TSHA 10-Q
Taysha Gene Therapies, Inc. (TSHA)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to ___________
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
|
|
|
|
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
|
|
|
|
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
|
|
|
|
|
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer |
|
☐ |
|
Accelerated filer |
|
☐ |
|
|
|
|
|
|||
|
|
|
☒ |
|
Smaller reporting company |
|
|
|
|
|
|
|
|
|
|
|
Emerging growth company |
|
|
|
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 8, 2022, the registrant had
Table of Contents
|
|
|
Page |
|
PART I. |
|
|
|
Item 1. |
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
3 |
|
|
|
5 |
|
|
|
6 |
|
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 |
|
Item 3. |
54 |
|
|
Item 4. |
54 |
|
|
PART II. |
|
|
|
Item 1. |
55 |
|
|
Item 1A. |
55 |
|
|
Item 2. |
55 |
|
|
Item 3. |
55 |
|
|
Item 4. |
55 |
|
|
Item 5. |
55 |
|
|
Item 6. |
56 |
|
|
57 |
||
i
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Taysha Gene Therapies, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
|
|
|
Restricted cash |
|
|
|
|
|
|
|
|
|
Deferred lease asset |
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
|
|
|
|
|
|
|
Other non-current assets |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
|
|
|
$ |
|
|
|
Accrued expenses and other current liabilities |
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
|
|
|
Build-to-suit lease liability |
|
|
|
|
|
|
|
|
|
Term loan, net |
|
|
|
|
|
|
|
|
|
Other non-current liabilities |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
|
Commitments and contingencies - Note 9 |
|
|
|
|
|
|
|
|
|
Stockholders' equity |
|
|
|
|
|
|
|
|
|
Preferred stock, $ |
|
|
|
|
|
|
|
|
|
Common stock, $ |
|
|
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
|
|
|
|
|
|
|
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
|
Total stockholders’ equity |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity |
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
Taysha Gene Therapies, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
(Unaudited)
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Other expense |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
Total other expense, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Net loss per common share, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Weighted average common shares outstanding, basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
Taysha Gene Therapies, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)
(Unaudited)
For the Three Months Ended September 30, 2022
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Total |
|
||
|
|
|
Common Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
Stockholders' |
|
||||||||
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
|||||
|
Balance as of June 30, 2022 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Issuance of common stock upon vesting and settlement of restricted stock units |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Issuance of common stock under ESPP |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Balance as of September 30, 2022 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
For the Three Months Ended September 30, 2021
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Total |
|
||
|
|
|
Common Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
Stockholders' |
|
||||||||
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
|||||
|
Balance as of June 30, 2021 |
|
|
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Issuance of common stock upon vesting and settlement of restricted stock units |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Balance as of September 30, 2021 |
|
|
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
3
Taysha Gene Therapies, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)
(Unaudited)
For the Nine Months Ended September 30, 2022
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Total |
|
||
|
|
|
Common Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
Stockholders' |
|
||||||||
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
|||||
|
Balance as of December 31, 2021 |
|
|
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Issuance of common stock, net of sales commissions and other offering costs of $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Issuance of common stock upon vesting and settlement of restricted stock units |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Issuance of common stock under ESPP |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Balance as of September 30, 2022 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
For the Nine Months Ended September 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Total |
|
||
|
|
|
Common Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
Stockholders' |
|
||||||||
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
|||||
|
Balance as of December 31, 2020 |
|
|
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Issuance of common stock upon vesting and settlement of restricted stock units |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Balance as of September 30, 2021 |
|
|
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
4
Taysha Gene Therapies, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
|
|
|
For the Nine Months Ended September 30, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation expense |
|
|
|
|
|
|
|
|
|
Research and development license expense |
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Prepaid expenses and other assets |
|
|
|
|
|
|
( |
) |
|
Accounts payable |
|
|
( |
) |
|
|
|
|
|
Accrued expenses and other liabilities |
|
|
( |
) |
|
|
|
|
|
Due to related party |
|
|
— |
|
|
|
( |
) |
|
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
Purchase of research and development license |
|
|
( |
) |
|
|
( |
) |
|
Purchase of property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
Proceeds from Term Loan, net |
|
|
— |
|
|
|
|
|
|
Proceeds from issuance of common stock, net of sales commissions |
|
|
|
|
|
|
— |
|
|
Payment of shelf registration costs |
|
|
( |
) |
|
|
— |
|
|
Proceeds from common stock issuances under ESPP |
|
|
|
|
|
|
— |
|
|
Other |
|
|
( |
) |
|
|
— |
|
|
Net cash provided by financing activities |
|
|
|
|
|
|
|
|
|
Net decrease in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
( |
) |
|
Cash, cash equivalents and restricted cash at the beginning of the period |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash at the end of the period |
|
$ |
|
|
|
$ |
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
Restricted cash |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash at the end of the period |
|
$ |
|
|
|
$ |
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
|
|
|
$ |
|
|
|
Supplemental disclosure of noncash investing and financing activities: |
|
|
|
|
|
|
|
|
|
Property, plant and equipment in accounts payable and accrued expenses |
|
|
|
|
|
|
|
|
|
Acquisition of property, plant and equipment funded by landlord |
|
|
— |
|
|
|
|
|
|
Deferred offering costs not yet paid |
|
|
|
|
|
|
|
|
|
Purchase of research and development license not yet paid |
|
|
— |
|
|
|
|
|
|
Build-to-suit lease liability |
|
|
— |
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
5
Note 1—Organization and Description of Business Operations
Taysha Gene Therapies, Inc. (the “Company” or “Taysha”) was originally formed under the laws of the State of Texas on September 20, 2019 (“Inception”). Taysha converted to a Delaware corporation on
Taysha is a patient-centric gene therapy company focused on developing and commercializing AAV-based gene therapies for the treatment of monogenic diseases of the central nervous system in both rare and large patient populations.
Sales Agreement
On October 5, 2021, the Company entered into a Sales Agreement (the “Sales Agreement”) with SVB Securities LLC (f/k/a SVB Leerink LLC) and Wells Fargo Securities, LLC (collectively, the “Sales Agents”), pursuant to which the Company may issue and sell, from time to time in its sole discretion, shares of its common stock having an aggregate offering price of up to $
Liquidity and Capital Resources
The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
Pursuant to ASC 205, Presentation of Financial Statements, the Company is required to and does evaluate at each annual and interim period whether there are conditions or events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. In its Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, the Company concluded that there was insufficient funding available to allow the Company to fund its currently planned research and discovery programs and the build-out of its GMP manufacturing facility for a period exceeding one year from the filing of those financial statements, and that those conditions raised substantial doubt about the Company’s ability to continue as a going concern.
In October 2022, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) and an option agreement (the “Option Agreement,” together with the Securities Purchase Agreement the “Astellas Transactions”) with Audentes Therapeutics, Inc. (d/b/a Astellas Gene Therapy) (“Astellas”), pursuant to which the Company agreed to issue and sell
The Company has concluded that these additional cash flows provide the Company with sufficient liquidity to satisfy its obligations for at least twelve months following the date of the issuance of these condensed consolidated financial statements. Accordingly, the Company has concluded that there is no longer substantial doubt about the Company’s ability to continue as a going concern.
The Company has incurred operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of September 30, 2022, the Company had an accumulated deficit of $345.9 million. Losses are expected to continue as the Company continues to invest in its research and development activities. Future capital requirements will depend on many factors, including the timing and extent of spending on research and development and the market acceptance of the Company’s products. The Company will need to obtain additional financing in order to complete clinical
6
studies and launch and commercialize any product candidates for which it receives regulatory approval. There can be no assurance that such financing will be available or will be on terms acceptable to the Company.
Note 2—Summary of Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("GAAP") as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X and are consistent in all material respects with those included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission ("SEC") on March 31, 2022 (the “2021 Annual Report”). In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. The consolidated balance sheet as of December 31, 2021 is derived from audited financial statements, however, it does not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes in the Company’s 2021 Annual Report.
Principles of Consolidation
The accompanying interim condensed consolidated financial statements include the accounts of Taysha and its inactive wholly owned U.S. subsidiaries as well as two foreign subsidiaries incorporated during 2021. All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The most significant estimates and assumptions in the Company’s financial statements relate to the determination of the fair value of the common stock prior to the Company’s initial public offering (“IPO”) in September 2020 (as an input into stock-based compensation), and estimating preclinical manufacturing accruals and accrued or prepaid research and development expenses. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.
Significant Accounting Policies
There have been no changes in the Company’s significant accounting policies as disclosed in Note 2 to the audited consolidated financial statements included in the 2021 Annual Report.
Comprehensive Loss
Comprehensive loss is equal to net loss as presented in the accompanying condensed consolidated statements of operations.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), as amended, with guidance regarding the accounting for and disclosure of leases. This update requires lessees to recognize the liabilities related to all leases, including operating leases, with a term greater than 12 months on the balance sheets. This update also requires lessees and lessors to disclose key information about their leasing transactions. This guidance will become effective for the Company for annual reporting periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. The new standard requires the use of one of the following two approaches, either (1) retrospectively to each prior reporting period presented in the financial statements with the cumulative effect recognized at the beginning of the earliest comparative period presented, or (2) retrospectively at the beginning of the period of adoption through a cumulative-effect adjustment. The Company commenced its implementation efforts of this new accounting standard during the quarter and concluded that the cumulative impact of the adoption will be recorded as an adjustment to accumulated deficit as of January 1, 2022, and prior periods will not be adjusted. Upon adoption, the Company expects to recognize right-of-use assets and lease liabilities in the consolidated balance sheet related to operating leases.
7
Additionally, upon adoption, the Company expects to derecognize the build-to-suit asset and obligation (see Note 9) related to the construction-in-progress as the Company does not control the building during the construction period.
Note 3—Balance Sheet Components
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||
|
Prepaid research and development |
|
$ |
|
|
|
$ |
|
|
|
Prepaid clinical trial |
|
|
|
|
|
|
|
|
|
Deferred offering costs |
|
|
|
|
|
|
|
|
|
Prepaid insurance |
|
|
|
|
|
|
|
|
|
Prepaid bonus |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Total prepaid expenses and other current assets |
|
$ |
|
|
|
$ |
|
|
Property, plant and equipment, net consisted of the following (in thousands):
|
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||
|
Leasehold improvements |
|
$ |
|
|
|
$ |
|
|
|
Laboratory equipment |
|
|
|
|
|
|
|
|
|
Computer equipment |
|
|
|
|
|
|
|
|
|
Furniture and fixtures |
|
|
|
|
|
|
|
|
|
Construction in progress |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
|
Property, plant and equipment, net |
|
$ |
|
|
|
$ |
|
|
Included in construction in progress at September 30, 2022 was $
Depreciation expense was $
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||
|
Accrued research and development |
|
$ |
|
|
|
$ |
|
|
|
Accrued compensation |
|
|
|
|
|
|
|
|
|
Accrued license fees |
|
|
— |
|
|
|
|
|
|
Accrued property, plant and equipment |
|
|
|
|
|
|
|
|
|
Accrued clinical trial |
|
|
|
|
|
|
|
|
|
Accrued professional and consulting fees |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Total accrued expenses and other current liabilities |
|
$ |
|
|
|
$ |
|
|
Note 4—Loan with Silicon Valley Bank
8
On August 12, 2021 (the “Closing Date”), the Company entered into a Loan and Security Agreement (the “Term Loan Agreement”), by and among the Company, the lenders party thereto from time to time (the “Lenders”) and Silicon Valley Bank, as administrative agent and collateral agent for the Lenders (“Agent”). The Term Loan Agreement provides for (i) on the Closing Date, $
The interest rate applicable to the Term Loans is the greater of (a) the WSJ Prime Rate plus
The Term Loans may be prepaid in full through August 12, 2023 with payment of a
The obligations under the Term Loan Agreement are secured by a perfected security interest in all of the Company’s assets except for intellectual property and certain other customarily excluded property pursuant to the terms of the Term Loan Agreement. There are no financial covenants and
The Term Loan Agreement also contains customary representations and warranties, and also includes customary events of default, including payment default, breach of covenants, change of control, and material adverse effects. The Company was in compliance with all covenants under the Term Loan Agreement as of September 30, 2022. Upon the occurrence of an event of default, a default interest rate of an additional
During the nine months ended September 30, 2022, the Company recognized interest expense related to the Term Loan of $
Future principal debt payments on the loan payable as of September 30, 2022 are as follows (in thousands):
|
Year Ending December 31, |
|
|
|
|
|
2022 |
|
|
— |
|
|
2023 |
|
|
— |
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
Total principal payments |
|
|
|
|
|
Unamortized debt discount |
|
|
( |
) |
|
Term Loan, net |
|
$ |
|
|
9
Note 5—Research, Collaboration and License Agreements
UT Southwestern Agreement
On November 19, 2019, the Company entered into a research, collaboration and license agreement (“UT Southwestern Agreement”) with the Board of Regents of the University of Texas System on behalf of The University of Texas Southwestern Medical Center (“UT Southwestern”). Under the UT Southwestern Agreement, UT Southwestern is primarily responsible for preclinical development activities with respect to licensed products for use in certain specified indications (up to investigational new drug application-enabling studies), and the Company is responsible for all subsequent clinical development and commercialization activities with respect to the licensed products. UT Southwestern will conduct such preclinical activities for a period under mutually agreed upon sponsored research agreements that were entered into beginning in April 2020. During the initial research phase, the Company has the right to expand the scope of specified indications under the UT Southwestern Agreement.
In connection with the UT Southwestern Agreement, the Company obtained an exclusive, worldwide, royalty-free license under certain patent rights of UT Southwestern and a non-exclusive, worldwide, royalty-free license under certain know-how of UT Southwestern, in each case to make, have made, use, sell, offer for sale and import licensed products for use in certain specified indications. Additionally, the Company obtained a non-exclusive, worldwide, royalty-free license under certain patents and know-how of UT Southwestern for use in all human uses, with a right of first refusal to obtain an exclusive license under certain of such patent rights and an option to negotiate an exclusive license under other of such patent rights. The Company is required to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize at least
On April 2, 2020, the Company amended the UT Southwestern Agreement to include the addition of another licensed product and certain indications, and a right of first refusal to the Company over certain patient dosing patents. No additional consideration was transferred in connection with this amendment. In March 2022, the Company and UT Southwestern mutually agreed to revise the payment schedules and current performance expectations of the current sponsored research agreements under the UT Southwestern Agreement and defer payments by fifteen months.
The UT Southwestern Agreement expires on a country-by-country and licensed product-by-licensed product basis upon the expiration of the last valid claim of a licensed patent in such country for such licensed product. After the initial research term, the Company may terminate the agreement, on an indication-by-indication and licensed product-by-licensed product basis, at any time upon specified written notice to UT Southwestern. Either party may terminate the agreement upon an uncured material breach of the agreement or insolvency of the other party.
In November 2019, as partial consideration for the license rights granted under the UT Southwestern Agreement, the Company issued
Queen’s Agreement
On February 21, 2020, the Company entered into a license agreement with Queen’s (the “Queen’s Agreement”) to obtain the exclusive perpetual, royalty-bearing license, with the right to sublicense through multiple tiers, under certain patent rights and know-how of Queen’s, including certain improvements to such patent rights and know-how, to develop products in any field which use one or more valid claims of the patents licensed under the Queen’s Agreement (the “Licensed Patents”), or the technology, information and intellectual property related to the patents licensed under the Queen’s Agreement (together with the Licensed Patents, the “Licensed Products”), and to make, have made, use, sell, offer for sale, import and export Licensed Products and otherwise exploit such patents and know-how for use in certain specified indications. In exchange for the rights granted to the Company, the Company made a cash payment of $
10
earned royalty in the low single digits on net sales of Licensed Products, subject to certain customary reductions, and a percentage of non-royalty sublicensing revenue ranging in the low double digits. Royalties are payable, on a Licensed Products-by-Licensed Products and a country-by-country basis, until expiration of the last valid claim of a Licensed Patent covering such Licensed Products in such country and the expiration of any regulatory exclusivity for such Licensed Products in such country.
Abeona CLN1 Agreements
In August 2020, the Company entered into license and inventory purchase agreements (collectively, the “Abeona Agreements”) with Abeona Therapeutics Inc. (“Abeona”) for worldwide exclusive rights to certain intellectual property rights and know-how relating to the research, development and manufacture of ABO-202, an AAV-based gene therapy for CLN1 disease (also known as infantile Batten disease). Under the terms of the Abeona Agreements, the Company made initial cash payments to Abeona of $
In December 2021, the Company’s Clinical Trial Application (“CTA”) filing for TSHA-118 for the treatment of CLN1 disease was approved by Health Canada and therefore triggered a regulatory milestone payment in connection with this agreement. The Company recorded $
Abeona Rett Agreement
On October 29, 2020, the Company entered into a license agreement (the “Abeona Rett Agreement”) with Abeona pursuant to which the Company obtained an exclusive, worldwide, royalty-bearing license, with the right to grant sublicenses under certain patents, know-how and materials originally developed by the University of North Carolina at Chapel Hill, the University of Edinburgh and Abeona to research, develop, manufacture, have manufactured, use, and commercialize licensed products for gene therapy and the use of related transgenes for Rett syndrome.
Subject to certain obligations of Abeona, the Company is required to use commercially reasonable efforts to develop at least one licensed product and commercialize at least one licensed product in the United States.
In connection with the Abeona Rett Agreement, the Company paid Abeona a one-time upfront license fee of $
The Abeona Rett Agreement expires on a country-by-country and licensed product-by-licensed product basis upon the expiration of the last royalty term of a licensed product. Either party may terminate the agreement upon an uncured material breach of the agreement or insolvency of the other party. The Company may terminate the agreement for convenience upon specified prior written notice to Abeona.
11
In March 2022, the Company’s CTA filing for TSHA-102 for the treatment of Rett Syndrome was approved by Health Canada and therefore triggered a regulatory milestone payment in connection with this agreement. The Company recorded $
Acquisition of Worldwide Rights for TSHA-120 for the treatment of GAN
In March 2021, the Company acquired the exclusive worldwide rights to a clinical-stage AAV9 gene therapy program, now known as TSHA-120, for the treatment of Giant Axonal Neuropathy (“GAN”). TSHA-120 is an intrathecally dosed AAV9 gene therapy currently being evaluated in a clinical trial for the treatment of GAN. The trial is being conducted by the National Institutes of Health (“NIH”) in close collaboration with a leading patient advocacy group focused on finding treatments and cures for GAN. TSHA-120 has received rare pediatric disease and orphan drug designations from the U.S. Food and Drug Administration for the treatment of GAN. The worldwide rights were acquired through a license agreement, effective March 29, 2021, between Hannah’s Hope Fund for Giant Axonal Neuropathy, Inc. (“HHF”) and the Company (the “GAN Agreement”).
Under the terms of the GAN Agreement, in exchange for granting the Company the exclusive worldwide rights to TSHA-120, HHF received an upfront payment of $
In exchange for the license rights, the Company recorded an aggregate of $
License Agreement for CLN7
In March 2022, the Company entered into a license agreement with UT Southwestern (the “CLN7 Agreement”) pursuant to which the Company obtained an exclusive worldwide, royalty-bearing license with right to grant sublicenses to develop, manufacture, use, and commercialize licensed products for gene therapy for CLN7, a form of Batten Disease. In connection with the CLN7 Agreement, the Company paid a one-time upfront license fee of $
Note 6—Stock-Based Compensation
On July 1, 2020, the Company’s board of directors approved the 2020 Equity Incentive Plan (“Existing Plan”) which permits the granting of incentive stock options, non-statutory stock options, stock appreciation rights, RSAs, RSUs and other stock-based awards to employees, directors, officers and consultants. On July 1, 2020,
On September 16, 2020, the Company’s stockholders approved the 2020 Stock Incentive Plan (“New Plan”), which became effective upon the execution of the underwriting agreement in connection with the IPO. Initially, the number of shares available for
12
future issuance under the New Plan was the sum of (1)
Furthermore, on September 16, 2020, the Company’s stockholders approved the Employee Stock Purchase Plan (“ESPP”), which became effective upon the execution of the underwriting agreement in connection with the IPO. The maximum number of shares of common stock that may be issued under the ESPP will not exceed
Stock Options
On July 1, 2020, options to purchase
For the three months ended September 30, 2022,
The following weighted-average assumptions were used to estimate the fair value of stock options that were granted during the three and nine months ended September 30, 2022 and 2021:
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Risk-free interest rate |
|
|
— |
|
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Expected dividend yield |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Expected term in years |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected volatility |
|
|
— |
|
|
|
|
% |
|
|
|
% |
|
|
|
% |
13
The following table summarizes stock option activity, during the nine months ended September 30, 2022:
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
Aggregate |
|
|||
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Intrinsic |
|
|||
|
|
|
Stock |
|
|
Exercise |
|
|
Contractual |
|
|
Value |
|
||||
|
|
|
Options |
|
|
Price |
|
|
Life (in years) |
|
|
(in thousands) |
|
||||
|
Outstanding at December 31, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
— |
|
|
Options granted |
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
— |
|
|
Options cancelled or forfeited |
|
|
( |
) |
|
|
|
|
|
|
— |
|
|
$ |
— |
|
|
Options expired |
|
|
( |
) |
|
|
|
|
|
|
— |
|
|
$ |
— |
|
|
Outstanding at September 30, 2022 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
— |
|
|
Vested and expected to vest at September 30, 2022 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
— |
|
|
Options exercisable at September 30, 2022 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
— |
|
The aggregate intrinsic value in the above table is calculated as the difference between the fair value of the Company’s common stock as of September 30, 2022 and the exercise price of the stock options. As of September 30, 2022, the total unrecognized compensation related to unvested stock option awards granted was $
Restricted Stock Units
On September 2, 2020, the Company issued
The Company's default tax withholding method for RSUs is the sell-to-cover method, in which shares with a market value equivalent to the tax withholding obligation are sold on behalf of the holder of the RSUs upon vesting and settlement to cover the tax withholding liability and the cash proceeds from such sales are remitted by the Company to taxing authorities.
The Company’s RSU activity for the nine months ended September 30, 2022 was as follows:
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
Grant Date |
|
|
|
|
|
Number |
|
|
Fair Value |
|
||
|
|
|
of Shares |
|
|
per Share |
|
||
|
Nonvested at December 31, 2021 |
|
|
|
|
|
$ |
|
|
|
Restricted units granted |
|
|
|
|
|
|
|
|
|
Vested |
|
|
( |
) |
|
|
|
|
|
Cancelled or forfeited |
|
|
|
|
|
|
|
|
|
Nonvested at September 30, 2022 |
|
|
|
|
|
$ |
|
|
Restricted Stock Awards
RA Session II, the Company’s President and Chief Executive Officer, was awarded
14
The Company’s RSA activity for the nine months ended September 30, 2022 was as follows:
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
Grant Date |
|
|
|
|
|
Number |
|
|
Fair Value |
|
||
|
|
|
of Shares |
|
|
per Share |
|
||
|
Nonvested at December 31, 2021 |
|
|
|
|
|
$ |
|
|
|
Restricted stock granted |
|
|
— |
|
|
|
— |
|
|
Vested |
|
|
( |
) |
|
|
|
|
|
Nonvested at September 30, 2022 |
|
|
|
|
|
$ |
|
|
Employee Stock Purchase Plan
In February 2022, the Company’s board of directors authorized the first offering under the ESPP. Under the ESPP, eligible employees may purchase shares of Taysha common stock through payroll deductions at a price equal to
During the nine months ended September 30, 2022, $
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Research and development expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Note 7—Net Loss Per Common Share
Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Since the Company had a net loss in all periods presented, basic and diluted net loss per common share are the same.
The following table represents the calculation of basic and diluted net loss per common share (in thousands, except share and per share data):
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Weighted-average shares of common stock outstanding used to compute net loss per common share, basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The following common stock equivalents outstanding as of September 30, 2022 and 2021 were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti‑dilutive:
15
|
|
|
September 30, 2022 |
|
|
September 30, 2021 |
|
||
|
Unvested RSUs |
|
|
|
|
|
|
|
|
|
Unvested RSAs |
|
|
|
|
|
|
|
|
|
Stock options |
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
Note 8—Income Taxes
Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. There is
As of September 30, 2022, there were no material changes to either the nature or the amounts of the uncertain tax positions previously determined for the year ended December 31, 2021.
Note 9—Commitments and Contingencies
Litigation
The Company is not a party to any material legal proceedings and is not aware of any pending or threatened claims. From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities.
Commitments
In the normal course of business, the Company enters into contracts that contain a variety of indemnifications with its employees, licensors, suppliers and service providers. The Company’s maximum exposure under these arrangements is unknown at September 30, 2022. The Company does not anticipate recognizing any significant losses relating to these arrangements.
Total lease expense, inclusive of lease incentives, under all operating lease agreements amounted to $
Durham Lease
On December 17, 2020, the Company entered into a lease agreement (the “Durham Lease”) with Patriot Park Partners II, LLC, a Delaware limited liability company (the “Durham Landlord”), pursuant to which the Company agreed to lease approximately
The Company was not required to provide a security deposit in connection with its entry into the Durham Lease. The Company is responsible for constructing interior improvements within the Facility. The Company was required to place $
The Company incurred initial direct costs to enter into the Durham Lease of approximately $
16
In accordance with ASC Topic 840, Leases, the Company is deemed, for accounting purposes only, to be the owner of the entire leased Facility, including the building shell, during the construction period because of the Company’s expected level of direct financial and operational involvement in the substantial tenant improvements, including structural improvements, required to build out the Facility. As a result, the Company capitalized approximately $
17
Note 10 – Strategic Reprioritization
In March 2022, the Company implemented changes to the Company’s organizational structure as well as a broader operational cost reduction plan to enable the Company to focus on specific clinical-stage programs for GAN and Rett syndrome. The Company will conduct small proof-of-concept studies in CLN1 disease and SLC13A5 deficiency. Development of the CLN7 program will continue in collaboration with existing partners with future clinical development to focus on the first-generation construct. Substantially all other research and development activities have been paused to increase operational efficiency.
In connection with prioritization of programs, the Company reduced headcount by approximately
Note 11 – Retirement Plan
In July 2021, the Company adopted a 401(k) retirement savings plan that provides retirement benefits to all full-time employees. Eligible employees may contribute a percentage of their annual compensation, subject to Internal Revenue Service limitations. The Company contributed $
Note 12– Subsequent Events
Astellas Transactions
On October 21, 2022, or the Effective Date, the Company entered into the Option Agreement with Astellas, pursuant to which the Company granted to Astellas an exclusive option to obtain an exclusive, worldwide, royalty and milestone-bearing right and license (A) to research, develop, make, have made, use, sell, offer for sale, have sold, import, export and otherwise exploit, or, collectively, Exploit, the product known, as of the Effective Date, as TSHA-120, or the 120 GAN Product, and any backup products with respect thereto for use in the treatment of GAN or any other gene therapy product for use in the treatment of GAN that is controlled by Taysha or any of its affiliates or with respect to which the Company or any of its affiliates controls intellectual property rights covering the Exploitation thereof, or a GAN Product, and (B) under any intellectual property rights controlled by Taysha or any of its affiliates with respect to such Exploitation, or the GAN Option. Subject to certain extensions, the GAN Option is exercisable from the Effective Date through a specified period of time following Astellas’ receipt of (i) the formal minutes from the Type B end-of-Phase 2 meeting between Taysha and the FDA in response to the Company’s meeting request sent to the FDA on September 19, 2022 for the 120 GAN Product, or the Type B end-of-Phase 2 Meeting, (ii) all written feedback from the FDA with respect to the Type B end-of-Phase 2 Meeting, and (iii) all briefing documents sent by Taysha to the FDA with respect to the Type B end-of-Phase 2 Meeting.
Under the Option Agreement, the Company also granted to Astellas an exclusive option to obtain an exclusive, worldwide, royalty and milestone-bearing right and license (A) to Exploit any Rett Product (as defined below), and (B) under any intellectual property rights controlled by Taysha or any of its affiliates with respect to such Exploitation, or the Rett Option and together with the GAN Option, each, an Option. Subject to certain extensions, the Rett Option is exercisable from the Effective Date through a specified period of time following Astellas’ receipt of (i) certain clinical data from the female pediatric trial and (ii) certain specified data with respect to TSHA-102, such period, the Rett Option Period, related to (i) the product known, as of the Effective Date, as TSHA-102 and any backup products with respect thereto for use in the treatment of Rett syndrome, and (ii) any other gene therapy product for use in the treatment of Rett syndrome that is controlled by Taysha or any of its affiliates or with respect to which the Company or any of its affiliates controls intellectual property rights covering the Exploitation thereof, or a Rett Product.
The parties have agreed that, if Astellas exercises an Option, the parties will, for a specified period, negotiate a license agreement in good faith on the terms and conditions outlined in the Option Agreement, including payments by Astellas of a to be determined upfront payment, certain to be determined milestone payments, and certain to be determined royalties on net sales of GAN Products and/or Rett Products, as applicable.
During the Rett Option Period, the Company has agreed to (A) not solicit or encourage any inquiries, offers or proposals for, or that could reasonably be expected to lead to, a Change of Control (as defined in the Option Agreement), or (B) otherwise initiate a process for a potential Change of Control, in each case, without first notifying Astellas and offering Astellas the opportunity to submit
18
an offer or proposal to the Company for a transaction that would result in a Change of Control. If Astellas fails or declines to submit any such offer within a specified period after the receipt of such notice, the Company will have the ability to solicit third party bids for a Change of Control transaction. If Astellas delivers an offer to the Company for a transaction that would result in a Change of Control, the Company and Astellas will attempt to negotiate in good faith the potential terms and conditions for such potential transaction that would result in a Change of Control for a specified period, which period may be shortened or extended by mutual agreement.
As partial consideration for the rights granted to Astellas under the Option Agreement, Astellas will pay the Company the Upfront Payment, which is $
Securities Purchase Agreement
On October 21, 2022, the Company entered into the Securities Purchase Agreement with Astellas, pursuant to which the Company agreed to issue and sell to Astellas in a private placement, or the Private Placement, an aggregate of
October 2022 Follow-On Offering
On October 26, 2022, the Company entered into the Underwriting Agreement with the Underwriter to issue and sell
19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2021 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2021, or Annual Report, filed with the Securities and Exchange Commission, or the SEC, on March 31, 2022. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us,” and “our” refer to Taysha Gene Therapies, Inc. together with its consolidated subsidiaries.
Forward-Looking Statements
The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and Part II, Item 1A, “Risk Factors” in our Annual Report. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.
Note Regarding Trademarks
All brand names or trademarks appearing in this report are the property of their respective holders. Unless the context requires otherwise, references in this report to the “Company,” “we,” “us,” and “our” refer to Taysha Gene Therapies, Inc.
Overview
We are a patient-centric gene therapy company focused on developing and commercializing AAV-based gene therapies for the treatment of monogenic diseases of the central nervous system, or CNS, in both rare and large patient populations. We were founded in partnership with The University of Texas Southwestern Medical Center, or UT Southwestern, to develop and commercialize transformative gene therapy treatments. Together with UT Southwestern, we are advancing a deep and sustainable product portfolio of gene therapy product candidates, with exclusive options to acquire several additional development programs at no cost. By combining our management team’s proven experience in gene therapy drug development and commercialization with UT Southwestern’s world-class gene therapy research capabilities, we believe we have created a powerful engine to develop transformative therapies to dramatically improve patients’ lives. In March 2022, we announced strategic pipeline prioritization initiatives focused on GAN and Rett syndrome. We will conduct small proof-of-concept studies in CLN1 disease and SLC13A5 deficiency. Development of the CLN7 program will continue in collaboration with existing partners with future clinical development to focus on the first-generation construct. Substantially all other research and development activities have been paused to increase operational efficiency.
In April 2021, we acquired exclusive worldwide rights to TSHA-120, a clinical-stage, intrathecally dosed AAV9 gene therapy program for the treatment of giant axonal neuropathy, or GAN. A Phase 1/2 clinical trial of TSHA-120 is being conducted by the National Institutes of Health, or NIH, under an accepted investigational new drug application, or IND. We reported clinical safety and functional MFM32 data from this trial for the highest dose cohort of 3.5E14 total vg in January 2022, where we saw continued clinically meaningful slowing of disease progression similar to that achieved with the lower dose cohorts, which we considered confirmatory of disease modification. We recently completed a commercially representative GMP batch of TSHA-120 which demonstrated that the pivotal lots from the commercial grade material were generally analytically comparable to the original clinical trial material. Release testing for this batch is currently underway and expected to be completed in the fourth quarter of 2022. Additional discussions with Health Authorities are planned to discuss these comparability data and a potential registration pathway. In September 2022, we submitted a meeting request to the FDA and were granted a Type B end-of-Phase 2 meeting via teleconference on December 13, 2022. We expect to provide an update on the feedback from the FDA following receipt of the formal Type B end-of-Phase 2 meeting minutes, anticipated in mid-January 2023. For Rett syndrome, we submitted a Clinical Trial Application, or CTA, filing to Health Canada in November 2021 and announced initiation of clinical development of TSHA-102 under the approved CTA in
20
March 2022. We expect to report preliminary safety and efficacy data for TSHA-102 from the entire first cohort of adult patients with Rett syndrome in the first half of 2023. We also expect to initiate a female pediatric clinical trial in the first half of 2023. We recently executed an exclusive option from UT Southwestern to license worldwide rights to a clinical-stage CLN7 program. The CLN7 program is currently in a Phase 1 clinical proof-of-concept trial run by UT Southwestern, and we reported preliminary clinical safety data for the first patient in history to be intrathecally dosed at 1.0x1015 total vg with the first-generation construct in December 2021. Development of the CLN7 program will continue in collaboration with existing partners with future clinical development to focus on the first-generation construct. We will conduct small proof-of-concept studies in CLN1 disease and SLC13A5 deficiency that we believe can further validate our platform.
We have a limited operating history. Since our inception, our operations have focused on organizing and staffing our company, business planning, raising capital and entering into collaboration agreements for conducting preclinical research and development activities for our product candidates. All of our lead product candidates are still in the clinical or preclinical development stage. We do not have any product candidates approved for sale and have not generated any revenue from product sales. We have funded our operations primarily through the sale of equity, raising an aggregate of $434.0 million of gross proceeds from our initial public offering, sales of common stock pursuant to our Sales Agreement (as defined below) and our October 2022 follow-on offering, pre-IPO private placements of our convertible preferred stock, from our Term Loan Agreement (as defined below) and from the Astellas Transactions.
On August 12, 2021, or the Closing Date, we entered into a Loan and Security Agreement, or the Term Loan Agreement, with the lenders party thereto from time to time, or the Lenders and Silicon Valley Bank, as administrative agent and collateral agent for the Lenders, or the Agent. The Term Loan Agreement provides for (i) on the Closing Date, $40.0 million aggregate principal amount of term loans available through December 31, 2021, (ii) from January 1, 2022 until September 30, 2022, an additional $20.0 million term loan facility available at the Company’s option upon having three distinct and active clinical stage programs, determined at the discretion of the Agent, at the time of draw, (iii) from October 1, 2022 until March 31, 2023, an additional $20.0 million term loan facility available at our option upon having three distinct and active clinical stage programs, determined at the discretion of the Agent, at the time of draw and (iv) from April 1, 2023 until December 31, 2023, an additional $20.0 million term loan facility available upon approval by the Agent and the Lenders, or, collectively, the Term Loans. We drew $30.0 million in term loans on the Closing Date and drew an additional $10.0 million term loan on December 29, 2021. We did not draw the additional $20.0 million tranche prior to its expiration on September 30, 2022. The loan repayment schedule provides for interest only payments until August 31, 2024, followed by consecutive monthly payments of principal and interest. All unpaid principal and accrued and unpaid interest with respect to each term loan is due and payable in full on August 1, 2026.
Since our inception, we have incurred significant operating losses. Our net losses were $110.3 million for the nine months ended September 30, 2022 and $124.1 million for the nine months ended September 30, 2021. As of September 30, 2022, we had an accumulated deficit of $345.9 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:
|
|
• |
continue to advance the preclinical and clinical development of our product candidates and preclinical and discovery programs; |
|
|
• |
conduct our ongoing clinical trials of TSHA-102, TSHA-118, TSHA-120 and TSHA-121, as well as initiate and complete additional clinical trials of TSHA-105 and any other current and future product candidates that we advance; |
|
|
• |
seek regulatory approval for any product candidates that successfully complete clinical trials; |
|
|
• |
continue to develop our gene therapy product candidate pipeline and next-generation platforms; |
|
|
• |
scale up our clinical and regulatory capabilities; |
|
|
• |
manufacture current Good Manufacturing Practice, or cGMP material for clinical trials or potential commercial sales; |
|
|
• |
establish and validate a commercial-scale cGMP manufacturing facility; |
|
|
• |
establish a commercialization infrastructure and scale up internal and external manufacturing and distribution capabilities to commercialize any product candidates for which we may obtain regulatory approval; |
|
|
• |
adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products; |
|
|
• |
maintain, expand and protect our intellectual property portfolio; |
|
|
• |
hire additional clinical, manufacturing quality control, regulatory, manufacturing and scientific and administrative personnel; |
21
|
|
• |
add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; and |
|
|
• |
incur additional legal, accounting and other expenses in operating as a public company. |
Our Pipeline
We are advancing a deep and sustainable product portfolio of gene therapy product candidates for monogenic diseases of the CNS in both rare and large patient populations, with exclusive options to acquire several additional development programs at no cost. Our portfolio of gene therapy candidates targets broad neurological indications across three distinct therapeutic categories: neurodegenerative diseases, neurodevelopmental disorders and genetic epilepsies. Our current pipeline, including the stage of development of each of our product candidates, is represented in the table below:
Clinical Programs
TSHA-120 for Giant Axonal Neuropathy (GAN)
In March 2021, we acquired the exclusive worldwide rights to a clinical-stage, intrathecally dosed AAV9 gene therapy program, now known as TSHA-120, for the treatment of giant axonal neuropathy, or GAN, pursuant to a license agreement with Hannah’s Hope Fund for Giant Axonal Neuropathy, Inc., or HHF. Under the terms of the agreement, HHF received an upfront payment of $5.5 million and will be eligible to receive clinical, regulatory and commercial milestones totaling up to $19.3 million, as well as a low, single-digit royalty on net sales upon commercialization of TSHA-120.
GAN is a rare autosomal recessive disease of the central and peripheral nervous systems caused by loss-of-function gigaxonin gene mutations. There are an estimated 5,000 affected GAN patients in addressable markets.
Symptoms and features of children with GAN usually develop around the age of five years and include an abnormal, wide based, unsteady gait, weakness and some sensory loss. There is often associated dull, tightly curled, coarse hair, giant axons seen on a nerve biopsy, and spinal cord atrophy and white matter abnormality seen on MRI. Symptoms progress and as the children grow older they develop progressive scoliosis and contractures, their weakness progresses to the point where they will need a wheelchair for mobility, respiratory muscle strength diminishes to the point where the child will need a ventilator (usually in the early to mid-teens) and the children often die during their late teens or early twenties, typically due to respiratory failure. There is an early- and late-onset phenotype associated with the disease, with shared physiology. The late-onset phenotype is often categorized as Charcot-Marie-Tooth Type 2, or CMT2, with a lack of tightly curled hair and CNS symptoms with relatively slow progression of disease. This phenotype represents up to 6% of all CMT2 diagnosis. In the late-onset population, patients have poor quality of life, significantly compromised activities of daily living, and is life limiting but not as severely as classic GAN. In early-onset disease, symptomatic treatments attempt to maximize physical development and minimize the rate of deterioration. Currently, there are no approved disease-modifying treatments available.
22
TSHA-120 is an AAV9 self-complementary viral vector encoding the full length human gigaxonin protein. The construct was invented by Dr. Steven Gray and is the first AAV9 gene therapy candidate to deliver a functional copy of the GAN gene under the control of a JeT promoter that drives ubiquitous expression.
We have received orphan drug designation and rare pediatric disease designation from the U.S. Food and Drug Administration, or the FDA, for TSHA-120 for the treatment of GAN. In April 2022, we received orphan drug designation from the European Commission for TSHA-120 for the treatment of GAN.
There is an ongoing longitudinal prospective natural history study being led by the NIH, that has already identified and followed a number of patients with GAN for over five years with disease progression characterized by a number of clinical assessments. The GAN natural history study was initiated in 2013 and included 45 patients with GAN, aged 3 to 21 years. Imaging data from this study have demonstrated that there are distinctive increased T2 signal abnormalities within the cerebellar white matter surrounding the dentate nucleus of the cerebellum, which represent one of the earliest brain imaging findings in individuals with GAN. These findings precede the more widespread periventricular and deep white matter signal abnormalities associated with advanced disease. In addition, cortical and spinal cord atrophy appeared to correspond to more advanced disease severity and older age. Impaired pulmonary function in patients with GAN also was observed, with forced vital capacity correlating well with several functional outcomes such as the MFM32, a validated 32-item scale for motor function measurement developed for neuromuscular diseases. Nocturnal hypoventilation and sleep apnea progressed over time, with sleep apnea worsening as ambulatory function
23
deteriorated. Total MFM32 score also correlated with ambulatory status, where independently ambulant individuals performed better and had higher MFM32 scores than the non-ambulant group, as shown in the graph below.
Patients also reported significant autonomic dysfunction based on the COMPASS 31 self-assessment questionnaire. In addition, nerve conduction function demonstrated progressive sensorimotor polyneuropathy with age. As would be expected for a neurodegenerative disease, younger patients have higher baseline MFM32 scores. However, the rate of decline in the MFM32 scores demonstrated consistency across patients of all ages, with most demonstrating an average 8-point decline per year regardless of age and/or baseline MFM32 score, as shown in the natural history plot below.
24
A 4-point score change in the MFM32 is considered clinically meaningful, suggesting that patients with GAN lose significant function annually. To date, we have up to eight years of robust data from this study.
Preclinical Data
TSHA-120 performed well across in vitro and in vivo studies, and demonstrated improved motor function and nerve pathology, and long-term safety across several animal models. Of note, improved dorsal root ganglia, or DRG, pathology was demonstrated in TSHA-120-treated GAN knockout mice. These preclinical results have been published in a number of peer-reviewed journals.
Additional preclinical data from a GAN knockout rodent model that had received AAV9-mediated GAN gene therapy demonstrated that GAN rodents treated at 16 months performed significantly better than 18-month old untreated GAN rodents and equivalently to controls. These rodents were evaluated using a rotarod performance test which is designed to evaluate endurance, balance, grip strength and motor coordination in rodents. The time to fall off the rotarod, known as latency, was also evaluated and the data below demonstrated the clear difference in latency in treated versus untreated GAN rodents.
A result is considered statistically significant when the probability of the result occurring by random chance, rather than from the efficacy of the treatment, is sufficiently low. The conventional method for determining the statistical significance of a result is known as the “p-value,” which represents the probability that random chance caused the result (e.g., a p-value = 0.01 means that there is a 1% probability that the difference between the control group and the treatment group is purely due to random chance). Generally, a p-value less than 0.05 is considered statistically significant.
25
With respect to DRG inflammation, a topic of considerable interest within the gene therapy arena, the DRG have a significantly abnormal histological appearance and function as a consequence of underlying disease pathophysiology. Treatment with TSHA-120 resulted in considerable improvements in the pathological appearance of the DRG in the GAN knockout mice. Shown below is tissue from a GAN knockout mouse model with numerous abnormal neuronal inclusions containing aggregates of damaged neurofilament in the DRG as indicated by the yellow arrows. On image C, tissue from the GAN knockout mice treated with an intrathecal (IT) injection of TSHA-120 had a notable improvement in the reduction of these neuronal inclusions in the DRG.
When a quantitative approach to reduce inclusions in the DRG was applied, it was observed that TSHA-120 treated mice experienced a statistically significant reduction in the average number of neuronal inclusions versus the GAN knockout mice that received vehicle as illustrated below.
26
Additionally, TSHA-120 demonstrated improved pathology of the sciatic nerve in the GAN knockout mice as shown below.
Results of Ongoing Phase 1/2 Clinical Trial
A Phase 1/2 clinical trial of TSHA-120 is being conducted by the NIH under an accepted IND. The ongoing trial is a single-site, open-label, non-randomized dose-escalation trial, in which patients are intrathecally dosed with one of 4 dose levels of TSHA-120 – 3.5E13 total vg, 1.2E14 total vg, 1.8E14 total vg or 3.5E14 total vg. The primary endpoint is to assess safety, with secondary endpoints measuring efficacy using pathologic, physiologic, functional, and clinical markers. To date, 14 patients have been intrathecally dosed and twelve patients have at least three years’ worth of long-term follow up data.
At 1-year post-gene transfer, a clinically meaningful and statistically significant slowing or halting of disease progression was seen with TSHA-120 at the highest dose of 3.5E14 total vg (n=3). The change in the rate of decline in the MFM32 score improved by 5 points in the 3.5E14 total vg cohort compared to an 8-point decline in natural history.
27
Although the change in the MFM32 score was clinically meaningful, we might have expected a greater change in the MFM32 score compared to natural history in the first year but one patient in the high dose cohort was a delayed responder. At the 12-month follow-up visit, the patient had a 7-point decline in the MFM32 total score that was similar to the slope of the natural history curve as shown below. Notably, from Year 1 post gene transfer to Year 2, this patient’s change in the MFM32 score remained unchanged suggesting stabilization of disease at 2 years post-treatment. At that 2-year post treatment timepoint, there was a 9-point improvement in the patient’s MFM32 score compared to the estimated natural history decline of 16 points. The annualized estimate of natural history over time assumes the same rate of decline as in Year 1.
28
An additional analysis was performed to examine the change in the rate of decline in the MFM32 score of all therapeutic doses combined (n=12). As shown below, the change in the rate of decline in the MFM32 score improved by 7 points by Year 1 compared to the natural history decline in the MFM32 score of 8 points. This result was clinically meaningful and statistically significant.
A Bayesian analysis was conducted on the 1.2E14 total vg, 1.8E14 total vg and 3.5E14 total vg dose cohorts at Year 1 to assess the probability of clinically meaningful slowing of disease progression as compared to natural history. This type of statistical analysis enables direct probability statements to be made and is both useful and accepted by regulatory agencies in interventional studies of rare diseases and small patient populations. As shown in the table below, for all therapeutic dose cohorts, there was nearly 100% probability of any slowing of disease and a 96.7% probability of clinically meaningful slowing of 50% or more following treatment with TSHA-120 compared to natural history data.
29
There remained consistent improvement in TSHA-120’s effect over time on the mean change from baseline in the MFM32 score for all patients in the therapeutic dose cohorts compared to the estimated natural history decline over the years. By Year 3, as depicted below, there was a 10-point improvement in the mean change from baseline in MFM32 score for all patients in the therapeutic dose cohorts.
In addition to the compelling three-year data, there was one patient at Year 5 whose MFM32 change from baseline improved by nearly 26-points in the 1.2E14 total vg dose cohort compared to the estimated natural history decline of 40 points by this timepoint.
30
Below is an additional analysis of the mean change from baseline in MFM32 score for the therapeutic dose cohorts compared to natural history at patients’ last visit. As shown, TSHA-120 demonstrated increasing improvement in the mean change in MFM32 score from baseline over time.
Additional Endpoints
Sensory nerve action potential, or SNAP, was assessed through nerve conduction studies in patients with GAN. Natural history data from the NIH suggest rapid and irreversible decline in sensory function early in life in patients with GAN. SNAPs are within normal limits early in life and rapid reduction in SNAP amplitude occurs around the age of symptom presentation. As demonstrated below, all patients with classic GAN have an abnormally low SNAP by the age of 4, reflective of compromised sensory neuronal function. By age 9, all patients had an irreversibly absent SNAP. The results from these nerve conduction studies reflect the clinical progression of patients with GAN.
31
TSHA-120-treated patients demonstrated a durable improvement in SNAP response compared to natural history. Five of the twelve patients treated demonstrated a response. One patient demonstrated near complete recoverability to normal from zero at the time of treatment.
32
Once SNAP reaches zero, natural history suggests sensory function is presumed non-recoverable. Among patients treated with 1.2E14 total vg or greater of TSHA-120, the three patients with a positive value at baseline maintained a positive SNAP at last study visit with the longest span of 3 years to date and continue to improve.
33
Below are individual patient SNAP change from baseline from treated patients who showed a positive response including their run-in natural history.
Biopsies of TSHA-120-treated patients confirmed presence of regenerative nerve clusters. Below is pathology data from biopsies of the superficial radial sensory nerve in 11 out of 11 patient samples analyzed. The remaining two samples were unable to be assessed due to biopsy limitations. Peripheral nerve biopsies from the superficial radial sensory nerve were obtained at baseline and at 1 year post gene therapy transfer. Data consistently generated an increase in the number of regenerative clusters observed at Year 1 compared to baseline, indicating active regeneration of nerve fibers following treatment with TSHA-120. Data also indicated improvement in disease pathology, providing evidence that the peripheral nervous system can respond to treatment.
Loss of vision has been frequently cited by patients and caregivers as a symptom they find particularly debilitating and would like to see improvement in following treatment. Patients were analyzed for visual acuity using a standard Logarithm of the Minimum Angle of Resolution, or LogMAR. An increase in LogMAR score represents a decrease in visual acuity. A LogMAR score of 0 means normal vision, approximately 0.3 reflects the need for eyeglasses, and a score value of 1.0 reflects blindness. Based on natural history,
34
individuals with GAN experience a progressive loss in visual function as indicated by an increase in the LogMAR score. Ophthalmologic assessments following treatment with TSHA-120 demonstrated preservation of visual acuity over time compared to the loss of visual acuity observed in natural history. Stabilization of visual acuity was observed following treatment with TSHA-120 as demonstrated below.
The thickness of the retinal nerve fiber layer or RNFL was also examined as an objective biomarker of visual system involvement and overall nervous system degeneration in GAN. Treatment with TSHA-120 resulted in stabilization of RNFL thickness and prevention of axonal nerve degeneration compared to diffuse thinning of RNFL observed in natural history as measured by optical coherence tomography, or OCT. Analysis by individual dose groups, as seen on the graph below, demonstrated relatively stable RNFL thickness which is in contrast to the natural history of GAN, where RNFL decreases. Overall, these data provide new evidence of TSHA-120’s ability to generate nerve fibers and preserve visual acuity.
35
Safety and Tolerability
As of January 2022, there were 53 patient-years of clinical data to support TSHA-120’s favorable safety and tolerability profile. TSHA-120 has been well-tolerated at multiple doses with no signs of significant acute or subacute inflammation, no sudden sensory changes and no drug-related or persisting transaminitis. Adverse events related to immunosuppression or study procedures were similar to what has been seen with other gene therapies and transient in nature. There was no increase in incidence of adverse events with increased dose. Importantly, TSHA-120 was safely dosed in the presence of neutralizing antibodies as a result of the combination of route of administration, dosing and immunosuppression regimen.
We currently have up to six years of longitudinal data in individual patients with GAN and collectively 53-patient years of clinical safety and efficacy data from our ongoing clinical study. Treatment with TSHA-120 was well-tolerated with no significant safety issues. There was no increase in incidence of adverse events with increased dose, no dose-limiting toxicity, no signs of acute or subacute inflammation, no sudden sensory changes and no drug-related or persistent elevation of transaminases. Adverse events related to immunosuppression or study procedures were similar to what was seen with other gene therapies and transient in nature.
We believe the comprehensive set of evidence generated across disease manifestations, depicted in the table below, support a robust clinical package for TSHA-120 in GAN.
In order to deliver a robust chemistry, manufacturing, and controls, or CMC, data package to support licensure discussions, we have successfully completed six development and GMP lots of TSHA-120 with our contract development and manufacturing organization, or CDMO, partner. We have also completed a comprehensive side-by-side biochemical and biophysical analysis of
36
current and previous clinical lots. Our CDMO utilizes the same Pro10TM manufacturing platform used to produce the original GAN lots, therefore reducing which is intended to reduce comparability risk. Five development lots ranging from 2L to 250L scale and one full-scale 500L GMP lot were analyzed side-by-side with the current TSHA-120 clinical lot using a comprehensive analytical panel that meets current regulatory requirements including assays for critical attributes such as product and process residuals, empty/full ratio, genetic integrity, potency and strength.
The side-by-side analysis demonstrated that the newly produced TSHA-120 lots were generally comparable to the original clinical trial material in impurity profile including host cell contaminants, residual plasmid, empty particle content, aggregate content and genomic integrity. These results supported our biophysical and biochemical comparability of the newly produced lots. Furthermore, we developed product-specific GAN potency methods which have also demonstrated that the previous and current clinical lots were functionally indistinguishable. Validation of our potency release assay is now underway.
We have applied our panel of release assays for side-by-side testing of the original clinical trial material and our commercial grade lots. Shown below are eight of the most critical attributes of TSHA-120.
First, all results demonstrated that both the clinical and commercial grade lots were of a high purity and lacked significant levels of host cell or process contaminants such as protein and, DNA or and aggregated species. Vector purity was in excess of 95% for all three lots and host cell protein contamination was below detection. In addition, and aggregation of all lots was very low. Host cell and plasmid DNA contamination are also important attributes to discuss with regulatory agencies since carryover represents a theoretical immunogenicity or oncogenicity risk. Residual plasmid and host cell DNA were similar for all lots, indicating a similar safety profile for both products. Empty capsids are a key attribute for AAV vectors since empty capsids can stimulate immune responses to the vector and reduce potency. All three lots were highly enriched in full particles. Potency of AAV vectors is a key measure that correlates with clinical efficacy. We developed a number of product-specific potency assays to measure the functional activity of our product which is reported relative to a reference standard. These assays recapitulated the biological activity of TSHA-120 starting with transduction of GAN knockout cell lines. Activity is measured by quantitation of transgene RNA or protein expression as two independent and complimentary readouts. We observed good agreement with both readouts and high activity of all three lots against our reference suggesting that the lots are of high and comparable activity.
Overall, these results support that our early clinical and pivotal lots are biochemically and biophysically similar and based on these results we believe they should perform identically in a clinical study.
Recently, regulators have encouraged sponsors to conduct deeper analysis of product contaminants not covered by standard release assays to better assess product safety and comparability. To comply with this guidance, we have added Pac-Bio next generation sequencing to our product characterization panel to better understand the nature of nucleic acid contaminants in our products. This method not only allows us to identify the source of the nucleic acid, but also the fragment size, and sequence variability, which also needs to be considered when assessing AAV safety and efficacy. Our analysis of the clinical trial lot and commercial grade pivotal batches demonstrated that the source and composition of transgene and contaminating host and plasmid
37
DNA are nearly identical and provided further support that for a conclusion that the nature of our product is unchanged between our early clinical and pivotal batches as noted in the below pie charts.
The TSHA-120 pivotal lot, which yielded over 50 patient doses of TSHA-120 at the highest dose cohort of 3.5E14 total vg, is currently expected to complete quality release testing in November 2022. This material positions us for future BLA-enabling activities and commercial production. These lots were also placed on stability to provide critical shelf-life data in support of our BLA filing.
In September 2021, we submitted a request for a Scientific Advice meeting for TSHA-120 to the United Kingdom’s Medicines and Healthcare products Regulatory Agency, or MHRA, and were granted a meeting in January 2022. MHRA agreed on our commercial manufacturing and release assay testing strategy including potency assays and we plan to dose a few additional patients with commercial grade material, which will be released in November 2022. Finally, MHRA was supportive of our proposal to perform validation work on MFM32 for GAN as a key clinical endpoint and for us to explore the MFM32 items with patients and families as part of this process. Given the positive comparability data for TSHA-120 that we recently received, additional discussions with Health Authorities to discuss these data and a potential registration pathway are planned. In September 2022, we submitted a meeting request to the FDA and were granted a Type B end-of-Phase 2 meeting via teleconference scheduled for December 13, 2022. We expect to provide an update on the feedback from the FDA following receipt of the formal Type B end-of-Phase 2 meeting minutes, anticipated in mid-January 2023.
TSHA-102 for Rett Syndrome
TSHA-102, a neurodevelopmental disorder product candidate, is being developed for the treatment of Rett syndrome, one of the most common genetic causes of severe intellectual disability, characterized by rapid developmental regression and in many cases caused by heterozygous loss of function mutations in MECP2, a gene essential for neuronal and synaptic function in the brain. The estimated prevalence of Rett syndrome is 350,000 patients worldwide and the disease occurs in 1 of every 10,000 female births worldwide. We designed TSHA-102 to prevent gene overexpression-related toxicity by inserting microRNA, or miRNA, target binding sites into the 3’ untranslated region of viral genomes. This overexpression of MECP2 is seen in the clinic in patients with a condition known as MECP2 duplication syndrome, where elevated levels of MECP2 result in a clinical phenotype similar to Rett syndrome both in terms of symptoms and severity. TSHA-102 is constructed from a neuronal specific promoter, MeP426, coupled with the miniMECP2 transgene, a truncated version of MECP2, and miRNA-Responsive Auto-Regulatory Element, or miRARE, our novel miRNA target panel, packaged in self-complementary AAV9. Currently, there are no approved therapies for the treatment of Rett syndrome, which affects more than 350,000 patients worldwide, according to the Rett Syndrome Research Trust.
In May 2021, preclinical data from the ongoing natural history study for TSHA-102 were published online in Brain, a highly esteemed neurological science peer-reviewed journal. The preclinical study was conducted by the UT Southwestern Medical Center laboratory of Sarah Sinnett, Ph.D., and evaluated the safety and efficacy of regulated miniMECP2 gene transfer, TSHA-102 (AAV9/miniMECP2-miRARE), via IT administration in adolescent mice between four and five weeks of age. TSHA-102 was compared to unregulated full length MECP2 (AAV9/MECP2) and unregulated miniMECP2 (AAV9/miniMECP2).
TSHA-102 extended knockout survival by 56% via IT delivery. In contrast, the unregulated miniMECP2 gene transfer failed to significantly extend knockout survival at either dose tested. Additionally, the unregulated full-length MECP2 construct did not demonstrate a significant extension in survival and was associated with an unacceptable toxicity profile in wild type mice.
38
In addition to survival, behavioral side effects were explored. Mice were subjected to phenotypic scoring and a battery of tests including gait, hindlimb clasping, tremor and others to comprise an aggregate behavioral score. miRARE attenuated miniMECP2-mediated aggravation in wild type aggregate phenotype severity scores. Mice were scored on an aggregate severity scale using an established protocol. AAV9/MECP2- and AAV9/miniMECP2-treated wild type mice had a significantly higher mean (worse) aggregate behavioral severity score versus that observed for saline-treated mice (p <0.05; at 6–30 and 7–27 weeks of age, respectively). TSHA-102-treated wild type mice had a significantly lower (better) mean aggregate severity score versus those of AAV9/MECP2- and AAV9/miniMECP2-treated mice at most timepoints from 11–19 and 9–20 weeks of age, respectively. No significant difference was observed between saline- and TSHA-102-treated wild type mice.
miRARE-mediated genotype-dependent gene regulation was demonstrated by analyzing tissue sections from wild type and knockout mice treated with AAV9 vectors given intrathecally. When knockout mice were injected with a vector expressing the mini-MECP2 transgene with and without the miRARE element, miRARE reduced overall miniMECP2 transgene expression compared to unregulated miniMECP2 in wild type mice as shown below.
39
TSHA-102 demonstrated regulated expression in different regions of the brain. As shown in the graph and photos below, in the pons and midbrain, miRARE inhibited mean MECP2 gene expression in a genotype-dependent manner as indicated by significantly fewer myc(+) cells observed in wild type mice compared to knockout mice (p<0.05), thereby demonstrating that TSHA-102 achieved MECP2 expression levels similar to normal physiological parameters.
In preclinical animal models, intrathecal myc-tagged TSHA-102 was not associated with early death and did not cause adverse behavioral side effects in wild type mice demonstrating appropriate downregulation of miniMECP2 protein expression as compared to unregulated MECP2 gene therapy constructs. In addition, preclinical data demonstrated that miRARE reduced overall expression of miniMECP2 transgene expression and regulated genotype-dependent myc-tagged miniMECP2 expression across different brain regions on a cell-by-cell basis and improved the safety of TSHA-102 without compromising efficacy in juvenile mice. Pharmacologic activity of TSHA-102 following IT administration was assessed in the MECP2 knockout mouse model of Rett syndrome across three dose levels and three age groups (n=252). A one-time IT injection of TSHA-102 significantly increased survival at all dose levels, with the mid to high doses improving survival across all age groups compared to vehicle-treated controls. Treatment with TSHA-102 significantly improved body weight, motor function and respiratory assessments in MECP2 knockout mice. Finally, an IND/CTA-enabling 6-month Good Laboratory Practice, or GLP, toxicology study (n=24) examined the biodistribution, toxicological effects and mechanism of action of TSHA-102 when intrathecally administered to Non-Human Primates,
40
or NHPs, across three dose levels. Biodistribution, as reflected by DNA copy number, was observed in multiple areas of the brain, sections of spinal cord and the DRG. Importantly, mRNA levels across multiple tissues were low, indicating miRARE regulation is minimizing transgene expression from the construct in the presence of endogenous MECP2 as expected, despite the high levels of DNA that were delivered. No toxicity from transgene overexpression was observed, confirmed by functional and histopathologic evaluations demonstrating no detrimental change in neurobehavioral assessments and no adverse tissue findings on necropsy.
In neonatal knockout Rett mice, treatment with TSHA-102 resulted in near normalization of survival as shown below. A single intracerebroventricular, or ICV, injection of TSHA-102 at a dose of 8.8E10 vg/mouse (Human Equivalent Dose of 2.86E14 vg/participant) within 48 hours after birth in Mecp2-/Y male mice significantly extended the survival of the animals as shown below. All cohorts, including vehicle, were sacrificed at 34 weeks. Preliminary data demonstrated approximately 70% of the treated Mecp2-/Y males survived to 34 weeks of age compared to 9 weeks in the vehicle-treated Mecp2-/Y male.
In addition, neonatal knockout Rett mice demonstrated normalization of behavior following treatment with TSHA-102 as assessed by the Bird Score, a composite measure of six different phenotypic abilities. Knockout animals were initially assessed at 4 weeks of age with a mean Bird Score of 4. Over the course of the study, TSHA-102 improved the behaviors (as assessed by the Bird aggregate score) of TSHA-102 treated mice as shown below.
.
41
In summary, we believe the totality of preclinical data generated to date, specifically including the mouse pharmacology study to ascertain minimally effective dose, the two toxicology studies (wild type rat and wild type NHP) and the recent mouse neonatal data, represents the most robust package supporting clinical advancement of TSHA-102 in Rett syndrome as shown below.
Safety and biodistribution assessments in NHPs were presented in May 2022 at the International Rett Syndrome Foundation (IRSF) meeting along with the caregiver perspective on Rett syndrome in adulthood. At the ASCEND National Summit, there was an oral presentation on “Putting Patients at the Center.” Finally, mouse pharmacology, rat and NHP toxicology data were presented at the 25th Annual Meeting of the American Society of Gene & Cell Therapy (ASGCT) and the European Society for Gene and Cell Therapy Congress (ESGCT).
We submitted a CTA for TSHA-102 in November 2021 and announced initiation of clinical development under a CTA approved by Health Canada in March 2022. We are advancing TSHA-102 in the REVEAL Phase 1/2 clinical trial which is an open-label, dose escalation, randomized, multicenter study that will examine the safety and efficacy of TSHA-102 in adult female patients with Rett syndrome. Up to 18 patients will be enrolled. In the first cohort, a single 5E14 total vg dose of TSHA-102 will be given intrathecally. The second cohort will be given a 1E15 total vg dose of TSHA-102. Key assessments will include Rett-specific and global assessments, quality of life, biomarkers, and neurophysiology and imaging assessments. Sainte-Justine Mother and Child University Hospital Center in Montreal, Quebec, Canada has been selected as the initial clinical trial site under the direction of Dr. Elsa Rossignol, Assistant Professor Neuroscience and Pediatrics, and Principal Investigator. We expect to report preliminary clinical data for TSHA-102 from the entire first cohort of adult patients with Rett syndrome in the first half of 2023. We also expect to initiate a female pediatric clinical trial in the first half of 2023.
We have received orphan drug designation and rare pediatric disease designation from the FDA and orphan drug designation from the European Commission for TSHA-102 for the treatment of Rett syndrome.
TSHA-118 for CLN1 Disease
CLN1 disease (one of the forms of Batten disease), a lysosomal storage disorder, is a progressive, fatal neurodegenerative disease with early childhood onset that has an estimated incidence of approximately 1 in 138,000 live births worldwide. The estimated prevalence of CLN1 disease is 1,000 patients in the United States and European Union. CLN1 disease is caused by loss-of-function mutations in the CLN1 gene that encodes the enzyme palmitoyl-protein thioesterase-1, or PPT1, a small glycoprotein involved in the degradation of certain lipid-modified proteins. Loss of function mutations in the CLN1 gene causes accumulation of these lipid-modified proteins in cells, eventually leading to aggregation, neuronal cellular dysfunction and ultimately neuronal cell death.
In the infantile-onset form of CLN1 disease, clinical symptoms appear between six to 24 months and include rapid deterioration of speech and motor function, refractory epilepsy, ataxia and visual failure. Infantile-onset CLN1 patients are typically poorly responsive by five years of age and remain noncommunicative until their death, which usually occurs by seven years of age. Late-infantile-onset CLN1 disease begins between two to four years of age with initial visual and cognitive decline followed by the development of ataxia and myoclonus, or quick, involuntary muscle jerks. Juvenile-onset CLN1 disease patients present between the
42
ages of five to ten years old, with vision loss as a first symptom followed by cognitive decline, seizures and motor decline. Approximately 60% of the children diagnosed with CLN1 disease in the United States present with early-onset infantile forms, with the remaining 40% experiencing later-onset childhood forms.
All currently available therapeutic approaches for patients with CLN1 disease are targeted towards the treatment of symptoms, and no disease-modifying therapies have been approved. Gene therapy has shown promise in correcting forms of neuronal ceroid lipofuscinoses, or NCL, diseases that involve mutations in soluble enzymes, in part, due to cross-correction of neighboring non-transduced cells.
We believe that the introduction of a functional CLN1 gene using an AAV9 vector delivered intrathecally to the CNS offers the potential of a disease-modifying therapeutic approach for this disease. TSHA-118 is a self-complementary AAV9 viral vector that expresses human codon-optimized CLN1 complementary deoxyribonucleic acid under control of the chicken ß-actin hybrid promoter. We acquired exclusive worldwide rights to certain intellectual property rights and know-how relating to the research, development and manufacture of TSHA-118 (formerly ABO-202) in August 2020 pursuant to a license agreement with Abeona Therapeutics Inc., or Abeona.
There is currently an open IND for the CLN1 program. We submitted a CTA filing for TSHA-118 which was approved by Health Canada in 2021 and have initiated clinical development.
TSHA-118 has been granted orphan drug designation, rare pediatric disease designation and fast track designation from the FDA and orphan drug designation from the European Medicines Agency for the treatment of CLN1 disease.
TSHA-105 for SLC13A5 Deficiency
We are developing TSHA-105 for the treatment of SLC13A5 deficiency, a rare autosomal recessive epileptic encephalopathy characterized by the onset of seizures within the first few days of life. SLC13A5 deficiency is caused by bi-allelic loss-of function mutations in the SLC13A5 gene, which codes for a sodium dependent citrate transporter, or NaCT, that is largely expressed in the brain and liver. To date, all tested mutations result in no or a greatly reduced amount of the citrate in the cells. Diminished NaCT function leads to loss of neuronal uptake of citrate and other metabolites such as succinate that are critical to brain energy metabolism and function. Affected children have impairments in gross motor function and speech production with relative preservation of fine motor skills and receptive speech. Currently, there are no approved therapies for SLC13A5 deficiency, and treatment is largely to address symptoms. The estimated prevalence of SLC13A5 deficiency is 1,900 patients in the United States and European Union.
We are developing TSHA-105 as a gene replacement therapy for SLC13A5 deficiency. TSHA-105 is constructed from a codon-optimized human SLC13A5 gene packaged in a self-complementary AAV9 capsid.
We have received orphan drug designation and rare pediatric disease designation from the FDA and orphan drug designation from the European Commission for TSHA-105 for the treatment of epilepsy caused by caused by SLC13A5 deficiency. We expect to initiate clinical development on TSHA-105 in SLC13A5 deficiency.
TSHA-121 for CLN7 Disease
The first-generation construct for the CLN7 program was developed in the laboratory of Steven Gray, Ph.D., Associate Professor at UT Southwestern Medical Center and our Chief Scientific Advisor with financial support from Mila’s Miracle and Batten Hope, the leading CLN7 patient advocacy groups. We provided a grant to Batten Hope to support patient awareness, disease education and newborn screening initiatives. We recently executed an exclusive option from UT Southwestern to license worldwide rights to a clinical-stage CLN7 program. The CLN7 program is currently in a Phase 1 clinical proof-of-concept trial run by UT Southwestern, and we reported preliminary clinical safety data for the first patient in history to be intrathecally dosed at 1.0E15 total vg with the first-generation construct in December 2021. Development of the CLN7 program will continue in collaboration with existing partners with future clinical development to focus on the first-generation construct.
CLN7 disease is a rare, fatal and rapidly progressive neurodegenerative disease that is a form of Batten disease. CLN7 is caused by autosomal recessive mutations in the MFSD8 gene that results in lysosomal dysfunction. Disease onset occurs around two to five years of age, with death often ensuing in young adolescence. Patients experience gradual nerve cell loss in certain parts of the brain and typically present with seizures, vision loss, speech impairment and mental and motor regression. Currently, there are no approved therapies to treat CLN7 disease, which impacts an estimated 4,000 patients globally. Preclinical data in rodents supported
43
advancement of the first-generation construct into a Phase 1 clinical proof-of-concept study in patients with CLN7 disease. In an in vivo efficacy study, IT administration of the first-generation construct to MFSD8 knockout mice with high or low doses resulted in clear age and dose effects with early intervention and high dose achieving the best therapeutic benefits. IT high dose of the first-generation construct in younger knockout mice resulted in: 1) widespread MFSD8 mRNA expression in all tissues assessed; 2) nearly complete normalization of impaired open field and rotarod performance at 6 and 9 months post injection; 3) more than doubled median life expectancy (16.82 months versus 7.77 months in untreated knockout mice); and 4) maintenance of healthy body weight for a prolonged period of time. Toxicology studies in wild type rodents demonstrated safety and tolerability of IT administration of the first-generation construct.
Clinical safety data presented at WORLDSymposium in February 2022 for the first-generation construct from the ongoing clinical trial following IT administration further demonstrated that the first-generation construct was well-tolerated at multiple doses including 1.0E15 total vg, which is the highest dose administered in humans ever for a gene therapy product. No adverse immune responses were noted, including no evidence of dorsal root ganglion toxicity or brain inflammation across all subjects. Moreover, stabilization in sural nerve conduction supported the absence of dorsal root ganglia inflammation. The ongoing trial includes three patients dosed to date, with two patients treated at the highest dose of 1.0Ex15 total vg. Complete blood counts revealed no signs of bone marrow suppression or clinically significant bone marrow reactivity, and CSF analysis revealed no signs of pleocytosis. A fourth patient was recently dosed at 1.0E15 total vg in March 2022.
License Agreements
Research, Collaboration and License Agreement with The University of Texas Southwestern Medical Center
In November 2019, we entered into a research, collaboration and license agreement, or the UT Southwestern Agreement, with The Board of Regents of the University of Texas System on behalf of UT Southwestern, as amended in April 2020.
In connection with the UT Southwestern Agreement, we obtained an exclusive, worldwide, royalty-free license under certain patent rights of UT Southwestern and a non-exclusive, worldwide, royalty-free license under certain know-how of UT Southwestern, in each case to make, have made, use, sell, offer for sale and import licensed products for use in certain specified indications. Additionally, we obtained a non-exclusive, worldwide, royalty-free license under certain patents and know-how of UT Southwestern for use in all human uses, with a right of first refusal to obtain an exclusive license under certain of such patent rights and an option to negotiate an exclusive license under other of such patent rights. We are required to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize at least one licensed product.
In connection with the UT Southwestern Agreement, we issued to UT Southwestern 2,179,000 shares of our common stock. We do not have any future milestone or royalty obligations to UT Southwestern under the UT Southwestern Agreement, other than costs related to the maintenance of patents.
The UT Southwestern Agreement expires on a country-by-country and licensed product-by-licensed product basis upon the expiration of the last valid claim of a licensed patent in such country for such licensed product. After the initial research term, we may terminate the agreement, on an indication-by-indication and licensed product-by-licensed product basis, at any time upon specified written notice to UT Southwestern. Either party may terminate the agreement upon an uncured material breach of the agreement or insolvency of the other party.
License Agreement with Queen’s University
In February 2020, we entered into a license agreement, or the Queen’s University Agreement with Queen’s University. In connection with the Queen’s University Agreement, we obtained an exclusive, perpetual, worldwide, royalty-bearing license, with the right to grant sublicenses, under certain patent rights and know-how of Queen’s University, including certain improvements to the foregoing, to make, have made, use, offer for sale, sell and import licensed products and otherwise exploit such patents and know-how for use in certain specified indications. We also obtained an exclusive right of first negotiation to license certain next generation technology and improvements of Queen’s University that do not constitute an already-licensed improvement to the licensed technology.
In connection with the Queen’s University Agreement, we paid Queen’s University a one-time fee of $3.0 million as an upfront fee and approximately $0.2 million to reimburse Queen’s University for certain plasmid production costs. We are obligated to pay Queen’s University up to $10.0 million in the aggregate upon achievement of certain regulatory milestones and up to $10.0 million in the aggregate upon achievement of certain commercial milestones, a low single digit royalty on net sales of licensed
44
products, subject to certain customary reductions, and a percentage of non-royalty sublicensing revenue ranging in the low double digits. Royalties are payable on a licensed product-by-licensed product basis and country-by-country basis until expiration of the last valid claim of a licensed patent covering such licensed product in such country and the expiration of any regulatory exclusivity for such licensed product in such country. Additionally, we are obligated to pay Queen’s University a low double-digit portion of any amounts received by us in connection with the sale of a priority review voucher related to a licensed product, not to exceed a low eight-figure amount.
In connection with a separate research grant agreement with Queen’s University, we reimbursed Queen’s University for certain manufacturing production costs totaling $3.8 million in fiscal year 2020. No additional milestone payments were made in connection with the Queen’s University Agreement during the nine months ended September 30, 2022.
License Agreement with Abeona (CLN1 Disease)
In August 2020, we entered into a license agreement, or the Abeona CLN1 Agreement, with Abeona Therapeutics Inc., or Abeona. In connection with the Abeona CLN1 Agreement, we obtained an exclusive, worldwide, royalty-bearing license, with the right to grant sublicenses under certain patents, know-how and materials originally developed by the University of North Carolina at Chapel Hill and Abeona to research, develop, manufacture, have manufactured, use, and commercialize licensed products for gene therapy for the prevention, treatment, or diagnosis of CLN1 Disease (one of the forms of Batten disease) in humans.
In connection with the license grant, we paid Abeona a one-time upfront license fee of $3.0 million during fiscal year 2020. We are obligated to pay Abeona up to $26.0 million in regulatory-related milestones and up to $30.0 million in sales-related milestones per licensed product and high single-digit royalties on net sales of licensed products. Royalties are payable on a licensed product-by-licensed product and country-by-country basis until the latest of the expiration or revocation or complete rejection of the last licensed patent covering such licensed product in the country where the licensed product is sold, the loss of market exclusivity in such country where the product is sold, or, if no licensed product exists in such country and no market exclusivity exists in such country, ten years from first commercial sale of such licensed product in such country. In addition, concurrent with the Abeona CLN1 Agreement, we entered into a purchase and reimbursement agreement with Abeona, pursuant to which we purchased specified inventory from Abeona and reimbursed Abeona for certain research and development costs previously incurred for total consideration of $4.0 million paid in fiscal year 2020.
In December 2021 the Company’s CTA filing for TSHA-118 for the treatment of CLN1 disease was approved by Health Canada and therefore triggered a regulatory milestone payment in connection with the Abeona CLN1 Agreement, and therefore we recorded $3.0 million within research and development expenses in the consolidated statements of operations for the year ended December 31, 2021. The milestone fee was paid in January 2022 and has been classified as an investing outflow in the condensed consolidated statements of cash flows for the nine months ended September 30, 2022. No additional milestone payments were made or triggered during the nine months ended September 30, 2022.
The Abeona CLN1 Agreement expires on a country-by-country and licensed product-by-licensed product basis upon the expiration of the last royalty term of a licensed product. Either party may terminate the agreement upon an uncured material breach of the agreement or insolvency of the other party. We may terminate the agreement for convenience upon specified prior written notice to Abeona.
License Agreement with Abeona (Rett Syndrome)
In October 2020, we entered into a license agreement, or the Abeona Rett Agreement, with Abeona pursuant to which we obtained an exclusive, worldwide, royalty-bearing license, with the right to grant sublicenses under certain patents, know-how and materials originally developed by the University of North Carolina at Chapel Hill, the University of Edinburgh and Abeona to research, develop, manufacture, have manufactured, use, and commercialize licensed products for gene therapy and the use of related transgenes for Rett syndrome.
Subject to certain obligations of Abeona, we are required to use commercially reasonable efforts to develop at least one licensed product and commercialize at least one licensed product in the United States.
In connection with the Abeona Rett Agreement, we paid Abeona a one-time upfront license fee of $3.0 million during fiscal year 2020. We are obligated to pay Abeona up to $26.5 million in regulatory-related milestones and up to $30.0 million in sales-related milestones per licensed product and high single-digit royalties on net sales of licensed products. Royalties are payable on a
45
licensed product-by-licensed product and country-by-country basis until the latest of the expiration or revocation or complete rejection of the last licensed patent covering such licensed product in the country where the licensed product is sold, the loss of market exclusivity in such country where the product is sold, or, if no licensed product exists in such country and no market exclusivity exists in such country, ten years from first commercial sale of such licensed product in such country.
In March 2022, our CTA filing for TSHA-102 for the treatment of Rett Syndrome was approved by Health Canada and therefore triggered a regulatory milestone payment in connection with the Rett Agreement. We recorded $1.0 million within research and development expenses in the condensed consolidated statements of operations for the nine months ended September 30, 2022. This milestone fee was paid in July 2022 and has been classified as an investing outflow in the condensed consolidated statements of cash flows for the nine months ended September 30, 2022.
The Abeona Rett Agreement expires on a country-by-country and licensed product-by-licensed product basis upon the expiration of the last royalty term of a licensed product. Either party may terminate the agreement upon an uncured material breach of the agreement or insolvency of the other party. We may terminate the agreement for convenience.
Impacts of COVID-19 and Market Conditions on Our Business
We have been actively monitoring the COVID-19 situation and its impact globally. We believe our financial results for the nine months ended September 30, 2022 were not significantly impacted by COVID-19. We believe our hybrid and remote working arrangements have had limited impact on our ability to maintain internal operations during the nine months ended September 30, 2022. Further, disruption of global financial markets and a recession or market correction, including as a result of the COVID-19 pandemic, the ongoing military conflict between Russia and Ukraine and the related sanctions imposed against Russia, and other global macroeconomic factors such as inflation, could reduce the Company’s ability to access capital, which could in the future negatively affect the Company’s liquidity and could materially affect the Company’s business and the value of its common stock.
Components of Results of Operations
Revenue
To date, we have not recognized any revenue from any sources, including from product sales, and we do not expect to generate any revenue from the sale of products, if approved, in the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval, or license agreements with third parties, we may generate revenue in the future from product sales. However, there can be no assurance as to when we will generate such revenue, if at all.
Operating Expenses
Research and Development Expenses
Research and development expenses primarily consist of preclinical development of our product candidates and discovery efforts, including conducting preclinical studies, manufacturing development efforts, preparing for clinical trials and activities related to regulatory filings for our product candidates. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. Costs incurred in obtaining technology licenses through asset acquisitions are charged to research and development expense if the licensed technology has not reached technological feasibility and has no alternative future use. Research and development expenses include:
|
|
• |
employee-related expenses, including salaries, bonuses, benefits, stock-based compensation, severance costs and other related costs for those employees involved in research and development efforts; |
|
|
• |
license maintenance fees and milestone fees incurred in connection with various license agreements; |
|
|
• |
external research and development expenses incurred under agreements with consultants, contract research organizations, or CROs, investigative sites and consultants to conduct our preclinical studies; |
|
|
• |
costs related to manufacturing material for our preclinical studies and clinical trials, including fees paid to contract manufacturing organizations, or CMOs; |
|
|
• |
laboratory supplies and research materials; |
|
|
• |
costs related to compliance with regulatory requirements; and |
46
|
|
• |
facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, maintenance of facilities, insurance and equipment. |
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of our product candidates due to the inherently unpredictable nature of preclinical and clinical development. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. Due to the strategic reprioritization of programs and reduction in force announced in March 2022, we expect overall lower research and development expenses for the second half of 2022 compared to 2021. Our future expenses may vary significantly each period based on factors such as:
|
|
• |
expenses incurred to conduct preclinical studies required to advance our product candidates into clinical development; |
|
|
• |
per patient trial costs, including based on the number of doses that patients received; |
|
|
• |
the number of patients who enroll in each trial; |
|
|
• |
the number of trials required for approval; |
|
|
• |
the number of sites included in the trials; |
|
|
• |
the countries in which the trials are conducted; |
|
|
• |
the length of time required to enroll eligible patients; |
|
|
• |
the drop-out or discontinuation rates of patients; |
|
|
• |
potential additional safety monitoring requested by regulatory agencies; |
|
|
• |
the duration of patient participation in the trials and follow-up; |
|
|
• |
the phase of development of the product candidate; |
|
|
• |
third-party contractors failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; |
|
|
• |
the ability to manufacture of our product candidates; |
|
|
• |
regulators or institutional review boards requiring that we or our investigators suspend or terminate clinical development for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; and |
|
|
• |
the efficacy and safety profile of our product candidates. |
General and Administrative Expenses
General and administrative expenses consist principally of salaries and related costs for personnel in executive and administrative functions, including stock-based compensation, severance costs, travel expenses and recruiting expenses. Other general and administrative expenses include professional fees for legal, consulting, accounting and audit and tax-related services and insurance costs.
We anticipate that our general and administrative expenses will decrease in the future due to the strategic reprioritization and reduction in force that was announced in March 2022. We also anticipate that our general and administrative expenses as a result of payments for accounting, audit, legal, consulting services, as well as costs associated with maintaining compliance with Nasdaq listing rules and SEC requirements, director and officer liability insurance and other expenses associated with operating as a public company will stay constant for the near future but may increase over time.
47
Results of Operations
Results of Operations for the Three Months ended September 30, 2022 and 2021
The following table summarizes our results of operations for the three months ended September 30, 2022 and 2021 (in thousands):
|
|
|
For the Three Months Ended September 30, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
16,391 |
|
|
$ |
39,528 |
|
|
General and administrative |
|
|
8,683 |
|
|
$ |
11,153 |
|
|
Total operating expenses |
|
|
25,074 |
|
|
|
50,681 |
|
|
Loss from operations |
|
|
(25,074 |
) |
|
|
(50,681 |
) |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
Interest income |
|
|
9 |
|
|
|
37 |
|
|
Interest expense |
|
|
(1,241 |
) |
|
|
(543 |
) |
|
Other expense |
|
|
(1 |
) |
|
|
— |
|
|
Total other expense, net |
|
|
(1,233 |
) |
|
|
(506 |
) |
|
Net loss |
|
$ |
(26,307 |
) |
|
$ |
(51,187 |
) |
Research and Development Expenses
Research and development expenses were $16.4 million for the three months ended September 30, 2022, compared to $39.5 million for the three months ended September 30, 2021. The $23.1 million decrease was attributable to a decrease of $11.7 million in research and development GMP manufacturing and other raw material purchases. Additionally, we incurred $6.7 million less expense in third-party research and development consulting fees, primarily related to non-clinical GLP toxicology studies, and a decrease of $4.7 million in employee compensation expenses.
General and Administrative Expenses
General and administrative expenses were $8.7 million for the three months ended September 30, 2022, compared to $11.2 million for the three months ended September 30, 2021. The decrease of approximately $2.5 million was primarily attributable to a decrease of $1.3 million in professional fees related to pre-commercialization, recruiting and patient advocacy activities. Additionally, we incurred $1.2 million less in employee compensation expenses.
Other Income (Expense)
Interest Expense
Interest expense was $1.2 million for the three months ended September 30, 2022, compared to $0.5 million for the three months ended September 30, 2021. The increase of approximately $0.7 million was primarily attributable to interest expense incurred under the Term Loan Agreement which we entered into in the third quarter of 2021.
48
Results of Operations for the Nine Months ended September 30, 2022 and 2021
The following table summarizes our results of operations for the nine months ended September 30, 2022 and 2021 (in thousands):
|
|
|
For the Nine Months Ended September 30, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
77,308 |
|
|
$ |
94,025 |
|
|
General and administrative |
|
|
30,019 |
|
|
|
29,518 |
|
|
Total operating expenses |
|
|
107,327 |
|
|
|
123,543 |
|
|
Loss from operations |
|
|
(107,327 |
) |
|
|
(123,543 |
) |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
Interest income |
|
|
50 |
|
|
|
143 |
|
|
Interest expense |
|
|
(3,002 |
) |
|
|
(737 |
) |
|
Other expense |
|
|
(12 |
) |
|
|
— |
|
|
Total other expense, net |
|
|
(2,964 |
) |
|
|
(594 |
) |
|
Net loss |
|
$ |
(110,291 |
) |
|
$ |
(124,137 |
) |
Research and Development Expenses
Research and development expenses were $77.3 million for the nine months ended September 30, 2022, compared to $94.0 million for the nine months ended September 30, 2021. The $16.7 million decrease was primarily attributable to a decrease of $12.0 million in research and development GMP manufacturing and other raw material purchases. We also incurred a year-over-year decrease of $6.0 million in research and development licensing fees and $2.9 million less expenses in third-party research and development consulting fees, mainly related to GLP toxicology studies. This was partially offset by an increase of $4.2 million in employee compensation, which included $2.2 million of severance and one-time termination costs in connection with the reprioritization of programs announced in March 2022.
General and Administrative Expenses
General and administrative expenses were $30.0 million for the nine months ended September 30, 2022, compared to $29.5 million for the nine months ended September 30, 2021. The increase of approximately $0.5 million was primarily attributable to $2.6 million of incremental compensation expense, which included $0.4 million of severance and one-time termination costs and $0.9 million of non-cash stock-based compensation. This was partially offset with a year-over-year decrease of $2.1 million in professional fees mainly related to lower recruiting and patient advocacy activities.
Other Income (Expense)
Interest Expense
Interest expenses were $3.0 million for the nine months ended September 30, 2022, compared to $0.7 million for the nine months ended September 30, 2021. The increase of approximately $2.3 million was primarily attributable to interest expense incurred under the Term Loan Agreement which we entered into in the third quarter of 2021.
Interest Income
Interest income for the nine months ended September 30, 2022 and 2021 primarily consisted of interest earned on our savings account.
Liquidity and Capital Resources
Overview
Since our inception, we have not generated any revenue and have incurred significant operating losses. As of September 30, 2022, we had cash and cash equivalents of $34.3 million. From inception through September 30, 2022, we have funded our operations primarily through equity financings, raising an aggregate of $319.0 million in gross proceeds from our initial public offering and private placements of convertible preferred stock as well as sales of common stock pursuant to our Sales Agreement (as defined below). Specifically, between March and July 2020, we closed on the sale of an aggregate of 10,000,000 shares of Series A
49
convertible preferred stock for gross proceeds of $30.0 million. In July and August 2020, we closed on the sale of an aggregate of 5,647,048 shares of Series B convertible preferred stock for gross proceeds of $96.0 million. In September 2020, we raised gross proceeds of $181.0 million in our initial public offering.
On August 12, 2021, or the Closing Date, we entered into a Loan and Security Agreement, or the Term Loan Agreement, with the lenders party thereto from time to time, or the Lenders and Silicon Valley Bank, as administrative agent and collateral agent for the Lenders, or the Agent. The Term Loan Agreement provides for (i) on the Closing Date, $40.0 million aggregate principal amount of term loans available through December 31, 2021, (ii) from January 1, 2022 until September 30, 2022, an additional $20.0 million term loan facility available at the Company’s option upon having three distinct and active clinical stage programs, determined at the discretion of the Agent, at the time of draw, (iii) from October 1, 2022 until March 31, 2023, an additional $20.0 million term loan facility available at our option upon having three distinct and active clinical stage programs, determined at the discretion of the Agent, at the time of draw and (iv) from April 1, 2023 until December 31, 2023, an additional $20.0 million term loan facility available upon approval by the Agent and the Lenders, or, collectively, the Term Loans. We drew $30.0 million in term loans on the Closing Date and an additional $10.0 million in term loans on December 29, 2021. We did not draw the additional $20.0 million tranche prior to its expiration in September 30, 202. The loan repayment schedule provides for interest only payments until August 31, 2024, followed by consecutive monthly payments of principal and interest. All unpaid principal and accrued and unpaid interest with respect to each term loan is due and payable in full on August 1, 2026.
On October 5, 2021, we filed a shelf registration statement on Form S-3 with the SEC in relation to the registration of common stock, preferred stock, debt securities, warrants and units or any combination thereof up to a total aggregate offering price of $350.0 million. We also simultaneously entered into a Sales Agreement, or the Sales Agreement, with SVB Leerink LLC and Wells Fargo Securities, LLC, or the Sales Agents, pursuant to which we may issue and sell, from time to time at our discretion, shares of our common stock having an aggregate offering price of up to $150.0 million through the Sales Agents. In March 2022, we amended the Sales Agreement to, among other things, include Goldman Sachs & Co. LLC as an additional Sales Agent. In April 2022, we sold 2,000,000 shares of common stock pursuant to the Sales Agreement and received net proceeds of $11.6 million. No other shares of common stock have been issued and sold pursuant to the Sales Agreement as of September 30, 2022.
On October 21, 2022, we entered into a securities purchase agreement, or the Securities Purchase Agreement, with Audentes Therapeutics, Inc. (d/b/a Astellas Gene Therapy), or Astellas, pursuant to which we agreed to issue and sell to Astellas in a private placement an aggregate of 7,266,342 shares of common stock for aggregate gross proceeds of $30.0 million. The Private Placement closed on October 24, 2022. Also on October 21, 2022 we entered into a registration rights agreement pursuant to which we agreed to register the resale of the shares purchased under the Securities Purchase Agreement no later than April 24, 2023.
On October 21, 2022, we entered into an option agreement, or the Option Agreement, with Astellas, granting Astellas an exclusive option to obtain exclusive, worldwide, royalty and milestone-bearing rights and licenses related to TSHA-120 and TSHA-102. As partial consideration for the rights granted to Astellas under the Option Agreement, Astellas will pay us a one-time payment in the amount of $20.0 million, or the Upfront Payment, within 30 days after receipt of an invoice for such payment (see Note 12 to the unaudited condensed consolidated financial statements located in “Part I – Financial Information, Item 1. Financial Statements” in this Quarterly Report on Form 10-Q). The invoice for the Upfront Payment was sent to Astellas on October 24, 2022.
In October 2022, we entered into an Underwriting Agreement with Goldman Sachs & Co. LLC, or the Underwriter, to issue and sell 14,000,000 shares of our common stock, par value $0.0001 per share, in an underwritten public offering, or the Offering, pursuant to effective registration statement on Form S-3 and a related prospectus and prospectus supplement. The offering price to the public was $2.00 per share and the Underwriter purchased the shares from the us pursuant to the Underwriting Agreement at a price of $1.88 per share. In addition, we granted the Underwriter an option to purchase, for a period of 30 days, up to an additional 2,100,000 shares of our common stock. The Offering closed on October 31, 2022 and we received net proceeds of $25.6 million after deducting underwriting discounts, commissions and estimated offering expenses. The Company estimates that the net proceeds from the Offering will be approximately $29.6 million if the Underwriter exercises in full its option to purchase additional shares of the Company’s common stock after deducting underwriting discounts and commissions and estimated offering expenses (see Note 12 to the unaudited condensed consolidated financial statements located in “Part I – Financial Information, Item 1. Financial Statements” in this Quarterly Report on Form 10-Q).
Funding Requirements
To date, we have not generated any revenues from the commercial sale of approved drug products, and we do not expect to generate substantial revenue for at least the next few years. If we fail to complete the development of our product candidates in a timely manner or fail to obtain their regulatory approval, our ability to generate future revenue will be compromised. We do not know when, or if, we will generate any revenue from our product candidates, and we do not expect to generate significant revenue unless
50
and until we obtain regulatory approval of, and commercialize, our product candidates. We expect our expenses to decrease in connection with our ongoing activities largely due to the strategic reprioritization of product candidates and the reduction in force announced in March 2022. We will continue the research and development of, initiate clinical trials of and seek marketing approval for specific product candidates. In addition, if we obtain approval for any of our product candidates, we then expect to incur significant commercialization expenses related to sales, marketing, manufacturing and distribution. We anticipate that we will need substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.
We believe that our existing cash and cash equivalents, along with the $50.0 million payment from Astellas and the anticipated $25.6 million net proceeds received from the Offering, will enable us to fund our operating expenses and capital requirements into the first quarter of 2024. We will require additional capital to fund the research and development of our product candidates, to fund our manufacturing activities, to fund precommercial activities of our programs and for working capital and general corporate purposes.
Because of the numerous risks and uncertainties associated with research, development and commercialization of biological products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
|
|
• |
the scope, progress, costs and results of discovery, preclinical development, laboratory testing and clinical trials for TSHA-102, TSHA-105, TSHA-118, TSHA-120, TSHA-121 and any current and future product candidates that we advance; |
|
|
• |
our ability to access sufficient additional capital on a timely basis and on favorable terms; |
|
|
• |
the extent to which we develop, in-license or acquire other product candidates and technologies in our gene therapy product candidate pipeline; |
|
|
• |
the costs and timing of process development and manufacturing scale-up activities associated with our product candidates and other programs as we advance them through preclinical and clinical development; |
|
|
• |
the number and development requirements of product candidates that we may pursue; |
|
|
• |
the costs, timing and outcome of regulatory review of our product candidates; |
|
|
• |
our headcount growth and associated costs as we expand our research and development capabilities and establish a commercial infrastructure; |
|
|
• |
the costs of establishing and maintaining our own commercial-scale cGMP manufacturing facility; |
|
|
• |
the costs and timing of future commercialization activities, including product manufacturing, marketing, sales, and distribution, for any of our product candidates for which we receive marketing approval; |
|
|
• |
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; |
|
|
• |
the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval; |
|
|
• |
whether we access the remaining tranches under our term loan facility with Silicon Valley Bank; and |
|
|
• |
the costs of operating as a public company. |
Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of product candidates that we do not expect to be commercially available in the near term, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the terms of these equity securities or this debt may restrict our ability to operate. The Term Loan Agreement contains negative covenants, including, among other things, restrictions on indebtedness, liens investments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions. Any future additional debt financing and equity financing, if available, may involve agreements that include covenants limiting and restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, entering into profit-sharing or other arrangements or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing
51
arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.
We are continuing to assess the effect that the COVID-19 pandemic may have on our business and operations. The extent to which COVID-19 may impact our business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the duration and effect of business disruptions and the short-term effects and ultimate effectiveness of the travel restrictions, quarantines, social distancing requirements and business closures in the United States and other countries to contain and treat the disease, the efficacy, availability and adoption of vaccines, both domestically and globally, and the impact of new variants or mutations of the coronavirus. Further, disruption of global financial markets and a recession or market correction, including as a result of the COVID-19 pandemic, the ongoing military conflict between Russia and Ukraine and the related sanctions imposed against Russia, and other global macroeconomic factors such as inflation, could reduce our ability to access capital, which could in the future negatively affect our liquidity and the value of our common stock.
Cash Flows
The following table shows a summary of our cash flows for the nine months ended September 30, 2022 and 2021 (in thousands):
|
|
|
For the Nine Months Ended September 30, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
Net cash used in operating activities |
|
$ |
(102,667 |
) |
|
$ |
(76,784 |
) |
|
Net cash used in investing activities |
|
|
(22,560 |
) |
|
|
(13,034 |
) |
|
Net cash provided by financing activities |
|
|
10,430 |
|
|
|
29,978 |
|
|
Net change in cash, cash equivalents and restricted cash |
|
$ |
(114,797 |
) |
|
$ |
(59,840 |
) |
Operating Activities
For the nine months ended September 30, 2022, our net cash used in operating activities of $102.7 million primarily consisted of a net loss of $110.3 million, primarily attributable to our spending on research and development expenses. The net loss of $110.3 million was partially offset by adjustments for non-cash items, primarily stock-based compensation, research and development license fees and depreciation expense of $16.6 million. Additional cash used in operating activities of $9.0 million was primarily due to a decrease in accounts payable and accrued expenses.
For the nine months ended September 30, 2021, our net cash used in operating activities of $76.8 million primarily consisted of a net loss of $124.1 million, primarily attributable to our spending on research and development expenses. The net loss of $124.1 million was partially offset by adjustments for non-cash items, primarily stock-based compensation of $13.2 million, and the add back of the up-front license fee of $5.5 million paid to HHF related to the acquisition of TSHA-120 which is treated as an investing outflow as well as other license fees of $1.3 million. The $124.1 million net loss was also partially offset by a $26.6 million increase in the cash provided by operating assets and liabilities, primarily resulting from an increase in accounts payable and accrued expenses.
Investing Activities
During the nine months ended September 30, 2022, investing activities used $22.6 million of cash primarily attributable to research and development license payments of $4.3 million, including regulatory milestone payments paid to Abeona pursuant to the Rett and CLN1 Agreements and $18.3 million in capital expenditures related to our in-house manufacturing facility and research and development lab. During the nine months ended September 30, 2021, investing activities used $13.0 million of cash primarily attributable to the upfront license fee payment of $5.5 million to acquire exclusive worldwide rights to TSHA-120, for the treatment of GAN, and capital expenditures related to our in-house manufacturing facility and office space.
Financing Activities
During the nine months ended September 30, 2022, financing activities provided $10.4 million of cash, which is primarily attributable to $11.6 million net proceeds from the sale of 2,000,000 shares of common stock pursuant to the Sales Agreement and $0.3 million of ESPP contributions. The proceeds were partially offset by the payment of shelf registration costs, and other financing
52
transactions. During the nine months ended September 30, 2021, financing activities provided $30.0 million of cash, which is attributable to the receipt of $30.0 million net proceeds from our Term Loan with Silicon Valley Bank.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Critical Accounting Policies and Significant Judgments and Estimates
There were no material changes to our critical accounting policies that are disclosed in our audited consolidated financial statements for the year ended December 31, 2021 filed with the SEC on March 31, 2022.
Recent Accounting Pronouncements
See Note 2 to our unaudited condensed consolidated financial statements located in “Part I – Financial Information, Item 1. Financial Statements” in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our condensed consolidated financial statements.
Emerging Growth Company and Smaller Reporting Company Status
In April 2012, the Jumpstart Our Business Startups Act of 2012, or JOBS Act, was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
In addition, as an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:
|
|
• |
an exception from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended; |
|
|
• |
reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registration statements; |
|
|
• |
exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements; and |
|
|
• |
an exemption from compliance with the requirements of the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor’s report on financial statements. |
We may take advantage of these provisions until we no longer qualify as an emerging growth company. We will cease to qualify as an emerging growth company on the date that is the earliest of: (i) December 31, 2025, (ii) the last day of the fiscal year in which we have more than $1.235 billion in total annual gross revenues, (iii) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, or (iv) the date on which we have issued more than $1.0 billion of non-convertible debt over the prior three-year period. We may choose to take advantage of some but not all of these reduced reporting burdens. We have taken advantage of certain reduced reporting requirements in this Quarterly Report on Form 10-Q and our other filings with the SEC. Accordingly, the information contained herein may be different than you might obtain from other public companies in which you hold equity interests.
We are also a “smaller reporting company,” meaning that the market value of our shares held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting
53
companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act ), as of the end of the period covered by this Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of September 30, 2022, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in this Form 10-Q was (a) reported within the time periods specified by SEC rules and regulations, and (b) communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding any required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Internal Controls
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud.
54
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are not subject to any material legal proceedings. From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Item 1A. Risk Factors.
Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission on March 31, 2022. Other than as described below, there have been no material changes to the risk factors described in that report.
Risks Related to our Financial Position and Capital Needs
Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.
Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. For example, the COVID-19 pandemic has caused extreme volatility and disruptions in the capital and credit markets. In addition, Russia’s invasion of Ukraine may lead to a prolonged, adverse impact on global economic, social and market conditions. A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for our product candidates and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption, or cause delays in payments for our services by third-party payors or our collaborators. For example, while we do not have any current operations in Ukraine or Russia, we do not know the extent to which Russia’s invasion of Ukraine could impact any of our current suppliers and their ability to provide us with supplies and services. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business, financial condition, results of operations and prospects.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) Recent Sales of Unregistered Equity Securities
None.
(b) Use of Proceeds
There has been no material change in the planned use of proceeds from our initial public offering as described in our prospectus filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on September 25, 2020.
(c) Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
55
Item 6. Exhibits.
The exhibits listed on the Exhibit Index are either filed or furnished with this report or incorporated herein by reference.
|
Exhibit Number |
|
Description |
|
3.1 |
|
|
|
3.2 |
|
|
|
10.1^+ |
|
|
|
10.2+ |
|
|
|
10.3+ |
|
|
|
31.1* |
|
|
|
31.2* |
|
|
|
32.1# |
|
|
|
32.2# |
|
|
|
101.INS |
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
104 |
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
|
* |
Filed herewith. |
|
# |
These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
|
+ |
Certain schedules to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedules will be furnished supplementally to the SEC upon request. |
|
^ |
Portions of this document (indicated by “[***]” have been omitted because they are not material and are the type that Taysha Gene Therapies, Inc. treats as private and confidential. |
56
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
Taysha Gene Therapies, Inc. |
|
|
|
|
|
|
|
Date: November 8, 2022 |
|
By: |
/s/ RA Session II |
|
|
|
|
RA Session II |
|
|
|
|
President and Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
|
|
Date: November 8, 2022 |
|
By: |
/s/ Kamran Alam |
|
|
|
|
Kamran Alam |
|
|
|
|
Chief Financial Officer (Principal Financial and Accounting Officer) |
57