What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-10 compared with 2021-08-16 · 194 added, 239 removed, 338 unchanged (56% of the section changed)

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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, or NIH 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.

We anticipate dosing the first patient in that trial in the second half of 2021 and reporting biomarker data in the first half of 2022.

Further, we plan to advance four new undisclosed programs focused on neurodevelopmental disorders, genetic epilepsies and neurodegenerative diseases into preclinical development in 2021.

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.

In April, 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, and we anticipate clinical safety and functional MFM32 data for TSHA-120 from the highest dose cohort of 3.5x10 14 total vg in December 2021, where we believe continued clinically meaningful slowing of disease progression similar to that achieved with the lower dose cohorts would be considered confirmatory of disease modification.

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 clinical safety data and HEX A enzyme activity in plasma and cerebral spinal fluid, or CSF, for TSHA-101 in GM2 gangliosidosis in December 2021 , where Hex A enzyme activity level of at least 5% in plasma would be considered disease modifying based on natural history data.

Based on natural history data, 2% to 4% Hex A enzyme activity in plasma normalizes survival and significantly improves clinical phenotype of GM2 gangliosidosis.

We recently announced 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 expect preliminary clinical safety data for the first patient in history to be intrathecally dosed at 1.0x10 15 total vg with the first-generation construct by December 2021.

We expect completion of a next-generation construct for CLN7 by year-end 2021 with initiation of a planned pivotal clinical trial in 2022 using next-generation construct with reference to the human proof-of-concept clinical data generated from the first-generation construct.

We are also developing TSHA-118 for the treatment of CLN1 disease (one of the forms of Batten disease).

We intend to initiate a Phase 1/2 clinical trial in CLN1 disease by year-end 2021 and expect clinical safety and PPT1 enzyme activity data in the first half of 2022.

For Rett syndrome , we intend to submit an IND / CTA filing in November 2021 and initiate a Phase 1/2 clinical trial by year-end 2021 with preliminary clinical data expected by year-end 2022 .

We have a limited operating history.

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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.

We have funded our operations primarily 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.

In addition, we drew down $30.0 million in term loans on August 12, 2021.

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 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 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.

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 $73.0 million for the six months ended June 30, 2021 and $26.7 million for the six months ended June 30, 2020.

As of June 30, 2021, we had an accumulated deficit of $134.1 million.

Our net losses were $124.1 million for the nine months ended September 30, 2021 and $41.7 million for the nine months ended September 30, 2020.

As of September 30, 2021, we had an accumulated deficit of $185.3 million.

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

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continue to advance the preclinical and clinical development of our product candidates and preclinical and discovery programs;

conduct our ongoing clinical trials 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;

conduct our ongoing clinical trials of TSHA-101 and TSHA-120, as well as initiate and complete additional clinical trials TSHA-118, TSHA-102, TSHA-121 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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Recent Developments

TSHA-120 for Giant Axonal Neuropathy

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.

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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-limiting.

In the late-onset population, patients have poor quality of life but the disease is not life-

In early-onset disease, symptomatic treatments attempt to maximize physical development and minimize the rate of deterioration.

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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.

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 GAN patients, aged 3 to 21 years.

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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 correlate with more advanced disease severity and older age.

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 deteriorated.

Nocturnal hypoventilation and sleep apnea progressed over time, with sleep apnea worsening as ambulatory function

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.

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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 p atients 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 .

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.

To date we have up to eight years of robust data from this study.

Preclinical Data

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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.

T he 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 .

To date, 14 patients have been intrathecally dosed and ten 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.

The 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.

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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 transaminases.

We expect to report additional data from this trial in the second half of 2021 , including results from the highest dose cohort of 3.5x10 14 total vg.

We expect to report safety and MFM32 functional data from the highest dose cohort of 3.5x10 14 total vg in December 2021.

Bayesian Analysis of TSHA-120

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

As shown below, t he Bayesian efficacy analysis confirmed that TSHA-120 halted patients’ pre-treatment rate of decline when compared to individual historical data.

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.

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

As shown below, t he 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 approximately 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.

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, carried 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 injection 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, f urther 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.

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 approximately 85% probability of clinically meaningful slowing of disease and a virtually 100% probability of any slowing of disease.

Data from eleven GAN patients were analyzed for visual acuity via the Logarithm of the Minimum Angle of Resolution (LogMAR).

A dose-dependent trend towards stabilization of visual acuity, i.e., a slowed increase in LogMAR values, was observed

and appeared to be independent of visual acuity at the time of treatment.

This newly obtained GAN exploratory endpoint showed improvement in visual acuity as shown below.

Currently in the GAN program, we have up to six years of longitudinal data in individual patients and collectively 55-patient years of clinical safety and efficacy data from our ongoing clinical study with no drug-related serious adverse events, no signs of acute or subacute inflammation, no sudden sensory changes and no drug-related or persistent elevation of transaminases.

In September 2021, we submitted a request for an end-of-Phase meeting with an ex-US regulatory agency for TSHA-120 and have a preliminary meeting date in January 2022.

Additional regulatory submissions are expected by the end of 2021.

We anticipate safety and functional clinical data for TSHA-120 from the highest dose cohort of 3.5x10 14 total vg in GAN in December 2021, with continued clinically meaningful slowing of disease progression similar to that achieved with the lower dose cohorts would be considered confirmatory of disease modification.

TSHA-101 for GM2 Gangliosidosis

GM2 gangliosidosis, which comprises Tay-Sachs disease and Sandhoff disease, refers to a group of lysosomal storage disorders caused by accumulation of the GM2 ganglioside in the lysosomes of cells within the CNS.

Gangliosides are lipid components of cell membranes particularly abundant in the plasma membranes of neurons.

Accumulation of GM2 ganglioside is caused by a deficiency in the Hex A enzyme, which is responsible for hydrolysis, or breakdown, of the GM2 ganglioside.

This accumulation results in lysosomal rupture, leading to a poorly understood inflammatory cascade that leads to neuronal cell death and neurodegeneration.

The global incidence of GM2 gangliosidosis is approximately one per 150,000 live births.

Approximately 80% to

85% of patients are diagnosed with an infantile form of GM2 gangliosidosis, with the remainder diagnosed with a juvenile or early-adulthood form of the disease.

There are no approved therapies for the treatment of GM2 gangliosidosis, and care is generally palliative.

Children diagnosed with GM2 gangliosidosis appear normal at birth but experience rapid neurodegeneration, culminating in death before the age of four, and patients with juvenile GM2 gangliosidosis rarely survive beyond their mid-teens.

The estimated prevalence of GM2 gangliosidosis is 500 patients in the United States and European U nion.

The Hex A enzyme is a heterodimer composed of two subunits:

ß-hexosaminidase a (encoded in humans by the HEXA gene) and ß-hexosaminidase ß (encoded in humans by the HEXB gene).

GM2 gangliosidosis caused by a mutation of the HEXA gene is termed Tay-Sachs disease, while Sandhoff disease is caused by a mutation of the HEXB gene.

Tay-Sachs disease and Sandhoff disease result in clinically indistinguishable phenotypes for which there is no effective treatment.

As illustrated in the graphic below, in GM2 gangliosidosis, its most common and severe form, the disease is characterized by a lack of Hex A enzyme activity, while juvenile GM2 gangliosidosis is characterized by Hex A enzyme activity that is 0.5% to less than 2% of normal activity.

Adult-onset GM2 gangliosidosis patients have Hex A enzyme activity levels typically in the range of 2% to 4% of normal Hex A activity and may live a normal lifespan.

We believe that the “critical threshold” for normal hydrolysis of GM2 ganglioside is estimated to be 5% to 10% of normal Hex A activity.

We believe that successful gene therapy to treat Tay-Sachs disease or Sandhoff disease requires expression of the α and ß subunits in a 1:1 ratio to ensure that Hex A expression confers a therapeutic benefit.

An imbalanced expression of either subunit could result in the formation of a dysfunctional homodimer, or identical proteins, which would limit the efficacy of the therapy.

Several therapeutic approaches utilize single vectors encoding either the α or ß subunit, while other approaches have utilized multiple vectors carrying the HEXA and HEXB genes separately.

However, these approaches either fail to deliver the Hex A subunits in the appropriate ratio or require the simultaneous transduction of cells to achieve efficacy.

Similar to other lysosomal enzymes, Hex A is ubiquitously expressed and therefore concerns related to off-target effects or overexpression are limited.

In addition, Hex A is secreted from transduced cells and can be taken up by neighboring cells to correct their phenotype, making it possible to cure these diseases without the need to transduce every cell, a process referred to as cross-correction.

Studies suggest that restoring Hex A enzyme levels to approximately 10% of normal may result in complete phenotypic absence of the disease.

Our Solution:

We are developing TSHA-101, a neurodegenerative product candidate, for the treatment of GM2 gangliosidosis.

TSHA-101 is a bicistronic, or dual loci of transcription, HEXB P2A- HEXA transgene packaged into an AAV9 vector under the control of the CAG promoter.

We have designed TSHA-101 to link the human HEXA and HEXB genes, utilizing a cleavable peptide linker, to ensure that the expression of each the subunit occurs simultaneously at the appropriate 1:1 ratio.

This approach is designed to maximize the expression of Hex A enzyme while minimizing the required therapeutic dosage.

Because GM2 gangliosidosis is clinically well defined, we believe we can leverage that knowledge to develop TSHA-101 with a higher probability of clinical and regulatory success.

If approved, we believe that TSHA-101 could have a transformational impact on these severely underserved patients and their families.

As TSHA-101 is designed to secrete the Hex A enzyme from transduced cells, uptake of the enzyme by neighboring cells via cross-correction has the potential to result in therapeutic benefit independent of their transduction status.

In addition, we believe Hex A enzyme activity in the serum and CSF can serve as a potential biomarker to detect and help verify treatment effects on GM2 gangliosidosis during the early stages of clinical development.

We have received orphan drug designation and rare pediatric disease designation from the FDA and orphan drug designation from the European Commission for TSHA-101 for the treatment of GM2 gangliosidosis.

Based on natural history data, 2% to 4% Hex A enzyme activity in plasma normalizes survival and significantly improves the clinical phenotype of GM2 gangliosidosis.

We expect preliminary clinical safety data and HEX A enzyme activity in plasma and CSF for TSHA-101 in GM2 gangliosidosis in December 2021, where Hex A enzyme activity level of at least 5% would be considered disease modifying based on natural history data.

Due to severity of the disease and unmet medical need, we are currently assessing the need for a clinical trial of TSHA-101 in the United States to support a regulatory filing.

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.

The CLN7 program is currently in a Phase 1 clinical proof-of-concept trial run by UT Southwestern, and we expect the availability of preliminary clinical data for the first-generation construct by December 2021, including preliminary clinical safety data for the first patient in history to be intrathecally dosed at 1.0x10 15 total vg.

We expect completion of a next-generation construct by year-end 2021 with initiation of a planned pivotal trial in 2022 using the next-generation construct with reference to the human proof-of-concept clinical data from the first-generation construct.

The next-generation construct is expected to improve potency, safety profile, packaging efficiency and manufacturability over the first-generation construct.

In addition, we have provided a grant to Batten Hope to support patient awareness, disease education and newborn screening initiatives.

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 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, intrathecal (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) maintained 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.

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 900 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 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.

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.

There is currently an open IND for the CLN1 program.

We submitted an additional CTA filing for TSHA-118 and expect to initiate of a Phase 1/2 clinical trial by year-end 2021 and report preliminary clinical safety and PPT1 enzyme activity data in the first half of 2022.

TSHA-102 for Rett Syndrome

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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.

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 (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 mouse model survival by 56% via IT delivery.

In contrast, the unregulated miniMECP2 gene transfer failed to significantly extend knockout mouse model survival at either dose tested.

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.

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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).

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.

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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.

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.

TSHA-102 demonstrated regulated expression in different regions of the brain.

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 demonstrating 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, initiate a Phase 1/2 clinical trial by the end of 2021 and report clinical data by the end of 2022.

TSHA-118 for CLN1 Disease

The estimated prevalence of CLN1 disease is 900 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.

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.

Juvenile-onset CLN1 disease patients present between the 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.

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.

There are currently two natural history studies ongoing to understand more about the disease.

One is an observational study in Hamburg , Germany to assess the natural history of CLN diseases, including CLN1 disease, as part of the international DEM-CHILD database.

The second study is a combined retrospective and prospective study being run by the University of Rochester to characterize the age-at-onset of major symptoms and the relationship between age and severity.

As shown below, there are three different forms of the disease which are categorized based on the age of onset of first symptom :

infantile, late infantile, and juvenile.

As demonstrated below, symptomatology is closely related to the underlying phenotype.

Preclinical Studies

In third-party preclinical studies, evidence of improvements in behavioral outcomes, survival and restoration of PPT1 enzymatic activity was observed, which we believe supports continued development of TSHA-118.

In these studies, TSHA-118 was administered at a dose of 7.0 x 10 11 vg/mouse via intrathecal lumbar puncture to a mouse model of CLN1 disease, selected for its ability to recapitulate the severity of the human disease.

The results from this study showed that intrathecal treatment with TSHA-

118 significantly extended survival of CLN1 knockout mice, with enhanced survival and behavioral outcomes correlating with treatment at younger ages and higher doses.

As illustrated in the figure below, mice treated with TSHA-118 at four weeks or twelve weeks of age had a mean survival of 18.7 or 16.7 months, respectively, compared to approximately 8 months survival for untreated CLN1 knockout mice.

Preclinical studies suggested that early intervention is key to better outcomes in CLN1 disease.

In CLN1 knockout mice, higher doses of TSHA-118 and earlier intervention mediated stronger rescue of these mice, as demonstrated below.

In addition, TSHA-118-treated CLN1 knockout mice had sustained preservation of motor function as demonstrated below.

PPT1 enzyme activity in serum was measured at selected timepoints following TSHA-118 delivery by intrathecal administration at four, twenty or twenty-six weeks of age.

Serum was collected either at four months post-treatment or at the humane endpoint.

As shown in the figure below, heterozygous mice had approximately 50% of normal serum PPT1 activity compared to wild-type mice.

In contrast, treatment of CLN1 knockout mice with TSHA-118 resulted in supraphysiological levels of active PPT1 in the serum in comparison to wild-type and heterozygous mice.

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 patients 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, initiate a Phase 1/2 clinical trial by the end of 2021 and report biomarker data in the first half of 2022.

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 support 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.

Improvement in MTC01, which is part of the assembled COX1 complex, was dose dependent in the treated mice as demonstrated below.

In addition, there was a correlation between MTCO1 assembly and COX activity , as demonstrated below.

When examining long-term rescue, TSHA-104 restored elevation of blood lactate on exhaustive exercise in the SURF1 knock-out mice.

Natural H istory S tudy D ata

A detailed retrospective chart review natural history study published in 2013 included 44 cases with SURF1 deficiency.

Of the 36 deceased patients with known causes of death, the cause was central respiratory failure in 80% of the patients.

Seven patients survived beyond 10 years of age.

Of these patients, six had neurological symptoms such as ataxia and motor developmental delay.

Of note, gastrointestinal symptoms were not the prominent presenting feature in these cases.

Furthermore, these six patients also did not experience developmental regression.

Literature searches identified 98 SURF1-deficient cases with available survival data, which were pooled together with the data from the 44 cases.

The Kaplan-Meier analysis below compared the survival experience of 142 SURF1-deficient cases to two other groups with Leigh syndrome due to nuclear gene mutations (56 with LRPPRC deficiency and 63 with nuclear-encoded complex I-deficient Leigh syndrome/“Leigh- like” disease).

As indicated in the survival curve, the disease is progressive with significant morbidity, involves impairment in development and cognition causes seizures and results in a median survival length of 5.4 years.

Exploratory Study to Examine COX1 Activity and Clinical Phenotype

The underlying pathophysiology of SURF1 deficiency is linked to the deficiency of mitochondrial activity, which is centered around the formation of a COX complex and the resulting activity of COX1.

We completed an exploratory study that examined the fibroblasts from various patients who were categorized as typical or severe Leigh syndrome versus patients who had a milder presentation, of Leigh syndrome to examine the difference in COX activity and the relevance of COX1 as a biomarker for the disease.

As demonstrated below, preliminary data indicated that mild patients had slightly higher COX activity than severe patients, which suggests that a small increase in cytochrome oxidase activity could benefit patients.

In addition, a reduction in COX activity correlated with disease worsening, as indicated by patient fibroblast data below.

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.

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.

Recently obtained pharmacology data demonstrated improvement in survival, and respiratory and motor functions in disease relevant mouse models.

Finally, preliminary data from a GLP toxicology study in non-human primates demonstrated no adverse findings at the highest dose tested suggesting that the miRARE platform is successfully downregulating MECP2 expression to within normal physiological levels.

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.

We intend to submit an IND / CTA for TSHA-102 in November 2021, initiate a Phase 1/2 clinical trial by the end of 2021 and expect to report preliminary clinical data by the end of 2022.

TSHA-105 for SLC13A5 Deficiency

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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

mutations in the SLC13A5 gene, which codes for a sodium dependent citrate transporter, or NaCT, that is largely expressed in the brain and liver.

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.

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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.

These results suggest that gene replacement therapy can restore citrate transport and that citrate may be used as a biomarker for the disease and following treatment.

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 seizures and associated deaths 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.

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, neonatal ICV administration of TSHA-103 rescued abnormal EEG.

TSHA-106 for Angelman Syndrome

We are developing TSHA-106 for the treatment of Angelman syndrome, a neurodevelopmental disorder caused by a maternal deficiency of the UBE3A gene.

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.

Angelman Syndrome Program – Two Approaches

We are pursuing two treatment strategies for the treatment of Angelman syndrome, a neurodevelopmental disorder caused by a maternal deficiency of the UBE3A gene.

Angelman syndrome is characterized by profound developmental delay, ataxia and gait disturbance, sleep disorder, seizures, heightened anxiety and aggression and severe speech impairments.

Angelman syndrome affects approximately one per 12,000 to 20,000 patients worldwide.

The estimated prevalence of Angelman syndrome is 55,000 patients in

the United States and European Union.

There are currently no approved therapies for the treatment of Angelman syndrome.

The estimated prevalence of Angelman syndrome is 55,000 patients in the United States and European Union.

There are currently no approved treatments for Angelman syndrome.

Current treatment focuses on supportive care and managing medical and developmental issues.

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There are two approaches to treat this genetic abnormality.

The first is to replace the maternal chromosome, or the maternal allele.

The second approach is to use a silencing mechanism, or a small interfering RNA, to silence the noncoding strip of RNA that binds to the paternal allele and causes silencing of the gene.

We are examining both approaches.

We are developing TSHA-106 to target the UBE3A -ATS transcript through shRNA knock-down with an AAV-based strategy to achieve broad distribution of the shRNA expression cassette across the entire CNS following a single intrathecal dose.

Our UBE3A gene replacement therapy is a cerebrospinal fluid-delivered AAV vector enabling dual isoform UBE3A expression for the treatment of Angelman syndrome.

The novel construct, which was originally developed in the laboratories of Dr.

Ben Philpot and Taysha’s Chief Scientific Advisor, Dr.

Steven Gray, packages both short and long isoforms of UBE3A into a single viral vector, which is expected to confer significant advantages over approaches that express only one of the isoforms.

Expression of the short and long isoforms occurs in a 3:1 ratio which recapitulates natural human UBE3A isoform levels.

In preclinical mouse models of Angelman syndrome, AAV-mediated UBE3A gene replacement recapitulated endogenous UBE3A isoform expression and UBE3A subcellular expression in neurons.

Anatomical and behavioral phenotypes, including nest building, motor performance and seizure phenotypes, were recovered following treatment, providing proof-of-concept preclinical data supporting further study of UBE3A gene replacement therapy as a potentially safe and effective treatment for Angelman syndrome.

These preclinical data were published in the Journal of Clinical Investigation Insight ( JCI Insight ) in October 2021.

Our other approach is a vectorized knockdown approach to unsilence the paternal copy of the UBE3A gene by targeting the antisense transcript responsible for silencing the gene.

Our gene therapy targets the UBE3A -ATS transcript through shRNA knock-down with an AAV-based strategy to achieve broad distribution of the shRNA expression cassette across the entire CNS following a single intrathecal dose.

We believe both the gene replacement and RNA-mediated knockdown strategies position Taysha as a world-leader in the discovery of treatments for Angelman syndrome.

License Agreements

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

Our financial results for the six months ended June 30, 2021 were not impacted by COVID-19.

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 six months ended June 30, 2021.

Our financial results for the nine months ended September 30, 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, the efficacy, availability and adoption of vaccines, both domestically and globally, and the impact of new variants or mutations of the coronavirus, such as the Delta variant.

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.

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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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 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.

We also anticipate that our general and administrative expenses will increase 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, investor and public relations activities and other expenses associated with operating as a public company.

We anticipate the additional costs for these services will substantially increase our general and administrative expenses by between $6.0 million and $7.0 million on an annual basis, including the cost of director and officer liability insurance.

We anticipate the additional costs for these services will increase our general and administrative expenses by between $6.0 million and $7.0 million on an annual basis, including the cost of director and officer liability insurance.

Results of Operations

Results of Operations for the Three Months Ended June 30, 2021 and for the Three Months Ended June 30, 2020

The following table summarizes our results of operations for the three months ended June 30, 2021 and the three months ended June 30, 2020 (in thousands):

Results of Operations for the Three Months ended September 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended September 30, 2021 and 2020 (in thousands):

For the Three Months

Ended June 30, 2021

Ended September 30, 2021

For the Three Months

Ended June 30, 2020

Ended September 30, 2020

Operating expenses:

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Other income (expense):

Change in fair value of preferred stock tranche liability

Interest income

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Research and Development Expenses

Research and development expenses were $30.6 million for the three months ended June 30, 2021, compared to $3.1 million for the three months ended June 30, 2020.

The $27.5 million increase was primarily attributable to an increase of $10.3 million of expenses incurred in research and development manufacturing and other raw material purchases, which included cGMP batches produced by Catalent and UT Southwestern.

Research and development expenses were $39.5 million for the three months ended September 30, 2021, compared to $11.1 million for the three months ended September 30, 2020.

The increase of approximately $28.4 million was primarily attributable to an increase of $14.5 million of expenses incurred in research and development manufacturing and other raw material purchases, which included cGMP batches produced by Catalent and UT Southwestern.

We incurred an increase in employee compensation expenses of $10.7 million, which included $1.9 million of non-cash stock-based compensation, and $4.9 million in third-party research and development expenses, which includes clinical trial CRO activities, GLP toxicology studies, and consulting for regulatory and clinical studies.

This was partially offset by a decrease in licensing fees of $1.7 million.

General and Administrative Expenses

General and administrative expenses were $10.1 million for the three months ended June 30, 2021, compared to $0.9 million for the three months ended June 30, 2020.

General and administrative expenses were $11.2 million for the three months ended September 30, 2021, compared to $4.0 million for the three months ended September 30, 2020.

The increase of approximately $7.2 million was primarily attributable to $4.3 million of incremental compensation expense, which included $1.8 million of non-cash stock-based compensation.

We also incurred an increase of $4.5 million in professional fees related to legal, insurance, investor relations/communications, accounting, personnel recruiting and patient advocacy activities.

Results of Operations for the Six Months Ended June 30, 2021 and for the Six Months Ended June 30, 2020

The following table summarizes our results of operations for the six months ended June 30, 2021 and the six months ended June 30, 2020 (in thousands):

For the Six Months

Ended June 30, 2021

For the Six Months

Ended June 30, 2020

We also incurred an increase of $2.9 million mainly in professional fees related to legal, insurance, investor relations/communications, accounting, personnel recruiting, market research, and patient advocacy activities.

Results of Operations for the Nine Months ended September 30, 2021 and 2020

The following table summarizes our results of operations for the nine months ended September 30, 2021 and 2020 (in thousands):

For the Nine Months

Ended September 30, 2021

For the Nine Months

Ended September 30, 2020

Operating expenses:

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Research and Development Expenses

Research and development expenses were $54.5 million for the six months ended June 30, 2021, compared to $8.6 million for the six months ended June 30, 2020.

Research and development expenses were $94.0 million for the nine months ended September 30, 2021, compared to $19.6 million for the nine months ended September 30, 2020.

The $74.4 million increase was primarily attributable to an increase of $29.7 million of expenses incurred in research and development manufacturing and other raw material purchases, which included cGMP batches produced by Catalent and UT Southwestern.

We also incurred an increase in employee compensation and expenses of $24.4 million, which included $5.7 million of non-cash stock-based compensation.

License fees increased by $3.0 million due to the acquisition of exclusive worldwide rights to TSHA-120, for the treatment of GAN.

We also incurred an increase of $8.0 million of third-party research and development consulting fees, primarily related to GLP toxicology studies and clinical study CRO activities, and $4.7 million in consulting for regulatory and clinical studies.

Finally, sponsored research agreement expenses increased by $1.2 million.

We also incurred an increase of $20.3 million of third-party research and development consulting fees, primarily related to GLP toxicology studies, clinical study CRO activities, and consulting for regulatory and clinical studies.

General and Administrative Expenses

General and administrative expenses were $18.4 million for the six months ended June 30, 2021, compared to $1.0 million for the six months ended June 30, 2020.

General and administrative expenses were $29.5 million for the nine months ended September 30, 2021, compared to $5.0 million for the nine months ended September 30, 2020.

The increase of approximately $24.5 million was primarily attributable to $13.2 million of incremental compensation expense, which included $6.2 million of non-cash stock-based compensation.

We also incurred an increase of $7.0 million in professional fees related to legal, insurance, investor relations/communications, accounting, personnel recruiting and patient advocacy activities and an increase is $1.5 million in other expenses.

We also incurred an increase of $11.3 million in professional fees related to legal, insurance, investor relations/communications, accounting, personnel recruiting, market research and patient advocacy activities.

Other Income (Expense)

Interest Expense

Interest expense for the three and nine months ended September 30, 2021 primarily consists of interest expense incurred under the Term Loan Agreement (as defined below).

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 convertible preferred stock financing at an original issuance price of $17.00 per share on July 2, 2020, certain Series A 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.

convertible preferred stock.

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

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

As of June 30, 2021, we had cash and cash equivalents of $197.4 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.

As of September 30, 2021, we had cash, cash equivalents and restricted cash of $191.4 million.

We have funded our operations primarily 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.

Specifically, between March and July 2020, we closed on the sale of an aggregate of 10,000,000 shares of Series A convertible preferred stock for gross proceeds of $30.0 million.

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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.

Assuming full access to the $100.0 million in term loans under the Term Loan Agreement we entered into on August 12 , 2021, we expect we will be able to fund our operating expenses and capital requirements into the second half of 2023 .

We intend to devote our existing cash and cash equivalents to the clinical and preclinical development of our product candidates.

We have based this estimate on assumptions that may prove to be imprecise, and we could utilize our available capital resources sooner than we expect.

We believe that our existing cash and cash equivalents, along with full access to the term loan facility, will enable us to fund our operating expenses and capital requirements into second half of 2023.

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-101, TSHA-118, TSHA-102, TSHA-104, and TSHA-120 and any current and future product candidates that we advance;

the scope, progress, costs and results of discovery, preclinical development, laboratory testing and clinical trials for TSHA-101, TSHA-118, TSHA-102, 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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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, such as the Delta variant .

While the potential economic impact brought by, and the duration of, the COVID-19 pandemic 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 market 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 six months ended June 30, 2021 and 2020 (in thousands):

For the Six Months Ended June 30, 2021

For the Six Months Ended June 30, 2020

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

For the Nine Months Ended September 30,

Net cash used in operating activities

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Net cash provided by financing activities

Net change in cash and cash equivalents

Net change in cash, cash equivalents and restricted cash

Operating Activities

For the six months ended June 30, 2021, our net cash used in operating activities of $44.9 million primarily consisted of a net loss of $73.0 million, primarily attributable to our spending on research and development expenses.

The net loss of $73.0 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 $8.1 million.

The $73.0 million net loss was also partially offset by a $14.1 million source of cash provided by operating assets and liabilities, primarily resulting from an increase in accounts payable and accrued expenses.

For the six months ended June 30, 2020, operating activities used $4.2 million of cash.

Net cash used in operating activities for the six months ended June 30, 2020 was primarily attributable to a $26.7 million net loss and offset by $20.0 million of non-cash items, primarily driven by a change in fair value of our preferred stock tranche liability of $17.0 million liability related to the issuance of Series A convertible preferred stock and the upfront payment to acquire the license rights pursuant to the Queen’s University Agreement for $3.0 million, which was recorded as a component of research and development expenses.

The $26.7 million net loss was also partially offset by a $2.5 million source of cash provided by operating assets and liabilities, primarily resulting from an increase 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.

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.

Investing Activities

During the six months ended June 30, 2021, investing activities used $9.0 million of cash attributable to the up front 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.

During the six months ended June 30, 2020, investing activities used $3.0 million of cash attributable to the upfront payment to acquire the license rights pursuant to the Queen’s University Agreement of $3.0 million.

During the nine months ended September 30, 2021, investing activities used $13.0 million of cash primarily attributable to the up- front 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.

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

Financing Activities

During the six months ended June 30, 2020, financing activities provided $18.4 million of cash, which was primarily attributable to the issuance of 6,200,000 shares of our Series A convertible preferred stock in exchange for gross proceeds of $18.6 million, net of the payment of issuance costs of approximately $0.3 million.

In January 2020, we also entered into two secured promissory notes with a related party, our President and Chief Executive Officer, RA Session II, for an aggregate of $1.67 million.

During March 2020, we repaid $1.65 million of the notes.

The remaining balance of approximately $28,000 was repaid in July 2020.

No financing activities took place during the six months ended June 30, 2021.

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.

During the nine months ended September 30, 2020, financing activities provided $292.5 million of cash, which was primarily attributable to the receipt of $167.2 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.

Off-Balance Sheet Arrangements

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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.

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.

17 unchanged sentences

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