expected to meet current regulatory requirements including assays for critical attributes such as product and process residuals, empty/full ratio, genetic integrity, potency and strength.
The side-by-side analysis demonstrated that the newly produced TSHA-120 lots were generally comparable to the original clinical trial material in impurity profile including host cell contaminants, residual plasmid, empty particle content, aggregate content and genomic integrity. These results supported our biophysical and biochemical comparability of the newly produced lots. Furthermore, we developed product-specific GAN potency methods which have also demonstrated that the previous and current clinical lots were functionally indistinguishable. Validation of our potency release assay is now underway.
We have applied our panel of release assays for side-by-side testing of the original clinical trial material and our commercial grade lots. Shown below are eight of the most critical attributes of TSHA-120.
First, all results demonstrated that both the clinical and commercial grade lots were of a high purity and lacked significant levels of host cell or process contaminants such as protein and, DNA or and aggregated species. Vector purity was in excess of 95% for all three lots and host cell protein contamination was below detection. In addition, and aggregation of all lots was very low. Host cell and plasmid DNA contamination are also important attributes to discuss with regulatory agencies since carryover represents a theoretical immunogenicity or oncogenicity risk. Residual plasmid and host cell DNA were similar for all lots, indicating a similar safety profile for both products. Empty capsids are a key attribute for AAV vectors since empty capsids can stimulate immune responses to the vector and reduce potency. All three lots were highly enriched in full particles. Potency of AAV vectors is a key measure that correlates with clinical efficacy. We developed a number of product-specific potency assays to measure the functional activity of our product which is reported relative to a reference standard. These assays recapitulated the biological activity of TSHA-120 starting with transduction of GAN knockout cell lines. Activity is measured by quantitation of transgene RNA or protein expression as two independent and complimentary readouts. We observed good agreement with both readouts and high activity of all three lots against our reference suggesting that the lots are of high and comparable activity.
Overall, these results support that our early clinical and pivotal lots are biochemically and biophysically similar and based on these results we believe they should perform identically in a clinical study.
Recently, regulators have encouraged sponsors to conduct deeper analysis of product contaminants not covered by standard release assays to better assess product safety and comparability. To comply with this guidance, we have added Pac-Bio next generation sequencing to our product characterization panel to better understand the nature of nucleic acid contaminants in our products. This method not only allows us to identify the source of the nucleic acid, but also the fragment size, and sequence variability, which also needs to be considered when assessing AAV safety and efficacy. Our analysis of the clinical trial lot and commercial grade pivotal batches demonstrated that the source and composition of transgene and contaminating host and plasmid
DNA are nearly identical and provided further support that for a conclusion that the nature of our product is unchanged between our early clinical and pivotal batches as noted in the below pie charts.
The TSHA-120 pivotal lot, which yielded over 50 patient doses of TSHA-120 at the highest dose cohort of 3.5E14 total1.0x1014 vg is expected to complete quality release testing by end of the third quarter ofddPCR, was released in November 2022. This material positions us for future BLA-enabling activities and commercial production. These lots were also placed on stability to provide critical shelf-life data in support of our BLA filing.
In September 2021, we submitted a request for a Scientific Advice meeting for TSHA-120 to the United Kingdom’s Medicines and Healthcare products Regulatory Agency, or MHRA and were granted a meeting in January 2022. The MHRA agreed on our commercial manufacturing and release assay testing strategy including potency assays and we plan to dose a few additional patients with commercial grade material, which will be released in September 2022.assays. Finally, the MHRA was supportive of our proposal to perform validation work on MFM32 for GAN as a key clinical endpoint and for us to explore the MFM32 items with patients and families as part of this process. GivenIn September 2022, we submitted a meeting request to the positiveFDA and were granted a Type B end-of-Phase 2 meeting via teleconference on December 13, 2022. In January 2023, we reported feedback from the Type B end-of-Phase 2 meeting with the FDA following receipt of the formal meeting minutes. The FDA provided additional clarity for TSHA-120 where MFM32 was acknowledged as an acceptable endpoint with a recommendation to dose additional patients in a double-blind, placebo-controlled design to support a BLA. The FDA acknowledged our overall approach to manufacturing of commercial material was deemed appropriate pending review of a planned CMC data package for TSHA-120. Subsequently, we submitted follow-up questions in response to the formal meeting minutes. The FDA clarified MFM32 as a relevant primary endpoint in the setting of a controlled trial and acknowledged our challenge in designing such study due to the ultra-rare nature of GAN. The FDA was open to acceptance of more uncertainty due to difficulty in enrolling a sufficient number of patients and regulatory flexibility in a controlled trial setting. In addition, the FDA indicated it was willing to consider alternative study designs utilizing objective measurements to demonstrate a relatively large treatment effect that is self-evident and clinically meaningful. The FDA acknowledged that the size of the safety database will be a review issue and acceptance of the existing safety data from treated
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patients will depend on demonstration of product comparability. We have completed the CMC module 3 amendment submission detailing drug comparability data for TSHA-120 that we recently received, additional discussions with Health Authorities to discuss these data and potential registration pathway are planned with regulatory feedback anticipated by year-end 2022.awaiting FDA feedback.
TSHA-102 for Rett Syndrome
TSHA-102 is a self-complementary intrathecally delivered AAV9 gene transfer therapy product candidate in clinical evaluation for Rett syndrome, a neurodevelopmental disorder product candidate, is being developed for the treatment of Rett syndrome,and one of the most common genetic causes of severe intellectual disability, characterized by rapid developmental regression and in many cases caused by heterozygous loss of function mutations in MECP2, a gene essential for neuronal and synaptic function in the brain. The estimated prevalence of Rett syndrome is 350,000 patients worldwide and the disease occurs in 1 of every 10,000 female births worldwide. WeTSHA-102 has been designed TSHA-102 to prevent gene overexpression-related toxicity by inserting microRNA, or miRNA target binding sites into the 3’ untranslated region of viral genomes. This overexpression of MECP2 is seen in the clinicclinically in patients with a condition known as MECP2 duplication syndrome, where elevated levels of MECP2 result in a clinical phenotype similar to Rett syndrome both in terms of symptoms and severity. TSHA-102 is constructed from a neuronal specific promoter, MeP426, coupled with the miniMECP2 transgene, a truncated version of MECP2, and miRNA-Responsive Auto-Regulatory Element, or miRARE, our novel miRNA target panel, packaged in self-complementary AAV9. Currently, there are no approved therapies forAAV9, which enables cellular regulation of both endogenous and exogenous MECP2 expression. According to the treatment ofRett Syndrome Research Trust, Rett syndrome which affects more than 350,000 patients worldwide, according toworldwide. The estimated addressable patient population with typical Rett syndrome caused by a pathogenic/likely pathogenic MECP2 mutation is between 15,000 and 20,000 patients in the Rett Syndrome Research Trust.United States, European Union and United Kingdom.
In May 2021, preclinical data from the ongoing natural history study for TSHA-102 were published online in Brain, a highly esteemed neurological science peer-reviewed journal. The preclinical study was conducted by the UT Southwestern Medical Center laboratory of Sarah Sinnett, Ph.D., and evaluated the safety and efficacy of regulated miniMECP2 gene transfer, TSHA-102 (AAV9/miniMECP2-miRARE), via IT administration in adolescent mice between four and five weeks of age. TSHA-102 was compared to unregulated full length MECP2 (AAV9/MECP2) and unregulated miniMECP2 (AAV9/miniMECP2).
TSHA-102 extended knockout survival of KO (MECP2 -/y) mice by 56% via IT delivery. In contrast, the unregulated miniMECP2 gene transfer failed to significantly extend knockoutKO survival at either doseall doses tested. Additionally, the unregulated full-length MECP2 construct did not demonstrate a significant extension in survival and was associated with an unacceptable toxicity profile in wild type mice.
In addition to survival, behavioral side effects were explored. Mice were subjected to phenotypic scoring and a battery of tests including gait, hindlimb clasping, tremor and others to comprise an aggregate behavioral score. miRARE attenuated
miniMECP2-mediated aggravation in wild type aggregate phenotype severity scores. Mice were scored on an aggregate severity scale using an established protocol. AAV9/MECP2- and AAV9/miniMECP2-treated wild type mice had a significantly higher mean (worse) aggregate behavioral severity score versus that observed for saline-treated mice (p <0.05; at 6–30 and 7–27 weeks of age, respectively). TSHA-102-treated wild type mice had a significantly lower (better) mean aggregate severity score versus those of AAV9/MECP2- and AAV9/miniMECP2-treated mice at most timepoints from 11–19 and 9–20 weeks of age, respectively. No significant difference was observed between saline- and TSHA-102-treated wild type mice.
miRARE-mediated genotype-dependent gene regulation was demonstrated by analyzing tissue sections from wild type and knockoutKO mice treated with AAV9 vectors given intrathecally. When knockoutKO mice were injected with a vector expressing the mini-MECP2
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transgene with and without the miRARE element, miRARE reduced overall miniMECP2 transgene expression compared to unregulated miniMECP2 in wild type mice as shown below.
The graph on the left depicts KO mice treated with regulated and unregulated vectors showed equivalent vector DNA biodistribution, confirming matched titers and injection accuracy (n = 3-8 mice per bar).
Source: Variant of Supplemental Fig 6B and C from Sinnett et al 2021
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TSHA-102 demonstrated regulated expression in different regions of the brain. As shown in the graph and photos below, in the pons and midbrain, miRARE inhibited mean MECP2 gene expression in a genotype-dependent manner as indicated by significantly fewer myc(+) cells observed in wild type mice compared to knockoutKO mice (p<0.05), thereby demonstrating that TSHA-102 achieved MECP2 expression levels similar to normal physiological parameters.
Source: Figure 6C from Sinnett SE, Boyle E, Lyons C, Gray SJ. Engineered microRNA-based regulatory element permits safe high-dose miniMECP2 gene therapy in Rett mice. Brain. 2021; 144(10): 3005-3019.
In preclinical animal models, intrathecal myc-tagged TSHA-102 was not associated with early death and did not cause adverse behavioral side effects in wild type mice demonstrating appropriate downregulation of miniMECP2 protein expression as compared to unregulated MECP2 gene therapy constructs. In addition, preclinical data demonstrated that miRARE reduced overall
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expression of miniMECP2 transgene expression and regulated genotype-dependent myc-tagged miniMECP2 expression across different brain regions on a cell-by-cell basis and improved the safety of TSHA-102 without compromising efficacy in juvenile mice. Pharmacologic activity of TSHA-102 following IT administration was assessed in the MECP2 knockoutKO mouse model of Rett syndrome across three dose levels and three age groups (n=252). A one-time IT injection of TSHA-102 significantly increased survival at all dose levels, with the mid to high doses improving survival across all age groups compared to vehicle-treated controls. Treatment with TSHA-102 significantly improved body weight, motor function and respiratory assessments in MECP2 knockoutKO mice. An additional study in neonatal mice is ongoing,(n=45) was completed and preliminary data suggest normalization ofshowed prolonged survival. Finally, an IND/CTA-enabling 6-month Good Laboratory Practice, or GLP toxicology study (n=24)studies examined the biodistribution, toxicological effects and mechanism of action of TSHA-102 when intrathecally administered to Non-Human Primates, or NHPs, acrossNHP and rats in three dose levels.levels, up to 2.0x1015 vg/animal, which was well tolerated in both WT species. Biodistribution, as reflected by DNA copy number, was observed in multiple areas of the brain, sections of spinal cord and the DRG. DRG as shown below.
NHP Toxicology Study - Broad biodistribution to brain and spinal cord
Source: Company data
Importantly, mRNA levels across multiple tissues were low, indicating miRARE regulation is minimizing transgene expression from the construct in the presence of endogenous MECP2 as expected, despite the high levels of DNA that were delivered. No toxicity from
transgene overexpression was observed, confirmed by functional and histopathologic evaluations demonstrating no detrimental change in neurobehavioral assessments and no adverse tissue findings on necropsy.
In a neonatal knockoutKO Rett mice,mouse efficacy study, treatment with TSHA-102 resulted in near normalization of survival as shown below. A singleTSHA-102 at the dose of 8.8x1010 vg/mouse, which translates to the Human Equivalent Dose of 2.86x1014 vg/participant significantly improved survival when administered in Postnatal day mice by intracerebroventricular, or ICV, injection of TSHA-102 at a dose of 8.8E10 vg/mouse (Human Equivalent Dose of 2.86E14 vg/participant) within 48 hours after birth in Mecp2-injection. While the longest lived vehicle‐treated Mecp2‐/Y male mice significantly extended the survival of the animals as shown below. All cohorts, including vehicle, were sacrificed at 34 weeks. Preliminary data demonstrated approximately 70%survived to 13.3 weeks only, 47% of the treated Mecp2-Mecp2‐/Y males survived to 3436 weeks of age, comparedwhich was the conclusion of the study and all subjects were then sacrificed. The Bird Score, a composite measure of six different phenotypes, was significantly improved in TSHA‐102‐treated KO mice. TSHA‐102 significantly delayed the average age of onset for severe clasping from approximately 7 to 921 weeks and severely abnormal gait from approximately 8 to 20 weeks. TSHA‐102 treatment at 8.8x1010 vg/mouse extended survival significantly in the vehicle-treated Mecp2-neonatal Mecp2‐/Y male.males, improved weight, improved their overall phenotypic score, and delayed the age of onset for severely abnormal limb clasping and gait.
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Source: Company data
In addition, neonatal knockoutKO Rett mice demonstrated normalization of behavior following treatment with TSHA-102 as assessed by the Bird Score, a composite measure of six different phenotypic abilities. KnockoutKO animals were initially assessed at 4four weeks of age with a mean Bird Score of 4.four. Over the course of the study, TSHA-102 improved the behaviors (as assessed by the Bird aggregate score) of TSHA-102 treated mice as shown below.
.
Source: Lyst MJ, Bird A. Rett syndrome: a complex disorder with simple roots. Nat Rev Genet. 2015 May;16(5):261-75. doi: 10.1038/nrg3897. Epub 2015 Mar 3. PMID: 25732612
As shown in the table below, TSHA-102 demonstrated broad biodistribution to the brain and spinal cord with low mRNA in the tissue of NHPs. Vector genome copy numbers detected in the brain, spinal cord and DRG were appropriately above 1.0 vg/diploid genome. miniMECP2 mRNA measured in the brain, spinal cord and DRG were zero, indicating downregulation of miRNA copies.
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In summary, we believe the totality of preclinical data generated to date, specifically includingwhich includes the mouse pharmacology study to ascertain the minimally effective dose, the two toxicology studies (wild type rat and wild type NHP), a mouse distribution and gene expression study, and the recent neonatal mouse neonatal data, represents the most robust package supporting clinical advancement of TSHA-102 in Rett syndrome as shown below.
Safety and biodistribution assessments in NHPs were presented in May 2022 at the International Rett Syndrome Foundation (IRSF) meeting along with the caregiver perspective on Rett syndrome in adulthood. At the ASCEND National Summit, there was an oral presentation on “Putting Patients at the Center.” Finally, mouse pharmacology, rat and NHP toxicology data were presented at the 25th Annual Meeting of the American Society of Gene & Cell Therapy (ASGCT) and the European Society for Gene and Cell Therapy Congress (ESGCT).
Phase 1/2 REVEAL Clinical Trial
We submitted a CTA for TSHA-102 in November 2021 and announced initiation of clinical development under a CTA approved by Health Canada in March 2022. We are advancing TSHA-102 in the REVEAL Phase 1/2 clinical trial, which is an open-label, dose escalation, randomized, multicenter study that will examine the safety and efficacy of TSHA-102 in up to 18 adult female patients with Rett syndrome. Up to 18 patients will be enrolled. In the first cohort, a single 5E145x1014 total vg dose of TSHA-102 will be given intrathecally. The second
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cohort will be given a 1E151x1015 total vg dose of TSHA-102. Key assessments will include Rett-specific and global assessments, quality of life, biomarkers, and neurophysiology and imaging assessments. assessments as seen below.
Sainte-Justine Mother and Child University Hospital Center in Montreal, Quebec, Canada has been selected as the initial clinical trial site under the direction of Dr. Elsa Rossignol, Assistant Professor Neuroscience and Pediatrics, and Principal Investigator. We expect to report preliminarydose the first adult patient with Rett syndrome in the first half of 2023, with initial available clinical data expected in the first half of 2023, followed by planned quarterly updates on available clinical data, primarily on safety, thereafter. We anticipate submission of a CTA to the MHRA for TSHA-102 in pediatric patients with Rett syndrome by year-end 2022.in mid-2023 and plan to submit an IND application for Rett syndrome to the FDA in the second half of 2023.
We have received orphan drug designation and rare pediatric disease designation from the FDA and orphan drug designation from the European Commission for TSHA-102 for the treatment of Rett syndrome.
Other Programs
We have at this time deprioritized the evaluation of our preclinical product candidates TSHA-105 for SLC13A5, TSHA-118 for CLN1 and TSHA-121 for CLN7 Disease
The first-generation construct forCLN7. Although we are not currently evaluating the CLN7 program was developedpotential of TSHA-105, TSHA-118 and TSHA-121, we may again evaluate any of these in the laboratoryfuture as a product candidate as a component of Steven Gray, Ph.D., Associate Professor at UT Southwestern Medical Center and our Chief Scientific Advisor with financial support from Mila’s Miracle and Batten Hope, the leading CLN7 patient advocacy groups. We provided a grantpipeline expansion plans, or pursue partnerships to Batten Hope to support patient awareness, disease education and newborn screening initiatives. We recently executed an exclusive option from UT Southwestern to license worldwide rights to a clinical-stage CLN7 program. The CLN7 program is currently in a Phase 1 clinical proof-of-concept trial run by UT Southwestern, and we reported preliminary clinical safety data for the first patient in history to be intrathecally dosed at 1.0E15 total vg with the first-generation construct in December 2021. Development of the CLN7 program will continue in collaboration with existing partners with future clinical development to focus on the first-generation construct.
CLN7 disease is a rare, fatal and rapidly progressive neurodegenerative disease that is a form of Batten disease. CLN7 is caused by autosomal recessive mutations in the MFSD8 gene that results in lysosomal dysfunction. Disease onset occurs around two to five years of age, with death often ensuing in young adolescence. Patients experience gradual nerve cell loss in certain parts of the brain and typically present with seizures, vision loss, speech impairment and mental and motor regression. Currently, there are no approved therapies to treat CLN7 disease, which impacts an estimated 4,000 patients globally. Preclinical data in rodents supported advancement of the first-generation construct into a Phase 1 clinical proof-of-concept study in patients with CLN7 disease. In an in vivo efficacy study, IT administration of the first-generation construct to MFSD8 knockout mice with high or low doses resulted in clear age and dose effects with early intervention and high dose achieving the best therapeutic benefits. IT high dose of the first-generation construct in younger knockout mice resulted in: 1) widespread MFSD8 mRNA expression in all tissues assessed; 2) nearly complete normalization of impaired open field and rotarod performance at 6 and 9 months post injection; 3) more than doubled
median life expectancy (16.82 months versus 7.77 months in untreated knockout mice); and 4) maintenance of healthy body weight for a prolonged period of time. Toxicology studies in wild type rodents demonstrated safety and tolerability of IT administration of the first-generation construct.advance these programs.
Clinical safety data presented at WORLDSymposium in February 2022 for the first-generation construct from the ongoing clinical trial following IT administration further demonstrated that the first-generation construct was well-tolerated at multiple doses including 1.0E15 total vg, which is the highest dose administered in humans ever for a gene therapy product. No adverse immune responses were noted, including no evidence of dorsal root ganglion toxicity or brain inflammation across all subjects. Moreover, stabilization in sural nerve conduction supported the absence of dorsal root ganglia inflammation. The ongoing trial includes three patients dosed to date, with two patients treated at the highest dose of 1.0Ex15 total vg. Complete blood counts revealed no signs of bone marrow suppression or clinically significant bone marrow reactivity, and CSF analysis revealed no signs of pleocytosis. A fourth patient was recently dosed at 1.0E15 total vg in March 2022.
TSHA-118 for CLN1 Disease
CLN1 disease (one of the forms of Batten disease), a lysosomal storage disorder, is a progressive, fatal neurodegenerative disease with early childhood onset that has an estimated incidence of approximately 1 in 138,000 live births worldwide. The estimated prevalence of CLN1 disease is 1,000 patients in the United States and European Union. CLN1 disease is caused by loss-of-function mutations in the CLN1 gene that encodes the enzyme palmitoyl-protein thioesterase-1, or PPT1, a small glycoprotein involved in the degradation of certain lipid-modified proteins. Loss of function mutations in the CLN1 gene causes accumulation of these lipid-modified proteins in cells, eventually leading to aggregation, neuronal cellular dysfunction and ultimately neuronal cell death.
In the infantile-onset form of CLN1 disease, clinical symptoms appear between six to 24 months and include rapid deterioration of speech and motor function, refractory epilepsy, ataxia and visual failure. Infantile-onset CLN1 patients are typically poorly responsive by five years of age and remain noncommunicative until their death, which usually occurs by seven years of age. Late-infantile-onset CLN1 disease begins between two to four years of age with initial visual and cognitive decline followed by the development of ataxia and myoclonus, or quick, involuntary muscle jerks. Juvenile-onset CLN1 disease patients present between the
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ages of five to ten years old, with vision loss as a first symptom followed by cognitive decline, seizures and motor decline. Approximately 60% of the children diagnosed with CLN1 disease in the United States present with early-onset infantile forms, with the remaining 40% experiencing later-onset childhood forms.
All currently available therapeutic approaches for patients with CLN1 disease are targeted towards the treatment of symptoms, and no disease-modifying therapies have been approved. Gene therapy has shown promise in correcting forms of neuronal ceroid lipofuscinoses or NCL, diseases that involve mutations in soluble enzymes, in part, due to cross-correction of neighboring non-transduced cells.
We believe that the introduction of a functional CLN1 gene using an AAV9 vector delivered intrathecally to the CNS offers the potential of a disease-modifying therapeutic approach for this disease. TSHA-118 is a self-complementary AAV9 viral vector that expresses human codon-optimized CLN1 complementary deoxyribonucleic acid under control of the chicken ß-actin hybrid promoter. We acquired exclusive worldwide rights to certain intellectual property rights and know-how relating to the research, development and manufacture of TSHA-118 (formerly ABO-202) in August 2020 pursuant to a license agreement with Abeona Therapeutics Inc., or Abeona.
There is currently an open IND for the CLN1 program. We submitted a CTA filing for TSHA-118 which was approved by Health Canada in 2021 and have initiated clinical development.
TSHA-118 has been granted orphan drug designation, rare pediatric disease designation and fast track designation from the FDA and orphan drug designation from the European Medicines Agency for the treatment of CLN1 disease.
There is currently an open IND for the CLN1 program. We submitted a CTA filing for TSHA-118 which was approved by Health Canada in 2021. Clinical trial material has been manufactured and released and is now ready for use in a clinical trial setting.
TSHA-105 for SLC13A5 Deficiency
We are developing TSHA-105 for the treatment of SLC13A5 deficiency, a rare autosomal recessive epileptic encephalopathy characterized by the onset of seizures within the first few days of life. SLC13A5 deficiency is caused by bi-allelic loss-of function mutations in the SLC13A5 gene, which codes for a sodium dependent citrate transporter, or NaCT, that is largely expressed in the brain and liver. To date, all tested mutations result in no or a greatly reduced amount of the citrate in the cells. Diminished NaCT
function leads to loss of neuronal uptake of citrate and other metabolites such as succinate that are critical to brain energy metabolism and function. Affected children have impairments in gross motor function and speech production with relative preservation of fine motor skills and receptive speech. Currently, there are no approved therapies for SLC13A5 deficiency, and treatment is largely to address symptoms. The estimated prevalence of SLC13A5 deficiency is 1,900 patients in the United States and European Union.
We are developing TSHA-105 as a gene replacement therapy for SLC13A5 deficiency. TSHA-105 is constructed from a codon-optimized human SLC13A5 gene packaged in a self-complementary AAV9 capsid.
We have received orphan drug designation and rare pediatric disease designation from the FDA and orphan drug designation from the European Commission for TSHA-105 for the treatment of epilepsy caused by SLC13A5 deficiency. Clinical trial material has been manufactured and released and is now ready for use in a clinical trial setting.
TSHA-113 for Tauopathies
We are developing TSHA-113 for the treatment of tauopathies. Tauopathies comprise a large subset of neurodegenerative diseases involving the aggregation of microtubule associated protein tau, or MAPT, protein into neurofibrillary or gliofibrillary tangles in the human brain. These include MAPT-associated frontotemporal dementia, or FTD, progressive supranuclear palsy, or PSP, corticobasal degeneration, or CD, and Alzheimer’s disease. There are an estimated 11,000 patients in United States and Europe affected by MAPT mediated FTD and 2,000 to 2,500 are affected with MAPT-mediated PSP. and CD, and Alzheimer’s disease affects an estimated 6.2 million Americans and 7.8 million Europeans.
Intrathecal delivery of an antisense oligonucleotide, or ASO, targeting Tau mRNA by Biogen/Ionis in a Phase 1 study demonstrated durable, robust, time and dose dependent lowering of tau protein and phospho-tau in cerebrospinal fluid of Alzheimer’s disease patients. Buoyed by these results, in August 2022, Biogen started a Phase 2 trial in people with mild cognitive impairment or mild dementia due to Alzheimer’s disease. This ASO target validation paved the way for other approaches targeting intercellular tau mRNA (reduce tau protein production), for treating Tauopathies.
Unlike an ASO treatment, which would require repeat lifelong administration, we are developing a one-time treatment for Tauopathies. TSHA-113 is an AAV9 capsid that packages a tau-specific miRNA and is delivered in the cerebrospinal fluid for the treatment of tauopathies. This miRNA targets all six isoforms of tau mRNA.
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We tested the efficacy of TSHA-113 in PS19 mice, a validated mouse model for tauopathies. These mice express human MAPT, and they exhibit significant tau pathology, neurodegeneration, loss of body weight and progressive hind-limb paralysis around nine to 12 months of age. We tested efficacy of our treatment by delivering TSHA-113 to PS19 mice at three months, six months and nine months of age via intracisterna magna injection. We found that the tau mRNA and protein levels were significantly reduced by TSHA-113 treatment. Consistently, the tau seeding assay showed reduced levels of pathological tau in brains from PS19 mice treated with TSHA-113. In addition, TSHA-113 treatment was able to rescue the survival rate, loss in body weight, and the hind limb clasping phenotype in the PS19 mice when treated at three months, six months and nine months of age. Taken together, these results demonstrate that a one-time, vectorized delivery of a tau-specific miRNA is a promising approach for treatment for tauopathies. Ongoing and future work is focused on optimal dose determination for IND-enabling studies.
TSHA-106 for Angelman syndrome
We are developing TSHA-106 for the treatment of Angelman syndrome, a neurodevelopmental disorder caused by SLC13A5 deficiency. a maternal deficiency of the UBE3A gene. Angelman syndrome is characterized by profound developmental delay, ataxia and gait disturbance, sleep disorder, seizures, heightened anxiety, aggression and severe speech impairments. Angelman syndrome affects approximately one per 12,000 to 20,000 patients worldwide.
Angelman syndrome is an imprinting disorder in which the maternal gene is deficient and the paternal copy of UBE3A is intact but silenced by a long non-coding RNA, UBE3A antisense transcript, or UBE3A-ATS. Delivery of an ASO targeting UBE3A-ATS showed promising results in ameliorating Angelman syndrome symptoms in a transgenic mouse model.
We expecthave in-licensed a novel gene replacement therapy from University of North Carolina. This novel construct is designed to initiate clinical developmentexpress two isoforms of UBE3A mRNA from the same codon optimized transgene cassette and could potentially be a one-time treatment for the disease. The unique design feature allows short and long hUBE3A isoforms expression at a near-endogenous 3:1 (short/long) ratio, a feature that could help to support optimal therapeutic outcomes. Additionally, this construct uses human Synapsin 1 promoter, to limit UBE3A expression primarily in neurons, the primary therapeutic target for treating Angelman syndrome.
In a published study, this dual isoform expressing cassette was packaged into PHP.B capsids and administered by intracerebroventricular injections in neonatal mice models. This treatment significantly improved motor learning and innate behaviors in Angelman syndrome mice (PMID: 34676830). It rendered Angelman syndrome mice resilient to epileptogenesis and associated hippocampal neuropathologies induced by seizure kindling. These results demonstrated the feasibility, tolerability, and therapeutic potential for dual-isoform hUBE3A gene transfer in the treatment of AS.
To advance these findings into translatable interventions, our collaborators packaged the dual isoform expressing cassette into AAV9 capsids and undertook animal proof of concept studies. Overall, these results are highly consistent with the published data describing neonatal ICV delivery of a similar dose of the PHP.B/hUBE3Aopt vector (PMID: 34676830) and support continued development. Ongoing and future work is focused on TSHA-105optimal dose and route of administration determination for IND enabling studies.
There are an estimated 55,000 patients with Angelman syndrome in SLC13A5 deficiency.the United States and Europe.
TSHA-114 for Fragile X Syndrome
We are developing TSHA-114 for the treatment of Fragile X syndrome, the most common single gene cause of autism and cognitive impairment, affecting about one in 6,000 individuals worldwide. Fragile X syndrome is diagnosed around three years of age and characterized by anxiety, aggression, hyperactivity, attention deficits and sleep and communication disruption.
Fragile X syndrome is caused by a pathological expansion of a CGG triplet repeat in the 5’ untranslated region of the FMR1 gene. Expansion of the triplet above the normal 5–55 repeats to 200 or more causes hypermethylation of the gene promoter, and shutdown of transcription and translation of the encoded protein, fragile X mental retardation protein, or FMRP. The expanded repeat also induces formation of RNA: DNA heteroduplexes that induces epigenetic gene silencing. Although most patients with Fragile X syndrome do not express FMRP, some individuals with the full mutation produce low amounts of the protein (less than 10% of normal levels). FMRP expression in unaffected persons varies greatly from person to person. Current pharmacotherapeutic treatments for Fragile X syndrome are solely directed towards symptom relief.
We conducted proof of concept studies in animal models of Fragile X (Fmr1 KO) with TSHA-114. No significant adverse effects were observed in behavioral, serological or pathohistological markers up to 12 months after intrathecal administration of TSHA-114 in wild-type mice. TSHA-114 treated FMRKO showed widespread FMRP expression was observed throughout brain post administration. TSHA-114 treated FMRKO mice showed robust suppression of audiogenic seizures and normalization of fear
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conditioning behavior. In addition, assessment of circadian locomotor activity revealed restoration of hyperactivity and sleep. Assessment of transgene expression and behavioral responses in individual mice demonstrated correlations between the level of FMRP expression and drug efficacy.
The results from the study strongly support continued development. Ongoing and future work is focused on optimal dose and route of administration determination for IND enabling studies.
There are an estimated 75,000 patients with Fragile X syndrome in the United States and Europe.
License Agreements
Research, Collaboration and License Agreement with The University of Texas Southwestern Medical Center
In November 2019, we entered into a research, collaboration and license agreement, or the UT Southwestern Agreement, with The Board of Regents of the University of Texas System on behalf of UT Southwestern, as amended in April 2020.
In connection with the UT Southwestern Agreement, we obtained an exclusive, worldwide, royalty-free license under certain patent rights of UT Southwestern and a non-exclusive, worldwide, royalty-free license under certain know-how of UT Southwestern, in each case to make, have made, use, sell, offer for sale and import licensed products for use in certain specified indications. Additionally, we obtained a non-exclusive, worldwide, royalty-free license under certain patents and know-how of UT Southwestern for use in all human uses, with a right of first refusal to obtain an exclusive license under certain of such patent rights and an option to negotiate an exclusive license under other of such patent rights. We are required to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize at least one licensed product.
In connection with the UT Southwestern Agreement, we issued to UT Southwestern 2,179,000 shares of our common stock. We do not have any future milestone or royalty obligations to UT Southwestern under the UT Southwestern Agreement, other than costs related to the maintenance of patents.
The UT Southwestern Agreement expires on a country-by-country and licensed product-by-licensed product basis upon the expiration of the last valid claim of a licensed patent in such country for such licensed product. After the initial research term, we may terminate the agreement, on an indication-by-indication and licensed product-by-licensed product basis, at any time upon specified written notice to UT Southwestern. Either party may terminate the agreement upon an uncured material breach of the agreement or insolvency of the other party.
License Agreement with Queen’s University
In February 2020, we entered into a license agreement, or the Queen’s University Agreement with Queen’s University. In connection with the Queen’s University Agreement, we obtained an exclusive, perpetual, worldwide, royalty-bearing license, with the right to grant sublicenses, under certain patent rights and know-how of Queen’s University, including certain improvements to the foregoing, to make, have made, use, offer for sale, sell and import licensed products and otherwise exploit such patents and know-how for use in certain specified indications. We also obtained an exclusive right of first negotiation to license certain next generation technology and improvements of Queen’s University that do not constitute an already-licensed improvement to the licensed technology.
In connection with the Queen’s University Agreement, we paid Queen’s University a one-time fee of $3.0 million as an upfront fee and approximately $0.2 million to reimburse Queen’s University for certain plasmid production costs. We are obligated to pay Queen’s University up to $10.0 million in the aggregate upon achievement of certain regulatory milestones and up to $10.0 million in the aggregate upon achievement of certain commercial milestones, a low single digit royalty on net sales of licensed products, subject to certain customary reductions, and a percentage of non-royalty sublicensing revenue ranging in the low double digits. Royalties are payable on a licensed product-by-licensed product basis and country-by-country basis until expiration of the last valid claim of a licensed patent covering such licensed product in such country and the expiration of any regulatory exclusivity for such licensed product in such country. Additionally, we are obligated to pay Queen’s University a low double-digit portion of any
amounts received by us in connection with the sale of a priority review voucher related to a licensed product, not to exceed a low eight-figure amount.
In connection with a separate research grant agreement with Queen’s University, we reimbursed Queen’s University for certain manufacturing production costs totaling $3.8 million in fiscal year 2020. No additional milestone payments were made in connection with the Queen’s University Agreement during the six months ended June 30, 2022.
License Agreement with Abeona (CLN1 Disease)
In August 2020, we entered into a license agreement, or the Abeona CLN1 Agreement, with Abeona Therapeutics Inc., or Abeona. In connection with the Abeona CLN1 Agreement, we obtained an exclusive, worldwide, royalty-bearing license, with the right to grant sublicenses under certain patents, know-how and materials originally developed by the University of North Carolina at Chapel Hill and Abeona to research, develop, manufacture, have manufactured, use, and commercialize licensed products for gene therapy for the prevention, treatment, or diagnosis of CLN1 Disease (one of the forms of Batten disease) in humans.
In connection with the license grant, we paid Abeona a one-time upfront license fee of $3.0 million during fiscal year 2020. We are obligated to pay Abeona up to $26.0 million in regulatory-related milestones and up to $30.0 million in sales-related milestones per licensed product and high single-digit royalties on net sales of licensed products. Royalties are payable on a licensed product-by-licensed product and country-by-country basis until the latest of the expiration or revocation or complete rejection of the last licensed patent covering such licensed product in the country where the licensed product is sold, the loss of market exclusivity in such country where the product is sold, or, if no licensed product exists in such country and no market exclusivity exists in such country, ten years from first commercial sale of such licensed product in such country. In addition, concurrent with the Abeona CLN1 Agreement, we entered into a purchase and reimbursement agreement with Abeona, pursuant to which we purchased specified inventory from Abeona and reimbursed Abeona for certain research and development costs previously incurred for total consideration of $4.0 million paid in fiscal year 2020.
In December 2021 the Company’s CTA filing for TSHA-118 for the treatment of CLN1 disease was approved by Health Canada and therefore triggered a regulatory milestone payment in connection with the Abeona CLN1 Agreement, and therefore weAgreement. We recorded $3.0 million within research and development expenses in the consolidated statements of operations for the year ended December 31, 2021. The milestone fee was paid in January 2022 and has been classified as an investing outflow in the condensed consolidated statements of cash flows for the sixthree months ended June 30,March 31, 2022. No additional milestone payments were made or triggered during the sixthree months ended June 30, 2022.March 31, 2023.
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The Abeona CLN1 Agreement expires on a country-by-country and licensed product-by-licensed product basis upon the expiration of the last royalty term of a licensed product. Either party may terminate the agreement upon an uncured material breach of the agreement or insolvency of the other party. We may terminate the agreement for convenience upon specified prior written notice to Abeona.
License Agreement with Abeona (Rett Syndrome)
In October 2020, we entered into a license agreement, or the Abeona Rett Agreement, with Abeona pursuant to which we obtained an exclusive, worldwide, royalty-bearing license, with the right to grant sublicenses under certain patents, know-how and materials originally developed by the University of North Carolina at Chapel Hill, the University of Edinburgh and Abeona to research, develop, manufacture, have manufactured, use, and commercialize licensed products for gene therapy and the use of related transgenes for Rett syndrome.
Subject to certain obligations of Abeona, we are required to use commercially reasonable efforts to develop at least one licensed product and commercialize at least one licensed product in the United States.
In connection with the Abeona Rett Agreement, we paid Abeona a one-time upfront license fee of $3.0 million during fiscal year 2020. We are obligated to pay Abeona up to $26.5 million in regulatory-related milestones and up to $30.0 million in sales-related milestones per licensed product and high single-digit royalties on net sales of licensed products. Royalties are payable on a licensed product-by-licensed product and country-by-country basis until the latest of the expiration or revocation or complete rejection of the last licensed patent covering such licensed product in the country where the licensed product is sold, the loss of market exclusivity in such country where the product is sold, or, if no licensed product exists in such country and no market exclusivity exists in such country, ten years from first commercial sale of such licensed product in such country.
In March 2022, our CTA filing for TSHA-102 for the treatment of Rett Syndrome was approved by Health Canada and therefore triggered a regulatory milestone payment in connection with the Rett Agreement. We recorded $1.0 million within research and development expenses in the condensed consolidated statements of operations for the sixthree months ended June 30,March 31, 2022. This milestone fee was not paid as of June 30, 2022 and has been recorded in accrued expenses and other current liabilities. This milestone fee was paid in July 2022. No additional milestone payments were made during the three months ended March 31, 2023.
The Abeona Rett Agreement expires on a country-by-country and licensed product-by-licensed product basis upon the expiration of the last royalty term of a licensed product. Either party may terminate the agreement upon an uncured material breach of the agreement or insolvency of the other party. We may terminate the agreement for convenience.
Impact
Option Agreement with Astellas
On October 21, 2022, or the Effective Date, we entered into an Option Agreement, or the Option Agreement, with Audentes Therapeutics, Inc. (d/b/a Astellas Gene Therapy), or Astellas.
TSHA-120 Giant Axonal Neuropathy
Under the Option Agreement, we granted to Astellas an exclusive option to obtain an exclusive, worldwide, royalty and milestone-bearing right and license (A) to research, develop, make, have made, use, sell, offer for sale, have sold, import, export and otherwise exploit, or, collectively, Exploit or the Exploitation, the product known, as of COVID-19the Effective Date, as TSHA-120, or the 120 GAN Product, and any backup products with respect thereto for use in the treatment of GAN or any other gene therapy product for use in the treatment of GAN that is controlled by us or any of our affiliates or with respect to which we or any of our affiliates controls intellectual property rights covering the Exploitation thereof, or a GAN Product, and (B) under any intellectual property rights controlled by us or any of our affiliates with respect to such Exploitation, or the GAN Option. Subject to certain extensions, the GAN Option is exercisable from the Effective Date through a specified period of time following Astellas’ receipt of (i) the formal minutes from the Type B end-of-Phase 2 meeting between us and the FDA in response to our meeting request sent to the FDA on Our BusinessSeptember 19, 2022 for the 120 GAN Product, (ii) all written feedback from the FDA with respect to the Type B end-of-Phase 2 Meeting, and (iii) all briefing documents sent by us to the FDA with respect to the Type B end-of-Phase 2 Meeting.
WeTSHA-102 Rett Syndrome
Under the Option Agreement, we also granted to Astellas an exclusive option to obtain an exclusive, worldwide, royalty and milestone- bearing right and license (A) to Exploit any Rett Product (as defined below), and (B) under any intellectual property rights controlled by us or any of our affiliates with respect to such Exploitation, or the Rett Option, and together with the GAN Option, each, an Option. Subject to certain extensions, the Rett Option is exercisable from the Effective Date through a specified period of time following Astellas’ receipt of (1) certain clinical data from the female pediatric trial and (2) certain specified data with respect to TSHA-102, or the Rett Option Period related to (i) the product known, as of the Effective Date, as TSHA-102 and any backup
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products with respect thereto for use in the treatment of Rett syndrome, and (ii) any other gene therapy product for use in the treatment of Rett syndrome that is controlled by us or any of our affiliates or with respect to which we or any of our affiliates controls intellectual property rights covering the Exploitation thereof, or a Rett Product.
The parties have been actively monitoringagreed that, if Astellas exercises an Option, the COVID-19 situationparties will, for a specified period, negotiate a license agreement in good faith on the terms and its impact globally.conditions outlined in the Option Agreement, including payments by Astellas of a to-be-determined upfront payment, certain to-be-determined milestone payments, and certain to-be-determined royalties on net sales of GAN Products and/or Rett Products, as applicable.
Going Concern
Since inception, we have incurred operating losses and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. Losses are expected to continue as we continue to invest in our research and development activities. We believe there is presently insufficient funding available to allow us to fund our financial resultscurrently planned research and discovery programs for a period exceeding one year from the six months ended June 30, 2022 were not significantly impacted by COVID-19. We believe our hybriddate of this filing with the SEC. These conditions and remote working arrangements have had limited impact on our ability to maintain internal operations during the six months ended June 30, 2022. The extent to which COVID-19 may impact our business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the effectiveness of actions to contain and treat COVID-19, the efficacy, availability and adoption of vaccines and other treatments, both domestically and globally, and the impact of new variants or mutations of the coronavirus, such as the Delta and Omicron variants. Although we have not experienced any material business shutdowns or interruptions due to the COVID-19 pandemic, we cannot predict the scope and severity of any potential business shutdowns or disruptions in the future, including to our planned clinical trials and preclinical studies. Any such shutdowns or other business interruptions could result in material and negative effects to our ability to conduct our business in the manner and on the timelines presently planned, which could have a material adverse impact on our business, results of operation and financial condition. Further, disruption of global financial markets and a recession or market correction, including as a result of the COVID-19 pandemic, the ongoing military conflict between Russia and Ukraine and the related sanctions imposed against Russia, and other global macroeconomic factors such as inflation, could reduceevents raise substantial doubt about the Company’s ability to access capital, which could incontinue as a going concern.
Recent Developments
NASDAQ Notice
On April 25, 2023, we received a letter from The Nasdaq Stock Market, or Nasdaq, notifying us that, for the future negatively affectprevious 30 consecutive business day periods prior to the Company’s liquidity and could materially affectdate of the Company’sletter, the closing bid price for our common stock was below $1.00. In accordance with Nasdaq Listing Rule 5810(c)(3)(A) we were provided an initial period of 180 calendar days, or until October 23, 2023, to regain compliance with Nasdaq’s bid price requirement. If, at any time before October 23, 2023, the bid price for our common stock closed at $1.00 or more for a minimum of 10 consecutive business anddays, we would regain compliance with the bid price requirement, unless Nasdaq staff exercised its discretion to extend this 10-day period pursuant to Nasdaq rules. In the event we do not regain compliance with the minimum bid price requirement by October 23, 2023, we may be eligible for an additional 180-calendar day compliance period if we elect to transfer to The Nasdaq Capital Market to take advantage of the additional compliance period offered on that market. To qualify, we would be required to meet the continued listing requirement for market value of its common stock.publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and would need to provide written notice of our intention to cure the bid price deficiency during the second compliance period. Our failure to regain compliance during this period could result in delisting.
Components of Results of Operations
Revenue
Revenue for the three months ended March 31, 2023 was derived from the Astellas Transactions. We recognize revenue as research and development activities related to our Rett program are performed and will recognize revenue related to the Rett and GAN Options at a point in time when the options are exercised or the option period expires.
To date, we have not recognized any revenue from any sources, including from product sales, and we do not expect to generate any revenue from the sale of products, if approved, in the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval, or license agreements with third parties, we may generate revenue in the future from product sales. However, there can be no assurance as to when we will generate such revenue, if at all.
Operating Expenses
Research and Development Expenses
Research and development expenses primarily consist of preclinical development of our product candidates and discovery efforts, including conducting preclinical studies, manufacturing development efforts, preparing for clinical trials and activities related to regulatory filings for our product candidates. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. Costs incurred in obtaining technology licenses through asset acquisitions are charged to research and development expense if the
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licensed technology has not reached technological feasibility and has no alternative future use. Research and development expenses include or could include:
| • employee-related expenses, including salaries, bonuses, benefits, stock-based compensation, severance costs and other related costs for those employees involved in research and development efforts; • license maintenance fees and milestone fees incurred in connection with various license agreements; • external research and development expenses incurred under agreements with consultants, contract research organizations, or CROs, investigative sites and consultants to conduct our preclinical studies; • costs related to manufacturing material for our preclinical studies and clinical trials, including fees paid to contract manufacturing organizations, or CMOs; • laboratory supplies and research materials; • costs related to compliance with regulatory requirements; and • facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, maintenance of facilities, insurance and equipment.
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Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We reduced our research and development and general and administrative spend from 2021 to 2022 but plan to increase our research and development expenses, particularly with respect to the Rett clinical trials, for the foreseeable future as we continue the development of our product candidates and manufacturing processes and conduct discovery and research activities for our preclinical programs. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of our product candidates due to the inherently unpredictable nature of preclinical and clinical development. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. DueWe anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the strategic reprioritizationresults of programsongoing and reductionfuture preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential. We will need to raise substantial additional capital in force announced in March 2022,the future. Our clinical development costs are expected to increase significantly as we expect overall lower research and development expenses for the remainder of 2022 compared to 2021. We expect lower expenses for the remainder of 2022 as certain programs have been deprioritized.commence clinical trials. Our future expenses may vary significantly each period based on factors such as:
• expenses incurred to conduct preclinical studies required to advance our product candidates into clinical development; • per patient trial costs, including based on the number of doses that patients received; • the number of patients who enroll in each trial; • the number of trials required for approval; • the number of sites included in the trials; • the countries in which the trials are conducted; • the length of time required to enroll eligible patients; • the drop-out or discontinuation rates of patients; • potential additional safety monitoring requested by regulatory agencies; • the duration of patient participation in the trials and follow-up; • the phase of development of the product candidate; • third-party contractors failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; • the ability to manufacture of our product candidates; • regulators or institutional review boards requiring that we or our investigators suspend or terminate clinical development for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; and • the efficacy and safety profile of our product candidates. 45 |
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General and Administrative Expenses
General and administrative expenses consist principally of salaries and related costs for personnel in executive and administrative functions, including stock-based compensation, severance costs, travel expenses and recruiting expenses. Other general and administrative expenses include professional fees for legal, consulting, accounting and audit and tax-related services and insurance costs.
We anticipate that certain of our general and administrative expenses will decrease in the future dueas a result of the reductions in our headcount in 2022 and 2023 to the strategic reprioritizationsupport our infrastructure and reductionfocus on a more prioritized set of programs in force that was announced in March 2022.Rett and GAN. We also anticipate that our general and administrative expenses as a result of payments for accounting, audit, legal, consulting services, as well as costs associated with maintaining compliance with Nasdaq listing rules and SEC requirements, director and officer liability insurance, investor and public relations activities and other expenses associated with operating as a public company will stay constant for the near future but may increase over time.
Impairment of Long-lived Assets
Impairment of long-lived assets are the result of an asset group's carrying value exceeding the fair value. In November 2022, we decided not to continue building out our manufacturing facility in North Carolina. We recorded a non-cash, non-recurring impairment charge related to the construction in progress and right-of-use lease assets at the manufacturing facility.
Results of Operations
Results of Operations for the Three Months ended June 30,March 31, 2023 and 2022 and 2021
The following table summarizes our results of operations for the three months ended June 30,March 31, 2023 and 2022 and 2021 (in thousands):
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| For the Three Months |
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| 2023 |
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| 2022 |
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Revenue |
| $ | 4,706 |
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| $ | — |
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Operating expenses: |
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Research and development |
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| 12,514 |
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| 38,182 |
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General and administrative |
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| 8,751 |
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| 11,469 |
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Total operating expenses |
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| 21,265 |
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| 49,651 |
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Loss from operations |
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| (16,559 | ) |
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| (49,651 | ) |
Other income (expense): |
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Interest income |
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| 319 |
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| 14 |
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Interest expense |
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| (1,374 | ) |
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| (672 | ) |
Other expense |
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| (8 | ) |
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| (8 | ) |
Total other expense, net |
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| (1,063 | ) |
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| (666 | ) |
Net loss |
| $ | (17,622 | ) |
| $ | (50,317 | ) |
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| For the Three Months Ended June 30, |
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| 2022 |
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| 2021 |
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Operating expenses: |
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Research and development |
| $ | 23,118 |
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| $ | 30,643 |
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General and administrative |
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| 9,867 |
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| $ | 10,129 |
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Total operating expenses |
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| 32,985 |
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| 40,772 |
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Loss from operations |
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| (32,985 | ) |
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| (40,772 | ) |
Other income (expense): |
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Interest income |
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| 27 |
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| 40 |
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Interest expense |
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| (912 | ) |
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| (194 | ) |
Other expense |
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| (3 | ) |
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| — |
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Total other expense, net |
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| (888 | ) |
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| (154 | ) |
Net loss |
| $ | (33,873 | ) |
| $ | (40,926 | ) |
Revenue
Research and Development Expenses
Research and development expenses were $23.1Revenue related to the Astellas Transactions was $4.7 million for the three months ended June 30, 2022, compared to $30.6March 31, 2023. The revenue recorded is the result of Rett research and development activities performed during the first quarter of 2023.
Research and Development Expenses
Research and development expenses were $12.5 million for the three months ended June 30, 2021.March 31, 2023, compared to $38.2 million for the three months ending March 31, 2022. The $7.5$25.7 million decrease was primarily attributabledue to a decrease of $3.8 million in third-partyreduced research and development primarilycompensation as a result of lower headcount of $10.7 million. The decrease was also due to reduced manufacturing and other raw material purchases of $7.1 million. We also incurred $6.4 million reduced expense in non-clinical studies related to GLPtranslational and toxicology studies a decrease of $3.2and $1.5 million lower expense in other research and development manufacturing, and lower employee compensation expenses of $0.5 million.activities.
General and Administrative Expenses
General and administrative expenses were $9.9$8.8 million for the three months ended June 30, 2022,March 31, 2023, compared to $10.1$11.5 million for the three months ended June 30, 2021.March 31, 2022. The decrease of approximately $0.2$2.7 million was primarily attributabledue to reduced general and administrative compensation as a decreaseresult of $1.1 million inlower headcount and reduced consulting and professional fees related to market research, recruiting, accounting, and patient advocacy activities. This was partially offset by $0.9 million of incremental employee compensation expenses.fees.
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Other Income (Expense)
Interest Expense
Interest expense was $0.9$1.4 million for the three months ended June 30, 2022,March 31, 2023, compared to $0.2$0.7 million for the three months ended June 30, 2021.March 31, 2022. The increase of approximately $0.7 million was primarily attributable to higher interest expense incurred under the Term Loan Agreement which we entered into in the third quarter of 2021.Agreement.
Results of Operations for the Six Months ended June 30, 2022 and 2021
The following table summarizes our results of operations for the six months ended June 30, 2022 and 2021 (in thousands):
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| For the Six Months Ended June 30, |
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| 2022 |
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| 2021 |
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Operating expenses: |
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Research and development |
| $ | 60,917 |
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| $ | 54,497 |
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General and administrative |
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| 21,336 |
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| 18,365 |
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Total operating expenses |
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| 82,253 |
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| 72,862 |
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Loss from operations |
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| (82,253 | ) |
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| (72,862 | ) |
Other income (expense): |
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Interest income |
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| 41 |
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| 106 |
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Interest expense |
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| (1,761 | ) |
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| (194 | ) |
Other expense |
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| (11 | ) |
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| — |
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Total other expense, net |
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| (1,731 | ) |
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| (88 | ) |
Net loss |
| $ | (83,984 | ) |
| $ | (72,950 | ) |
Research and Development Expenses
Research and development expenses were $60.9 million for the six months ended June 30, 2022, compared to $54.5 million for the six months ended June 30, 2021. The $6.4 million increase was primarily attributable to an increase of $8.9 million in employee compensation, which included $2.2 million of one-time severance and termination costs in connection with the reduction in force announced in March 2022. We also incurred an increase of $2.6 million of clinical study CRO activities and consulting for regulatory and clinical studies. This was partially offset by a year-over-year decrease of $5.1 million in research and development licensing fees and manufacturing expenses.
General and Administrative Expenses
General and administrative expenses were $21.3 million for the six months ended June 30, 2022, compared to $18.4 million for the six months ended June 30, 2021. The increase of approximately $2.9 million was primarily attributable to $3.7 million of incremental employee compensation expenses, which included $0.4 million of one-time severance and termination costs and $1.2 million of non-cash stock-based compensation. This was partially offset by a year-over-year decrease of $0.8 million in professional fees related to insurance, legal, recruiting and patient advocacy activities.
Other Income (Expense)
Interest Expense
Interest expense was $1.8 million for the six months ended June 30, 2022, compared to $0.2 million for the six months ended June 30, 2021. The increase of approximately $1.6 million was primarily attributable to interest expense incurred under the Term Loan Agreement which we entered into in the third quarter of 2021.
Interest Income
Interest income for the six months ended June 30, 2022 and 2021 primarily consisted of interest earned on our savings account.
Liquidity and Capital Resources
Overview
Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses. As of June 30, 2022,March 31, 2023, we had cash and cash equivalents of $66.2$63.4 million. From inception through June 30, 2022, weWe have funded our operations primarily through equity financings, raising an aggregate of $319.0$438.5 million in gross proceeds from equity financings, including from our initial public offering and private placements of convertible preferred stock as well as salesIPO, the sale of common stock pursuant to the Sales Agreement, our Sales Agreement.October 2022 Follow-on Offering, pre-IPO private placements of common stock and convertible preferred stock, from our loan agreement with Silicon Valley Bank and from the Astellas Transactions. Specifically, between March and July 2020, we closed on the sale of an aggregate of 10,000,000 shares of Series A convertible preferred stock for gross proceeds of $30.0 million. In July and August 2020, we closed on the sale of an aggregate of 5,647,048 shares of Series B convertible
preferred stock for gross proceeds of $96.0 million. In September 2020, we raised gross proceeds of $181.0 million in our initial public offering.
On August 12, 2021, or the Closing Date, we entered into a Loan and Security Agreement, or the Term Loan Agreement, with the lenders party thereto from time to time, or the Lenders and Silicon Valley Bank, as administrative agent and collateral agent for the Lenders, or the Agent. The Term Loan Agreement provides for (i) on the Closing Date, $40.0 million aggregate principal amount of term loans available through December 31, 2021, (ii) from January 1, 2022 until September 30, 2022, an additional $20.0 million term loan facility available at the Company’s option upon having three distinct and active clinical stage programs, determined at the discretion of the Agent, at the time of draw, (iii) from October 1, 2022 until March 31, 2023, an additional $20.0 million term loan facility available at our option upon having three distinct and active clinical stage programs, determined at the discretion of the Agent, at the time of draw and (iv) from April 1, 2023 until December 31, 2023, an additional $20.0 million term loan facility available upon approval by the Agent and the Lenders, or, collectively, the Term Loans. We drew $30.0 million in term loans on the Closing Date and an additional $10.0 million in term loans on December 29, 2021. We did not draw on any of the additional $20.0 million tranches prior to their expiration on September 30, 2022 and March 31, 2023. The loan repayment schedule provides for interest only payments until August 31, 2024, followed by consecutive monthly payments of principal and interest. All unpaid principal and accrued and unpaid interest with respect to each term loan is due and payable in full on August 1, 2026.
On October 5, 2021, we filed a shelf registration statement on Form S-3 with the SEC in relation to the registration of common stock, preferred stock, debt securities, warrants and units or any combination thereof up to a total aggregate offering price of $350.0 million. We also simultaneously entered into a Sales Agreement, or the Sales Agreement with SVB Leerink LLC and Wells Fargo Securities, LLC, or the Sales Agents, pursuant to which we may issue and sell, from time to time at our discretion, shares of our common stock having an aggregate offering price of up to $150.0 million through the Sales Agents. In March 2022, we amended the Sales Agreement to, among other things, include Goldman Sachs & Co. LLC as an additional Sales Agent. In April 2022, we sold 2,000,000 shares of common stock pursuant to the Sales Agreement and received net proceeds of $11.6 million. No other shares of common stock have been issued and sold pursuant to the Sales Agreement as of June 30,March 31, 2023.
On October 21, 2022, we entered into the Option Agreement with Astellas granting Astellas an exclusive option to obtain exclusive, worldwide, royalty and milestone-bearing rights and licenses related to TSHA-120 and TSHA-102. As partial consideration for the rights granted to Astellas under the Option Agreement, Astellas paid us a one-time payment in the amount of $20.0 million, or the Upfront Payment, in November 2022.
Also on October 21, 2022, we entered into the Securities Purchase Agreement with Astellas, pursuant to which we agreed to issue and sell to Astellas in a private placement, or the Private Placement, an aggregate of 7,266,342 shares of our common stock, or the Private Placement Shares, for aggregate proceeds of approximately $30.0 million. The Private Placement closed on October 24, 2022. Pursuant to the Securities Purchase Agreement, in connection with the Private Placement, Astellas has the right to designate one individual to attend all meetings of the Board in a non-voting observer capacity. We also granted Astellas certain registration rights with respect to the Private Placement Shares.
On October 26, 2022, we entered into the Underwriting Agreement, to issue and sell 14,000,000 shares of our common stock, par value $0.00001 per share, in an underwritten public offering pursuant to an effective registration statement on Form S-3 and a related prospectus and prospectus supplement. The offering price to the public was $2.00 per share and the Underwriter purchased the
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shares from us pursuant to the Underwriting Agreement at a price of $1.88 per share. In addition, we granted the Underwriter an option to purchase, for a period of 30 days, up to an additional 2,100,000 shares of our common stock. The Follow-on Offering closed on October 31, 2022 and we received net proceeds of $26.0 million after deducting underwriting discounts, commissions and offering expenses. On November 10, 2022, the Underwriter exercised their option to purchase an additional 765,226 shares of our common stock and we received net proceeds of $1.4 million after deducting underwriting discounts and commissions.
Funding Requirements
To date, we have not generated any revenues from the commercial sale of approved drug products, and we do not expect to generate substantial revenue for at least the next few years. If we fail to complete the development of our product candidates in a timely manner or fail to obtain their regulatory approval, our ability to generate future revenue will be compromised. We do not know when, or if, we will generate any revenue from our product candidates, and we do not expect to generate significant revenue unless and until we obtain regulatory approval of, and commercialize, our product candidates. Our expenses decreased from 2021 to 2022 as a result of our program prioritization efforts and reduced headcount. We expect our expensesanticipate further reductions in spending in 2023 compared to decrease in connection with our ongoing activities largely2022 levels due to the strategic reprioritization of product candidatespipeline prioritization initiatives focused on developing Rett and the reduction in force announced in March 2022. We will continue the research and development of, initiate clinical trials of and seek marketing approval for specific product candidates, as well as continue the build out of our cGMP manufacturing facility in Durham, North Carolina. In addition, ifGAN. If we obtain approval for any of our product candidates, we then expect to incur significant commercialization expenses related to sales, marketing, manufacturing and distribution. We anticipate that we will need substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.
As of June 30, 2022,March 31, 2023, our material cash requirements consisted of $49.9$34.6 million in total lease payments entered into since inception.under our noncancelable leases for equipment, laboratory space and office space. These leases are described in further detail in Note 4 to our unaudited condensed consolidated financial statements located in “Part I – Financial Information, Item 1. Financial Statements” in this Quarterly Report on Form 10-Q. Our most significant purchase commitments consist of approximately $6.0 million related to the build-out of our cGMP manufacturing facility and $4.0$10.4 million in cancellable purchase obligations to our CROs.CROs and other clinical trial vendors.
We believe that our existing cash and cash equivalents along with full access to the term loan facility will enable us to fund our operating expenses and capital requirements into the fourthfirst quarter of 2023. This estimate reflects our strategic prioritization efforts to improve operating efficiency previously announced in March 2022.2024. We will require additional capital to fund the research and development of our product candidates, to fund our manufacturing activities, to fund precommercial activities of our programs and for working capital and general corporate purposes. There is currently insufficient funding available to allow the us to fund our currently planned research and discovery programs for a period exceeding one year from the filing of this Quarterly Report on Form 10-Q, and that those conditions raised substantial doubt about our ability to continue as a going concern.
Because of the numerous risks and uncertainties associated with research, development and commercialization of biological products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
| • the scope, progress, costs and results of discovery, preclinical development, laboratory testing and clinical trials for TSHA-102, TSHA-120 and any current and future product candidates that we advance; • our ability to access sufficient additional capital on a timely basis and on favorable terms; • the extent to which we develop, in-license or acquire other product candidates and technologies in our gene therapy product candidate pipeline; • the costs and timing of process development and manufacturing scale-up activities associated with our product candidates and other programs as we advance them through preclinical and clinical development; • the number and development requirements of product candidates that we may pursue; • the costs, timing and outcome of regulatory review of our product candidates; • our headcount growth and associated costs as we expand our research and development capabilities and establish a commercial infrastructure; • the costs and timing of future commercialization activities, including product manufacturing, marketing, sales, and distribution, for any of our product candidates for which we receive marketing approval; • the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; • the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval; 48 • the costs of operating as a public company.
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Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of product candidates that we do not expect to be commercially available in the near term, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the terms of these equity securities or this debt may restrict our ability to operate. The Term Loan Agreement contains negative covenants, including, among other things, restrictions on indebtedness, liens investments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions. Any future additional debt financing and equity financing, if available, may involve agreements that include covenants limiting and restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, entering into profit-sharing or other arrangements or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.
We are continuing to assess the effect that the COVID-19 pandemic may have on our business and operations. The extent to which COVID-19 may impact our business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the duration and effect of business disruptions and the short-term effects and ultimate effectiveness of the travel restrictions, quarantines, social distancing requirements and business closures in the United States and other countries to contain and treat the disease, the efficacy, availability and adoption of vaccines, both domestically and globally, and the impact of new variants or mutations of the coronavirus. Further, disruption of global financial markets and a recession or market correction, including as a result of the COVID-19 pandemic, the ongoing military conflict between Russia and Ukraine and the related sanctions imposed against Russia, and other global macroeconomic factors such as inflation, could reduce our ability to access capital, which could in the future negatively affect our liquidity and the value of our common stock.
Cash Flows
The following table shows a summary of our cash flows for the sixthree months ended June 30,March 31, 2023 and 2022 and 2021 (in thousands):
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| For the Six Months Ended June 30, |
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| For the Three Months |
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| 2022 |
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| 2021 |
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| 2023 |
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| 2022 |
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Net cash used in operating activities |
| $ | (74,012 | ) |
| $ | (44,851 | ) |
| $ | (20,185 | ) |
| $ | (40,939 | ) |
Net cash used in investing activities |
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| (19,540 | ) |
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| (9,032 | ) |
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| (3,900 | ) |
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| (11,427 | ) |
Net cash provided by financing activities |
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| 10,688 |
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Net cash used in financing activities |
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| (370 | ) |
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| (107 | ) | ||||||||
Net change in cash, cash equivalents and restricted cash |
| $ | (82,864 | ) |
| $ | (53,883 | ) |
| $ | (24,455 | ) |
| $ | (52,473 | ) |
Operating Activities
For the sixthree months ended June 30, 2022,March 31, 2023, our net cash used in operating activities of $74.0$20.2 million primarily consisted of a net loss of $84.0 million, primarily attributable to our spending on research and development expenses. The net loss of $84.0 million was partially offset by adjustments for non-cash items, primarily stock-based compensation and depreciation expense of $10.0 million.
For the six months ended June 30, 2021, our net cash used in operating activities of $44.9 million primarily consisted of a net loss of $73.0$17.6 million, primarily attributable to our spending on research and development expenses. The net loss of $73.0$17.6 million was partially offset by adjustments for non-cash items, primarily stock-based compensation expense of $1.7 million. Additional cash used in operating activities of $5.0 million was primarily due to a decrease in deferred revenue.
For the up-front license feethree months ended March 31, 2022, our net cash used in operating activities of $5.5$40.9 million primarily consisted of a net loss of $50.3 million, primarily attributable to HHF related to the acquisitionour spending on research and development expenses. The net loss of TSHA-120 and$50.3 million was partially offset by adjustments for non-cash items, primarily stock-based compensation of $8.1$5.3 million, and the add back of regulatory milestone and upfront license fees of $1.3 million. The $73.0$50.3 million net loss was also partially offset by a $14.1$2.0 million source ofincrease in the cash provided by operating assets and liabilities, primarily resulting from an increase in accounts payable and accrued expenses.payable.
Investing Activities
During the sixthree months ended June 30, 2022,March 31, 2023, investing activities used $19.5$3.9 million of cash primarily attributable to capital expenditures related to the close out of our in-house manufacturing facility project. During the three months ended March 31, 2022, investing activities used $11.4 million of cash primarily attributable to a regulatory milestone payment of $3.0 million paid to Abeona pursuant to the CLN1 Agreement, and $16.3 million in capital expenditures related to our in-house manufacturing facility. During the six months ended June 30, 2021, investing activities used $9.0 million of cash attributable to the upfront license fee payment of $5.5 million to acquire exclusive worldwide rights to TSHA-120, for the treatment of GAN, and $3.5 million in capital expenditures related to our in-house manufacturing facility and office space.
Financing Activities
During the sixthree months ended June 30, 2022,March 31, 2023, financing activities provided $10.7used $0.4 million of cash, which is primarily attributable to $11.6 million net proceeds from the sale of 2,000,000 shares of common stock pursuant to the Sales Agreement and $0.3 million of ESPP contributions. The proceeds were partially offset by the payment of shelf registration costs and other financing transactions. No financing activities took place duringDuring the sixthree months ended June 30, 2021.March 31, 2022, financing
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activities used $0.1 million of cash, which is primarily attributable to the payment of shelf registration costs, and other financing transactions, which are partially offset by contributions to our Employee Stock Purchase Plan.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Critical Accounting Policies and Significant Judgments and Estimates
There were no material changes to our critical accounting policies that are disclosed in our audited consolidated financial statements for the year ended December 31, 2021 2022 filed with the SEC on March 31, 2022.28, 2023.
Recent Accounting Pronouncements
See Note 2 to our unaudited condensed consolidated financial statements located in “Part I – Financial Information, Item 1. Financial Statements” in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our condensed consolidated financial statements.
Emerging Growth Company and Smaller Reporting Company Status
In April 2012, the Jumpstart Our Business Startups Act of 2012, or JOBS Act, was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of
the Securities Act of 1933, as amended, for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
In addition, as an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:
| • an exception from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended; • reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registration statements; • exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements; and • an exemption from compliance with the requirements of the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor’s report on financial statements.
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We may take advantage of these provisions until we no longer qualify as an emerging growth company. We will cease to qualify as an emerging growth company on the date that is the earliest of: (i) December 31, 2025, (ii) the last day of the fiscal year in which we have more than $1.07$1.235 billion in total annual gross revenues, (iii) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, or (iv) the date on which we have issued more than $1.0 billion of non-convertible debt over the prior three-year period. We may choose to take advantage of some but not all of these reduced reporting burdens. We have taken advantage of certain reduced reporting requirements in this Quarterly Report on Form 10-Q and our other filings with the SEC. Accordingly, the information contained herein may be different than you might obtain from other public companies in which you hold equity interests.
We are also a “smaller reporting company,” meaning that the market value of our shares held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited
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financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act ), as of the end of the period covered by this Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, 2022,March 31, 2023, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in this Form 10-Q was (a) reported within the time periods specified by SEC rules and regulations, and (b) communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding any required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Internal Controls
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are not subject to any material legal proceedings. From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Item 1A. Risk Factors.
Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021,2022, filed with the Securities and Exchange Commission on March 31, 2022.28, 2023. Other than as described below, there have been no material changes to the risk factors described in that report.
Risks Related to Ownership of our Financial Position and Capital Needs
We have incurred significant losses since our inception. We expect to incur losses over the next several years and may never achieve or maintain profitability. These factors raise substantial doubt regarding our ability to continue as a going concern.Common Stock
SinceIf we fail to meet all applicable requirements of Nasdaq and Nasdaq determines to delist our inception, we have incurred significant net losses, and we expect to continue to incur significant expenses and operating losses for the foreseeable future. Our net losses were $174.5 million and $60.0 million for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, we had an accumulated deficit of $235.6 million. We have financed our operations with $359.0 million in gross proceeds from equity financings, including from our initial public offering, the sale of common stock, pursuant tothe delisting could adversely affect the market liquidity of our Sales Agreement and private placements of convertible preferredcommon stock and from our loan agreement with Silicon Valley Bank. We have no products approved for commercialization and have never generated any revenue from product sales.
All of our product candidates are still in the clinical or preclinical development stage. We expect to continue to incur significant expenses and operating losses over the next several years. We expect that it could be several years, if ever, before we have a commercialized product. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase substantially as we:
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To date, we have not generated any revenue. To become and remain profitable, we must succeed in developing and eventually commercializing product candidates that generate significant revenue. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates, obtaining regulatory approval, and manufacturing, marketing and selling any product candidates for which we may obtain regulatory approval, as well as discovering and developing additional product candidates. We are only in the preliminary stages of most of these activities and all of our product candidates are in clinical or preclinical development. We may never succeed in these activities and, even if we do, may never generate any revenue or revenue that is significant enough to achieve profitability.
Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our development efforts, obtain product approvals, diversify our offerings or continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.
These and other factors raise substantial doubt regarding our ability to continue as a going concern, which may create negative reactions to themarket price of our common stock. stock could decrease.
On April 25, 2023, we received a letter from Nasdaq, notifying us that, for the previous 30 consecutive business day periods prior to the date of the letter, the closing bid price for our common stock was below $1.00. In accordance with Nasdaq Listing Rule 5810(c)(3)(A) we have been provided an initial period of 180 calendar days, or until October 23, 2023, to regain compliance with Nasdaq’s bid price requirement. If, at any time before October 23, 2023, the bid price for our common stock closes at $1.00 or more for a minimum of 10 consecutive business days, we will regain compliance with the bid price requirement, unless Nasdaq staff exercised its discretion to extend this 10-day period pursuant to Nasdaq rules.
If we are unable to continue as a going concern, we may havesatisfy the Nasdaq criteria for continued listing, our common stock would be subject to liquidatedelisting. A delisting of our assets and may receive less thancommon stock could negatively impact us by, among other things, reducing the value at which those assets are carried on our financial statements, and it is likely that investors will lose all or a part of their investment. Further, the perception that we may be unable to continue as a going concern may impede our ability to pursue strategic opportunities or operate our business due to concerns regarding our ability to discharge our contractual obligations. In addition, if there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms, or at all.
Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.
Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. For example, the COVID-19 pandemic has caused extreme volatility and disruptions in the capital and credit markets. In addition, Russia’s invasion of Ukraine may lead to a prolonged, adverse impact on global economic, socialliquidity and market conditions. A severeprice of our common stock; reducing the number of investors willing to hold or prolonged economic downturnacquire our common stock, which could result in a variety of risks to our business, including weakened demand for our product candidates andnegatively impact our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strainequity financing; decreasing the amount of news and analyst coverage of us; and limiting our suppliers, possibly resulting in supply disruption, or cause delays in payments for our services by third-party payors or our collaborators. For example, while we do not have any current operations in Ukraine or Russia, we do not know the extent to which Russia’s invasion of Ukraine could impact any of our current suppliers and their ability to provide us with supplies and services. Any ofissue additional securities or obtain additional financing in the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adverselyfuture. In addition, delisting from Nasdaq may negatively impact our business, financial condition, results of operationsreputation and, prospects.consequently, our business.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) Recent Sales of Unregistered Equity Securities
None.
(b) Use of Proceeds
On September 23, 2020, our Registration Statement on Form S-1, as amended (File No. 333-248559), was declared effective in connection with our initial public offering, pursuant to which we sold an aggregate of 9,050,000 shares of our common stock for aggregate net proceeds of $165.9 million.None.
There has been no material change in the planned use of proceeds from our initial public offering as described in our prospectus filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on September 25, 2020.
(c) Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
The exhibits listed on the Exhibit Index are either filed or furnished with this report or incorporated herein by reference.
Exhibit Number | Description | |
3.1 | ||
3.2 | ||
10.1 | ||
10.2 | ||
10.3 | ||
31.1* | ||
31.2* | ||
32.1# | ||
32.2# | ||
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
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SIGNATURES* Filed herewith.
# These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
+ Certain schedules to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedules will be furnished supplementally to the SEC upon request.
^ Portions of this document (indicated by “[***]” have been omitted because they are not material and are the type that Taysha Gene Therapies, Inc. treats as private and confidential.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Taysha Gene Therapies, Inc. | |||
Date: | By: | /s/ | |
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(Principal Executive Officer) | |||
Date: | By: | /s/ Kamran Alam | |
Kamran Alam | |||
Chief Financial Officer (Principal Financial and Accounting Officer) | |||
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