Taysha Gene Therapies, Inc. Q4 FY2023 Earnings Call

Greetings and welcome to Taysha Gene Therapies Fourth Quarter and Full-Year 2023 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference call is being recorded. It is now my pleasure to introduce Hayleigh Collins, Director, Head of Corporate Communications and Investor Relations. Thank you. You may begin.

Thank you. Good afternoon and welcome to Taysha’s full-year 2023 financial results and corporate update conference call. Earlier today, Taysha issued a press release announcing financial results for the full-year ended December 31, 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 safety results initially seen in our first and second patients dosed in the REVEAL trial 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, including timing for our clinical trials and reporting results therefrom, and our current cash resources supporting our plans operating expenses and capital requirements into 2026. 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 actions for product candidates dependent 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 we have filed with the Securities and Exchange Commission, including in our annual report on Form 10-K for the year ended December 31, 2023, that we filed today. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, March 19, 2024. 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 full-year financial results and corporate update conference call. Today, I will begin with a brief update on our corporate and clinical activities, then Dr. Suku Nagendran, President and Head of R&D of Taysha, will provide an update on our lead TSHA-102 program and clinical evaluation for the treatment of Rett syndrome. Kamran Alam, our Chief Financial Officer, will follow up with a financial update. I will provide closing remarks and open the call up for questions. In 2023, we made tremendous progress on the development of TSHA-102, our lead gene therapy program and clinical evaluation for the treatment of Rett syndrome, which is a rare neurodevelopmental disorder with significant unmet medical need. This included generating initial clinical data in adult patients and expanding the trial into the adolescent population, obtaining regulatory clearance to initiate the clinical evaluation of TSHA-102 in two additional geographies, and dosing the first patient in our pediatric trial. Importantly, we believe these accomplishments enable us to focus our efforts this year on generating critical long-term clinical data in a broad range of ages and stages of Rett syndrome patients across multiple geographies. We now have two ongoing first-in-human trials evaluating the safety and preliminary efficacy of TSHA-102: the REVEAL Phase 1/2 Adolescent and Adult Trial in Canada and the U.S. and the REVEAL Phase 1/2 Pediatric Trial in the United States with clearance in the U.K. Today we are excited to report longer-term clinical data from our first two adult patients treated with a low dose of TSHA-102 in our adolescent and adult trial. As a reminder, our ongoing review of Phase 1/2 adolescent and adult trial is a first-in-human, open-label, randomized dose escalation and dose expansion trial evaluating the safety and preliminary efficacy of TSHA-102 in females age 12 years and older with Stage 4 Rett syndrome. We are currently enrolling patients in Part A, the dose escalation portion of the trial, which is evaluating two dose levels of TSHA-102 sequentially. Two patients have been dosed to-date in Cohort 1, evaluating the low dose of TSHA-102 of 5.7x10^14. And dosing in Cohort 1 is now considered complete. Today we're pleased to provide an update on the encouraging follow-up data from the first two adult patients treated in the low dose cohort. Recall, when we initiated the REVEAL trial, there were low expectations of efficacy for the Stage 4 adult population among key opinion leaders in the Rett syndrome community, due to the advanced and relentless progression of 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 two adult patients treated as early as four weeks following the treatment that we reported in November 2023. The data presented today for Patient 1 is from her six-month post-treatment assessment with clinical observations from week 35 post-treatment. Importantly, we continue to see a durable response, and we are seeing sustained improvement in the absence or reduction of steroid levels. We have received many questions since initially announcing Patient 1 data about the possible impact of steroids on the disease itself. We are not surprised, but nonetheless pleased to highlight today that patient improvements were maintained or further improved in the absence of steroids. As of the six-month assessment, Patient 1 has shown sustained improvement across key efficacy measures at decreased steroid levels, with new improvements observed in the Rett syndrome behavioral questionnaire or RSVQ. Additionally, the second adult patient also sustained improvements across key efficacy measures, with new improvements observed in certain measures, including the Revised Motor Behavior Assessment, or RMBA, and significantly reduced seizures at 12 weeks post-treatment. The longer-term clinical observations reported by the principal investigator showed that both patients had sustained and new improvements across multiple clinical domains, including autonomic function, social communication, motor skills, and seizures, compared to earlier post-treatment assessments. Importantly, these continued improvements were reported at week 35 following completion of the steroid taper for the first patient and at week 19 at decreased steroid levels for the second patient.

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. Rett syndrome is a rare neurodevelopmental disorder caused by mutations in the X-linked MECP2 gene encoding methyl CpG-binding protein 2 or MeCP2 protein, which is essential for regulating neuronal and synaptic function in the brain. This disorder is characterized by loss of communication and hand function, slowing and regression of development, motor and respiratory impairment, seizures, intellectual disabilities, and shortened life expectancy. Rett syndrome progression is divided into four key stages, beginning with early onset stagnation at six to 18 months of age followed by rapid regression, plateau, and late motor deterioration. The X-chromosome 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. This heterogeneity in MeCP2 expression is what makes Rett syndrome challenging with traditional small molecule and simple gene therapy approaches. But we believe our construct equipped with the novel miRNA responsive autoregulatory element or miRARE can appropriately address this challenge and provide therapeutic benefit. As a reminder, TSHA-102 is a self-complementary intrathecally delivered AAV9 gene transfer therapy designed as a one-time treatment. Because of the risk associated with both under and over expression of MeCP2, we have combined high throughput MicroRNA profiling and genome mining to create miRARE, a novel miRNA target panel designed to mediate MeCP2 expression in the central nervous system on a cell-by-cell basis. With miRARE, endogenous microRNA, which are activated in the presence of MeCP2, are thought to base pair with targets in the viral genome encoded mRNA and ultimately decrease protein expression levels through RNA interference. Thus, TSHA-102 is expected to provide the necessary function of the MeCP2 protein in cells lacking MeCP2 while protecting against toxic overexpression of MeCP2 in healthy cells. By increasing MeCP2 levels in MeCP2 deficient cells and maintaining healthy levels of MeCP2 output in normal cells, TSHA-102 has demonstrated the ability to produce and maintain safe transgene expression in the CNS in preclinical models. As Sean mentioned, TSHA-102 is currently being investigated in the ongoing reveal Phase 1/2 adolescent and adult trial. 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, Phase 2 trial continue to generate long-term data across more patients and cohorts this year, these data across measures will further inform our thinking relative to optimal primary endpoint selection for registration study purposes. Today, we are pleased to share the long-term data from the two adult patients treated with TSHA-102. I will be discussing data from two different time points for each patient. Efficacy assessments were captured at month six for Patient 1 and week 12 for Patient 2. Safety data and clinical observations from the principal investigator were captured at week 35 for Patient 1, following completion of a steroid taper and week 19 for Patient 2 at decreased steroid levels, compared to earlier post-treatment assessments. All these data have been reviewed by the Independent Data Monitoring Committee.

Thank you, Suku, and good afternoon. Revenue for the full-year ended December 31, 2023, was $15.5 million, compared to $2.5 million for the full-year ended December 31, 2022, as revenue was derived entirely from our option agreement with Astellas Gene Therapies. The increase in revenue is primarily a result of Rett syndrome research and development activities performed in 2023. Research and development expenses were $56.8 million for the full-year ended December 31, 2023, compared to $91.2 million for the full-year ended December 31, 2022. The decrease was due to reduced research and development head count, lower research and development manufacturing expenses and a reduction in third-party research and development consulting fees mainly related to preclinical studies and IND-enabling toxicology studies. General and administrative expenses were $30 million for the full-year ended December 31, 2023, compared to $37.4 million for the full-year ended December 31, 2022. The decrease was primarily attributed to a reduction in compensation expenses as a result of lower headcount and reduced corporate insurance and consulting expenses. Net loss for the full-year ended December 31, 2023 was $111.6 million or $0.96 per share, as compared to a net loss of $166 million or $3.78 per share for the full-year ended December 31, 2022. The net loss includes a non-recurring and non-cash expense of $34.5 million related to the change in fair value from the prefunded warrants as a result of the August 2023 private placement financing. As of December 31, 2023, Taysha had $143.9 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 2026. I will now turn the call back over to Sean for his closing remarks.

Thank you, Kamran. As you heard today, we've made significant progress in the clinical development of our TSHA-102 program. We are highly encouraged by the safety profile and durable response reported at reduced steroid levels and the longer-term data from both patients in the low dose of our Reveal adolescent and adult trial. These continued improvements in both adult patients with advanced Stage 4 Rett syndrome, coupled with the IDMC's approval to dose the second pediatric patient following a review of the initial clinical data from the first pediatric patient dose with TSHA-102 reinforced the transformative potential of TSHA-102 across a broad population of patients with Rett syndrome. Building on the momentum from 2023, we believe 2024 is poised to be a transformational year for the company. This year, we're focused on data generation across a broad range of ages and stages of patients with Rett syndrome in multiple geographies with the goal of completing dosing in part of both trials with the low and high dose of TSHA-102 to inform the next phase of the studies. With many clinical catalysts expected in the year ahead, we look forward to providing additional updates on our progress. With that, I will now ask the operator to begin our Q&A session.

Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. Our first question comes from the line of Whitney Ijem with Canaccord. Please proceed with your question.

Hey, guys. Thanks for all the updates. I guess to limit myself to one, just can you help set expectations into the pediatric data mid-year and in particular, our understanding of Stage 3, and I think you guys have talked about this a little bit before, but is that the disease is kind of stable, more variable and potentially some improvements in terms of the natural history. So how should we be thinking about kind of what you could show an initial update versus maybe over the longer term in the pediatric updates as we go through the year? Thanks.

Thanks, Whitney. I guess I would say that, number one, keep in mind that the pediatric patients will likely be in a severity range of CGI-S of between 4 and 6, which is similar to what's happening in the adolescent and adult trial. And I think if you talk to the KOLs out there, you'd get very consistent feedback that that's the most appropriate severity range to study in a first-in-human trial for gene therapy with this particular disease. So I think, Whitney, to answer your question, you're going to see a bit of a spectrum of patients, right? Someone who's a four is going to be different than someone who's a six. We've seen that with our first two adult patients here. The time to impact it's a new population. You'd like to think that you should see a relatively similar time to effect and hopefully, initial magnitude of effect is relatively similar depending upon the severity of the disease, it's also possible that it could take longer to see change in someone that's less severe versus more severe. So if you think about a mid-year readout, I would say that we dosed our first patient at the end of 2023. So we'd likely have between four to six months of data at that particular time. We've guided to dosing the second patient this quarter. So you're probably talking between two to three months of data for that patient and potentially early data for the third patient depending upon the timing of that particular dosing. So hopefully, that gives you a little bit of flavor of what to expect.

Hey guys, good evening. This is Elizabeth on for Salveen. Thank you for taking our question and congrats on the data. Mechanistically, what is your hypothesis around what is driving the RSBQ improvement for Patient 1 at week 25, noting that, that score was relatively flat from week four to 12? And then how should we think about expectations for the particular score metric on the forward? Thank you.

I can go first and Suku can jump in. But I would say with patient number one, the changes that you saw in RSBQ were primarily driven by anxiety going down, general mood improving, and hand function improvement. Those are the three main drivers in the latest decrease in that particular scale. I would just say one potential hypothesis right now on some of the mood aspects is that these patients are on very high levels of steroids for a long period of time. And we'll have to see how other patients do as well. But one potential is that you're reducing the steroids the level of irritability, the impact on sleep, just the overall mood could be improving as a result of that. Put another way, it's possible that the steroids somewhat masked benefits until they're either reduced significantly or further withdrawn. So we're quite encouraged by what we've seen in that aspect of things. And hopefully, that gives you a bit of perspective on how we're thinking of it and will lead at this juncture.

Hi everyone, thanks for taking my question and congrats on these data updates. I wanted to ask about the leap anecdote you shared for Patient 1. So we understand that sleep issues are very common in Rett syndrome patients, but they can present pretty differently depending on the type of mutation. So can you speak more to the background expected for this patient based on their mutation. And essentially what difficulties they were having sleeping through the night? So was there any fleet screaming or laughing or other notable effects and essentially what you believe is happening that you were able to see the drastic change there? Thank you.

Yes. So that's an important question because as you pointed out, many patients with Rett syndrome do have significant sleep abnormalities and sometimes they also correlate with the respiratory abilities that can coexist. And in this Patient 1, what was observed by the parents was that this patient never ever seemed to have a reasonable night's sleep and always had a very disruptive night sleep, which included restraint features, night terrors, etc. And post gene therapy, the feedback from the caregiver, especially the father, was that this patient was now sleeping through the night, and that's the first time he was getting a good night's sleep. So obviously, the gene therapy itself, I think we're speculating what we think is restoring MECP2 function in the sleep centers and probably helping with many features of sleep that resulted in this patient being restored to almost a normal state.

Good afternoon. Let me also add my congratulations on progress. So just one from us. Can you maybe put into context the burden experienced by adult Rett patients from being on steroids on a daily basis? And are steroids ever tapered during the standard of care for adult patients during the natural course of the disease?

Yes. So that's another good question. So immunosuppression or immunomodulation, in general, is not used to treat Rett patients in a disease-modifying fashion. It has been tried in the past using drugs like sirolimus or prednisolone or hydrocortisone to treat Rett syndrome, but it hasn't had any positive impact on disease duration, severity, or outcome. So what we're seeing in our trial, though, is because it's a gene therapy trial, steroids and immunosuppressants are being used as immunomodulatory agents to allow us to get through that initial period where there might be some theoretical risk of the treatment itself.

Hi, good afternoon. This is Mehdi on for Joon and congrats on the quarter, and thanks for taking our questions. We have a couple, if I may. First, could you please elaborate on the safety and efficacy of using a fixed dose for patients as young as three years old to adults? And if you expect to achieve a comparable exposure level in the CNS of these patients?

The answer to that is that the overall CNS fluid volume between a three-year-old and an adult is actually very similar, which is why the IDMC and regulators have felt comfortable with the preclinical data supporting the use of that fixed dose across patient populations.

Oh, great. Thank you for taking our questions. Congrats on the progress. So I was wondering since the first patient seeing a pediatric trial has gone through the six-week safety monitoring committee evaluation, wondering is there any color from that patient in terms of improvement that could be consistent with what you are seeing in the adult trial or in general, potential for such improvement in the pediatric population?

Thank you for the question. We dosed the first pediatric patient at the end of December, and about a week later, we announced our intention to begin disclosing data by cohort rather than on a patient-by-patient basis. At this time, I can share that the Independent Data Monitoring Committee reviewed the initial pediatric data along with the data from the two adults we recently reported. This informed their decision to allow us to move to the high dose in the adolescent segment of the adult study and to proceed with dosing the second adolescent patient. However, we prefer not to comment further at this stage and plan to provide more comprehensive data disclosure by midyear. If you're referring to CGI, is that what you're talking about?

Sorry, sorry, CGI-I, I fully appreciate even maintenance of the prior numbers according to our check with the doctors, that's a very, very encouraging sign to have those minimum improved ratings maintained following in a follow-up and also to have the much improved for the other patient maintained. Those are great achievements. I'm talking about RSBQ and RMBA, where both patients had one score improve and the other score relatively flat. Yes, that's what I'm talking.

I got you. So in Patient number 1. So first of all, the RMBA is administered by the clinician in the hospital. The RSBQ is provided by the caregivers in the home setting and they ask different questions, okay? So it's a little difficult to put apples to oranges. But I would say this, we actually asked the primary investigator this same question. And what she said was the Patient number 1 has gotten very aware of what's going on in her surroundings. If I showed you the video from pretreatment, she was very, very, almost in a catatonic state in a wheelchair, really not interacting. Now she's much more aware. She's trying to communicate and vocalize. And basically, what the PI told us is she does not like going through the testing at the hospital. She gets irritated and she doesn't want to cooperate. And at this point, she has the strength to not cooperate. So that has been driving some of the score that you're seeing. She's essentially not necessarily cooperating with some aspects of the disease of the testing, where in the home setting, she's getting very much a comfortable situation and sees the parents are seeing. The other thing I would say is that some of the improvement that I mentioned earlier in the RSBQ, the patient one had was in the anxiety, the general mood aspect of things, that is not captured in the RMBA. So that's one aspect there.

Yes. And also for Patient 2, I would highlight the seizures were decreased by 95% post gene therapy treatment. So this patient had, I think, eight to 16 seizures a month, and other than one seizure day 13 post-treatment, the patient has had no new seizures and also the use of a combination antiepileptic meds have dropped by 25%. That is a big deal from a clinical standpoint and for the parents and caregivers and from an activities of daily living standpoint. The second thing you should note is in Patient 2, some of the hand function and stereotypic movements have decreased, which also makes it promising that this patient may eventually get independent functionality of the hand. And there is something else that goes on in about 40% of these patients with Rett syndrome which is the upper and lower extremities, have abnormal circulation, which means the hands and feet get quite cool and at times painful, and you would note in Patient 2 and Patient 1 that resolve post-gene therapy treatment. So other than RMB and RSBQ, which obviously we focus on for different reasons, these major clinical observations, I think, could be life changing in this stage of the population.

All right. Thanks for taking the question, and congratulations on the progress. I'm looking to zoom out a little bit and take attention to the established collaboration that you have. It seems like you're really developing data quite quickly, especially with the pediatric low-dose data expected in the middle of this year and the potential initial high dose data later this year. Can you remind us of the structure of the Astellas deal and how it relates to the rep program? And what measures are in place to ensure you get a fair deal. I believe the option was fairly open-ended when that deal was struck?

Astellas has an exclusive right to negotiate an option with us, but there are no predetermined terms. The option period will begin after we have collected approximately six months of data from a small number of pediatric patients. There's no immediate timeframe for Astellas to decide on an opt-in, as that will likely be a topic for 2025. It's important to note that while Astellas is aware of developments, the agreement does not prevent another interested party from making an unsolicited offer. In that case, we would inform Astellas, allowing them the opportunity to counter, but they don't have any blocking rights. I hope that clarifies things or do you have any follow-up questions? The current stagger is 42 days and we need to have an IDMC meeting before moving on to the next patient. It's a combination of art and science. When we have enough data to request the removal of the stagger, we analyze the data from three patients and believe we have shown safety and preliminary efficacy. Based on preclinical data, there's justification to increase the dose, and we can do that. Instead of treating three patients with a lower dose in the adult study, we treated two patients and then shifted to a higher dose, which we believe will provide more valuable information for the overall program and could be more beneficial for patients. Following this reasoning, there will come a time when we feel comfortable discussing the removal of the stagger with the IDMC, and we’ll proceed when we have data that strongly supports that request.

I'll start and ask Suku to chime as well. But first of all, when you look at the preclinical data, there is a dose response. So you would expect there to be a greater response moving to the higher dose. What's driving that? You anticipate that by giving roughly more dose that you'd be transducing more cells, you'd be generating more MECP2 in the cells that need more MECP2, and that overall, you should have a more significant clinical effect than what was seen in the low dose. I just want to thank everyone for taking the time, and I appreciate you listening to the story and we're eager to continue to progress in 2024 and generate additional data and hopefully more value-creating milestones for the investors and care for the patients. So thank you, and have a good night.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.