Taysha Gene Therapies, Inc. Q3 FY2023 Earnings Call

Good afternoon and welcome to the Taysha Gene Therapies Third Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer will follow the formal presentation. Please note that this call is being recorded. I would now like to turn the call over to Hayleigh Collins, Director, Head of Corporate Communications and Investor Relations. Thank you and you may proceed, Hayleigh.

Thank you. Good afternoon and welcome to Taysha’s third quarter 2023 financial results and corporate update conference call. Earlier today, Taysha issued a press release announcing financial results for the third quarter 2023. 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; 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 therapeutic and commercial potential of TSHA-102 including the reproducibility and durability of any favorable results initially seen in our first and second patients dosed in the REVEAL trial and including our preclinical product candidates to positively impact quality of life and alter the course of disease in the patients we seek to treat in our research, development and regulatory plans for our product candidates. These statements may include the expected timing and results of clinical trials for 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 in future operating results, discovery and development of product candidates, strategic alliances and intellectual property, as well as matters that are not 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 regulatory interactions for our product candidates depending 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, and our quarterly report on Form 10-Q for the quarter ended September 30, 2023 that we filed today. The conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, November 14, 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 laws. With that, I would now like to turn the call over to our CEO, Sean Nolan.

Thank you, Hayleigh, and welcome everyone to our 2023 third quarter financial results and corporate update conference call. Today, I will begin with a brief update on our corporate and clinical activities. Then Dr. Sukumar Nagendran, President and head of R&D of Taysha will provide an update on the clinical development of our TSHA-102 program. Kamran Alam, our Chief Financial Officer, will follow up with a financial update, and I will provide closing remarks and open the call up for questions. This quarter, we continue to advance the clinical development of our lead gene therapy program in Rett syndrome, including generating new clinical data in our adult trial in Canada and further engaging in regulatory discussions on our planned pediatric trials in the United States and United Kingdom. As a reminder, the REVEAL Phase 1/2 adult trial is a first-in-human study that was designed primarily to evaluate safety. Recall, when we initiated the REVEAL trial in Canada, there was low expectation of efficacy for the stage 4 adult population among the KOLs in the Rett syndrome community due to the advanced and relentless progression of the disease. The focus was placed primarily on safety. Therefore, it was very exciting when we announced the encouraging initial impact that TSHA-102 appeared to have across multiple clinical domains in the first adult patient treated. Today, we are pleased to share that as of the week 12 assessment, patient one has demonstrated a sustained response and key efficacy measures and new improvements in several areas, including hand function, which is a hallmark manifestation of Rett syndrome. Additionally, the second adult patient treated also demonstrated a consistent early response across multiple clinical domains four weeks following treatment. The two patients have quite different genetic mutations, with the first patient's MECP2 mutation manifesting in a more severe disease phenotype than the second patient's mutation. Interestingly, while baseline characteristics and related assessments are very different between the two patients, for example, patient one was completely non-ambulatory and patient two could walk with prompting, both patients demonstrated an improvement across key clinical domains and presented similarly in a number of efficacy measures as early as four weeks following treatment. The principal investigator observed that both patients demonstrated improvements across clinical domains, including autonomic function, socialization, and gross and fine motor skills with sustained and new improvements in the first patient at 12 weeks, and initial improvements in the second patient four weeks following treatment. We believe these early improvements in both patients, coupled with the sustained response through week 12 in the first patient support the transformational potential of TSHA-102 across multiple genotypes of Rett syndrome and further validate our construct. Suku will discuss the clinical observations and data in more detail. In addition to the positive clinical outcomes data, we are encouraged by the initial safety profile of TSHA-102. The data from the first adult patient showed TSHA-102 was well tolerated with no treatment emergent serious adverse events, as of the 20-week assessment, and initial data from the second patient showed that TSHA-102 was well tolerated with no treatment emergent serious adverse events as of a six-week assessment. The Independent Data Monitoring Committee or IDMC recently convened to review the initial clinical data from the second patient dose with TSHA-102 following the patient's required 42-day evaluation period, as well as the 20-week clinical data from the first patient. Based on the encouraging clinical data, the IDMC recommended the continuation of the REVEAL Phase 1/2 adult trial and provided clearance to dose the third patient in the first cohort evaluating the low dose of TSHA-102. Looking ahead, we remain focused on further exploring the initial therapeutic potential of TSHA-102 across different ages and geographies. We expect to dose the third adult patient and complete dosing in the low dose cohort in either the fourth quarter of 2023 or the first quarter of 2024. Expansion of the TSHA-102 into earlier stages of the disease remains on track with dosing of the first pediatric patient in our planned U.S. trial anticipated in the first quarter of 2024. Additionally, we expect to receive a response from the UK MHRA on our clinical trial application submission for TSHA-102 in pediatric patients with Rett Syndrome by the end of this year. We recently entered into a loan and security agreement with Trinity Capital that includes no financial covenants or warrants and terminated our existing loan and security agreement with Silicon Valley Bank. This has extended our cash runway by one quarter into 2026, which will further support the clinical development of TSHA-102. Cameron will provide more details on the agreement. With the extension of our runway and encouraging clinical data in TSHA-102, we believe we are well positioned to execute across our key value creating milestones. Moving forward, we plan to continue to advance TSHA-102 program in an effort to bring a potentially transformational treatment to patients living with this devastating disease. I will now turn the call over to Suku to provide a more in-depth discussion on our clinical program in Rett syndrome.

Thank you, Sean, and good afternoon everyone. I'm pleased to provide an update on our TSHA-102 gene therapy program in clinical evaluation for the treatment of Rett syndrome. As a reminder, TSHA-102 utilizes a novel MRI technology designed to mediate MECP2 expression in the central nervous system on a cell-by-cell basis to mitigate risk of overexpression due to X-chromosomal inactivation and silencing of MECP2 expression that occurs randomly with Rett syndrome results in a mixture of cells that are either deficient in or express MECP2 normally. The heterogeneity in MECP2 expression is what makes Rett syndrome challenging for traditional small molecule and simple gene therapy approaches, but we believe our novel MRI technology can appropriately address this challenge and provide therapeutic benefit. TSHA-102 is currently being investigated in the ongoing REVEAL Phase 1/2 adult trial of first-in-human open-label, randomized dose escalation and dose expansion study, evaluating the safety and preliminary efficacy of TSHA-102 in adult females with Rett syndrome due to MECP2 loss of function mutation. The trial, which was designed primarily as a safety study, is also measuring pre-specified efficacy measures. All efficacy data being collected in this Phase 1/2 trial is hypothesis generating; as we continue to generate longer-term data across more patients and cohorts, these measures will further inform our thinking relative to optimal primary endpoint selection for registration study purposes. To date, two adult patients have been dosed with TSHA-102 in the first cohort evaluating the low dose. We are highly encouraged by the early safety and efficacy data seen in both adult patients. Importantly, we believe these data, which have been reviewed by the IDMC, reinforce the transformational potential of TSHA-102. TSHA-102 was generally well tolerated with no treatment emergent adverse events as of the 20-week post-treatment assessment for the first patient and the six-week assessment for the second patient. In terms of efficacy data, as Sean referenced earlier, it is important to understand that we did not expect to see meaningful efficacy data in adults with Rett syndrome, particularly in patients with the most advanced stage of disease due to the severity and progressive nature of Rett Syndrome. However, based on the clinical data from two adult patients in the low dose cohort, we are seeing clear signs of improvement across multiple domains following treatment with TSHA-102, including autonomic function, socialization, as well as growth and fine motor skills. To provide you with a clear and collective picture, let's begin with an overview of the baseline status of the two patients prior to treatment with TSHA-102. Both patients had been diagnosed with stage four Rett syndrome, the late motor deterioration stage, which is the most advanced stage of the disease. However, the patients possess different genetic backgrounds and mutation types in their MECP2 gene, which manifest in dramatically different phenotypes and clinical severity. Studies have confirmed that MECP2 mutation type is a reliable predictor of Rett syndrome disease severity with more severe mutations correlating to greater motor dysfunction, loss of ambulation, and a higher prevalence of scoliosis. Patient one, a 20-year-old female, has a large deletion within her MECP2 gene that manifests as a highly severe phenotype. The patient's severity is evident by her clinical presentation at baseline. Prior to treatment, she was in a constant state of hypertonia with complete loss of ambulation and was wheelchair-bound. She had lost the ability to sit or stand by eight years old. Additionally, the patient had limited body movement, required constant back support, and had lost fine and gross motor function early in childhood. She had very little hand function with essentially no function of her non-dominant hand. She experienced frequent apnea and hyperventilation episodes and had a history of seizures. The patient's level of severity is reflected in her baseline scores across efficacy measures, including clinical global impression severity of CGIS, which is a 7-point scale that rates the severity of the participant's illness relative to the clinician's experience with participants who have the same diagnosis. At baseline, the patient's CGI score was 6 indicating severely ill. In contrast, the second patient, a 21-year-old female, had a missense mutation in her MECP2 gene that manifests in a milder phenotype. The patient presented with a milder form of disease, which is reflected in a clinical presentation at baseline. Prior to treatment, she had only partial loss of ambulation and could walk with prompting, but she experienced progressive kyphosis and bradykinesia impacting her gait and balance. Hand stereotypies appeared at three years old and she mostly held her hands firmly together. Her ability to reach and grasp objects was weak. Additionally, the patient experienced frequent hyperventilation episodes and had a history of frequent seizures. Her level of severity is reflected in her baseline scores across efficacy measures, with a baseline CGIS score of 4 indicating moderately ill. The key takeaway is that there are phenotypic differences between the two stage 4 patients which are correlated to their genetic status. Importantly, we are seeing a consistent pattern of improvement across pre-clinical domains and efficacy measures in both adult patients following treatment with TSHA-102, despite the differences in their genetic status and severity. Based on clinical observations by the principal investigator, both patients demonstrated improvements across multiple clinical domains impacting activities of daily living, including autonomic function, socialization, and growth, and fine motor skills following treatment with TSHA-102. Specifically, 12 weeks following treatment, the first patient demonstrated sustained and new improvements from the initial four and six week assessments in multiple clinical domains including fine motor and hand function, with the gained ability to grasp objects with her non-dominant hand and transfer them to her dominant hand for the first time since infancy. She was also able to open her hands and dissociate her fingers, with the gained ability to stretch her nose and touch a screen. Progressive loss of hand function is a hallmark characteristic of Rett syndrome and a key area of concern for caregivers that impact a patient's ability to communicate and impedes daily activities, which ultimately limits independence. These new improvements in hand function at 12 weeks following treatment, which are not observed in the natural history of Rett syndrome, are very encouraging and support the potential of TSHA-102 to bring meaningful therapeutic benefit to patients and caregivers. Further, the first patient achieved additional gross motor improvements since her initial six-week assessment. When she had gained the ability to sit unassisted for three minutes for the first time in over a decade, by week 12, the patient improved her ability to sit unassisted with caregivers reporting her ability to sit up to 15 minutes, and she demonstrated restored movement in her legs. The second patient also demonstrated clinical improvements following treatment, specifically, she demonstrated gross motor improvements four weeks following treatment. Her posture, gait and stability improved, resulting in straight posture and smoother movements when walking. Her fine motor skills also improved. Following treatment, specifically, her hand stereotypies, which are repetitive purposeless hand movements and a diagnostic hallmark of Rett syndrome improved for the first time since regression at age three. Based on the principal investigator's observations, the patient displayed less forceful hand running, and her hands were often open and relaxed at week four, providing new opportunities for fine motor skill learning. Following treatment, both patients demonstrated improved socialization with increased interest in social communication and activities and improved autonomic function with improved breathing patterns and reduced breathing dysrhythmias, including less breath holding spells and infrequent hyperventilation. The first patient also demonstrated a sustained improvement in sleep quality and duration at week 12. Overall, both patients also demonstrated improvements across key efficacy measures following treatment TSHA-102, which reinforce these clinical observations by the principal investigator. Let's begin now with an update on the efficacy measures from the first patient. The first patient demonstrated sustained and new improvements across key efficacy measures through week 12. Specifically, she had sustained improvement from the initial four-week assessment in clinical global impression improvement of CGI Clinical global impression severity of CGIS and Rett syndrome behavior questionnaire or RSBQ. CGI is a clinician-reported 7-point assessment of overall improvement following treatment adapted to Rett syndrome that accounts for key aspects of the disease. A sustained score of two indicating much improved was reported at week 12, which is consistent with the score reported at the week four assessment. Additionally, the patient demonstrated a sustained 1-point improvement from the baseline score of six indicating severely ill to a score of five indicating markedly ill at CGIS at week 12, which is consistent with the week four score. In RSBQ, which is a fortified item questionnaire that assesses Rett syndrome characteristics, the patient demonstrated a sustained 22-point total score improvement from the baseline score of 52 to a score of 30 at week 12. The score was driven by improvements in hand behaviors, nighttime behaviors, breathing problems and facial expressions. Importantly, the first patient also demonstrated new improvements from the initial four-week assessment in the revised Motor Behavior Assessment or RMBA, parental global impressions improvement of PGI-I and Rett syndrome hand function scales or RSHFS. The RMBA, which is a 24-question clinician-reported scale measuring disease behaviors of Rett syndrome demonstrated a total score improvement of 6 points from a baseline score of 43 to a score of 37 at week 12. The score was driven by improvements in motor dysfunction and social skills. PGI-I is a caregiver-reported assessment of overall improvement following treatment that uses a 7-point scale. A score of two indicating much improved was reported at week 12. The RSHFS is a clinician-reported outcome of hand function in patients with Rett syndrome, which is evaluated by an experienced independent physical therapist who codes the demonstrated hand function in each video at one of four levels, ranging from no active grasping of any objects to independent grasping. The highest score that can be achieved is a four. The first patient demonstrated a significant improvement in RSHFS at 11 weeks following treatment. At week 11, although there were no changes from a baseline score of three indicating the ability to hold an object for at least two seconds in a dominant hand, she was able to increase the number of objects held from one to two. Additionally, she gained basic grasping ability in her non-dominant hand. At baseline, she could not hold any objects with her non-dominant hand, and at week 11, the score of three was demonstrated indicating the ability to hold an object for at least two seconds. She also demonstrated the ability to hold two different objects in her non-dominant hand at week 11. Again, it's very important to note that hand function improvements are not observed in the natural history of Rett syndrome. Now let's discuss the efficacy data from the second patient. Recall, the second patient had a baseline CGIS severe score of four indicating moderately ill versus the baseline CGIS score of 6 indicating severely ill for patient one. The second patient demonstrated an improvement four weeks post-treatment in CGI-I, PGI-I, RSBQ, and RMBA, a score of three indicating minimally improved was reported at week four in both CGI-I and PGI-I for patient two; the patient demonstrated a four-point improvement in the RSBQ total score from a baseline score of 37 to a score of 33 at week four. As a comparison, the first patient's RSBQ total score was 30 at week 12. The second patient's score was driven by improvements in body rocking, facial expressions, walking, standing, and breathing abnormalities. Additionally, she demonstrated a 7-point improvement in the RMBA total score from the baseline score of 38 to a score of 31 at week four, which was driven by improvements in social skills and respiratory behaviors, including less frequent hyperventilating and breath holding. There were no changes for weeks post-treatment in CGIS and RSHFS in the second patient. However, the principal investigator noted improved hand stereotypies, which are not measured in the RSHFS for the first time since regression at age three, and the patient displayed less forceful handling with more open and relaxed hands. We will continue to monitor the patient's progress over time. More details on the available data can be found in our form 10-Q for the quarter ended September 30, 2023, filed with the SEC. The first patient severity and genetic background suggests that she has less residual MECP2 at baseline and therefore it is reasonable that the treatment effect would be of greater magnitude compared to the treatment effect observed in the second patient with mild disease. However, while the two patients presented with very different clinical features at baseline, both patients responded in a clinically meaningful manner and presented similarly in a number of key efficacy measures at the week four post-treatment assessment. The critical takeaway is that following treatment with TSHA-102, there were early improvements observed across consistent clinical domains and key efficacy measures in the two stage four adult patients with different genetic mutations, severity, and phenotypic expression, which is encouraging and may allow us to address an unmet medical need for patients with Rett syndrome across multiple genotypes. Collectively, these improvements coupled with the new and sustained response through week 12 in the first patient supports the transformative potential of TSHA-102 across multiple genotypes of Rett syndrome. We continue to look for consistent patterns of improvement as we dose more patients and evaluate the clinical impact of TSHA-102 in our adult trial. Looking ahead, we expect to dose the third adult patient and complete dosing in the low dose cohort in either the fourth quarter of 2023 or first quarter of 2024. We intend to provide further updates on available clinical data from the low dose cohort in the REVEAL Phase 1/2 adult trial in the first quarter of 2024. Our efforts to expand the clinical evaluation to pediatric patients with early stages of disease progression remain underway. We are focused on clinical trial initiation activities for our U.S. pediatric Rett Syndrome trial and anticipate dosing the first pediatric patient in the first quarter of 2024. As a reminder, Part A of a dose-finding study will focus on identifying the maximum administered dose and maximum tolerated dose in pediatric girls five to eight years of age with Rett syndrome. Data from Part A will be assessed by the regulatory agencies and the IDMC to determine final key elements of Part B or Phase 2 of the study, such as hierarchy of efficacy, endpoint, and study duration. Part B will evaluate TSHA-102 in two cohorts and an expanded 5 to 8 cohort with a 1:2:1 randomization of randomized treat cohort or delay treatment cohort, and a cohort for three to five years of age. We expect to receive feedback from the UK MHRA on our submitted clinical trial application for the proposed pediatric study by the end of this year, which will further inform program timelines in the UK. As a reminder, there are no approved disease-modifying therapies currently available that treat the genetic root cause of Rett syndrome. There is high unmet need with Rett syndrome caused by a pathogenic likely pathogenic MECP2 mutation afflicting between 15,000 and 20,000 patients in the US, EU, and UK, and a high burden of care associated with it. TSHA-102 recently received fast track designation and has already received orphan drug and rare pediatric disease designation from the U.S. FDA and has been granted orphan drug designation from the European Commission for the treatment of Rett syndrome. Overall, we're highly encouraged by the early efficacy and safety data in the first two adult patients and look forward to sharing additional progress. I will now turn the call over to Kamran to discuss our financial results.

Thank you, Suku. Research and development expenses were $11.8 million for the three months ended September 30, 2023 compared to $16.8 million for the three months ended September 30, 2022. The net change was due to a $9.3 million decrease due to lower compensation expense as a result of reduced headcount, lower licensing milestone fees, fewer manufacturing batches, and fewer raw material purchases. This was partially offset by a $4.3 million increase in activity surrounding ongoing clinical trial efforts and the Rett syndrome REVEAL adult and pediatric studies. General and administrative expenses were $8.6 million for the three months ended September 30, 2023 compared to $8.7 million for the three months ended September 30, 2022. The decrease of $0.1 million was due to reduced compensation expense due to lower head count of $2 million and reduced consulting and professional fees of $0.7 million, partially offset by $2.6 million in issuance costs allocated to the liability classified pre-funded warrant issued in connection with the private placement financing completed in August, 2023. Net loss for the three months ended September 30, 2023 was $117.1 million or $0.93 per share as compared to a net loss of $26.5 million or $0.65 per share for the three months ended September 30, 2022 due to a $100.5 million non-cash expense recorded in Q3 2023 from a change in the fair value of warrant liability from pre-funded warrants in connection with the private placement financing completed in August 2023. As of September 30, 2023, the Company had cash and cash equivalents of $164.3 million. The Company expects that its existing cash and cash equivalents will fund operating expenses and capital requirements into 2026. Taysha entered into a loan and security agreement with Trinity Capital on November 13th and terminated its existing loan and security agreement with Silicon Valley Bank. As Sean noted, our cash runway now extends into 2026 as a result of this agreement and there are no financial covenants or warrants associated with the loan and security agreement. I'll now turn the call back over to Sean for his closing remarks.

Thank you, Cameron. We are highly encouraged by the clinical data observed in TSHA-102 program to date, the initial safety profile of TSHA-102, and the early and consistent pattern of improvement observed across clinical domains in both adult patients with very different genetic mutation severity, coupled with the sustained response through week 12 for the first patient is encouraging. We believe the data presented today further validates the therapeutic potential of TSHA-102 for patients and families living with Rett syndrome. We remain focused on our key upcoming milestones as we approach 2024, including dosing additional patients in the REVEAL adult trial in both low and high dose cohorts and expanding our clinical footprint into pediatric patients in the U.S. and UK. With that, I will now ask the operator to begin our Q&A session.

The first question comes from Whitney Ijem from Canaccord Genuity. Please proceed with your question, Whitney.

First question from me, again, great data. Just curious though, in terms of the RSVQ, it looked like in the first patient it increased slightly from week 8 to week 12. Sorry if I missed it, but can you provide any more color, I guess, on which domains in particular changed over that timeframe?

I can turn it over to Suku, but I believe the main areas where changes occurred were in breathing, socialization, and gross and fine motor skills. Suku, is there anything you would like to add?

No, Sean, I mean, as you pointed out, those were the domains that actually improved. What is interesting to note is that it also correlates with some of the clinical observations that have been evaluated by the principal investigator as well as evaluated when it comes to the broad application of CGI and CGIS. So, it's an interesting correlation, and given that patient one was much sicker than patient two, you also see the significant change there in the RSVQ that is maintained from 4 weeks to 12 weeks post-treatment.

And then just does. And then just kind of a broader question, how are you guys thinking about these two patients from a proof-of-concept perspective for the miRARE tech? I guess kind of what else or what else in terms of data or patients, patient number or follow-up would you be looking for to kind of consider this technology de-risked? And can you remind us how you're thinking about additional indications where it might make sense?

Sure. Well, I'll go first and certainly open up to Suku if he has additional comments. But I would say, you know, what's encouraging to us about proof of concept with the miRARE technology is that the first patient had significantly severe disease at baseline, right? I mean, the CGIS was at 6. So you would infer from that that she's got a relatively low level of endogenous MECP2 and yet preliminarily through week 12 we're seeing encouraging response across clinical domains. Then you juxtapose that with patient two. So keep in mind that that phenotype from patient one is based on a significant deletion genetically. Patient two had a missense mutation resulting in a much less severe manifestation of the disease. So you would think she probably is generating more endogenous MECP2 than patient one. And yet, we have not seen any safety concerns with that particular patient through week six. So, in a way, Whitney, with the first two patients seen, you're seeing very, very different genotypes corresponding phenotypes and levels of endogenous MECP2 and you're seeing consistent response across clinical domains, and there appears to be a promising safety profile. So, I would say these first two patients are good indicators of the potential safety of the miRARE technology.

And what I would add to what you just said, Sean, in very simple terms, is given that there were two different genotypes with different phenotype representations that fit into the classification of classic Rett syndrome, it is reassuring to see that our gene therapy actually worked quite effectively in both patients. As we continue to accumulate more data and accumulate different genotypes that present as classic Rett syndrome, it will also give us the confidence that this gene therapy will be applicable to the broader Rett syndrome patient population as a whole. The second piece of the puzzle is, as you pointed out or you asked, miRARE technology is critical to maintain a very tight control of MECP2 protein levels in the nucleus. Based on the clinical improvements that appear to happen very quickly post-gene therapy, given that our product has self-complimentary technology as well, changes have been noted in a positive manner by the principal investigator within one to two weeks post-dosing. This is also reassuring because it enables us to see clinical improvements, which also precede the need for the biomarkers, as such to measure responses, which is sometimes what you need in other products because they take much longer to act.

The next question comes from Kristen Kluska from Cantor Fitzgerald. Please proceed with your question, Kristen.

Let me also add my congratulations that a second patient exceeded the expectations here. With this particular readout, you commented a lot about the cardiac and some of the respiratory items. I wanted to see if you can kind of give us context about the importance of some of these measures. From our understanding, about a quarter of the patients may experience sudden death as a result of complications from these matters.

Yes, let me address that because that's a very important question. So, Rett syndrome patients typically do have autonomic dysfunction. When you think of autonomic dysfunction, it's usually respiratory abnormalities i.e., they have episodes of apnea where they have breath-holding spells followed by significant hyperventilation. That's one. Second, they have a history of seizures depending on which part of the brain the foresight exists. They also have significant sleep abnormalities at times where they cannot fall asleep, cannot stay asleep, may have also sleep terrors, and they also have gastrointestinal dysfunction usually more constipation than diarrhea. So, these are pretty standard when it comes to Rett syndrome patients. When we highlighted in patient one and patient two is that our gene therapy, once dosed within a week or two, had significant positive impact on these respiratory abnormalities. There was significant reduction in these apnea spells as well as hyperventilation episodes. We did not really talk about cardiac abnormalities because these patients did not have any cardiac abnormalities in rhythm or any concerns on the EKGs done. So, those are not clinically appropriate at this point in time for an efficacy measure of a clinical evaluation with our gene therapy.

Okay, thanks. And then looking at the two different phenotypes here, do you think that the scales and the specific anecdotes shared today weigh differently across the different types? Or is it more important, you think, to just focus on the bigger picture? I guess while all of the endpoints you shared are important, I guess the question I'm trying to ask is if any of them are particularly weighed more for each of the different phenotypes shared. Thanks again.

Yes, let me take that question. That's another very important question because when you look at Rett syndrome patients, you have to break them down into what is their clinical abnormalities that they present with, what are the autonomic dysfunction abnormalities they present with, and then these scales that we refer to, CGI-I, CGI-S, RSBQ, R-MBA, and the hand function scales. I would really focus on the clinical impact of our gene therapy. For example, if you looked at patient one and patient two, even though their phenotypes are different, they both had developmental milestone abnormalities. Patient one was unable to sit, I think after the age of seven or eight. Patient two had difficulties in walking and maintaining appropriate gait and posture, probably after the age of 10. These patients also have difficulties with sometimes tracking objects with their eyes. Most of them do have significant hand function abnormalities and stereotypic movements, and they also have difficulties with social interaction and many of them have cognitive challenges. So clinically, those are components that we have to focus on. We did highlight that our gene therapy in both patient one and two had an impact on some of these aspects of the disease. We've also highlighted the impact on the autonomic dysfunction and then the scales that you refer to really the numbers on the scales and the degree of change on these scales actually depend on how severe the phenotype is. The more severe the phenotype, the higher the RSBQ and the RMB scores can be. If the therapeutic is efficacious, then you'll see a relative change in the number, and you will see that even in RSBQ for the second patient, the numbers are much lower because the patient overall has a much milder phenotype. You have to keep that relative aspect in mind and look at the broader clinical impact of the product because clinical transformational impact, I think, is far more important from a clinical management and regulatory review standpoint sometimes than certain scales.

The next question comes from Salveen Richter from Goldman Sachs.

This is Elizabeth on for sine. Congratulations on the data. I was hoping you could provide additional color on the seizure activity in the seizure diary. Specifically, what was the baseline seizure rate for each patient prior to steroid treatment and what's being observed now? And then also for the second patient, if you could provide some color on how quickly improvements were observed. I know for the first patient, those were observed quite soon after treatment. So any color there would be helpful.

Yes. That's a very important question that you ask because, I'm going to try and walk you through first patient and second patient because there are lots of clinical aspects to the seizure history in both patients. So patient one, stage four 20-year-old female, right, with severe Rett syndrome, had four to five seizures per quarter before the gene therapy was given. The first six weeks post gene therapy there were no reported seizures in the seizure diary nor in the EEG that was reviewed by the principal investigator. After week six, what was noticed is, this patient is on prednisolone and sirolimus, and sirolimus actually works on the liver and inhibits the cytochrome P450 system, which results in Dilantin levels dropping significantly. So what happened after week six up to now is that the Dilantin levels dropped to below 50, which is very low, and therefore there were some breakthrough seizures. From what I recall, I think this patient had about seven seizures during the period following the six weeks post-treatment. Now, it is also of interest to note before the gene therapy was given, whenever this patient one had seizures, usually it was when the Dilantin levels were below 100, but I think usually above 50. I would say that even though this patient had breakthrough seizures six weeks post gene therapy, this happened when the Dilantin levels were below 50. Therefore, I think the gene therapy still had a protective effect, but the Dilantin levels got way too low which allowed for breakthrough seizures. So that is patient one. Patient two had roughly four seizures per month, which is 12 seizures, I guess every quarter. Following gene therapy treatment with our product, this patient had one breakthrough seizure up to week six, if I recall, on day 13th. But that was it, just one seizure. So that is a good signal that our gene therapy is most likely having an impact on seizure incidence in this patient as well. So, that's the update on the seizure question for you. Thank you.

Yes. Just to try to hit a punch line on that question, Elizabeth, I would say pre and post treatment through week 20 the seizure rates are comparable. Pre-treatment, the patient generally experienced seizures if she had Dilantin levels below 100. Now what it is looking like post-treatment is that the seizures occur when she's less than 50, so at a much lower amount of Dilantin. Thank you, Sean, for clarifying that. And then patient two had roughly four seizures per month, which is 12 seizures every quarter. Following gene therapy treatment with our product, this patient had one breakthrough seizure up to week six, if I recall, on day 13th. But that was it, just one seizure. So, that is a good signal that our gene therapy is most likely having an impact on seizure incidence in this patient as well. So, that's the update on the seizure question for you.

Super helpful. And then just on the second question of the rapidity of response observed in the second patient.

That's another important question. So just again to go back to the technology, our product has self-complimentary DNA. Once it's given into the central CSF and gets into the central nervous system, the episode is formed within 48 hours and we think starts producing the MECP1 protein. The principal investigator has noted that clinical impacts appear to be noted within seven to 10 days initially post the gene therapy being given via lumbar puncture. This includes impact on some motor function as well as reducing some of the autonomic abnormalities. We are pleased to see that and we hope that will continue because that will hopefully give some of these patients rapid relief of their serious symptomology.

Thank you. The next question comes from Gil Blum from Needham & Co. Please proceed with your question.

Allow me to extend my congratulations. It's actually rather impressive. So one thing I do want to understand about some of these metrics, could there be a ceiling effect? I mean, specifically talking about RSBQ, we're kind of seeing a leveling around 30. I'm not super familiar with the scale, but is that a possibility?

A ceiling effect?

Yes, sorry, go ahead, Sean.

What I would say to that, Gil, is that we need to consider the stage of the disease, the age of the patients, and the dose being administered at this point in time in the study to determine if a ceiling is being demonstrated. We are currently seeing some similar patterns to your point, and it is still somewhat early in the assessment. With that, I'll defer to Suku on the clinical question.

No, that's an important question that I think we are still struggling to assess because keep in mind that both these patients were adults, right? They were both 20 and 21-year-old females where we frankly did not expect to see much effect. The more severe the patient, the higher the RSBQ score should be given that there are 45 items in that scale, and 38 of them are used to maximize the score up to a 90. It's very important to understand who actually does the assessment. It's usually done by the parents or the caregivers over a period of time. So they have to reflect on how the patient or their child is doing over the course of a week or so. There can be variability in the scores being assessed as well. And then finally, as far as there being a ceiling effect, I think what we are observing with the gene therapy is the more sick the patient, the higher the score and the greater the drop. While the patient is not as sick, the drop may not be as significant because they are starting at a much lower baseline. I think I can probably answer your question once you dose a few more patients and we have a little more data. The other thing to keep in mind with RSBQ is that the questions you have to actually look at the questions being asked because some of the questions have been designed to evaluate the disease process that worsens over time. RSBQ frankly was not developed to evaluate the therapeutic intervention. Now, the caveat is for phenotype that we used RSBQ combined with CGI-I for a combined endpoint to get their approval. If you look at the 17 to 20-year-old group that for phenotype study that drop in the RSBQ was only 2 points. In relative terms, even though I don't like doing cross-study comparisons, our first patient showed a 22 and a 23 point drop and the second patient had a 4 point drop.

The severity was…

And the severity, that's right.

And I agree this is very early. This is more for educational purposes. My second question, so kind of as a segue in a hypothetical adult study, would it be beneficial to look at patients with more severe disease just to increase the signal to noise?

Yes, you're saying basically enrich the study with more severe patients to show a bigger effect. What’s interesting, Gil, when you look at the phenotype data, they generated their P-value difference essentially off the severe patients. There really wasn't much effect in CGI-I or RSVQ in mild to moderate. Your point's a good one. I think what's exciting us and we have to see more patients, I think to get to a more definitive answer. But what we liked about this was the fact that the genotypes were so different and the corresponding phenotypes were so different, yet we're still seeing response is very encouraging that, again, the population that could be treatable here continues to remain significant. So I would say, to reaffirm Suku's point, let's see some more patients, let's get to the high dose as well. And that will certainly inform how we think about Part B endpoints and trial design.

The next question comes from Yanan Zhu from Wells Fargo Securities. Please proceed with your question.

So, I have a question on R-MBA and I think, if I heard this correctly, I think patient number two's R-MBA improvement is roughly 7 points. That sounds like that's as big as patient number one's 12-week improvement and much bigger than patient number one four-week improvement. Could you comment on why despite the milder disease in this patient R-MBA improvement appears to be quite striking? If you can provide the baseline R-MBA score for this patient that would be great. I have maybe one or two follow-ups.

So, the baseline scores to your point were for patient one was 43, for patient two was 38, and then at week four for patient two was 31, week four for patient one was 48, and now at week 12 patient one's at 37. So there's been a 6-point drop in patient one over 12 weeks and a 7-point drop in patient two over four weeks. I'll turn it over to Suku to try to get at the rest of your question. What was driving this?

That's an important question because R-MBA is a clinician assessment of the patient as well, and it has five components and I think goes up to a score of as you can see on the scale. The first patient who was much sicker, the R-MBA score was influenced by anxiety and fear and also increased paroxysm, which shifted the score in a manner that didn't show improvement. When we talked to some of the experts, the understanding was that increased muscle function in the face included the maceta muscles where bruxism is actually positive. In the assessment of these questions that were set up, as I said, they were arranged and designed to actually show disease worsening, not necessarily a therapeutic response. To my knowledge, R-MBA has never been validated to evaluate a therapeutic intervention. In patient two though, given that this patient had much milder disease, the change I think is positive because this patient already did not have some of the previous abnormalities of severe patients such as patient one hand. The questions asked in the R-MBA didn't cloud the actual assessment. So, I guess my point again is that you need to really understand what the questions are within some of these measures to make sense of the eventual numbers.

In terms of the motor behavior assessment, some of the improvements were in social skills and respiratory behavior.

What I would also say is that the clinical assessments of each of these patients, especially hopefully for a transformative therapy, will significantly overcome sometimes the need for these skills that mostly have not been validated for therapeutic intervention and assessment.

Thank you. My follow-up question is regarding the 4-point improvement in RSBQ, which seems to resemble what can be achieved with the Treg phenotype. However, it also appears that the patient experienced significant clinical improvements. Could you explain how the nature of the improvements observed in this patient differs from what might have been seen if this patient had been treated with the Treg phenotype? Also, concerning patient number three, have you identified this patient, and if so, how severe is their condition? Thank you.

I would say, with the Treg phenotype piece of the question, when you look at patients that had moderate or mild disease, the impact on RSBQ was 1. In this particular circumstance, you would definitely grade this person out as a mild or moderate and the impact that we demonstrated was 4 on that particular scale. It was driven primarily by the breathing, the socialization, and the gross and fine motor skills. She’s landing at 33, which is in the same ballpark at week 12 is where the first patient is landing, which is at 30. We’re getting a very nice response from her. Again, I think the Suku’s point, the scales are moving in the right direction along with what’s being observed clinically. We’re seeing a lot of congruence across clinical domains, which I think is a testament to the product getting to where it needs to be, levels of MECP2 being put forward into a more therapeutic area. As it relates to patient number three, I would say that we have identified the next adult patient. She has not yet gone through screening, and there are a couple of things at play which is why we modified the guidance to Q4 this year. Q1 next year dosing is that it’s final stages of an LAR process which we talked about in the past. We do not have absolute line of sight to, so we know it should be in that window. Within the institution, there are windows of time given the holidays and what have you where the patient can slot in. It is still possible this year could be Q1 next year. We’ll keep you apprised on that, but we do not know any baseline characteristics at this particular juncture. We just do know that it would be a stage four patient.

The next question comes from Jack Allen from Baird. Please proceed with your question, Jack.

I was hoping you could provide some more context around the steroid regimen that's given post-dose here and how the results from patient one are shaping up in the context of the steroid taper? So, what degree of confidence do you have that these results are different from any potential impact that could be due to steroids in the short term post-gene therapy?

Yes, all patients who are over the age of 18 will be started on prednisolone, 1 milligram per kilogram from day minus seven. That will continue out to 16 weeks and then taper down to 0.5 milligrams per kilogram and then 0.25. These patients also get sirolimus at a much lower dose than what's used for transplant based on the body surface area. Starting around day minus seven, it runs if I recall for 36 weeks and then is tapered after that. We’ve looked extensively into the literature, talked to all the experts who treat Rett syndrome, and they’ve all stated that both prednisone and sirolimus in no way or form impact the clinical progression of the disease. Some people have done experiments too, and they say there is no impact, therefore any improvement seen with the disease is actually due to the gene therapy that has been given.

And then just as it relates to the sirolimus dosing and the potential implications it has on the seizures the patient two, have you given any consideration to modifying that dosing moving forward?

Yes, we’ve actually started looking into it, but the issue is sirolimus with prednisolone and we have some experience now with the GAN program where we showed that patients could be dosed regardless of the seropositivity to AAV9 antibodies, which is very helpful especially given that our gene therapy is working in adult patients as well, where there is a higher seropositivity. We have to balance that, as you said, with the type of anti-seizure medicine being used, especially if levels do drop significantly like what happened with Dilantin. A bigger question is if there are other medicines that we can try which are not processed in a way through the liver and impacted negatively by sirolimus, so I think that's something that we have to continue to assess for now.

I would add to that, Jack, that it was patient one that was on Dilantin. From her history, it’s known that she tried multiple products to control the seizures, and Dilantin was the only one that appeared to work. It may be a bit of a unique circumstance. We’ll just have to see and monitor carefully as we proceed in the study.

Thank you. The next question comes from Joon Lee from Truist Securities. Please proceed with your question.

Congratulations on the data, and thank you for addressing our question. This is Mandy for Joon. You have a direct competitor in gene therapy for Rett syndrome with Neurogen's NGN-401. Could you explain any specific aspects of your program that might strongly differentiate it? I'm referring to factors like construct, design, and route of administration, especially since the capsid appears to be similar. Additionally, I have a second question regarding TSHA-120 in GAN. What is the current status? Are there any interested parties or ongoing negotiations for this program? Thank you.

Thanks, Joon. Well let's, let's start with the GAN question. I would just say there's not a lot to comment on specifically. We are in the process that we've outlined of stepping through strategic alternatives, and I wouldn't want to comment on anything until it's actually been resolved. So stay tuned on that one, but nothing to report specifically. As it relates to Neurogen, a couple of high-level points: you’re correct that both constructs use AAV9 as the capsid, but that's where the similarities end. So number one, we have a mini gene, they have a full-length gene. The promoters are slightly different. A key aspect is really the regulatory element, miRARE that we have vs. the exact technology that they have. Our construct is able to take into account and read the endogenous levels of MECP2 in each cell that it goes into. It will either create exogenous MECP2 or not. I think that’s the distinguishing feature where our understanding of their technology is that it does not take into account the endogenous levels of MECP2. Potentially, there could be additional risk for overexpression with that construct. We’ll find out in the clinical setting. But that’s a key area of differentiation. I would also just note that we’re going through intrathecal delivery vs. their ICV route. A lot of differences here; I can't comment anymore on Neurogen, I'm not aware of anything specific. But we’re quite pleased with what we’re seeing in our construct. The proof of concept with our construct with these two very different phenotypes and genotypes is encouraging. We saw a very severe patient that would arguably have very low levels of MECP2, and we’re seeing a nice response. And in a patient with a less severe mutation, where you would expect her to be producing significantly more MECP2, we’re seeing response coupled with the fact that we’re not seeing any signs of over-expression. So hopefully that gets at your question.

The next question comes from Silvan Tuerkcan from JMP Securities. Please proceed with your question.

Thank you very much for taking my questions and congratulations on the great update here. Just considering this is one single trial site and one investigator, can you just comment on the objectivity and variability of especially autonomic function measures? I would assume that they're measured by some sort of scale or device. How does the breathing pattern, how is it measured, how does it improve? And also the sleep quality and duration. I think that's a very important measure here.

Yes, I would say that both functions are evaluated using different scales and by different individuals. For example, measures like the CGI-I and the R-MBA are based on the clinician's observations during assessments. In contrast, the RSVQ and PGI are administered by caregivers who record and report their observations. Additionally, for motor function assessments, such as hand function, videos are recorded and sent to an independent party for review and scoring. Suku, I’ll let you provide further details.

I think your question was with reference to autonomic abnormalities seen in these patients. I’ll break this down for you. In these adult patients who have been referred into this single center in Montreal, they do have physicians who have been taking care of them for a very long time, so you have the medical history that documents the abnormalities seen, whether it's in sleep, seizure history, respiratory abnormalities, or GI function. When it comes to sleep, usually these patients also have sleep lab evaluations whenever appropriate and possible that document the abnormalities that are observed. When it comes to seizures, there are usually seizure diaries and parental diaries, and also EEG activities that have been measured that give you some sense of how often these seizures happen. When it comes to GI dysfunction, it depends on clinical reports, but also sometimes you do mobility studies in these patients, that may give you a good sense how abnormal GI function could be. It’s a collective assessment of each patient over time.

Is another DSMB meeting needed to transition to the higher dose after dosing the third patient? Thank you.

Yes. Once the third patient is dosed, you wait six weeks and then you collect the data, clean the database, and then you have to meet with the IDMC or DSMB before you go to the higher dose cohort of 1E15.

It seems like we no longer have Eun connected on the line, and at this time there are no further questions in the queue. Ladies and gentlemen, we have reached the end of the question-and-answer session, and I'd like to turn the call back to Sean Nolan for closing remarks. Thank you, Sean.

Just want to thank everyone for attending the call. We appreciate the questions and look forward to speaking again soon. Take care.

Thank you. Ladies and gentlemen, that does conclude today's conference. Thank you very much for joining us. You may now disconnect your lines.