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Item 7. Management’s Discussion and Analysis

2022-03-31 compared with 2021-03-03 · 99 added, 67 removed, 231 unchanged (42% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes.

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 CNS in both rare and large patient populations.

We were founded in partnership with UT Southwestern to develop and commercialize transformative gene therapy treatments.

Together with UT Southwestern, we are advancing a deep and sustainable product portfolio of 19 gene therapy product candidates, with exclusive options to acquire four additional development programs at no cost.

We are a patient-centric gene therapy company focused on developing and commercializing AAV-based gene therapies for the treatment of monogenic diseases of the central nervous system, or CNS, in both rare and large patient populations.

We were founded in partnership with The University of Texas Southwestern Medical Center, or UT Southwestern, to develop and commercialize transformative gene therapy treatments.

Together with UT Southwestern, we are advancing a deep and sustainable product portfolio of gene therapy product candidates, with exclusive options to acquire several additional development programs at no cost.

By combining our management team’s proven experience in gene therapy drug development and commercialization with UT Southwestern’s world-class gene therapy research capabilities, we believe we have created a powerful engine to develop transformative therapies to dramatically improve patients’ lives.

A Phase 1/2 clinical trial of TSHA-101 was initiated by Queen’s University under a 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 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 in Lafora disease, TSHA-111-MALIN in 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 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.

In March 2022, we announced strategic pipeline prioritization initiatives focused on GAN and Rett syndrome.

We will conduct small proof-of-concept studies in CLN1 disease and SLC13A5 deficiency.

Development of the CLN7 program will continue in collaboration with existing partners with future clinical development to focus on the first-generation construct.

All other research and development activities will be paused to increase operational efficiency.

In April 2021, we acquired exclusive worldwide rights to TSHA-120, a clinical-stage, intrathecally dosed AAV9 gene therapy program for the treatment of giant axonal neuropathy, or GAN.

A Phase 1/2 clinical trial of TSHA-120 is being conducted by the National Institutes of Health, or NIH, under an accepted investigational new drug application, or IND.

We reported clinical safety and functional MFM32 data from this trial for the highest dose cohort of 3.5x10 14 total vg in January 2022, where we saw continued clinically meaningful slowing of disease progression similar to that achieved with the lower dose cohorts, which we considered confirmatory of disease modification.

For Rett syndrome, we submitted a CTA filing in November 2021 and announced initiation of clinical development of TSHA-102 under a Clinical Trial Application (CTA) approved by Health Canada in March 2022.

We expect to report preliminary clinical data for TSHA-102 in Rett syndrome by year-end 2022.

We recently executed an exclusive option from UT Southwestern to license worldwide rights to a clinical-stage CLN7 program.

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

Development of the CLN7 program will continue in collaboration with existing partners with future clinical development to focus on the first-generation construct.

We will conduct small proof-of-concept studies in CLN1 disease and SLC13A5 deficiency that we believe can further validate our platform.

We plan to initiate clinical development on TSHA-105 for the treatment of SLC13A5 in 2022.

We have a limited operating history.

Since our inception, our operations have focused on organizing and staffing our company, business planning, raising capital and entering into collaboration agreements for conducting preclinical research and development activities for our product candidates.

All of our lead product candidates are still in the clinical or preclinical development stage.

All 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.

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 $30.0 million and $10.0 million in term loans on August 12, 2021 and December 29, 2021, respectively.

On August 12, 2021, or the Closing Date, we entered into a Loan and Security Agreement, or the Term Loan Agreement, with the lenders party thereto from time to time, or the Lenders and Silicon Valley Bank, as administrative agent and collateral agent for the Lenders, or the Agent.

The Term Loan Agreement provides for (i) on the Closing Date, $40.0 million aggregate principal amount of term loans available through December 31, 2021, (ii) from January 1, 2022 until September 30, 2022, an additional $20.0 million term loan facility available at the Company’s option upon having three distinct and active clinical stage programs, determined at the discretion of the Agent, at the time of draw, (iii) from October 1, 2022 until March 31, 2023, an additional $20.0 million term loan facility available at our option upon having three distinct and active clinical stage programs, determined at the discretion of the Agent, at the time of draw and (iv) from April 1, 2023 until December 31, 2023, an additional $20.0 million term loan facility available upon approval by the Agent and the Lenders, or, collectively, the Term Loans.

We drew $30.0 million in term loans on the Closing Date and drew an additional $10.0 million term loan on December 29, 2021.

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 $60.0 million for the year ended December 31, 2020 and $1.1 million for the period from September 20, 2019 (date of inception) through December 31, 2019.

As of December 31, 2020, we had an accumulated deficit of $61.1 million.

Our net losses were $174.5 million for the year ended December 31, 2021 and $60.0 million for the year ended December 31, 2020.

As of December 31, 2021, we had an accumulated deficit of

$ 235.6 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 clinical trial of TSHA-101, 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, TSHA-102, TSHA-118, TSHA-120 and TSHA-121, as well as initiate and complete additional clinical trials of TSHA-105 and any other current and future product candidates that we advance;

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

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scale up our clinical and regulatory capabilities;

manufacture 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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In connection with the entry into the UT Southwestern Agreement, we issued to UT Southwestern 2,179,000 shares of our common stock.

We are aware that UTSW has sold all such shares as of the date of this Annual Report on Form 10-K.

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.

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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.

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 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.

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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.

In December 2021 a regulatory milestone was triggered in connection with this agreement and therefore we recorded $3.0 million within research and development expenses in the consolidated statements of operations for the year ended December 31, 2021.

The milestone fee was paid in January 2022.

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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employee-related expenses, including salaries, bonuses, benefits, stock-based compensation, other related costs for those employees involved in research and development efforts;

external research and development expenses incurred under agreements with consultants, CROs, investigative sites and consultants to conduct our preclinical studies;

costs related to manufacturing material for our preclinical studies and clinical trials, including fees paid to CMOs;

license maintenance fees and milestone fees incurred in connection with various license agreements;

external research and development expenses incurred under agreements with consultants, contract research organizations, or CROs, investigative sites and consultants to conduct our preclinical studies;

costs related to manufacturing material for our preclinical studies and clinical trials, including fees paid to contract manufacturing organizations, or CMOs;

laboratory supplies and research materials;

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Research and development activities are central to our business model.

We have historically not tracked 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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the ability to manufacture of our product candidates;

regulators 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;

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;

the efficacy and safety profile of our product candidates.

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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 year ended December 31, 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.

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 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 Year Ended December 31, 2020 and the Period from September 20, 2019 (date of inception) through December 31, 2019

The following table summarizes our results of operations for the year ended December 31, 2020 and the period from September 20, 2019 (date of inception) through December 31, 2019 (in thousands):

September 20, 2019

(date of inception)

through December

Results of Operations for the Year Ended December 31, 2021 and 2020

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

Ended December 31,

Operating expenses:

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Loss from operations

Other expense:

Other income (expense):

Change in fair value of preferred stock tranche liability

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Research and Development Expenses

Research and development expenses were $31.9 million for the year ended December 31, 2020, compared to $1.0 million for the period from September 20, 2019 (date of inception) through December 31, 2019.

The $30.9 million increase was primarily attributable to $10.0 million of expenses recognized pursuant to the Abeona CLN1 and Rett IP License Agreements, $6.8 million pursuant to the Queen’s University Agreement, which included $3.8 million related to the manufacture of clinical trial materials and a $3.0 million licensing fee.

Additionally, we incurred an increase of $3.2 million related to the UT Southwestern Agreement and $1.7 million in other sponsored research agreements for our various product candidates.

Additionally, we incurred $2.9 million in research and development manufacturing and other raw material purchases, which included a $1.7 million cell line licensing fee.

We also incurred $1.6 million for regulatory and clinical consulting, $1.0 million for all other research and development consulting fees including technical operations support, and employee compensation and benefits expenses of $3.1 million, which included $1.2 million of non-cash stock-based compensation.

All other spending for research and development activities totaled $0.6 million.

Research and development expenses were $131.9 million for the year ended December 31, 2021, compared to $31.9 million for the year ended December 31, 2020.

The $100.0 million increase was primarily attributable to an increase of $38.3 million of expenses

incurred in research and development manufacturing and other raw material purchases, which included cGMP batches produced by Catalent and UT Southwestern.

We also incurred an increase in employee compensation and expenses of $32.7 million, which included $7.1 million of non-cash stock-based compensation, due to an increase in the employee headcount in the research and development function.

We also incurred an increase of $29.0 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 $11.1 million for the year ended December 31, 2020, compared to $0.1 million for the period from September 20, 2019 (date of inception) through December 31, 2019.

The increase of approximately $11.0 million was

primarily attributable to $5.6 million of compensation and benefits related to new hires, which included $2.2 million of non-cash stock-based compensation.

Additionally, we incurred $2.1 million in consulting fees, which included patient advocacy consulting fees and personnel recruiting expenses.

We also incurred $1.

8 million of professional fees, which included $1.

1 million in legal expenses related to general corporate matters and $0.7 million in accounting and auditing fees.

Finally, we incurred $ 1.

0 million related to insurance expenses and $0.5 million of marketing expenses and other general administrative expenses.

General and administrative expenses were $41.3 million for the year ended December 31, 2021, compared to $11.1 million for the year ended December 31, 2020.

The increase of approximately $30.2 million was primarily attributable to $16.3 million of incremental compensation expense, which included $7.7 million of non-cash stock-based compensation, due to increases in employee headcount.

We also incurred an increase of $13.9 million in professional fees related to legal, insurance, investor relations/communications, accounting, personnel recruiting, market research and patient advocacy activities.

Other Expense

Interest Expense

Interest expense for the year ended December 31, 2021 primarily consisted of interest expense incurred under the Term Loan Agreement.

Interest Income

Interest income for the year ended December 31, 2021 primarily consisted of interest earned on our savings account.

Change in Fair Value of Preferred Stock Tranche Liability

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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.

Liquidity and Capital Resources

Sources of Liquidity

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

As of December 31, 2021, we had cash and cash equivalents of $149.1 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.

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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In September 2020, we raised gross proceeds of $181.0 million in our initial public offering.

We drew $30.0 million in term loans on the Closing Date and an additional $10.0 million in term loans on December 29, 2021.

The loan repayment schedule provides for interest only payments until August 31, 2024, followed by

consecutive monthly payments of principal and interest.

All unpaid principal and accrued and unpaid interest with respect to each term loan is due and payable in full on August 1, 2026.

On October 5, 2021, we filed a shelf registration statement on Form S-3 with the SEC in relation to the registration of common stock, preferred stock, debt securities, warrants and units or any combination thereof up to a total aggregate offering price of $350.0 million.

We also simultaneously entered into a Sales Agreement, or the Sales Agreement with SVB Leerink LLC and Wells Fargo Securities, LLC, or the Sales Agents, pursuant to which we may issue and sell, from time to time at our discretion, shares of our common stock having an aggregate offering price of up to $150.0 million through the Sales Agents.

In March 2022, we amended the Sales Agreement to, among other things, include Goldman Sachs & Co.

LLC as an additional Sales Agent.

As of December 31, 2021, no shares of common stock have been issued and sold pursuant to the Sales Agreement.

Funding Requirements

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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.

Furthermore, we expect to incur additional costs associated with operating as a public company.

We anticipate that we will need substantial additional funding in connection with our continuing operations.

If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital requirements into 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.

As of December 31, 2021, our material cash requirements consisted of $29.2 million in total lease payments under our noncancelable leases for equipment, laboratory space and office space entered into in 2021 and $22.9 million in total lease payments under our noncancelable lease for manufacturing space entered into in 2020.

These leases are described in further detail in Note 11 to our audited consolidated financial statements located in Part IV, Item 15 of this Annual Report on Form 10-K.

Our most significant purchase commitments consist of approximately $12.0 million related to the build-out of our cGMP manufacturing facility and $8.1 million in cancellable purchase obligations to our CROs.

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 the fourth quarter of 2023.

This estimate reflects that our strategic prioritization efforts to improve operating efficiency, including pausing development of TSHA-101 and the reduction of our headcount by approximately 35% in March 2022.

We will require additional capital to fund the research and development of our product candidates, to fund our manufacturing activities, to fund precommercial activities of our programs and for working capital and general corporate purposes.

Because of the numerous risks and uncertainties associated with research, development and commercialization of biological products, we are unable to estimate the exact amount of our operating capital requirements.

Our future funding requirements will depend on many factors, including, but not limited to:

the scope, progress, costs and results of discovery, preclinical development, laboratory testing and clinical trials for TSHA-101, TSHA-118, TSHA-102, TSHA-104 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-102, TSHA-105, TSHA-118, TSHA-120, TSHA-121 and any current and future product candidates that we advance;

our ability to access sufficient additional capital on a timely basis and on favorable terms, including with respect to our term loan facility with Silicon Valley Bank;

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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Our commercial revenues, if any, will be derived from sales of product candidates that we do not expect to be commercially available in the near term, if at all.

Accordingly, we will need to continue to rely on additional financing to achieve our business objectives.

Accordingly, we will need to continue to rely on additional financing, including the remaining tranches of our Term Loan Facility, to achieve our business objectives.

Adequate additional financing may not be available to us on acceptable terms, or at all.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the terms of these equity securities or this debt may restrict our ability to operate.

Any future debt financing and equity financing, if available, may involve agreements that include covenants limiting and restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, entering into profit-sharing or other arrangements or declaring dividends.

The Term Loan Agreement contains negative covenants, including, among other things, restrictions on indebtedness, liens investments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions.

Any future additional debt financing and equity financing, if available, may involve agreements that include covenants limiting and restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, entering into profit-sharing or other arrangements or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.

We are continuing to assess the effect that the COVID-19 pandemic may have on our business and operations.

The extent to which COVID-19 may impact our business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the duration and effect of business disruptions and the short-term effects and ultimate effectiveness of the travel restrictions, quarantines, social distancing requirements and business closures in the United States and other countries to contain and treat the disease and the availability, timing and effectiveness of a vaccine, 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 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.

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 and Omicron variants.

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 year ended December 31, 2020 and the period from September 20, 2019 (date of inception) through December 31, 2019 (in thousands):

September 20, 2019

(date of inception)

through December

The following table shows a summary of our cash flows for the years ended December 31, 2021 and 2020 (in thousands):

For the Year Ended December 31,

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 year ended December 31 , 2021, our net cash used in operating activities of $117.0 million primarily consisted of a net loss of $174.5 million, primarily attributable to our spending on research and development expenses.

The net loss of $60.0 million was partially offset by $29.4 million in adjustments for non-cash items, primarily due to the change in the fair value of the preferred stock tranche liability of $17.0 million and stock-based compensation expense of $3.4 million, as well as the upfront payment to acquire the license rights pursuant to the Queen’s University Agreement for $3.0 million, and the upfront payments related to the Abeona CLN1 and Rett Agreements for $3.0 million each, all of which were recorded as a component of research and development expenses and are reported as investing cash outflows.

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 net loss of $174.5 million was partially offset by $28.8 million in adjustments for non-cash items, primarily due to stock-based compensation expense of $18.2 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, and the regulatory milestone fee of $3.0 million due to Abeona in connection with the CLN1 Agreement, as well as other license fees of $1.3 million.

The $174.5 million net loss was also partially offset by a source of cash of $28.7 million from the change in our operating assets and liabilities, primarily resulting from an increase in accounts payable and accrued expenses.

For the year ended December 31 , 2020, our net cash used in operating activities of $30.7 million primarily consisted of a net loss of $60.0 million, primarily attributable to our spending on research and development expenses.

pursuant to the Queen’s University Agreement for $3.0 million, and the upfront payments related to the Abeona CLN1 and Rett Agreements for $3.0 million each, all of which were recorded as a component of research and development expenses and were reported as investing cash outflows.

Investing Activities

During the year ended December 31, 2021, investing activities used $21.6 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 year ended December 31, 2020, investing activities used $9.1 million of cash primarily attributable to the upfront fees paid pursuant to the Queen’s University Agreement, the Abeona CLN1 Agreement and the Abeona Rett Agreement .

Financing Activities

During the year ended December 31, 2021, financing activities provided $39.1 million of cash, which was attributable to the receipt of $40.0 million net proceeds from our Term Loan with Silicon Valley Bank, partially offset by $0.4 million of cash paid for costs related to our filing of a shelf registration statement on Form S-3 and $0.5 million in other financing activities.

During the year ended December 31, 2020, financing activities provided $291.1 million of cash, which was primarily attributable to the receipt of $165.9 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 $29.4 million in net proceeds from the sale of our Series A convertible preferred stock.

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When evaluating the adequacy of the accrued liabilities, we analyze progress of the studies, including the phase or completion of events, invoices received and contracted costs.

Research and development costs primarily consist of payroll, stock-based compensation, certain manufacturing costs, laboratory costs and other supplies, and the cost to acquire third-party licenses.

Research and development costs primarily consist of payroll, stock-based compensation, clinical trial expense, certain manufacturing costs, laboratory costs and other supplies, and the cost to acquire third-party licenses.

Costs incurred in obtaining technology licenses through asset acquisitions are charged to research and development expense if the licensed technology has not reached technological feasibility and has no alternative future use.

To date, we have not experienced significant changes in our estimates of accrued research and development liabilities after a reporting period.

However, due to the nature of estimates, there is no assurance that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical studies and other research activities.

Stock‑Based Compensation

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Due to the lack of historical exercise history, the expected term of our stock options is determined using the “simplified” method.

The risk-free interest rate is

determined by reference to the U.S.

The risk-free interest rate is determined by reference to the U.S.

Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

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The Company expenses stock-based compensation related to stock options, RSAs and RSUs over the requisite service period using the straight-line method.

All stock-based compensation costs are recorded in research and development expense or general and administrative expense in the consolidated statements of operations based upon the respective employee’s roles within our Company.

Stock-based compensation costs are generally recorded in research and development expense or general and administrative expense in the consolidated statements of operations based upon the respective employee’s roles within our Company, however a portion of stock-based compensation related to employees who are directly involved in the manufacturing facility buildout, is capitalized into the cost basis of the manufacturing plant.

Forfeitures are recorded as they occur.

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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-K

Item 7. Management’s Discussion and Analysis