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Item 2. Management’s Discussion and Analysis

2021-05-11 compared with 2020-11-12 · 291 added, 112 removed, 173 unchanged (70% of the section changed)

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 period from September 20, 2019 (date of inception) through December 31, 2019 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our final prospectus dated September 23, 2020 and filed with the Securities and Exchange Commission, or SEC, on September 25, 2020, pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, or the Securities Act.

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, 2020 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, 2020, or Annual Report, filed with the Securities and Exchange Commission, or the SEC, on March 3, 2021.

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.

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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 in our other filings with the SEC.

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.

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 in both rare and large patient populations.

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.

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 26 gene therapy product candidates, with exclusive options to acquire four 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 capabilities, we believe we have created a powerful engine to develop transformative therapies to dramatically improve patients’ lives.

We expect to initiate a Phase 1/2 clinical trial of TSHA-101 for the treatment of GM2 gangliosidosis, under a Clinical Trial Application, in Canada by the end of 2020.

In addition, we plan to submit investigational new drug applications, or INDs, for four programs to the U.S.

Food and Drug Administration, or the FDA, by the end of 2021:

TSHA-101, TSHA-102 (Rett syndrome), TSHA-103 (SLC6A1 haploinsufficiency) and TSHA-104 (SURF1 deficiency).

We are also developing TSHA-118 (formerly ABO-202) for the treatment of CLN1 disease (or infantile Batten disease) and intend to initiate a Phase 1/2 clinical trial of TSHA-118 under a currently open IND.

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.

We recently acquired 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.

A Phase 1/2 clinical trial of TSHA-120 is being conducted by the National Institutes of Health under an accepted investigational new drug application, or IND, and we expect to provide a regulatory and clinical update by the end of 2021.

A Phase 1/2 clinical trial of TSHA-101 was initiated by Queen’s University at Kingston, or Queen’s University, under an accepted Clinical Trial Application, or CTA, in Canada, and Queen’s University expects to report preliminary safety and biomarker data in the second half of 2021 and preliminary clinical data by the end of 2021.

We plan to submit an IND for TSHA-101 for the treatment of GM2 gangliosidosis to the U.S.

Food and Drug Administration, or FDA, and initiate a Phase 1/2 clinical trial in the United States, each in the second half of 2021.

In addition, we plan to submit INDs / CTAs for each of TSHA-102 in Rett syndrome and TSHA-104 in SURF1-associated Leigh syndrome in the second half of 2021 and one of the following programs in 2021:

TSHA-103 in SLC6A1 haploinsufficiency, TSHA-105 in SLC13A5 deficiency, TSHA-111-LAFORIN and TSHA-111-MALIN for two different forms of Lafora disease, TSHA-112 in APBD and TSHA-119 in GM2 AB variant.

We are also developing TSHA-118 for the treatment of CLN1 disease (one of the forms of Batten disease) and intend to initiate a Phase 1/2 clinical trial of TSHA-118 in the second half of 2021 under a currently open IND.

In addition to our product pipeline candidates, we are building a platform of next-generation technologies to optimize key components of our AAV-based gene therapies, including redosing, transgene regulation and capsid development.

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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 preclinical testing stage.

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 through the sale of equity, raising an aggregate of $307.0 million of gross proceeds from our initial public offering and private placements of our convertible preferred stock.

funded our operations through the sale of equity, raising an aggregate of $307.0 million of gross proceeds from our initial public offering and private placements of our convertible preferred stock.

Since our inception, we have incurred significant operating losses.

Our net losses were $1.1 million for the period from September 20, 2019 (date of inception) through December 31, 2019, and $ 41.7 million for the nine months ended September 30, 2020.

As of September 30, 2020, we had an accumulated deficit of $ 42.8 million.

We exp ect to continue to incur significant expenses and operating losses for the foreseeable future.

Our net losses were $32.0 million for the three months ended March 31, 2021 and $5.4 million for the three months ended March 31, 2020.

As of March 31, 2021, we had an accumulated deficit of $93.2 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 planned clinical trial of TSHA-101, as well as initiate and complete additional clinical trials of TSHA-101, TSHA-118, TSHA-102, TSHA-103, TSHA-104 and future product candidates;

conduct our ongoing clinical trial of TSHA-101 and TSHA-120, as well as initiate and complete additional clinical trials of TSHA-101, TSHA-118, TSHA-102, TSHA-104 and any other current and future product candidates that we advance;

seek regulatory approval for any product candidates that successfully complete clinical trials;

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scale up our clinical and regulatory capabilities;

manufacture current good manufacturing practices, or cGMP, material for clinical trials or potential commercial sales;

manufacture current Good Manufacturing Practice, or cGMP material for clinical trials or potential commercial sales;

establish and validate a commercial-scale cGMP manufacturing facility;

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incur additional legal, accounting and other expenses in operating as a public company.

We are advancing a deep and sustainable product portfolio of 26 gene therapy product candidates for monogenic diseases of the CNS in both rare and large patient populations, with exclusive options to acquire four 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.

Recent Developments

In March 2021, we acquired the exclusive worldwide rights to a clinical-stage AAV9 gene therapy program, now known as TSHA-120, for the treatment of 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 will receive 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.

TSHA-120 for Giant Axonal Neuropathy

We recently acquired 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.

GAN is a rare autosomal recessive disease of the central and peripheral nervous systems caused by loss-of-function gigaxonin gene mutations.

The estimated prevalence of GAN is 2,400 patients in the Unites States and European Union.

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 but the disease is not life-

I n 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.

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 FDA for TSHA-120 for the treatment of GAN.

There is an ongoing 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 GAN patients, aged 3 to 21 years.

As would be expected for a neurodegenerative disease, younger patients have higher baseline 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.

A 4-point score change in the MFM32 is considered clinically meaningful, suggesting that GAN patients lose significant function annually.

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 demonstrate the clear difference in latency in treated versus untreated GAN rodents.

A result is considered to be 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.

With respect to dorsal root ganglia, or DRG, inflammation that has been a topic of considerable interest within the gene therapy circles, in GAN and in the majority of diseases in our neurodegenerative franchise, 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, the tissue from the GAN knockout mice treated with an intrathecal inj ection of TSHA-120 had a notable improvement in the reduction of these neuronal inclusions in the DRG.

When a quantitative approach to the reduction in 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.

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 – 3.5x10 13 total vg, 1.2x10 14 total vg, 1.8x10 14 total vg or 3.5x10 14 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 six patients have at least three years’ worth of long-term follow up data.

The 1.8x10 14 total vg dose and

1.2x10 14 total vg cohorts demonstrated dose-related and meaningful slowing of disease progression in the first year post dosing , as illustrated below .

T he 1.8x10 14 total vg dose effected a statistically significant 8-point improvement versus the historical control over the course of a year and the 1.2x10 14 total vg dose effected a statistically significant 6-point improvement over the course of a year .

Six patients in the trial have been followed for more than three years.

Patients dosed with 1.8x10 14 total vg and 1.2x10 14 total vg have shown sustained dose-dependent improvements in MFM32 scores for more than three years, as illustrated below.

To date, 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 persistent elevation of transam inases.

We expect to report additional data from this trial later this year, including results from the highest dose cohort of 3.5x10 14 total vg.

Bayesian Analysis of TSHA-120

To gain further insight into the impact of TSHA-120 treatment on GAN disease progression and to add more robustness to the data, an additional analysis utilizing Bayesian statistical methodology was performed.

Bayesian analysis is a useful method that enables direct probability statements about any unknown quantity of interest to be m ade, in this case, a statement around the probability of a clinically meaningful improvement in MFM32.

Bayesian analysis also enables immediate incorporation into the analysis of data gathered as the trial progresses.

It is a particularly appropriate approach for a clinical trial in a rare disease and is a way of statistically increasing the power of a clinical trial in a small patient population when used to incorporate auxiliary information such as historical data, or data that are being accumulated as the trial progresses.

Importantly, it has been accepted by regulatory agencies in such cases.

Below are the results of the Bayesian analysis of patient data from cohorts treated at 1.8x10 14 total vg and 1.2x10 14 total vg.

As seen in the table, the analysis confirmed both the natural history data of an 8-point decline in the MFM32 total percent score per year, and importantly, that patients treated with 1.8x10 14 total vg experienced an arrest of disease progression that was statistically significant.

The Bayesian analysis confirms the positive findings that were seen with the frequentist approach.

As shown below, the Bayesian efficacy analysis confirmed that TSHA-120 halted patients’ pre-treatment rate of decline when compared to individual historical data.

As shown on these graphs, the 1.8x10 14 total vg dose halted patient pre-treatment rate of decline with an average annual slope improvement of 7.78 points while the 1.2x10 14 total vg dose resulted in a clinically meaningful

slowing of disease progression with an average annual slope improvement of 6.09 points.

These results are consistent with a dose respo nse relationship.

Further analyses confirmed that there was a nearly 100% probability of clinically meaningful slowing of disease progression.

As shown below, the 1.8x10 14 total vg dose confirmed a virtually 100% probability of clinically meaningful slowing of disease

compared to natural history decline of GAN patients while the 1.2x10 14 total vg dose confirmed an approximat ely 85% probability of clinically meaningful slowing of disease and a virtually 100% probability of any slowing of disease.

We intend to engage with the FDA, European Medicines Agency, Medicines and Healthcare products Regulatory Agency in the United Kingdom and the Pharmaceuticals and Medical Devices Agency in Japan to discuss the regulatory pathway for TSHA-120 and will provide an update by year-end.

Preclinical Program Updates

Vagus Nerve Redosing

Proof-of-concept research in the preclinical setting has supported that direct injection into the vagus nerve of TSHA-120 following an intrathecal administration of TSHA-120 may ameliorate autonomic nervous system dysfunction.

At either four or sixteen weeks after wild-type rats were injected intrathecally with TSHA-120, they received a second dose via direct injection of the AAV9 vector into the vagus nerve.

Four weeks after the second injection, tissues were assessed for expression of our re-dosed virus by

staining for the green fluorescent protein, GFP , c arried by the second AAV9 vector.

Examination of the injected vagus nerve and associated nodose ganglia showed a robust expression of GFP (as represented by the brown staining below ), indicating that in rats, AAV9 can be re-dosed through a direct nerve inj ection following intrathecal delivery.

Consistent with single-dosing studies, re-dosed animals showed expression in the medulla vagus nerve nuclei.

As shown below, GFP expression was seen in the nucleus ambiguous, which controls motor functions critical for vocalization, swallowing and

peristalsis and in the Pre-Botzinger complex, which contains respiratory rhythm generating neurons – all of which are autonomic functions compromised in GAN and many other neurological diseases.

As illustrated below, further support of how vagus nerve injection permits AAV9 redosing was demonstrated in the brain of a naïve animal shown on the left compared to an intrathecally AAV9-immunized rat on the right.

Efficient GFP transduction was observed in vagal nerve fibers and in brain neurons.

In the area postrema, which has a reduced blood-barrier and is a target for vagal afferent fiber trafficking, there was reduced GFP expression in pre-immunized animals, at four and sixteen weeks, as compared to naïve animals.

This suggests that pre-existing neutralization antibodies may dampen the overall transduction of vagal nerve delivered

AAV9, but efficient transduction of autonomic relevant neurons can still be achieved.

These results support that the vagus nerve space is immune privileged enough to allow for redosing.

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.

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.

Recently, 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 (UT Southwestern) laboratory of Sarah Sinnett, Ph.D., and evaluated the safety and efficacy of regulated miniMECP2 gene transfer, TSHA-102 (AAV9/miniMECP2-miRARE), via intrathecal (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.

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.

TSHA-102 demonstrated regulated expression in different regions of

As shown in the graph and photos below, i n 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 dem onstrating that TSHA-102 achieved MECP2 expression levels similar to normal physiological parameters.

We plan to submit an IND / CTA for TSHA-102 in the second half of 2021 and initiate a clinical trial by the end of 2021.

TSHA-104 for SURF1-Associated Leigh Syndrome

We are developing TSHA-104, a neurodegenerative product candidate, for the treatment of SURF1-associated Leigh syndrome.

The SURF1 gene encodes the SURF1 protein, which plays a critical role in mitochondrial translation and is involved in the assembly of the cytochrome c oxidase complex.

Mutations in SURF1 lead to SURF1-associated Leigh syndrome, a recessively inherited mitochondrial disease, and are the most frequent cause of Leigh syndrome, a rapidly progressive neurological condition characterized by the degeneration of the CNS.

To date over 100 SURF1 mutations, including non-sense, frame shift and missense variants have been described in literature.

The incidence of SURF1-associated Leigh syndrome is estimated to be approximately 1 in 100,000 live births.

The estimated prevalence of SURF1 deficiency is 300 to 400 patients in the United States and European Union.

SURF1-associated Leigh syndrome can lead to difficulty swallowing in infancy, with subsequent failure to thrive.

Severely diseased muscle tone leading to respiratory failure, movement disorders and balance abnormalities are common.

According to the literature, only a few patients have been reported to survive beyond 10 years of age.

In the majority of SURF1-deficient patients, serum lactate is elevated, and elevated levels of serum lactate have been reported in the CSF as well, indicative of mitochondrial dysfunction.

We are pursuing a gene replacement strategy with the goal of restoring mitochondrial function in pati ents with SURF1-associated Leigh syndrome caused by loss-of-function mutations.

We are constructing TSHA-104 from a codon-optimized version of the human SURF1 gene packaged within a self-complementary AAV9 viral vector under the control of a CBh promoter.

We plan to submit an IND / CTA for TSHA-104 in the second half of 2021 and initiate a Phase 1/2 clinical trial by the end of 2021.

We have received orphan drug designation and rare pediatric disease designation from the FDA for TSHA-104 for the treatment of SURF1-associated Leigh Syndrome.

Preclinical Studies

Data from preclinical studies suggest that functional gene replacement strategy could restore mitochondrial functions in SURF1-associated Leigh syndrome caused by SURF1 loss-of-function mutations, which we believe supports continued development of TSHA-104.

In these studies, TSHA-104 was administered at two dose levels via intrathecal lumbar puncture to a knock-out mouse model of SURF1-associated Leigh syndrome.

Intrathecal treatment with TSHA-104 was observed to be well tolerated.

TSHA-104 also induced SURF1 expression in the brain and partially rescued COX activity in a tissue specific manner as shown below.

As shown below, TSHA-104 restored elevation of blood lactate on exhaustive exercise in the SURF1 knock-out mice.

TSHA-113 for Tauopathies

We are developing TSHA-113 for the treatment of tauopathies.

Tau accumulation predicts neurodegeneration in Alzheimer’s disease, and the propagation of tau aggregates is thought to mediate the progression of several neurodegenerative diseases, including progressive supranuclear palsy, corticobasal degeneration, behavioral variant frontotemporal degeneration, chronic traumatic encephalopathy, frontotemporal dementia and parkinsonism linked to chromosome 17.

As a result, multiple strategies are currently being tested to reduce tau and ameliorate the effects of these diseases.

Preclinical studies testing tau anti-sense oligonucleotides, or ASOs, in the PS19 tauopathy mouse model prevented neuronal loss and showed a reversal of pathological tau deposition and seeding.

This treatment in being tested in clinical trials.

While promising, ASOs only reduced tau protein levels by approximately 50% in mice, and they required repeated, life-long intrathecal administration to reach this maximum effect.

We are developing TSHA-113 to utilize AAV-mediated gene silencing to deliver life-long reduction of tau protein levels in neurons following administration of a single dose.

We are developing tau-specific miRNA shuttles that have been designed to target mRNA for all six isoforms of tau found in the human brain and/or mouse brain.

Our preliminary data in cells has shown that our tau miRNA selectively reduced some human and mouse tau expression in vitro and we have packaged our miRNA shuttles in AAV9 capsids for further evaluation in mouse models of human tauopathies.

Preclinical Studies

In transgenic mouse models carrying human tau, TSHA-113 significantly reduced tau mRNA and protein levels, as shown in the three figures below.

Mice dosed with TSHA-113 demonstrated widespread function and GFP expression in neurons and glia, as illustrated below.

Together with previous in vitro findings, we believe that these data further validate selective reduction of tau mRNA and protein levels and warrant further preclinical development.

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.

The estimated prevalence of SLC13A5 deficiency is 1,900 patients in the United States and European Union.

Affected children have impairments in gross motor function and speech production with relative preservation of fine motor skills and receptive speech.

SLC13A5 deficiency is caused by bi-allelic loss-of function

m utations 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.

Currently, there are no approved therapies for SLC13A5 deficiency, and treatment is largely to address symptoms.

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 for TSHA-105 for the treatment of epilepsy caused by caused by SLC13A5 deficiency.

Preclinical Studies

In preliminary safety studies conducted in wildtype mice, vehicle or TSHA-105 was administered via CSF delivery.

Weight and survival in the control and treatment group were the same and no overt toxicities were observed for up to one-year post-treatment.

Studies to evaluate TSHA-105 were conducted using SLC13A5 knockout mice.

In comparison to age-matched, wildtype controls, SLC13A5 knockout mice exhibit altered citrate metabolism along with abnormal electroencephalogram, or EEG, activity and increased seizure susceptibility.

At 3 months of age, SLC13A5 knockout mice were treated with TSHA-105 via CSF delivery.

Administration of TSHA-105 resulted in a significant, sustainable decrease of plasma citrate levels up to 3-months post-injection, as shown below.

In addition, in ongoing EEG studies, TSHA-105 normalized EEG activity and decreased the number of seizures in knockout mice in comparison vehicle-treated controls as shown below.

TSHA-105 also reduced seizure susceptibility in SLC13A5 knockout mice as shown below.

TSHA-103 for SLC6A1 Haploinsufficiency Disorder

SLC6A1 haploinsufficiency disorder is caused by loss-of-function mutations in the SLC6A1 gene.

Loss of-function mutations in the SLC6A1 gene have been identified as one of the most common monogenic causes of epilepsy with myoclonic atonic seizures, or brief and abrupt seizures followed by loss of muscle strength, as well as autism spectrum disorder and intellectual disability.

Patients diagnosed with SLC6A1 haploinsufficiency disorder typically present with developmental delay, varying degrees of intellectual disability, seizures and abnormal EEG characterized by generalized spike-wave discharges.

Most patients are refractory to pharmacological seizure control although a portion of patients become seizure free during the course of disease progression.

Importantly, seizure control is not associated with improved cognitive outcomes, which highlights the complexity of the disease as well as the need for novel therapies directed at its underlying pathology.

Approximately 81% of patients with SLC6A1 haploinsufficiency disorder have epilepsy, with typical absence seizures, which are abrupt and followed by lack of awareness, being the predominant form observed.

In addition, 91% of individuals exhibit developmental delays, with more than 80% characterized as mild or moderate intellectual disability.

Ataxia, or tremors, is present in approximately 29% of individuals, while autism or autistic features are observed in approximately 24% of individuals diagnosed with SLC6A1 haploinsufficiency disorder.

The SLC6A1 gene encodes the gamma-aminobutyric acid, or GABA, transporter 1, or GAT1.

GAT1 is a voltage-dependent transporter responsible for the reuptake of GABA, a non-protein amino acid that is well characterized for its role as a major inhibitory neurotransmitter within the mammalian CNS.

GAT1 plays a critical role in the reuptake of GABA from neuronal synapses and extracellular spaces and as a result, a critical role in balancing neuronal excitations.

When GABA transport is disrupted, brain development is negatively impacted resulting in deficits in attention and cognition as well as seizures.

The exact incidence and prevalence of SLC6A1 haploinsufficiency disorder is unknown but we believe the estimated prevalence is 17,000 patients in the United States and European Union.

According to recently published data, the incidence of SLC6A1 haploinsufficiency disorder is approximately 1 in 36,000 live births.

We believe that SLC6A1 haploinsufficiency disorder is underdiagnosed as the underlying biology was only recently elucidated and the gene had not been part of commercially available genetic epilepsy screening panels.

Clinician education and expanded use of genetic screening panels that include SLC6A1 will likely lead to increased identification of individuals with these mutations.

Our Solution:

We are developing TSHA-103, a genetic epilepsy product candidate, for the treatment of SLC6A1 haploinsufficiency disorder.

TSHA-103 is a gene replacement therapy constructed from a codon-optimized version of the human SLC6A1 gene packaged within a self-complementary AAV9 viral vector.

We are currently conducting preclinical studies of TSHA-103.

We have received orphan drug designation and rare pediatric disease designation from the FDA for TSHA-103 for the treatment of epilepsy caused by SLC6A1 haploinsufficiency disorder.

Preclinical Studies

We are currently conducting preclinical studies of TSHA-103.

In the SLC6A1 knockout mouse model, TSHA-103 improved nesting and EEG, activity, as shown below.

In SLC6A1 knockout and heterozygous mouse models, TSHA-103 reduced spike train activity, which is a recording of abnormal neuronal activity associated with seizures, as shown below.

License Agreements

Research, Collaboration and License Agreement with The University of Texas Southwestern Medical Center

In November 2019, we entered into 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 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.

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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.

License Agreement with Queen’s University at Kingston

In February 2020, we entered into a license agreement, or the Queen’s University Agreement, with Queen’s University at Kingston, or Queen’s University.

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 $220,000 to reimburse Queen’s University for certain plasm id production costs.

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 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 count ry-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 p ay 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.

We were also obligated under the terms of a separate research grant agreement between us and Queen’s University to pay up to a total of $3.8 million to fund certain manufacturing expenses.

License Agreement with Abeona Therapeutics Inc.

(CLN1 Disease)

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.

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 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 (or infantile Batten disease) in humans.

In connection with the license grant, we will pay Abeona a one-time upfront license fee of $3.0 million.

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.

country, ten years from first commercial sale of such licensed product in such country.

In addition, concurrent with the Abeona C LN1 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.

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.

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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.

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.

Impact of COVID-19 on Our Business

We have been actively monitoring the novel coronavirus, or COVID-19, situation and its impact globally.

Our financial results for the three and nine months ended September 30, 2020 were not impacted by COVID-19, and we currently do not expect any material impact on our financial results for the remainder of 2020.

We believe the remote working arrangements and travel restrictions imposed by various governmental jurisdictions have had limited impact on our ability to maintain internal operations during the nine months ended September 30, 2020.

We cannot presently predict the scope and severity of any potential business shutdowns or disruptions, including to our planned clinical trials and preclinical studies.

We have been actively monitoring the COVID-19 situation and its impact globally.

Our financial results for the quarter ended March 31, 2021 were not impacted by COVID-19.

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 effectiveness of actions to contain and treat COVID-19 and the efficacy, availability and adoption of vaccines, both domestically and globally.

Although we have not experienced any material business shutdowns or interruptions due to the COVID-19 pandemic, we cannot predict the scope and severity of any potential business shutdowns or disruptions in the future, including to our planned clinical trials and preclinical studies.

Any such shutdowns or other business interruptions could result in material and negative effects to our ability to conduct our business in the manner and on the timelines presently planned, which could have a material adverse impact on our business, results of operation and financial condition.

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Research and development activities are central to our business model.

We do not currently track our research and development expenses on a program-by-program basis as such costs are deployed across multiple projects under development.

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.

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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 manufactur e of our product candidates;

the ability to manufacture of our product candidates;

regulators or institutional review boards, or IRBs 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;

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Other general and administrative expenses include professional fees for legal, consulting, accounting and audit and tax-related services and insurance costs.

We began paying salaries and related costs for personnel during the quarter ended June 30, 2020 and granted equity awards to employees and directors during the quarter ended September 30, 2020.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our expanded infrastructure, as well as the initiation and continuation of our preclinical studies and clinical trials for our product candidates.

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Results of Operations

Results of Operations for the Three Months Ended September 30, 2020 and for the Period from September 20, 2019 (date of inception) through September 30, 2019

The following table summarizes our results of operations for the three months ended September 30, 2020 and the period from September 20, 2019 (date of inception) through September 30, 2019 (in thousands):

September 30,

September 20,

2019 (date of

September 30,

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other expense:

Interest expense

Total other expense

Research and Development Expenses

Research and development expenses were $11.1 million for the three months ended September 30, 2020, compared to no expenses for the period from September 20, 2019 (date of inception) through September 30, 2019.

The $11.1 million was primarily attributable to $7.0 million of expenses recognized pursuant to the Abeona CLN1 Agreement, as well as $2.8 million in other sponsored research agreements for our various product candidates.

Additionally, we incurred regulatory and clinical consulting expenses of $0.6 million and employee compensation and benefits expenses of $0.7 million, which included $0.4 million of non-cash stock-based compensation.

General and Administrative Expenses

General and administrative expenses were $4.0 million for the three months ended September 30, 2020, compared to less than $0.1 million for the period from September 20, 2019 (date of inception) through September 30, 2019.

The increase of approximately $4.0 million was primarily attributable to $2.1 million of compensation and benefits related to new hires, which included $0.9 million of non-cash stock-based compensation, $1.4 million in consulting fees, $0.3 million of legal expenses related to general corporate matters and approximately $0.2 million related to insurance and other administrative expenses.

Results of Operations for the Nine Months Ended September 30, 2020 and for the Period from September 20, 2019 (date of inception) through September 30, 2019

The following table summarizes our results of operations for the nine months ended September 30, 2020 and the period from September 20, 2019 (date of inception) through September 30, 2019 (in thousands):

September 30,

September 20,

2019 (date of

September 30,

Results of Operations for the Three Months Ended March 31, 2021 and for the Three Months Ended March 31, 2020

The following table summarizes our results of operations for the three months ended March 31, 2021 and the three months ended March 31, 2020 (in thousands):

For the Three Months

Ended March 31, 2021

For the Three Months Ended March 31, 2020

Operating expenses:

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Loss from operations

Other expense:

Other income (expense):

Change in fair value of preferred stock tranche liability

Interest income

Interest expense

Total other expense

Total other income, net

Research and Development Expenses

Research and development expenses were $19.6 million for the nine months ended September 30, 2020, compared to no expenses for the period from September 20, 2019 (date of inception) through September 30, 2019.

The $19.6 million was primarily attributable to $10.0 million of expenses recognized pursuant to the Queen’s University Agreement and the Abeona CLN1 Agreement, $4.1 million related to the manufacture of clinical trial material and $3.9 million in other sponsored research agreements for our various product candidates.

Additionally, we incurred regulatory and clinical consulting expenses of $0.8 million and employee compensation and benefits expenses of $0.8 million, which included $0.4 million of non-cash stock-based compensation.

Research and development expenses were $23.9 million for the three months ended March 31, 2021, compared to $5.5 million for the three months ended March 31, 2020.

The $18.4 million increase was primarily attributable to an increase of $3.1 million of expenses incurred in research and development manufacturing and other raw material purchases, which included cGMP batches produced by Catalent and UT Southwestern.

Additionally, we incurred a year-over-year increase of $3.1 million in research and development licensing fees driven by the acquisition of exclusive worldwide rights to TSHA-120, for the treatment of GAN.

We incurred an increase in employee compensation and expenses of $5.2 million, which included $1.6 million of non-cash stock-based compensation.

We also incurred an increase of $2.4 million in sponsored research agreement expenses for our various product candidates.

Additionally, we incurred an increase of $2.7 million for research and development consulting fees including technical operations support and translational sciences, $0.9 million for regulatory and clinical consulting, and other research and development of $1.0 million.

General and Administrative Expenses

General and administrative expenses were $5.0 million for the nine months ended September 30, 2020, compared to less than $0.1 million for the period from September 20, 2019 (date of inception) through September 30, 2019.

The increase of approximately $5.0 million was primarily attributable to $2.7 million of compensation and benefits related to new hires, which included $0.9 million of non-cash stock-based compensation, $1.7 million in consulting fees, $0.5 million of legal expenses related to general corporate matters and $0.1 million related to insurance and other administrative expenses.

Other Expense

General and administrative expenses were $8.2 million for the three months ended March 31, 2021, compared to less than $0.1 million for the three months ended March 31, 2020.

The increase of approximately $8.1 million was primarily attributable to $4.2 million of incremental compensation expense, which included $2.0 million of non-cash stock-based compensation, $1.5 million of additional consulting and professional fees, including patient advocacy consulting fees and personnel recruiting expenses.

We also incurred an increase of $0.9 million of professional fees, which included $0.7 million in legal expenses related to general corporate matters, $0.8 million related to insurance expenses, $0.3 million of marketing expenses, and other general and administrative expenses of $0.5 million.

Other Income (Expense)

Change in Fair Value of Preferred Stock Tranche Liability

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We concluded that the tranche liability met the definition of a freestanding financial instrument, as it was legally detachable and separately exercisable from the initial closing of the Series A convertible preferred stock.

On June 30, 2020, ahead of the anticipated closing of the Series B preferred stock financing at a purchase price of $17.00 per share on July 2, 2020, certain investors elected to exercise in full their options to purchase their pro-rata portion of the milestone

shares prior to our achievement of the clinical milestones and purchased 200,000 shares of Series A convertible preferred stock.

We remeasured the fair value of the en tire tranche liability at June 30, 2020, and recognized a non-cash expense of approximately $17.0 million.

The tranche liability was extinguished upon the issuance of the Series A milestone shares on July 1, 2020 and July 2, 2020, and no additional changes in fair value were recorded.

On March 31, 2020 the tranche liability was remeasured and a non-cash gain of $0.2 million was recorded in other income, net.

Liquidity and Capital Resources

Since our inception, we have not generated any revenue and have incurred significant operating losses.

As of September 30, 2020, we had cash and cash equivalents of $278.6 million.

As of March 31, 2021, we had cash and cash equivalents of $228.7 million.

We have funded our operations through equity financings, raising an aggregate of $307.0 million in gross proceeds from our initial public offering and private placements of convertible preferred stock.

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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 and until we obtain regulatory approval of, and commercialize, our product candidates.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, initiate clinical trials of and seek marketing approval for our product candidates.

In addition, if we obtain approval for any of our product candidates, we expect to incur significant commercialization expenses related to sales, marketing, manufacturing and distribution.

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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-101, TSHA-118, TSHA-102, TSHA-103, TSHA-104 and future product candidates;

the scope, progress, costs and results of discovery, preclinical development, laboratory testing and clinical trials for TSHA-101, TSHA-118, TSHA-102, TSHA-104, and TSHA-120 and any current and future product candidates that we advance;

the extent to which we develop, in-license or acquire other product candidates and technologies in our gene therapy product candidate pipeline;

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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 ultimate geographic spread of the disease, 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.

While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity.

In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.

Prior to the issuance and sale of our Series A convertible preferred stock in March 2020, we had no cash.

Outstanding accrued expenses of $0.2 million as of December 31, 2019 were paid in 2020 following the receipt of the proceeds from the issuance and sale of our Series A convertible preferred stock.

The following table shows a summary of our cash flows for the nine months ended September 30, 2020 (in thousands):

September 30,

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 and the efficacy, availability and adoption of vaccines, both domestically and globally.

While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a continued and growing pandemic could result in significant disruption of global financial markets, reducing our ability to

access capital, which could in the future negatively affect our liquidity.

In addition, a recession or marke t correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.

The following table shows a summary of our cash flows for the three months ended March 30, 2021 and 2020 (in thousands):

For the Three Months

Ended March 31, 2021

For the Three Months Ended March 31, 2020

Net cash used in operating activities

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Operating Activities

For the nine months ended September 30, 2020 our net cash used in operating activities of $10.9 million primarily consisted of a net loss of $41.7 million, primarily attributable to our spending on research and development expenses.

The net loss of $41.7 million was partially offset by changes in working capital of $6.4 million, which was primarily due to increases in accounts payable related to the Abeona clinical materials and development costs of $4.0 million, and $24.4 million in adjustments for non-cash items, primarily the change in the fair value of the preferred stock tranche liability of $17.0 million, the upfront payment to acquire the license rights pursuant to the Queen’s University Agreement for $3.0 million, the upfront expense related to the Abeona CLN1 license agreement for $3.0 million, both of which were recorded as a component of research and development expenses, and stock-based compensation expense of $1.3 million.

For the three months ended March 31, 2021, our net cash used in operating activities of $22.0 million primarily consisted of a net loss of $32.0 million, primarily attributable to our spending on research and development expenses.

The net loss of $32.0 million was partially offset by adjustments for non-cash items, primarily the up-front license fee of $5.5 million to HHF related to the acquisition of TSHA-120 and stock-based compensation of $3.6 million.

For the three months ended March 31, 2020, our net cash used in operating activities of $1.7 million primarily consisted of a net loss of $5.4 million, primarily attributable to spending on research and development expenses.

The net loss of $5.4 million was partially offset by the upfront fee to acquire the license rights pursuant to the Queen’s University Agreement for $3.0 million.

Investing Activities

During the nine months ended September 30, 2020, investing activities used $3.0 million of cash attributable to the upfront fee paid pursuant to the Queen’s University Agreement.

During the three months ended March 31, 2021, investing activities used $0.5 million of cash attributable to capital expenditures related to computer and lab equipment.

No investing activities took place in the three months ended March 31, 2020.

Financing Activities

During the nine months ended September 30, 2020, financing activities provided $292.5 million of cash, which was primarily attributable to the receipt of $167.1 million in net proceeds from our initial public offering, $95.8 million in net proceeds from the sale of our Series B convertible preferred stock and $29.6 million in net proceeds from the sale of our Series A convertible preferred stock.

Contractual Obligations and Other Commitments

As of December 31, 2019, we did not have any commitments or contractual obligations.

In addition, we enter into agreements in the normal course of business with CROs, CMOs and other vendors for research and development services for operating purposes, which are generally cancelable upon written notice.

These payments are therefore not included in our contractual obligations herein.

We have not included milestone or royalty payments or other contractual payment obligations as the timing and amount of such obligations are unknown or uncertain, and are contingent upon the initiation and successful completion of future activities.

See Notes 4 and 11 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.

During the three months ended March 31, 2020, financing activities provided $18.0 million attributable to the net proceeds from the sale of our Series A convertible preferred stock.

No financing activities took place during the three months ended March 31, 2021.

Off-Balance Sheet Arrangements

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Critical Accounting Policies and Significant Judgments and Estimates

This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S.

generally accepted accounting principles, or U.S.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements.

In accordance with U.S.

GAAP, we evaluate our estimates and judgments on an ongoing basis, including those related to accrued expenses, the preferred stock tranche liability and stock-based compensation.

We base our estimates on historical experience, known trends and events, and various other factors that are 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 that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

We define our critical accounting policies as those accounting principles that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles.

While our significant accounting policies are more fully described in 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, we believe the following are the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments.

There were no material changes to our critical accounting policies that are disclosed in our audited financial statements for the period from September 20, 2019 (date of inception) through December 31, 2019 included in our final prospectus dated September 23, 2020, and filed with the SEC on September 25, 2020 pursuant to Rule 424(b)(4).

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, 2020 filed with the SEC on March 3, 2021.

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 financial statements.

Emerging Growth Company and Smaller Reporting Company Statu s

Financial Statements” in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our 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.

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 accou nting 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.

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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.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis