Taysha Gene Therapies, Inc. Q4 FY2022 Earnings Call

Greetings, and welcome to the Taysha Gene Therapies Fourth Quarter and Full-Year 2022 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Hayleigh Collins, Director and Head of Corporate Communications. Thank you, Ms. Collins. You may begin.

Thank you. Good afternoon, and welcome to Taysha's fourth quarter and full-year 2022 financial results and corporate update conference call. I'm Hayleigh Collins, Taysha's recently appointed Director and Head of Corporate Communications. I will also be overseeing Investor Relations activities. With my experience in corporate communications and in rare diseases, having previously served in a similar role at Jaguar Gene Therapy, I'm excited to join Taysha at this pivotal time and look forward to working with the team to help bring potentially life-changing therapies to patients with rare diseases with high unmet medical needs. Earlier today, Taysha issued a press release announcing financial results for the fourth quarter and full-year 2022. A copy of this press release is available on the Company's website and through our SEC filings. Joining me on today's call are Sean Nolan, Taysha's CEO, Sukumar Nagendran, President and Head of R&D, and Kamran Alam, Chief Financial Officer. We will hold a question-and-answer session following our prepared remarks. Please note that on today's call, we will be making forward-looking statements, including statements relating to the existing clinical data for TSHA-120 and the therapeutic and commercial potential of TSHA-120 and TSHA-102. These statements may include expected timing and results of clinical trials of our product candidates and other clinical and regulatory plans and the market opportunity for those programs. This call may also contain forward-looking statements relating to Taysha's growth, forecasted cash runway and future operating results, discovery and development of 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 of, and regulatory interactions for our product candidates, our dependence upon strategic alliances and other third-party relationships, our ability to obtain patent protection for our discoveries, limitations imposed by patents owned or controlled by third parties and the requirements of substantial 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 that we have filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2022. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, March 28, 2023. 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. With that, I would now like to turn the call over to our CEO, Sean Nolan.

Thank you, Hayleigh, and welcome, everyone to our 2022 fourth quarter and full-year financial results and corporate update conference call. Today, I will begin providing a brief corporate outlook for 2023. Then Suku Nagendran, President and Head of R&D of Taysha, will provide an update on our clinical development programs followed by a financial update from Kamran Alam, our Chief Financial Officer. I will then provide closing remarks before opening the call up for questions. The actions taken earlier this year to improve execution and expedite progress with our two lead clinical programs in Rett syndrome and GAN are having a positive effect. For TSHA-102 in Rett syndrome, we remain on track to execute across our timelines for both initial available safety data and regulatory submissions this year and our ongoing Phase I/II REVEAL adult study. Suku will provide further details shortly. For TSHA-120 in GAN, an ultra-rare disease with no currently approved treatments. We recently received constructive feedback from the FDA regarding our follow-up questions to the Type B end-of-Phase II meeting. We are completing a comprehensive review of the data from the ongoing natural history and interventional trial, including functional, biological, and electrophysiological assessments. The preliminary analysis appears encouraging and we believe there are some compelling new findings that we intend to share with the FDA to further discuss a potential regulatory path forward. Again, Suku will discuss this in further detail shortly. In the year ahead, we remain focused on achieving the anticipated near-term milestones in our Rett syndrome and GAN programs and continue to work towards our mission of bringing transformational new treatments to patients with these devastating neurodegenerative diseases. I will now turn the call over to Suku to provide a more in-depth discussion of our Rett syndrome and GAN programs. Suku?

Thank you, Sean, and good afternoon, everyone. First, I will start with an update on TSHA-102, our gene therapy program for the treatment of Rett syndrome. As a reminder, TSHA-102 utilizes an innovative miRNA-Responsive Auto-Regulatory Element or miRARE platform designed to regulate the cellular expression of MECP2 for the treatment of Rett syndrome. TSHA-102 has received orphan drug and rare pediatric disease designations from the FDA and has been granted orphan drug designation from the European Commission. In our REVEAL Phase I/II trial in adult patients with Rett syndrome, we recently initiated screening for the first potential patient and we anticipate dosing the first patient in the first half of the year. We remain on track to report initial available clinical data, primarily on safety, for TSHA-102 in the first half of 2023 and plan to provide quarterly updates on available clinical data thereafter. Importantly, we recently submitted a protocol amendment to allow patients as young as 15 years old to be included in the study, which we believe will further expedite enrollment. In the second half of the year, we intend to continue dosing patients with Rett syndrome in our REVEAL trial. For our study in pediatric patients with Rett syndrome, we plan to submit a CTA to the UK MHRA for TSHA-102 in mid-2023. We also have an IND application submission to the U.S. FDA planned in the second half of the year. Now let's turn to TSHA-120 for the treatment of GAN, which to reiterate is an ultra-rare neurodegenerative indication with no approved treatments or established regulatory pathway. TSHA-120 has received orphan drug and rare pediatric disease designations from the FDA and has been granted orphan drug designation from the European Commission. In regards to manufacturing, we recently submitted a CMC module 3 amendment submission to the FDA detailing our commercial process product manufacturing and drug comparability analysis. As Sean mentioned, we also received feedback from the FDA in response to our follow-up questions to the formal Type B end-of-Phase II meeting minutes. The FDA clarified MFM32, the primary efficacy scale discussed at the FDA Type B end-of-Phase II meeting, as a relevant primary endpoint only in the setting of a randomized double-blind controlled trial, while also acknowledging Taysha's challenge in executing and enrolling such a study design due to the ultra-rare nature of GAN. As such, the FDA is open to regulatory flexibility in a controlled trial setting and is willing to consider alternative study designs utilizing objective measurements to demonstrate a relatively large treatment effect that is self-evident and clinically meaningful. We are completing a comprehensive review of data from the ongoing natural history and interventional trial, including functional, biological, and electrophysiological assessments, which will inform our plans for future interactions with the FDA. The ongoing analysis includes functional assessments of MFM32 and Ataxia, as progressive gait and limb ataxia, which is a common clinical manifestation observed in patients with GAN that often leads to loss of ambulation by the second decade. Additionally, we continue to analyze functional and structural aspects of the retina and optic nerve given that GAN patients experience deterioration of visual acuity and optic nerve degeneration over time. We are also conducting several objective biological and electrophysiological assessments including sensory nerve action potential, nerve and skin biopsies, ganglion cell and retinal nerve fiber layer thickness, brain and spine MRI images, and muscle responses to nerve activation to determine whether there is a relatively large treatment effect that is self-evident and clinically meaningful. We intend to continue a collaborative dialogue with the FDA regarding the potential registrational path to bring TSHA-120 to patients with GAN, who reiterate have no approved treatments or established regulatory pathway. We plan to submit a formal meeting request to the agency in the second quarter of 2023 to further discuss the potential regulatory pathway forward for this ultra-rare disease. I will now turn the call over to Kamran to discuss financials. Kamran?

Thank you, Suku. Research and development expenses were $13.9 million for the three months ended December 31, 2022, compared to $37.9 million for the three months ended December 31, 2021. Research and development expenses were $91.2 million for the full-year ended December 31, 2022, compared to $131.9 million for the full-year ended December 31, 2021. The $40.7 million decrease was primarily attributable to a decrease of $20.3 million in research and development manufacturing and other raw material purchases and a $9 million decrease in license fees. The decrease in research and development expenses for the year ended December 31, 2022 was also attributable to a $12 million decrease in third-party research and development fees, mainly related to non-clinical and toxicology studies, and a $4.7 million decrease in compensation expense as a result of lower headcount. Overall, lower research and development expenses for the year ended December 31, 2022 were partially offset by higher clinical trial expenses of $2.4 million and higher severance expense of $2.9 million in 2022. General and administrative expenses were $7.3 million for the three months ended December 31, 2022, compared to $11.8 million for the three months ended December 31, 2021. General and administrative expenses were $37.4 million for the year ended December 31, 2022, compared to $41.3 million for the year ended December 31, 2021. The decrease of approximately $3.9 million was primarily attributable to $5 million of lower consulting professional fees and reduced compensation expenses driven by lower headcount in 2022. Lower general and administrative expenses were partially offset by $1.1 million of severance expense. Net loss for the three months ended December 31, 2022 was $55.7 million, or $0.99 per share, as compared to a net loss of $50.4 million, or $1.32 per share, for the three months ended December 31, 2021. In November 2022, we recorded a $36.4 million non-cash, non-recurring impairment charge related to the North Carolina manufacturing facility. Currently, we are in the process of actively looking for buyers for the North Carolina manufacturing facility. The net loss for the three months ended December 31, 2022 was partially offset by revenue of $2.5 million recognized related to the Astellas Transactions. Net loss for the full-year ended December 31, 2022 was $166 million or $3.78 per share, as compared to a net loss of $174.5 million, or $4.64 per share, for the full-year ended December 31, 2021. As of December 31, 2022, Taysha had $87.9 million in cash and cash equivalents. The company continues to expect that its current cash resources will support planned operating expenses and capital requirements into the first quarter of 2024. I will now return the call back over to Sean for his closing remarks. Sean?

Thank you, Kamran. I am pleased with the progress we have made with our two lead programs during the first few months of 2023, including initiating screening of the first potential patient in the adult Rett study and submitting a protocol amendment that should further expedite patient enrollment. For GAN, we are encouraged by the constructive feedback received from the FDA and the preliminary assessment of the comprehensive data analysis to support a formal meeting request in the second quarter to further discuss the potential regulatory path forward. Our focus throughout this year will be on execution and delivering across our planned milestones for Rett syndrome and GAN programs. We look forward to providing further updates throughout 2023. With that, I will now ask the operator to begin our Q&A session. Operator?

Thank you. We will now be conducting a question-and-answer session. Thank you. And our first question is from Yanan Zhu with Wells Fargo Securities. Please proceed with your question.

Hi, thanks for taking our question. This is Quan on behalf of Yanan. My question is about the Rett syndrome program. With Acadia's DAYBUE now approved for Rett syndrome patients aged five to 20, how will this impact your clinical study count in enrollment, especially regarding the UK study? Do you need to incorporate DAYBUE into your trial design? Thank you.

Thank you very much for the question. We've carefully thought about this in our planning and I'd like to ask Suku to provide some perspective on that. Suku?

Yes. Thanks, Sean. This is an important question that you asked because I think getting a product approved for a terrible disease like Rett is very important for the whole disease state and the patient population. What I would also identify is that by having trofinetide approved, it also increases the awareness of the disease state amongst the physician and patients communities, which could potentially increase the number of accessible prevalent patients and also result in some serious discussion at the state and federal level when it comes to newborn screening, which could further increase the number of patients available from an incidence standpoint. So what I'm saying is collectively this could be a real plus for the whole disease community, but also for sponsors like us who are doing interventional trials. Now to address your question about whether, once you have an approved product like trofinetide, where the mechanism of action obviously is very different from our product TSHA-102, which addresses the root cause of the disease, we would ideally like to treat patients that are treatment-naive, such that we can optimize and show the FDA and other regulatory authorities and the patient communities and the healthcare providers who treat this disease that our product will have a significant impact on the clinical progression of the disease. Now that is the hope, but the caveat is, as you asked, if there is an approved product, there is always a possibility that we may have to evaluate a combination product as well, and that is something we would be happy to discuss further with the regulators and take it on a case-by-case basis. But my team is already considering this in the protocol designs for the future. Sean, anything else you'd like to add?

The only other thing I would add is that, given the half-life of the product and some of the adverse event profiles, there's an opportunity for patients that take the drug to not be able to stay on it. So you've got a pool of, call it, non-treated patients that you could potentially access. Our experience with the Zolgensma study shows that even with the addition of SPINRAZA, patients are willing to either wait or wash out from taking those other medicines. So we'll certainly keep an active eye on the impact that trofinetide has on our study design for patient enrollment, and we remain confident that we will be able to enroll patients in the U.S. and in other geographies, including Canada and the UK. So thank you.

And Sean, if I can add one more point. Also, if you look at the trofinetide label, the discontinuation rates in the trials are very high due to GI symptoms, and I believe the numbers were anywhere from 70% to even 90% in some of the trials. So that may have a significant impact on more patients being available even with this product approved for patients with Rett syndrome.

Got it. Very clear. Thank you.

Thank you. Our next question is from Whitney Ijem with Canaccord. Please proceed with your question.

Thanks for taking the question. So for GAN, you kind of listed out a lot of additional endpoints and functional biomarkers, etc. that you're looking at. And I'm just curious, are those things that were selected all along and hadn't been analyzed or focused on, or are those things that you are calling patients back in now to look at and will be comparing to natural history? And then the second part of my question is, is the goal there to kind of continue the dialogue with the FDA, use that data to potentially support filing, or use that data to design another study?

So I'll take a first hand of that, Suku, and feel free to contribute. I wanted to answer the first part of your question. This is data that's existing in the database. So these patients have been treated. Remember, there have been 12 patients that have been treated. We've got the natural history before they were treated, and then all the study visits over the course of time, in some cases for many years. There are a multitude of assessments that were conducted. Suku’s team has been comprehensively and systematically going through all of that data to fully assess it and to evaluate additional data points that can further demonstrate the clinically meaningful effect and the objective measurement effect of the treatment on these patients suffering from GAN. To answer your second question, I'll turn it over to Suku.

Yes, Sean. Thank you. So as you've highlighted, it's an ultra-rare disease with no available treatment, a very small patient population, and the patients typically treated are over six years of age. What we've observed is a slowing of the disease, as we've all talked about previously in relation to MFM32. As Sean pointed out, there were multiple efficacy endpoints in the protocol designed by the NIH, and it's that dataset that we are analyzing when it comes to functional, biological, and electrophysiological endpoints. We are also doing some modeling work, and we believe that comprehensive data analysis should give us enough information to go back to the FDA and request a meeting in the second quarter of this year for further discussion on the best path forward for a dataset that we think could really make a difference in the lives of these patients, given it's an ultra-rare disease with no other treatments available. So we are cautiously optimistic as we collect all the data and work with the NIH, and then present our findings to the FDA to hopefully move this program forward. Thanks for the question.

Thank you.

Thank you. Our next question is from Jack Allen with Baird. Please proceed with your question.

Great. Thank you so much for taking the question. I'm going to stick with GAN here. I was wondering if you could provide an update regarding the Astellas option for GAN, how are you thinking about the ex-U.S. opportunity? And then what's the turnaround time for the meeting request and who have you been meeting with specifically at the FDA? I'd love to get any insights there. It does sound like Peter Marks is quite optimistic about accelerated approvals based on a recent medical meeting that you are speaking at?

Yes. I'll take a stab at this, and Suku, please jump in. To answer your last question first, in terms of who from the FDA will be present, it's premature for us to say. We cannot definitively make a statement relative to that. We'll do everything we can to ensure that the package we put together is as compelling as possible based on both the natural history and the interventional data. And your point about Peter Marks is a good one. We're headquartered in Dallas, and the MDA Conference was in Dallas. There was a lot of buzz about Peter's comments regarding how to deal with ultra-orphan diseases. We feel like this one fits that bill tremendously. That flexibility may lend itself well to the program, but we also understand we have to make that case. There's new leadership there now with Celia Witten, and we're all watching to see what will happen. Hopefully, we can get some additional flexibility as Peter has outlined in many of his public remarks over time. Suku, could you take on the other two questions from Jack?

Jack, can you repeat the question because there were a lot of questions that you asked.

Yes. Thanks so much, and I apologize. I know we're still limited to one. The other questions I had were surrounding the Astellas option. Where does that fit or where does that fit as it relates to GAN? And if you could just touch on the ex-U.S. path forward for GAN and how you're thinking about potentially following in Europe, I would think? Thanks so much.

Sean, do you want me to take that or would you like to take that?

Yes, I'll take it. On the ex-U.S. piece, Jack, we're not – we are focused right now on the U.S., so we have not had additional interactions with anyone overseas since the initial discussions. We want to focus all of our efforts, energy, and resources right now on the U.S. As it relates to the Astellas option, we really haven't provided too much detail about that. But what I would say is that we're still in a window where Astellas has the option and the time to evaluate whether or not they want to opt-in. I think it stands to reason that they would likely make a decision after we have this upcoming FDA meeting that we're planning to have. So we are planning to submit the meeting request in the second quarter. Hopefully, by mid-year, we will have the actual meeting. And again, I can't speak for Astellas, but I would guess around that time they would have the information to make a more informed decision on whether or not they want to opt-in on the program. So it's still a very active opt-in.

And Jack, you have one more question on the regulatory turnaround times. As you know, it depends on the type of meeting we request, right? Whether it's a Type A, B, C, or D. And I think that's the decision we'll have to make, and that'll impact the turnaround times. Some, as you know, could be 30 days or anywhere from 30 to 75 days depending on the type of meeting requested by the FDA, so…

Great. Thank you so much. I appreciate you taking the questions.

Yes. Thanks.

Thank you. Our next question is from Gil Blum with Needham & Company. Please proceed with your question.

Hi. This is Rohit on for Gil. Thanks for taking my questions. Can you just talk about the ex-U.S. market for TSHA-102, and would you be open to partnering the program? Thanks.

I would say that the opportunity is significant, right? When we talk about factors, there are approximately 25,000 patients in the U.S. and EU combined. So the opportunity over there is significant. There's good infrastructure over there in terms of clinical study sites, treatment centers, and the patients are well identified. We're encouraged by the opportunity there, and it's one of the reasons we've focused our clinical efforts in submitting that CTA mid-year into the UK. As for the partnering aspect, that's something we would potentially consider. You always have to look at all options based on your current capital situation and make a determination on whether it’s better to partner or to keep it to yourself. Right now, our plans are to execute the trial as we've outlined, as we have the funding this year to support it.

Thank you.

Thank you. Our next question is from Silvan Tuerkcan with JMP Securities. Please proceed with your question.

Yes. Thank you. Thanks for taking my questions. Just to come back to GAN, I think the last time the FDA indicated you a modest effect on the primary endpoint, and I don't remember exactly the wording, and that's why they wanted maybe a controlled trial. But I mean, obviously those are just words. And so how do we know now that they're open to a strong efficacy measure that you have met the bar with these additional endpoints? Could you stack them together to show a strong outcome here with the data at hand, or how do you imagine this will play out? Thank you.

I would say first of all that what the FDA said in the meeting minutes, the initial meeting minutes, was very focused on MFM32 because that's where the majority of the discussion happened. That was the primary endpoint, and that was the focus of the company. Their comments were generally around that particular endpoint, where they basically said, because they believe it's subjective, you need to have a double-blind randomized controlled trial. When we went back to them and asked subsequent questions, I would say that the new insight is that they restated their review on MFM32 but then said they are willing to evaluate alternative trial designs that are controlled. A control can be natural history, as you know, and those endpoints have to be clinically meaningful and objective. That's a door that’s been opened for us and gives us an opportunity, so it's up to us to determine what we believe are the data points that justify and meet those aspects. I will turn it over to Suku.

Yes. Thanks, Sean. Your question is an important one. So let me start by saying, again, I think somebody earlier asked about Peter Marks and the FDA's position when it comes to CNS ultra-rare diseases, where there is no treatment available. Those remarks were very important, and I hope they have some strategic impact on any sponsor dealing with an ultra-rare disease, GAN or otherwise. As Sean pointed out, as we continue our detailed analysis, the big question is not just MFM32. There are multiple other efficacy endpoints. The question is whether our intrathecal gene therapy shows broad clinical impact that could be clinically significant, whether in a large way or even moderately so, in our ultra-rare disease that allows us to make a case for potential accelerated approval for the patient community. The collective body of data we have may strengthen our submission to the FDA for further review.

Great. Thank you very much.

Thank you. Our next question is from Yun Zhong with BTIG. Please proceed with your question.

Hi. Thank you very much for taking the question. So my question is on the Rett syndrome program. The change in the patient age to treat patients as young as 15 years old. In addition to helping patient enrollment, do you have any other goals that you would like to achieve in terms of treatment outcome analysis and the initial data? Would that be safety only, or will you be able to provide any additional information?

Suku, would you like to take this question, please?

Yes, Sean, I will. Absolutely. This is another very important question. There was a significant clinical reason behind submitting this updated version for amendment to Health Canada. By lowering the age to 15, we have preclinical data and other data supporting this, enabling us to treat a younger group of patients. We believe we may have greater impact over time by treating younger patients with this neurodevelopmental disorder. Our hope is that by treating younger patients, we could not only have access to more patients, given that it’s a larger patient pool, but also show greater clinical impact that goes beyond safety in a much shorter timeframe.

Okay. Great. Thank you.

Our next question is from David Hoang with SMBC. Please proceed with your question.

Thanks for the update and taking my question. I had one question just related to GAN. Are you formally considering the accelerated approval pathway? Is that something that, given the endpoints and the data you are now reviewing, you think that path would be available to pursue? If so, why, or if not, why not?

Suku, would you please take that question?

Yes, Sean. I can only give you my opinion based on the data that I've seen in our overall regulatory discussions. We will look at our dataset and see if the broad impact of our product gene therapy is truly clinically meaningful, and then we will ask for the meeting with the FDA. If we believe our product is making a difference in this ultra-rare disease, while there's no treatment option available, I would absolutely ask the FDA to consider our product for accelerated approval so we can make the medicine available to patients. The caveat is this: we have to have a collective dataset that truly enables us to make a convincing case to the FDA that this gene therapy qualifies for accelerated approval. That is our hope, and that’s the plan when we submit our request for FDA review once we complete our full analysis, okay? So I hope that helps, and I don't know, Sean, if you want to add anything more to what I said?

Yes. The only point I would add is, when you think about remarks made by Dr. Peter Marks who has publicly stated multiple times, and you consider the disease state of GAN and a product that could merit accelerated approval, it certainly fits the bill. We are encouraged by the preliminary assessment, and we will ensure we present our data as aggressively as we can to expedite the product given the lack of available solutions.

Thank you. Our next question is from Joon Lee with Truist Securities. Please proceed with your question.

Hi. Thanks for the update. When you say in your press release that the FDA is open to regulatory flexibility in a controlled trial setting, does that necessarily refer to a placebo-controlled trial setting, or can that include some other controlled setting? If it's the latter, what could it be?

I'll give you my answer to that, and Suku, please add your perspective. When it comes to FDA guidance and accelerated approval, generally, there must be a consideration of a controlled trial. A controlled trial is defined as involving trials using natural history as a comparison. There's a distinction between a controlled trial and a double-blind placebo-controlled trial. The language provided in the responses from the FDA were clear. When they were focused on MFM32, they were discussing a double-blind placebo-controlled trial. However, they were open to discussing alternative trial designs, provided they're clinically meaningful and utilize objective endpoints.

Yes. Thanks, Sean. Given that it’s an ultra-rare disease, conducting a placebo-controlled trial may not be practical and could take a significant amount of time. Should alternative study designs be necessary, the simplest option might be to dose a few more patients for whom we already have pre-treatment natural history for comparison. We hope the dataset submitted to the FDA will qualify for serious review and potential approval if the FDA views that as the best path forward for the patient community.

No, I think you covered it.

Okay. Thank you.

There are no further questions at this time. I would like to turn the floor back over to Sean Nolan for closing comments.

Thank you, everyone for your time and interest in what we're trying to accomplish here at Taysha. I'm very pleased with the progress we've made in the short time period in 2023. We've got a long way to go; we are working hard, and we look forward to sharing future updates with you in the coming months. Thank you all and have a good night.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.