Taysha Gene Therapies, Inc. Q1 FY2022 Earnings Call

Good morning. Welcome to Taysha Gene Therapies’ First Quarter 2022 Financial Results and Corporate Update Conference Call. 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, May 16, 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 first quarter 2022 financial results and corporate update 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 first quarter ended March 31, 2021. A 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 expected timing and results of clinical trials for a product candidate. Our expectations regarding the data necessary to support regulatory approval of TSHA-120 and the regulatory status and market opportunity for those programs as well as Taysha’s manufacturing plans. This call may also contain forward-looking statements relating to Taysha’s growth and future operating results, discovering development and product candidates, strategic alliances, and intellectual property as well as matters that are not of historical facts or information. Various risks may cause Taysha’s 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 being dependent upon strategic alliances and other third-party relationships, our ability to obtain patent protection for discoveries, limitations imposed by patents owned or controlled by third-parties, and the requirements of successful funding to conduct our research and development activities. For a list and 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 today of this live broadcast, May 16, 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, except as may be required by applicable securities law. I would now like to turn the call over to our President, Founder, and CEO, RA Session II. RA?

Thanks, Kimberly. We have made significant recent progress and its launch in our clinical programs for GAN and Rett syndrome and expect exciting milestones throughout the remainder of the year. I will begin with Rett syndrome. TSHA-102 is a transgene for MECP2, which is a protein essential for neuronal development and function. The challenge in gene replacement therapy of MECP2 is finding the appropriate balance of sufficient physiological expression to correct the deficiency while also avoiding overexpression and the associated toxicity. To do this, TSHA-102 regulates the expression of MECP2 using the novel microRNA responsive auto-regulatory elements platform known as miRARE that is exclusively licensed to Taysha and developed by Drs. Sarah Sinnett and Steven Gray of UT Southwestern Medical Center. miRARE provides sophisticated regulation of transgene expression on a cell-by-cell basis ensuring controlled expression that avoids excessive levels of MECP2. We recently initiated clinical development of TSHA-102 under an approved CTA by Health Canada. In further support of this promising program, we presented positive IND CTA enabling preclinical data at the International Rett Syndrome Foundation Scientific Conference and ASCEND Rett Syndrome National Patient Advocacy Summit. These data supported the CTA acceptance, including a pharmacology study in Rett knockout mice, assessing the efficacy of TSHA-102 and a 6-month GLP toxicology study in non-human primates exploring the safety by distribution and mechanism of action of TSHA-102. Collectively, these preclinical results confirm the ability of TSHA-102 to regulate transgene expression within appropriate physiological levels. This week, we will have a prevalence of the 25th Annual Meeting of the American Society of Gene & Cell Therapy, or ASGCT, where we will be presenting the safety and distribution data in NHPs as well as safety data in rats. These presentations will further support the ability of our miRARE platform to control gene expression and address the challenge of ensuring appropriate levels of protein expression that have limited effective therapeutic development with other gene replacement strategies. As I indicated, there are over 350,000 patients estimated to suffer from Rett syndrome worldwide, spanning patients as young as 6 months into adulthood. Currently, there are no disease-modifying therapies to treat this devastating condition. We are excited to advance TSHA-102 in the REVEAL Phase 1/2 clinical trial as the first gene therapy in clinical development for Rett syndrome. The REVEAL study is an open-label dose escalation randomized multi-center study that will examine the safety and efficacy of TSHA-102 in adult female patients with Rett syndrome. Up to 18 patients will be enrolled. In the first cohort, a single 5E14 total vg dose of TSHA-102 will be given intrathecally. The second cohort will be given a 1E15 total vg dose of TSHA-102. Key assessments will include Rett-specific kind of global assessments, quality of life, biomarkers, and neurophysiology and imaging assessments. 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 look forward to reporting preliminary first-in-human data by the end of 2022. TSHA-102 has been granted rare pediatric disease designation and orphan drug designation from the FDA and more recently orphan drug designation from the European Commission. Turning to TSHA-120 for the treatment of GAN, earlier this year, we reported positive clinical efficacy and safety data for the high dose cohort of 3.5E14 total vg delivered intrathecally as well as long-term safety and durability across all therapeutic doses. Treatment with TSHA-120 achieved a clinically meaningful or statistically significant slowing or halting of disease progression across all therapeutic dose cohorts that was further confirmed by long-term data demonstrating sustained durability. Notably, nerve biopsy data provided new evidence for active regeneration of nerve fibers following treatment with TSHA-120. In addition, we observed preservation of visual acuity as measured by the LogMAR scale and optical coherence tomography. There were no significant safety issues, no increase in adverse events at high doses, and no dose-limiting toxicities. All adverse events related to immunosuppression or study procedures were comparable to other gene therapies and transient in nature. Lastly, there is no evidence of dorsal root ganglion inflammation or thrombocytopenia. We recently completed a commercially representative GMP batch for TSHA-120 and release testing for this batch is currently underway. Also in April, TSHA-120 received orphan drug designation from the European Commission further supporting a large unmet need for treatment options in GAN and potentially expedited support in regulatory approval. As a reminder, TSHA-120 previously received orphan drug and rare pediatric disease designations from the FDA. Partnerships with genetics testing leader, GeneDx, to sponsor the inclusion of a genetic marker for GAN testing and the GeneDx routine hereditary neuropathy screening panel free of charge are ongoing, as well as a collaboration with a hereditary neuropathy foundation and the Charcot-Marie-Tooth Association Centers of Excellence healthcare professionals and patient advocacy groups to help raise awareness on the early diagnosis of GAN. We remain well positioned to further advance TSHA-120 through regulatory approval and believe the comprehensive gene therapy dataset generates the data in GAN offers TSHA-120 a potentially de-risk regulatory path that meets most registration requirements of the FDA and EMA. We look forward to our continued discussions with major regulatory agencies on potential registration pathways for TSHA-120 and anticipate providing a regulatory update by mid-2022. At the upcoming ASGCT meeting, Dr. Rachel Bailey, Assistant Professor in the Department of Pediatrics at UTSW will be presenting data on vagus nerve delivery of TSHA-120 to treat the autonomic nervous system dysfunction in GAN. There will also be other presentations on some of our earlier stage programs, including preclinical data in tauopathy, Prader-Willi syndrome, and Angelman syndrome. There will also be a symposium on innovative approaches and translational strategies in gene therapy development. In addition to expected regulatory clearance for TSHA-120 in GAN by mid-2022 and first in human preliminary Phase 1/2 safety and efficacy data for TSHA-102 in Rett syndrome by year-end, we remain focused on continued clinical development of the first generation construct for CLN7 disease in partnership with UT Southwestern and under the leadership of Dr. Ben Greenberg, Vice Chair of Clinical and Translational Research and Principal Investigator during the course of 2022. Clinical development of TSHA-118 in CLN-1 disease also remains ongoing and we intend to initiate clinical development for our small proof-of-concept study for TSHA-105 and SLC13A5 deficiency. With that, I will turn the call over to Kamran to review our financial results. Kamran?

Thank you, Suyash. This morning, I will discuss key aspects of our financial results for the first quarter ended on March 31, 2022. More details can be found in our Form 10-Q, which will be filed with the SEC shortly. As indicated in our press release today, research and development expenses were $37.8 million for the 3 months ended March 31, 2022 compared to $23.9 million for the 3 months ended March 31, 2021. The $13.9 million increase was primarily attributable to an increase of $9.3 million in employee compensation, which included $2.2 million of severance and one-time termination costs in connection with the strategic reprioritization of programs completed in March 2022 and $1 million of non-cash stock-based compensation. Additionally, in the 3 months ended March 31, 2022, we incurred an increase of $2.9 million in expenses in research and development, manufacturing, and other raw material purchases. We also incurred an increase of $1.7 million in third-party research and development consulting fees primarily related to GLP toxicology studies and clinical study activities. General and administrative expenses were $11.5 million for the 3 months ended March 31, 2022 compared to $8.2 million for the 3 months ended March 31, 2021. The increase of approximately $3.3 million was primarily attributable to $2.9 million of incremental compensation expense, which included $0.4 million of severance and one-time termination costs and $0.7 million of non-cash stock-based compensation. We also incurred an increase of $0.4 million in professional fees related to insurance, Investor Relations, communications, accounting, and market research. Net loss for the 3 months ended March 31, 2022 was $50.1 million or $1.31 per share as compared to a net loss of $32 million or $0.87 per share for the 3 months ended March 31, 2021. As of March 31, 2022, Taysha had $96.6 million in cash and cash equivalents. This cash balance excludes $12 million in gross proceeds generated from the sale of common shares under our existing at-the-market facility or ATM in April. Current cash and cash equivalents along with full access to our existing term loan facility is expected to fund operating expenses and capital requirements into the fourth quarter of 2023. And with that, I will hand the call back to RA.

Thank you. Our first question comes from Joon Lee of Truist Securities. Please proceed with your question.

Hi, good morning and thank you for taking my question. This is an analyst on for Joon. So what is the probability by which you think FDA might ask you to have efficacy data on new patients using commercial-grade material and how long would you think it takes to provide such data? Thank you.

Thank you. Our next question comes from the line of Gil Blum with Needham & Company. Please proceed with your question.

Good morning and thanks for taking our question. We have another quick one on TSHA-120. So what more is there to do on your commercial-grade product, what more things do you need to do there? And maybe you can give us an idea of how many patients can be treated with this batch? Thank you.

No, I think I would just echo the fact that the batches made, there was plenty of product metrics or high yielding run and release testing is underway looking at the characterization of the product and it’s all looking very promising thus far. RA is quite correct, the only thing we are doing is outstanding is to finalize the potency assay. And just to remind you, potency assay essentially exists to demonstrate that the molecule that we are administering closely mimics what effectively in the clinical settings it does in the lab setting and every lot needs to be tested, there is predefined acceptance character that need to be met. And the FDA and the regulators are pretty keen to ensure obviously the product we make on an ongoing basis is consistent and highly appropriate level of quality. And as RA said, we have made a lot of progress in finalizing that potency assay. So, everything is looking great. We are release testing is underway and the drug is going to be available to pre-treating patients imminently.

Thank you. Our next question comes from the line of Salveen Richter with Goldman Sachs. Please proceed with your question.

Hey, good morning, guys and thank you for taking our question. This is Elizabeth on for Salveen. Maybe just switching over to Rett; if you could comment on the nature of the first clinical data we expect to see and how many patients we can expect to see data from? And then a second one from us are, what kind of assumptions have been baked into the 4Q ‘23 cash runway guidance? Thank you.

Sure. Let me take the question about the clinical trial, then Kamran and RA can handle the second question. So with regard to the Rett clinical trial, this is a trial in adult females with Rett syndrome. To remind you, we just felt given the concerns about potential overexpression, which we show with actually downregulate very nicely in our non-human primate data, we still wanted to be a little bit conservative. And so we are starting off in adults, and the plan will be to move into children, pediatric females with Rett at some point thereafter, and then we want to plan a small study in boys, the very rare population of boys with Rett shortly thereafter. Now, in terms of expectations with regard to what we are going to have coming out of the clinical trial data from the adult study, which we anticipate sharing data from by the end of the year, the likelihood is going to be safety data and to have some preliminary efficacy data, we are not sure at the moment. We will, as is the case for these first enhanced studies with these innovative products, they have to target those things. We can’t dose several patients all at once. We have to dose one patient, leave a period of time, and then dose the second patient after a DMC review and then leave a period of time for dosing the next patients. So my guess is going to be a small number of patients’ safety data by the end of this year potentially some preliminary efficacy data if we are starting to see some early signs of that, but I think that’s why we are focusing on clinical trial at the moment. With regard to the assumptions, I’ll let RA and Kamran take that question.

Sure, and thanks, Liz for the question. I was actually talking on mute. So just to reiterate what Suyash mentioned, we are quite excited about the Rett data, the preclinical datasets that supports the CTA, and again, are really excited about what this means to the Rett community being the first and only gene therapy in clinical development for Rett syndrome. And I think just to echo what Suyash mentioned, it will really be on the totality of data, the amount of endpoints that are being collected are immense. Both from physician-reported Rett syndrome outcomes, patient-reported outcomes, respiratory measures, and obviously, some neurodevelopmental measures as well as movement. So it’s really going to be a whole host of endpoints that we will share including safety, and safety is going to be probably one of the most important ones because there’s always this notion around overexpression, and the data from our NHP study not only demonstrated the safety of our construct at doses up to fourfold above what the starting dose will be in the clinical setting, but also proof of mechanism and the ability to downregulate the expression of MECP2 in the presence of wild-type MECP2. So again, for us, it’s quite exciting. But certainly, this is one of the reasons why we decided to start into adults. So I would probably characterize it similarly to the way that Suyash did, and it’ll be on the totality of data, it will be safety with some preliminary efficacy in there. From an assumption perspective on cash runway, the way that we’re thinking about this is we have, with the full drawdown of our current term loan facility from Silicon Valley Bank, the ability to extend runway into Q4 of 2023. With our existing cash, and that’s kind of the assumption, the base case assumption that has gone in as you are aware, we executed on a pipeline parameterization exercise earlier this year, which we announced this our year-end earnings call, which also included a risk of 35%. And essentially, kind of right-sizing based on a clear focus on two key programs. And that’s our Rett syndrome program and our GAN program, which we’re both quite excited about. And then taking two of the additional clinical development assets and moving those from more of a registration-directed trial to more of a proof-of-small concept study that being CLN1, and then SLC13A5. What I would also say though, is again, I’m quite excited about the progress that the team has made just in this short period. And really, the ability to get through this prioritization analysis and really report focus on the company while still executing is something that I’ve been immensely proud of. It’s not easy for anyone out there, in biotech, and particularly in gene therapy, but the team is really nose to the grind and executing. And so for us, all of this has been baked into our cash analysis, and we continue to look at ways to augment and extend runway.

Thank you. Our next question comes from the line of Kevin DeGeeter with Oppenheimer & Company. Please proceed with your question.

Hey, great, thanks for taking our questions. Just on again, regulatory update, RA, can you comment on your confidence sort of that mid-2022 update timeline? I guess sort of underlying this question is, is it reasonable to conclude they’ve had the necessary meetings with FDA and other regulatory agencies are waiting for feedback at this point? Are there kind of open scheduling components that could impact that timeline and cause some uncertainty?

Thank you. Our next question comes from the line of Jack Allen with Baird. Please proceed with your question.

Hi, thank you so much for taking the questions and congratulations on all progress. I wanted to shift gears back to Rett really briefly and talk about the dose there. I know you mentioned that you’re starting at 5E14 total VG and then moving up to 1E15. And that, I guess the preclinical package showed safety at 4x the first dose, I was just curious was there a dose in the preclinical package where you did see tolerability issues and how much coverage do you think you have to dose escalate as we move through the study based on the existing preclinical package?

Yes, hi Jack. Thanks for the question. So it’s a really important question. The dose selection for the clinical trial for a gene therapy study, getting the dose right the first time is really important because you’ve got to make sure you give enough drug to ensure the drug’s effectiveness while also making sure that there are no safety or tolerability issues because once you’ve administered gene therapy drugs, you can’t take it away again. So it’s a critical decision that needs to be made. In particular, for Rett, where there is this risk of overexpression toxicity, you have to get the amount of protein being produced appropriate within physiological limits enough to ensure you’re having efficacy while not producing so much protein that it causes toxic side effects. Because of that, we actually did a very disciplined preclinical package, which included a mouse pharmacology study. So a mouse model pharmacology study, we did a Rett toxicology study, we did an NHP toxicology study, all of the studies were very extensive and comprehensive. The mouse study included over 250 mice, the Rett study incorporated over 120 rats, and the NHP study had 24 NHPs. The mouse pharmacology study is where you look for a dose that’s going to be efficacious. We were able to identify that very clearly in terms of demonstrating enough drug to cause improvements in survival, motor assessments, respiratory assessments, and other assessments. The 5E14 total vg dose is above that level. On the other end, both in the Rett toxicology and the NHP toxicology studies, we tested doses up to an equivalent of 2E15 total vg human equivalents, that’s fourfold over the starting dose, and to answer your question specifically, there were no adverse events of any note at the 2E15 dose. So, it’s possible we could go even higher with that. However, we didn’t test higher than that because we didn’t think there would be a need to go higher than 2E15, simply because we saw efficacy at a much lower amount in the naive pharmacology study. I think it was that combination of studies that really persuaded Health Canada to allow the CTA to be opened. There’s one other important piece around this NHP study that is really vital, and I will actually be discussing this at a poster presentation at ASGCT. The NHP toxicology data shows three things: it shows a full absence of any kind of toxic effects, which is important for the fourfold higher clinical dose; it also shows very excellent biodistribution from an intrathecal dose throughout the brain and the spinal cord, achieving copy numbers within a very nice range, and low levels of RNA. Don’t forget, these are wild type NHPs. You are getting great delivery of the drug into the brain and spinal cord, but with correspondingly low levels of RNA. This gives us confidence that we are achieving great biodistribution with minimal side effects from an intrathecal dose of injection. That’s a response to your question, Jack.

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

Hi. Thank you very much for taking the question. This is actually a follow-up question on just what you said just now, Suyash. So, on Rett syndrome, has anyone looked at comparability between non-human primates and human patients in terms of biodistribution? And also, given that this is not cross-correction to be expected? So, are there any data to suggest the transduction efficiency, or do you have an estimate on how many cells will need to be transduced to see reasonable efficacy?

Two very good questions. So, the first question was about the translatability of NHP biodistribution to humans. It’s a good question. No one has done it specifically in Rett. What we have done is we have shown very nice biodistribution with our Rett program with an intrathecal dose into an NHP, which is of course smaller than the human being but with similar anatomy, making it the best comparison looking at biodistribution. We get really nice biodistribution throughout the brain and the spinal cord with the intrathecal dose of injection. Now, in the human setting, the only way to truly ascertain biodistribution is in unfortunate situations if a patient passes away and examines DNA, RNA, and protein in that individual. This did occur early on in one of the GAN patients, a low-dose GAN patient who sadly passed away due to disease progression; this data was presented by Carson Palmer and Steven Gray at the ASGCT meeting a few years ago. They demonstrated that with an intrathecal dose of AAV9 gene therapy for GAN, you achieved nice biodistribution, although it’s a low level, but it was delivered throughout all target organs and tissues. From what we learned from the GAN program, both AAV9 and delivered via intrathecal dose share similarities with the Rett program. Additionally, we have demonstrated more recently that we see improvements in peripheral nerves in our nerve biopsies, performed in the radial superficial nerve, indicating that drug may be reaching the peripheral nervous system effectively from an intrathecal dose of injection. For those reasons, we are confident that an intrathecal dose of drug will deliver effectively to all tissues that need to be transduced in Rett syndrome, particularly the brain and spinal cord. To answer your second question about the proportion of cells needing to be transduced, it’s difficult to know specifically. However, we believe that with the 50-50 ratio of mosaic versus non-mosaic (wild-type) cell settings, if we transduce some of the cells, you will observe some clinical benefits. The more cells that are transduced, the greater clinical benefit may be expected. Our approach is to deliver a high dose intrathecally to enhance biodistribution, knowing that with higher doses, we still see down-regulation of the protein production in the presence of wild-type cells. In summary, we are confident that delivering high doses will enhance biodistribution and efficacy.

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

Hey. Good morning, guys. Thanks for taking the question. I wanted to circle back with regards to the spend; I am wondering if you can offer a little bit more clarity on perhaps the breakdown between R&D and G&A. And RA, I think you made an earlier comment too, about kind of exploring additional channels for monetization, just wondering if you could kind of expand on that a little bit. Thanks guys.

Yes. Sure. Happy to help. Thanks RA and thanks for the question, Laura. So, over 75% of our operating expenses are R&D related. As RA mentioned, because of our strategic pipeline prioritization efforts, we will be able to significantly reduce that R&D expense burn over the coming quarters as a result of pausing R&D activities on our preclinical programs as well as substantial reductions in CMC expenses. As a reminder, we conducted six GMP batches last year, some of which were completed in Q1 of this year in terms of product release. We are only doing GMP manufacturing on our GAN program this year, so you can expect significant reductions in our CMC expenses year-over-year and in subsequent quarters as a result. Thank you.

Thank you. Our next question comes from the line of Yanan Zhu with Wells Fargo. Please proceed with your question.

Hi. Thanks for taking my questions. A couple on the Rett syndrome clinical trial, what is the waiting period for safety observation once patient one is dosed? And how could you ascertain whether there is MECP2 overexpression associated toxicity, given that the MECP2 duplication syndrome shares many of the same manifestations with Rett syndrome? Thank you.

Sure. The staggering specifically is eight weeks. So, after a patient is dosed, there will be a review at the eight-week time point, and discussions with the DMC will then show with the absence of any safety issues that we will go ahead and dose the next patient. Initially, that’s between patients one and two; as time progresses, the staggering changes in the clinical trial course, so we will do less staggering as the study progresses. Specifically, regarding signs of overexpression toxicity, it’s a good question and one we have discussed at length, both with regulators and with key opinion leaders. The bottom line is that most patients, in fact, all patients in the adult study, certainly unlike in the pediatric study, will be in Phase 3 of Rett syndrome, meaning they are stable and not declining. You may recall that there are four phases to the clinical progression of patients with Rett. The first is the diagnosis. The second is a rapid decline in functionality. The third is the stable phase characterized by a complex level of functioning. Finally, there can be a deterioration phase that may last for years, sometimes decades. All patients we are working with have been stable for a while. What we are clinically looking for is any deterioration. Given their current stable state, any deterioration in terms of Rett syndrome-type behaviors or other neurological features is likely due to overexpression rather than the progression of Rett syndrome. We will definitely monitor carefully for this, but based on our substantial data from the NHP and rat studies showing no adverse events, we believe the likelihood of this occurring is very low.

Thank you. Ladies and gentlemen, we have come to the end of our time allowed for questions. I will turn the floor back to Mr. Session for any final comments. Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.