Taysha Gene Therapies, Inc. Q4 FY2021 Earnings Call

Welcome to the Taysha Gene Therapies, Fourth Quarter and full-year 2021 financial results and corporate update. At this time, all participants are in listen-only mode. Following management's prepared remarks, we will hold a brief question-and-answer session. As a reminder this call is being recorded today March 31st, 2022. I will now turn the call over to Dr. Kimberly Lee, Chief Corporate Affairs Officer. Please go ahead.

Good morning and welcome to Taysha's fourth quarter and full-year 2021 financial results and corporate update and conference call. Joining me on today's call are RA Session II, Taysha's President, Founder, and CEO, Dr. Suyash Prasad, Chief Medical Officer and Head of R&D, and Kamran Alam, Chief Financial Officer. After our formal remarks, we will conduct a question-and-answer session and instructions will follow at that time. Earlier today, Taysha issued a press release announcing financial results for the fourth quarter and full-year ended December 31st, 2021. The copy of this press release is available on the company's website and through our SEC filings. Please note that on today's call, we will be making forward-looking statements, including statements relating to the safety and efficacy and the therapeutic and commercial potential of our investigational product candidates. These statements may include the effect of timing and results of clinical trials for a product candidate. Our expectations regarding the data necessary to support regulatory approval of Taysha 120. The regulatory status and market opportunity for our clinical programs, as well as patients manufacturing plants. This call may also contain forward-looking statements relating to Taysha’s growth and future operating results, discovering development and product candidates, strategic alliances, intellectual property, cash runway, and improvement limitation, and potential impacts of our strategic pipeline prioritization initiatives, as well as matters that are not of historical facts or information. Various risks may cause actual results to differ materially from those stated or implied in such forward-looking statements. These risks include uncertainties related to the timing and results of clinical trials and preclinical studies of our product candidates are dependent upon strategic alliances and other third-party relationships. Our ability to obtain patent protection for discoveries, limitations imposed by patents owned by third parties and the requirement of successful funding to conduct our research and development activities. For a listened description of the risks and uncertainties that we face, please see the reports we have filed with the Securities and Exchange Commission. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, March 31, 2022. Taysha undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call, as maybe required by applicable securities law. With that, I'd now like to turn the call over to our President, founder and CEO, RA Session II. RA?

Thank you, RA. Recently, we shared encouraging initial clinical data for GAN GM2 gangliosidosis and CLN7 disease, underscoring the therapeutic potential of our platform across several central nervous system disorders. Let's start with Taysha 120, aimed at treating GAN. Taysha 120 is the first gene therapy to be delivered at equal doses and is currently part of a pioneering dose escalation clinical trial at the NIH, led by Dr. Costand Dominant. We have recently disclosed positive clinical efficacy and safety data for the high-dose group of 3.514 total VG, along with long-term safety and durability data for all therapeutic doses. The treatment with Taysha 120 resulted in a significant and meaningful reduction or cessation of disease progression observed in the highest dose group of 3.58014 total VG across all dosage levels. At this highest dose, Taysha 120 showed substantial and statistically significant improvements in MFM32 score after one year, compared to the historical data. Furthermore, the long-term data across all doses indicated a 10-point improvement from baseline in MFM32 score after three years, relative to a 24-point decline typically expected. These long-term findings confirm a disease-modifying impact with sustained results from Taysha-120. Notably, biopsy data before and after treatment with Taysha-120 showed evidence of active fiber regeneration, indicating pathological improvements that align with the clinical benefits observed. Furthermore, we noted the preservation of visual acuity as measured by the logMAR scale, coupled with increased retinal nerve fiber layer thickness from optical coherence tomography. There were no significant safety concerns or heightened adverse events at higher doses. The adverse events tied to immunosuppression from study procedures were comparable to those seen in other gene therapies. No dose-limiting toxicities were identified with Taysha-120. There was no sign of dorsal root ganglion inflammation, nor thrombocytopenia was observed. Overall, this represents the most thorough gene therapy dataset in GAN, positioning Taysha-120 for a potentially less risky regulatory journey. We believe this program currently meets most registration criteria based on guidance from the FDA and EMA for gene therapy targeting neurodegenerative diseases. We look forward to ongoing discussions with key regulatory authorities about possible registration pathways for Taysha-120 and expect an update by mid-2022. Additionally, Taysha-120 has already received Orphan Drug and Rare Pediatric Disease designations from the FDA. We have also established partnerships to promote awareness and aid early diagnosis of GAN, including a collaboration with GeneDx, the leading global genetic testing company, to add a genetic marker for GAN in their routine Hereditary Neuropathy screening panel, which is available at no cost to individuals at risk for GAN. Our efforts also involve partnerships with the Hereditary Neuropathy Foundation, the Charcot-Marie-Tooth Association Centers of Excellence, healthcare professionals, and patient advocacy groups to enhance access to genetic testing. Moving to Rett syndrome, Taysha-102 is the only gene therapy in clinical development for this condition, designed to deliver the MECP2 transgene using our innovative miRARE platform. This technology is exclusively licensed to Taysha and was developed by researchers at UT Southwestern Medical Center. The miRARE platform aims to carefully regulate transgene expression on a cell-by-cell basis to manage toxicity linked to excessive MECP2 levels. We are excited to announce that we initiated clinical development for Taysha-102 with the acceptance of our Clinical Trial Application by Health Canada in March. The Sainte-Justine Mother and Child University Hospital Center in Montreal, Canada, has been designated as the first clinical site under the leadership of the principal investigator. We also released positive preclinical data that underpinned the CTA acceptance, which included pharmacology studies in MECP2 knockout mice evaluating Taysha-102's efficacy and a six-month GLP toxicology study in non-human primates assessing the drug's mechanism of action. Taysha-102 boasts a strong preclinical data package validating the ability of miRARE to effectively and safely control transgene expression. Data from the pharmacology study in MECP2 knockout syndrome demonstrated that miRARE regulated transgene expression improved survival, respiratory function, and motor performance across various dose levels. A single intrathecal injection of Taysha-102 resulted in significantly improved survival at all dose levels, showing benefits across all age groups in comparison to vehicle-treated controls. Treatment with Taysha-102 also notably enhanced body weight, motor skills, and respiratory function in MECP2 knockout mice. An ongoing study is currently in progress with preliminary data suggesting normalization of survival. Positive GLP toxicology findings from non-human primate trials reaffirm Taysha's favorable safety profile across all tested doses, including doses significantly exceeding the Brazilian clinical stocks index. These results support effective drug distribution demonstrated by DNA copy number in various brain regions and parts of the spinal cord. Most importantly, we saw low levels of mRNA in multiple tissues, indicating that the miRARE system effectively downregulated transgene expression, which is crucial when considering the presence of endogenous MECP2 in these non-human primates. To reiterate, high levels of DNA in target tissues reflect good drug distribution, while low mRNA levels indicate the successful downregulation by miRARE, minimizing toxicity. Low toxicity from transgene expression was confirmed through functional evaluations, showing no adverse changes in behavioral assessments, and histopathological evaluations showed no detrimental findings on necropsy. These data collectively reinforce the therapeutic potential, safety, and tolerability of Taysha-102 for treating Rett syndrome at varying doses. We plan to present these preclinical safety and efficacy results at the International Rett Syndrome Foundation's scientific meeting in Nashville on April 26-27, 2022. Currently, there are no treatments that alter the course of the disease for the estimated 350,000 patients affected by Rett syndrome worldwide. We are thrilled to advance Taysha-102 as the first gene therapy in clinical development for this serious neurodevelopmental disorder and anticipate reporting preliminary Phase 1-2 clinical data by the end of 2022. It’s worth noting that Taysha-102 has received Rare Pediatric Disease and Orphan Drug designations from the FDA and, more recently, Orphan Drug designation from the European Commission. Regarding GM2 gangliosidosis, Taysha-101 is the first and only bicistronic vector currently in clinical development, marking a significant advance in gene therapy. Taysha-101 expresses both the HEXA and HEXB genes from a single promoter, allowing the production of functional beta-Hexosaminidase A and the restoration of enzyme activity in GM2 gangliosidosis using one vector. In January, we reported initial positive biomarker results for Taysha-101, showing normalization of HEXA enzyme activity in patients with various forms of GM2 gangliosidosis. In our analysis, Patient 1 with Sandhoff disease demonstrated HEXA enzyme activity of 190% of normal after Month 1 and 298% after Month 3, significantly exceeding the presumed asymptomatic level. Patient 2 with Tay-Sachs disease reached HEXA enzyme activity of 25% of normal after Month 1, which also surpassed the presumed asymptomatic level. Preliminary data indicates that Taysha-101 was well-tolerated, with no major drug-related events reported for both patients. The unfortunate passing of Patient 1 was due to pneumonia and related complications, and the Data Safety Monitoring Board confirmed that their death was unrelated to the study drug. Patient 2 continues to progress positively, and we are actively monitoring Patients 2 and 3. We are currently not looking to enroll more patients in the Phase 1-2 trial due to a focus on programs that improve operational efficiency, but we will keep following those previously treated. For CLN7, we provided preliminary clinical safety data for the first-generation construct in CLN7 disease from our ongoing clinical trial with UT Southwestern Children's Health and Children's Medical Center Foundation. We recently treated our fourth patient at 1E15 total VG, making it the highest dose safely administered in gene therapy to date. The Data Safety Monitoring Board supported dose escalation from 5E14 to 1E15 total VG. Initial findings for three patients indicated a good safety and tolerability profile with no significant adverse events. Future development of the CLN7 program will concentrate exclusively on the first-generation construct in partnership with our existing collaborators. In 2022, we expect several milestones including regulatory feedback for Taysha-120 and GAN by mid-2022, as well as preliminary Phase 1-2 data for Taysha-102 and Rett syndrome by year-end. Clinical progress on the first-generation constructs in CLN7 remains ongoing with our existing partners. We will continue the clinical development of Taysha-118 for CLN1 and CLN2 diseases and plan to initiate clinical development for Taysha-105 targeting SLC13A5 deficiency this year. Now, I'll hand the call over to Kamran to discuss our financial results.

Thank you, Suyash. This morning, I will discuss the key aspects of our fourth quarter and full-year financial results for the year ended December 31, 2021. More details will be available in our upcoming Form 10-K filing with the SEC. As noted in our press release today, recent development expenses totaled $37.9 million for the three months ending December 31, 2021, compared to $12.3 million for the same period in 2020. Research and development expenses amounted to $131.9 million for the full-year ending December 31, 2021, in contrast to $31.9 million for the previous year. The increase of $100 million was mainly due to a rise of $38.3 million in costs related to research, development manufacturing, and raw material purchases, including cGMP batches produced by Catalent and UT Southwestern. We also saw a $32.7 million increase in employee compensation expenses, which included $7.1 million in non-cash stock-based compensation, due to a larger workforce in research and development. Additionally, there was a $29 million rise in third-party research and development consulting fees, primarily for GLP toxicology studies, clinical study CRO activities, and regulatory consulting. General and administrative expenses reached $11.8 million for the three months ending December 31, 2021, versus $6.1 million for the same time last year. For the full-year ending December 31, 2021, these expenses were $41.3 million, compared to $11.1 million the prior year. The full-year increase of about $30.2 million was largely due to $16.3 million in incremental compensation expenses and $7.7 million in non-cash stock-based compensation as a result of higher employee headcount. We also incurred an additional $13.9 million in professional fees associated with legal, insurance, investor relations, communications, accounting, personnel recruiting, market research, and patient efficacy activities. The net loss for the three months ending December 31, 2021, was $50.4 million or $1.32 per share, compared to a net loss of $18.3 million or $0.50 per share for the same quarter in 2020. The net loss for the full-year ending December 31, 2021, was $174.5 million or $4.64 per share, compared to a net loss of $60 million or $3.40 per share for the previous year. As of December 31, 2021, Taysha had $149.1 million in cash and cash equivalents. Our strategic pipeline prioritization initiatives, along with existing cash and financing under our current debt facility, are expected to extend our cash runway into the fourth quarter of 2023. I will now turn the call back over.

Thank you. We will now begin the question-and-answer session. For those using speakerphones, please make sure to lift your handset before pressing the star keys. To address as many questions as possible, we ask that you limit yourself to one question. Please hold on while we gather questions.

All right. Good morning. This is Elizabeth on for Salveen. Just given the strong data that you had for GM2 this year, I guess, why choose to deprioritize that program?

Thank you. Our next question is from the line of Joon Lee with Truist Securities.

Hi, thanks for taking our questions. In addition to restructuring, would you also consider monetization of some of non-core programs via out-licensing or partnering? And then also our understanding is that the term loans from SVB is contingent upon you having three active programs. So in addition to GAN or Rett, do you plan to have a third program still active? Thank you.

Our next question is from the line of Mike Ulz with Morgan Stanley, please proceed with your question.

Hey, guys, thanks for taking the question. Just with respect to GAN, maybe you can just give us an update on your current thinking on the path forward there in the U.S. and in the past, you'd mentioned analytic comparability as one of the potential scenarios there. And I'm just curious if you've done that analysis yet, or are you waiting to get feedback from the FDA before you move forward with that? Thanks.

Our next question is coming from the line of Jack Allen with Baird, please proceed with your question.

All right. Thank you so much for taking my questions and congratulations on all progress. I guess the first one I wanted to stick in GAN and talk about TSHA-120. Maybe you can provide a little bit more context around the dating factors surrounding getting regulatory clarity here. Do you have a meeting on the calendar with the FDA and any comments around when you may have clarity around the timeline in greater detail than mid-2022? And then I was just curious how the genetic testing program is going as well. Any comments you can make around early findings from that and if you would consider presenting that data I think would be quite interesting to see a little bit more insight into the epidemiology of GAN as well.

Our next question is coming from the line of Kevin DeGeeter with Oppenheimer.

Okay. Great. Thanks for taking our questions. Maybe a two-part question with regard to manufacturing. Can you provide an update as to whether this strategic refocusing has any impact on the build-out of in-house manufacturing capacity and then within the cash runway assumption, how should we think about CapEx and investment manufacturing? Yeah, within the cash runway guidance, how should we consider cumulative CapEx or other metrics during that time?

Our next question is on the line of Gil Blum with Needham and Company.

Hello, everyone, can you hear me? Okay. Maybe just kind of a general question about Rett here. So because it's a relatively larger indication, would you also expect the studies to be larger or more expensive to that account? Thank you.

Our next question comes from the line of Laura Chico with Wedbush Securities. Please proceed with your question.

Good morning, everyone. Thank you for taking my question. I wanted to follow up on the cash runway and the recent changes. Could you clarify how much the cash runway has been extended, particularly concerning the GAN program? I'm interested in understanding your best-case scenario regarding 120 and what options are available. Additionally, how would the cash runway be affected if we needed to conduct an additional study in a worst-case scenario? Thank you.

Our next question comes from the line of Yun Zhong with BTIG. Please proceed with your question.

Good morning. Thank you for taking my questions. Regarding the Rett syndrome study, I'm curious about the dose-finding aspect. What markers will help you determine when you are near the optimal dose? Additionally, are there any signals for efficacy that you could share? Previously, we discussed the potential markers, including EGP, and I'm wondering if these will be part of the data readout by the end of the year, along with any other markers.

Let me share a few thoughts. We have initiated a study involving two boys and adults with Rett syndrome. The initial stock presented is a total viral genome dose of 5E14, which can escalate to 1E15. The key takeaway here is that we have a strong preclinical package that enabled us to open a clinical trial application. We've received insights from regulators regarding some details. The framework for our studies has been developed over many years based on extensive research. We conducted a pharmacology study in 252 mice, examining various doses and age groups under a wide range of parameters, all of which correlate well with clinical measures. For instance, we monitored mouse activity and mobility in relation to their respiration rates and other assessments. From this study, we identified a minimally effective dose. Additionally, we executed toxicology studies, which provided vital data on post-distribution metrics. Notably, even at elevated doses, we did not experience adverse findings, demonstrating that our approach is working effectively. The toxicology results showed high levels of DNA and minimal adverse effects. We've sent our findings to the team overseeing the Hong Kong study, which will inform our starting dose decision. We are optimistic about the efficacy without significant toxicity. In terms of measurements, we are identifying biomarkers that are relevant and investigating EEG as a potential marker, along with various assessments related to brain function, respiration, and seizure frequency. These will guide our dose selection and overall clinical progress. EEG will be part of our biomarker evaluation, but we aren't making any decisions based on biomarkers that are not well understood at this stage.

Our next question comes from Silvan Tuerkcan with JMP Securities. Thank you for your question.

Good morning and congrats on all the progress. I just had two quick questions, please. Could you run me maybe in more granularity through your GAN base case in terms of getting this into commercial material into a handful of patients? How much will be hand full and when could this start whether it makes sense to start right now or do you need to wait for your validation run in the third quarter to how much time to filing? And then my second quick question would be on the CLN7 program. Now we're going ahead with a first Gene construct. Do you think that's good enough for it or you just want to get some clinical experience no matter what this program? And thank you for taking my questions.

Our next question is from the line of Kristen Kluska with Cantor, please proceed with your question.

Good morning. This is Rick on for Kristen. Thank you for taking our question. In terms of the prioritized programs announced today, could you please talk a little bit about the potential for grants or other non-dilutive funding opportunities around these implications? For example, we understand that a federal funding bill was recently passed supporting funding for Rett syndrome research. Thank you.

Thank you. Our next question is from the line of Eun Yang with Jefferies, please proceed with your question.

Thank you for taking my question. I have a question about GAN. Toward the end of last year, you mentioned a meeting with the former U.S. regulatory agencies scheduled for January. Have you met with them? I know you won't provide an update until later this year, but I wanted to check. Also, in the U.S., you discussed three scenarios for some time. It seems like option 2 could have been likely when you met with the FDA. Before considering option 2, what would be the timing for the filing? I believe you mentioned around mid-2023 in the past, so I'd like to hear your updated view on that. Lastly, you mentioned that your cash runway has been extended by one quarter. Should we interpret the 35% reduction in workforce as leading to a one-quarter extension in the cash runway? Thank you.

Thank you. Our next question is from the line of Sami Corwin with William Blair.

Hey guys, thanks for taking my question. For the Rett study, will there be different outcome measures for patients depending on their age or disease stage? And then, can we expect any data this year from these CLN1 or CLN7 clinical trials? Thanks.

Yes, generally speaking. We're going to examine similar categories of measurements regardless of specific factors. We will focus on specific assessments that RSP conducts, such as the medication behavior assessment and the practice scale. We will also analyze certain seizure measurements, including EEGs. Additionally, we will consider assessments that evaluate stress indices, sleep apnea, and various communication assessments, along with numerous biomarkers.

Thank you. Our next question is from the line of David Hoang with SMBC.

Thank you for the update and for answering my questions. I have a few more regarding the base case for GAN and the regulatory path. Do you have any idea how many additional patients the FDA may require you to dose? Also, regarding the follow-up on those patients, do you know who received the commercial-grade material? What exactly do you need to report? Is it just safety and pharmacokinetic data, or do you need to follow up and gather some efficacy data as well?

Please, standby. We'll resume with your answer in a moment, Mr. Juan. Our speakers here. You may continue with your answer. It was with Mr. Juan. Please stand by, we will resume our question-and-answer session momentarily. Thank you. Please stand by everyone, our question-and-answer session will resume momentarily, thank you. We can hear you now. Please continue. I can hear you. You can be heard into the conference again now, where we still have Mr. Hong on the line with this first question. Ladies and gentlemen, please stand by while we switch speakers' lines. Speakers, please continue with your second line.

Hi, guys.

Please go ahead, you're on your second line. I'm going to disconnect. I'm hearing feedback on another line. May I disconnect at this time? Thank you. Please standby while we resume with the line of Sami Corwin. Sami, please go ahead.

Hey guys. Yeah. I think you were just going to answer my question on, if you can expect any data from CLN1 or CLN7.

Thank you our final question comes from the line of Yanan Zhu with Wells Fargo, please proceed with your question.

Thank you for taking my question and congratulations on starting the Rett syndrome program trial. My first question is about the GAN programs data. You mentioned H-matched controls, but the MFM32 data presented primarily covers the overall natural history control cohort. I was curious about what the H-matched controls look like, as you mentioned having enough patient data to create specific age matches. Is this part of your discussions or package with your advisors? Thank you.

Thank you. We have now reached the end of the question-and-answer session, and I will now turn the call over for closing remarks. Thank you, everyone who joined us today. This will conclude today's conference call and webcast. You may now disconnect your lines at this time. We thank you for your participation.