What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-16 compared with 2021-11-10 · 229 added, 245 removed, 287 unchanged (62% of the section changed)

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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 27 gene therapy product candidates, with exclusive options to acquire four additional development programs at no cost.

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

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

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

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

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

All other research and development activities have been paused to increase operational efficiency.

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

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

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 Clinical Trial Application, or CTA, filing to Health Canada in November 2021 and announced initiation of clinical development of TSHA-102 under the approved CTA in March 2022.

We recently completed a commercially representative GMP batch of TSHA-120 and release testing for this batch is currently underway.

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

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

We have a limited operating history.

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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.

In addition, we drew down $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 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 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.

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Since our inception, we have incurred significant operating losses.

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.

Our net losses were $50.1 million for the three months ended March 31, 2022 and $32.0 million for the three months ended March 31, 2021.

As of March 31, 2022, we had an accumulated deficit of $285.8 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 TSHA-118, TSHA-102, TSHA-121 and any other current and future product candidates that we advance;

conduct our ongoing clinical trials of TSHA-102, TSHA-118, TSHA-120 and TSHA-121, as well as initiate and complete additional clinical trials of TSHA-105 and any other current and future product candidates that we advance;

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

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

We are advancing a deep and sustainable product portfolio of 27 gene therapy product candidates for monogenic diseases of the CNS in both rare and large patient populations, with exclusive options to acquire four additional development programs at no cost.

We are advancing a deep and sustainable product portfolio of gene therapy product candidates for monogenic diseases of the CNS in both rare and large patient populations, with exclusive options to acquire several additional development programs at no cost.

Our portfolio of gene therapy candidates targets broad neurological indications across three distinct therapeutic categories:

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

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

There are an estimated 5,000 affected GAN patients in addressable markets.

Symptoms and features of children with GAN usually develop around the age of five years and include an abnormal, wide based, unsteady gait, weakness and some sensory loss.

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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-

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

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.

In May 2022, we received orphan drug designation from the European Commission for TSHA-120 for the treatment of GAN.

There is an ongoing longitudinal prospective natural history study being led by the NIH, that has already identified and followed a number of patients with GAN for over five years with disease progression characterized by a number of clinical assessments.

The GAN natural history study was initiated in 2013 and included 45 GAN patients, aged 3 to 21 years.

Imaging data from this study has demonstrated that there are distinctive increased T2 signal abnormalities within the cerebellar white matter surrounding the dentate nucleus of the cerebellum, which represents one of the earliest brain imaging findings in individuals with GAN.

The GAN natural history study was initiated in 2013 and included 45 patients with GAN, aged 3 to 21 years.

Imaging data from this study have demonstrated that there are distinctive increased T2 signal abnormalities within the cerebellar white matter surrounding the dentate nucleus of the cerebellum, which represent one of the earliest brain imaging findings in individuals with GAN.

These findings precede the more widespread periventricular and deep white matter signal abnormalities associated with advanced disease.

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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.

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

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

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These rodents were evaluated using a rotarod performance test which is designed to evaluate endurance, balance, grip strength and motor coordination in rodents.

The time to fall off the rotarod, known as latency, was also evaluated and the data below demonstrate the clear difference in latency in treated versus untreated GAN rodents.

The time to fall off the rotarod, known as latency, was also evaluated and the data below demonstrated the clear difference in latency in treated versus untreated GAN rodents.

A result is considered statistically significant when the probability of the result occurring by random chance, rather than from the efficacy of the treatment, is sufficiently low.

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Generally, a p-value less than 0.05 is considered statistically significant.

With respect to dorsal root ganglia, or DRG, inflammation that has been a topic of considerable interest within the gene therapy circles, in GAN and in the majority of diseases in our neurodegenerative franchise, the DRG have a significantly abnormal histological appearance and function as a consequence of underlying disease pathophysiology.

With respect to DRG inflammation , a topic of considerable interest within the gene therapy arena , the DRG have a significantly abnormal histological appearance and function as a consequence of underlying disease pathophysiology.

Treatment with TSHA-120 resulted in considerable improvements in the pathological appearance of the DRG in the GAN knockout mice.

Shown below is tissue from a GAN knockout mouse model with numerous abnormal neuronal inclusions containing aggregates of damaged neurofilament in the DRG as indicated by the yellow arrows.

On image C, the tissue from the GAN knockout mice treated with an intrathecal injection of TSHA-120 had a notable improvement in the reduction of these neuronal inclusions in the DRG.

When a quantitative approach to the reduction in inclusions in the DRG was applied, it was observed that TSHA-120 treated mice experienced a statistically significant reduction in the average number of neuronal inclusions versus the GAN knockout mice that received vehicle as illustrated below.

On image C, tissue from the GAN knockout mice treated with an intrathecal (IT) injection of TSHA-120 had a notable improvement in the reduction of these neuronal inclusions in the DRG.

When a quantitative approach to reduce inclusions in the DRG was applied, it was observed that TSHA-120 treated mice experienced a statistically significant reduction in the average number of neuronal inclusions versus the GAN knockout mice that received vehicle as illustrated below.

Additionally, TSHA-120 demonstrated improved pathology of the sciatic nerve in the GAN knockout mice as shown below.

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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 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.

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

To date, TSHA-120 has been well-tolerated at multiple doses with no signs of significant acute or subacute inflammation, no sudden sensory changes and no drug-related or persistent elevation of transaminases.

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

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

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

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

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

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

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

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

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

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

As shown on these graphs, the 1.8x10 14 total vg dose halted patient pre-treatment rate of decline with an average annual slope improvement of 7.78 points while the 1.2x10 14 total vg dose resulted in a clinically meaningful slowing of disease progression with an average annual slope improvement of 6.09 points.

These results are consistent with a dose response relationship.

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

As shown below, the 1.8x10 14 total vg dose confirmed a virtually 100% probability of clinically meaningful slowing of disease compared to natural history decline of GAN patients while the 1.2x10 14 total vg dose confirmed an 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.

To date, 14 patients have been intrathecally dosed and twelve patients have at least three years’ worth of long-term follow up data.

At 1-year post-gene transfer, a clinically meaningful and statistically significant slowing or halting of disease progression was seen with TSHA-120 at the highest dose of 3.5x10 14 total vg (n=3).

The change in the rate of decline in the MFM32 score improved by 5 points in the 3.5x10 14 total vg cohort compared to an 8-point decline in natural history.

Although the change in the MFM32 score was clinically meaningful, we might have expected a greater change in the MFM32 score compared to natural history in the first year but one patient in the high dose cohort was a delayed responder.

At the 12-month follow-up visit, the patient had a 7-point decline in the MFM32 total score that was similar to the slope of the natural history curve as shown below.

Notably, from Year 1 post gene transfer to Year 2, this patient’s change in the MFM32 score remained unchanged suggesting stabilization of disease at 2 years post-treatment.

At that 2-year post treatment timepoint, there was a 9-point improvement in the patient’s MFM32 score compared to the estimated natural history decline of 16 points.

The annualized estimate of natural history over time assumes the same rate of decline as in Year 1.

An additional analysis was performed to examine the change in the rate of decline in the MFM32 score of all therapeutic doses combined (n=12).

As shown below, the change in the rate of decline in the MFM32 score improved by 7 points by Year 1

compared to the natural history decline in the MFM32 score of 8 points.

This result was clinically meaningful and statistically significant.

A Bayesian analysis was conducted on the 1.2x10 14 total vg, 1.8x10 14 total vg and 3.5x10 14 total vg dose cohorts at Year 1 to assess the probability of clinically meaningful slowing of disease progression as compared to natural history.

This type of statistical analysis enables direct probability statements to be made and is both useful and accepted by regulatory agencies in interventional studies of rare diseases and small patient populations.

As shown in the table below, for all therapeutic dose cohorts, there was nearly 100% probability of any slowing of disease and a 96.7% probability of clinically meaningful slowing of 50% or more following treatment with TSHA-120 compared to natural history data.

There remained consistent improvement in TSHA-120’s effect over time on the mean change from baseline in the MFM32 score for all patients in the therapeutic dose cohorts compared to the estimated natural history decline over the years.

By Year 3, as depicted below, there was a 10-point improvement in the mean change from baseline in MFM32 score for all patients in the therapeutic dose cohorts.

In addition to the compelling three-year data, there was one patient at Year 5 whose MFM32 change from baseline improved by nearly 26-points in the 1.2x10 14 total vg dose cohort compared to the estimated natural history decline of 40 points by this timepoint.

Below is an additional analysis of the mean change from baseline in MFM32 score for the therapeutic dose cohorts compared to natural history at patients’ last visit.

As shown, TSHA-120 demonstrated increasing improvement in the mean change in MFM32 score from baseline over time.

Secondary Endpoints

Below is pathology data from biopsies of the superficial radial sensory nerve in 5 out of 6 patient samples analyzed.

The remaining patient samples are currently being analyzed.

These biopsies confirmed that treatment with TSHA-120 stimulated active regeneration of axons.

There was an increase in the number of regenerative clusters observed at Year 1 compared to baseline, indicating active regeneration of nerve fibers following TSHA-120 treatment.

Loss of vision has been frequently cited by patients and caregivers as a symptom they find particularly debilitating and would like to see improvement in following treatment.

Patients were analyzed for visual acuity using a standard Logarithm of the Minimum Angle of Resolution, or LogMAR.

An increase in LogMAR score represents a decrease in visual acuity.

A LogMAR score of 0 means normal vision, approximately 0.3 reflects the need for eyeglasses, and a score value of 1.0 reflects blindness.

Based on natural history, individuals with GAN experience a progressive loss in visual function as indicated by an increase in the LogMAR score.

Ophthalmologic assessments following treatment with TSHA-120 demonstrated preservation of visual acuity over time compared to the loss of visual acuity observed in natural history.

Stabilization of visual acuity was observed following treatment with TSHA-120 as demonstrated below.

The thickness of the retinal nerve fiber layer or RNFL was also examined as an objective biomarker of visual system involvement and overall nervous system degeneration in GAN.

Treatment with TSHA-120 resulted in stabilization of RNFL thickness and prevention of axonal nerve degeneration compared to diffuse thinning of RNFL observed in natural history as measured by optical coherence tomography, or OCT.

Analysis by individual dose groups, as seen on the graph below, demonstrated relatively stable RNFL thickness which is in contrast to the natural history of GAN, where RNFL decreases.

Overall, these data provide new evidence of TSHA-120’s ability to generate nerve fibers and preserve visual acuity.

Safety and Tolerability

To date, there are 53 patient-years of clinical data to support TSHA-120’s favorable safety and tolerability profile.

TSHA-120 has been well-tolerated at multiple doses with no signs of significant acute or subacute inflammation, no sudden sensory changes and no drug-related or persisting transaminitis.

Adverse events related to immunosuppression or study procedures were similar to what has been seen with other gene therapies and transient in nature.

There was no increase in incidence of adverse events with increased dose.

Importantly, TSHA-120 was safely dosed in the presence of neutralizing antibodies as a result of the combination of route of administration, dosing and immunosuppression regimen.

Currently in the GAN program, we have up to six years of longitudinal data in individual patients and collectively 53-patient years of clinical safety and efficacy data from our ongoing clinical study.

Treatment with TSHA-120 was well-tolerated with no significant safety issues.

There was no increase in incidence of adverse events with increased dose, no dose-limiting toxicity, no signs

of acute or subacute inflammation, no sudden sensory changes and no drug-related or persistent elevation of transaminases .

Adverse events related to immunosuppression or study procedures were similar to what was seen with other gene therapies and transient in nature.

In September 2021, we submitted a request for a Scientific Advice meeting with an ex-US regulatory agency for TSHA-120 and had a meeting in January 2022.

Additional discussions with other Health Authorities are planned and regulatory feedback is anticipated mid-2022.

We have finalized plans for commercial grade material and initiated development of the comparability protocol to support regulatory submissions.

We recently completed a commercially representative GMP batch of TSHA-120 and release testing for this batch is currently underway.

We anticipate completion of a validation lot by the third quarter of 2022.

In addition, we expect to hold discussions with major regulatory agencies focused on the registration pathway for TSHA-120.

We will continue our institutional readiness activities, patient identification and maximizing patient access.

Lastly, we anticipate several publications of these data by the NIH in collaboration with Taysha.

TSHA-102 for Rett Syndrome

TSHA-102, a neurodevelopmental disorder product candidate, is being developed for the treatment of Rett syndrome, one of the most common genetic causes of severe intellectual disability, characterized by rapid developmental regression and in many cases caused by heterozygous loss of function mutations in MECP2, a gene essential for neuronal and synaptic function in the brain.

We designed TSHA-102 to prevent gene overexpression-related toxicity by inserting microRNA, or miRNA target binding sites into the 3’ untranslated region of viral genomes.

This overexpression of MECP2 is seen in the clinic in patients with a condition known as MECP2 duplication syndrome, where elevated levels of MECP2 result in a clinical phenotype similar to Rett syndrome both in terms of symptoms and severity.

TSHA-102 is constructed from a neuronal specific promoter, MeP426, coupled with the miniMECP2 transgene, a truncated version of MECP2, and miRNA-Responsive Auto-Regulatory Element, or miRARE, our novel miRNA target panel, packaged in self-complementary AAV9.

Currently, there are no approved therapies for the treatment of Rett syndrome, which affects more than 350,000 patients worldwide, according to the Rett Syndrome Research Trust.

In May 2021, preclinical data from the ongoing natural history study for TSHA-102 were published online in Brain , a highly esteemed neurological science peer-reviewed journal.

The preclinical study was conducted by the UT Southwestern Medical Center laboratory of Sarah Sinnett, Ph.D., and evaluated the safety and efficacy of regulated miniMECP2 gene transfer, TSHA-102 (AAV9/miniMECP2-miRARE), via IT administration in adolescent mice between four and five weeks of age.

TSHA-102 was compared to unregulated full length MECP2 (AAV9/MECP2) and unregulated miniMECP2 (AAV9/miniMECP2).

TSHA-102 extended knockout survival by 56% via IT delivery.

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

Additionally, the unregulated full-length MECP2 construct did not demonstrate a significant extension in survival and was associated with an unacceptable toxicity profile in wild type mice.

In addition to survival, behavioral side effects were explored.

Mice were subjected to phenotypic scoring and a battery of tests including gait, hindlimb clasping, tremor and others to comprise an aggregate behavioral score.

miRARE attenuated miniMECP2-mediated aggravation in wild type aggregate phenotype severity scores.

Mice were scored on an aggregate severity scale using an established protocol.

AAV9/MECP2- and AAV9/miniMECP2-treated wild type mice had a significantly higher mean (worse) aggregate behavioral severity score versus that observed for saline-treated mice (p <0.05;

at 6–30 and 7–27 weeks of age, respectively).

TSHA-102-treated wild type mice had a significantly lower (better) mean aggregate severity score versus those of AAV9/MECP2- and AAV9/miniMECP2-treated mice at most timepoints from 11–19 and 9–20 weeks of age, respectively.

No significant difference was observed between saline- and TSHA-102-treated wild type mice.

miRARE-mediated genotype-dependent gene regulation was demonstrated by analyzing tissue sections from wild type and knockout mice treated with AAV9 vectors given intrathecally.

When knockout mice were injected with a vector expressing the mini-

MECP2 transgene with and without the miRARE element, miRARE reduced overall miniMECP2 transgene expression compared to unregulated miniMECP2 in wild type mice as shown below.

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

As shown in the graph and photos below, in the pons and midbrain, miRARE inhibited mean MECP2 gene expression in a genotype-dependent manner as indicated by significantly fewer myc(+) cells observed in wild type mice compared to knockout mice (p<0.05), thereby demonstrating that TSHA-102 achieved MECP2 expression levels similar to normal physiological parameters.

In preclinical animal models, intrathecal myc-tagged TSHA-102 was not associated with early death and did not cause adverse behavioral side effects in wild type mice demonstrating appropriate downregulation of miniMECP2 protein expression as compared to unregulated MECP2 gene therapy constructs.

In addition, preclinical data demonstrated that miRARE reduced overall expression of miniMECP2 transgene expression and regulated genotype-dependent myc-tagged miniMECP2 expression across different brain regions on a cell-by-cell basis and improved the safety of TSHA-102 without compromising efficacy in juvenile mice.

Pharmacologic activity of TSHA-102 following IT administration was assessed in the MECP2 knockout mouse model of Rett syndrome across three dose levels and three age groups (n=252).

A one-time IT injection of TSHA-102 significantly increased survival at all dose levels, with the mid to high doses improving survival across all age groups compared to vehicle-treated controls.

Treatment with TSHA-102 significantly improved body weight, motor function and respiratory assessments in MECP2 knockout mice.

An additional study in neonatal mice is ongoing, and preliminary data suggest normalization of survival.

Finally, An IND/CTA-enabling 6-month GLP toxicology study (n=24) examined the biodistribution, toxicological effects and mechanism of action of TSHA-102 when intrathecally administered to NHPs across three dose levels.

Biodistribution, as reflected by DNA copy number, was observed in multiple areas of the brain, sections of spinal cord and the dorsal root ganglion (DRG).

Importantly, mRNA levels across multiple tissues were low, indicating miRARE regulation is minimizing transgene expression from the construct in the presence of endogenous MECP2 as expected, despite the high levels of DNA that were delivered.

No toxicity from transgene overexpression was observed, confirmed by functional and histopathologic evaluations demonstrating no detrimental change in neurobehavioral assessments and no adverse tissue findings on necropsy.

In May 2022 at the International Rett Syndrome Foundation (IRSF) meeting, there were two oral presentations titled “Safety and Biodistribution Assessment in Non-Human Primates (NHPs) of a miniMeCP2 AAV9 Vector for Gene Replacement Therapy of Rett Syndrome” and “Rett Syndrome in Adulthood:

The Caregiver Perspective.” At the ASCEND National Summit, there was one oral presentation titled “Putting Patients at the Center.”

At the upcoming 25th Annual Meeting of the American Society of Gene & Cell Therapy (ASGCT) meeting in May 2022, the following oral and poster presentations and symposium will occur:

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 submitted a CTA for TSHA-102 in November 2021 and announced initiation of clinical development under a CTA approved by Health Canada in March 2022.

We are advancing TSHA-102 in the REVEAL Phase 1/2 clinical trial which is an open-

label, dose escalation, randomized, multicenter study that will examine the safety and efficacy of TSHA-102 in adult female patients with Rett syndrome.

Up to 18 patients will be enrolled.

In the first cohort, a single 5E14 total vg dose of TSHA-102 will be given intrathecally.

The second cohort will be given a 1E15 total vg dose of TSHA-102.

Key assessments will include Rett-specific and global assessments, quality of life, biomarkers, and neurophysiology and imaging assessments.

Sainte-Justine Mother and Child University Hospital Center in Montreal, Quebec, Canada has been selected as the initial clinical trial site under the direction of Dr.

Elsa Rossignol, Assistant Professor Neuroscience and Pediatrics, and Principal Investigator.

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

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.

We provided a grant to Batten Hope to support patient awareness, disease education and newborn screening initiatives.

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

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

CLN7 disease is a rare, fatal and rapidly progressive neurodegenerative disease that is a form of Batten disease.

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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.

In an in vivo efficacy study, IT administration of the first-generation construct to MFSD8 knockout mice with high or low doses resulted in clear age and dose effects with early intervention and high dose achieving the best therapeutic benefits.

IT high dose of the first-generation construct in younger knockout mice resulted in:

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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.

and 4) maintenance of healthy body weight for a prolonged period of time.

Toxicology studies in wild type rodents demonstrated safety and tolerability of IT administration of the first-generation construct.

Clinical safety data presented at WORLDSymposium in February 2022 for the first-generation construct from the ongoing clinical trial following IT administration further demonstrated that the first-generation construct was well-tolerated at multiple doses including 1.0x10 15 total vg, which is the highest dose administered in humans ever for a gene therapy product.

No adverse immune responses were noted, including no evidence of dorsal root ganglion toxicity or brain inflammation across all subjects.

Moreover, stabilization in sural nerve conduction supported the absence of dorsal root ganglia inflammation.

The ongoing trial includes three patients dosed to date, with two patients treated at the highest dose of 1.0x10 15 total vg.

Complete blood counts revealed no signs of bone marrow suppression or clinically significant bone marrow reactivity, and CSF analysis revealed no signs of pleocytosis.

A fourth patient was recently dosed at 1.0x10 15 total vg in March 2022.

TSHA-118 for CLN1 Disease

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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.

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.

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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

We designed TSHA-102 to prevent gene overexpression-related toxicity by inserting microRNA, or miRNA target binding sites into the 3’ untranslated region of viral genomes.

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 survival by 56% via IT delivery.

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

Additionally, the unregulated full-length MECP2 construct did not demonstrate a significant extension in survival and was associated with an unacceptable toxicity profile in wild type mice.

In addition to survival, behavioral side effects were explored.

Mice were subjected to phenotypic scoring and a battery of tests including gait, hindlimb clasping, tremor and others to comprise an aggregate behavioral score.

miRARE attenuated miniMECP2-mediated aggravation in wild type aggregate phenotype severity scores.

Mice were scored on an aggregate severity scale using an established protocol.

AAV9/MECP2- and AAV9/miniMECP2-treated wild type mice had a significantly higher mean (worse) aggregate behavioral severity score versus that observed for saline-treated mice (p <0.05;

at 6–30 and 7–27 weeks of age, respectively).

No significant difference was observed between saline- and TSHA-102-treated wild type mice.

miRARE-mediated genotype-dependent gene regulation was demonstrated by analyzing tissue sections from wild type and knockout mice treated with AAV9 vectors given intrathecally.

When knockout mice were injected with a vector expressing the mini-

MECP2 transgene with and without the miRARE element, miRARE reduced overall miniMECP2 transgene expression compared to unregulated miniMECP2 in wild type mice as shown below.

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

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.

We submitted a CTA filing for TSHA-118 which was approved by Health Canada in 2021 and have initiated clinical development.

TSHA-105 for SLC13A5 Deficiency

We are developing TSHA-105 for the treatment of SLC13A5 deficiency, a rare autosomal recessive epileptic encephalopathy characterized by the onset of seizures within the first few days of life.

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

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

SLC13A5 deficiency is caused by bi-allelic loss-of function mutations in the SLC13A5 gene, which codes for a sodium dependent citrate transporter, or NaCT, that is largely expressed in the brain and liver.

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Diminished NaCT function leads to loss of neuronal uptake of citrate and other metabolites such as succinate that are critical to brain energy metabolism and function.

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

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

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

We are developing TSHA-105 as a gene replacement therapy for SLC13A5 deficiency.

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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 treatments for Angelman syndrome.

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

Angelman syndrome is an imprinting disorder in which the maternal gene is deficient and the paternal copy of UBE3A is intact but silenced by a long non-coding RNA, UBE3A antisense transcript, or UBE3A -ATS.

Delivery of an ASO targeting UBE3A-ATS showed promising results in ameliorating Angelman syndrome symptoms in a transgenic mouse model.

There are two approaches to treat this genetic abnormality.

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.

We expect to initiate clinical development on TSHA-105 in SLC13A5 deficiency.

License Agreements

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We are required to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize at least one licensed product.

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

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

We do not have any future milestone or royalty obligations to UT Southwestern under the UT Southwestern Agreement, other than costs related to the maintenance of patents.

The UT Southwestern Agreement expires on a country-by-country and licensed product-by-licensed product basis upon the expiration of the last valid claim of a licensed patent in such country for such licensed product.

After the initial research term, we may terminate the agreement, on an indication-by-indication and licensed product-by-licensed product basis, at any time upon specified written notice to UT Southwestern.

Either party may terminate the agreement upon an uncured material breach of the agreement or insolvency of the other party.

License Agreement with Queen’s University

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In connection with a separate research grant agreement with Queen’s University, we reimbursed Queen’s University for certain manufacturing production costs totaling $3.8 million in fiscal year 2020.

No additional milestone payments were made in connection with the Queen’s University Agreement during the three months ended March 31, 2022.

License Agreement with Abeona (CLN1 Disease)

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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 paid in fiscal year 2020.

In December 2021 the Company’s CTA filing for TSHA-118 for the treatment of CLN1 disease was approved by Health Canada and therefore triggered a regulatory milestone payment in connection with the Abeona CLN1 Agreement, and therefore we

recorded $3.0 million within research and development expenses in the consolidated statements of operations for the year ended December 31, 2021.

The milestone fee was paid in January 2022 and has been classified as an investing outflow in the condensed consolidated statements of cash flows for the three months ended March 31, 2022.

No additional milestone payments were made or triggered during the three months ended March 31, 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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Royalties are payable on a licensed product-by-licensed product and country-by-country basis until the latest of the expiration or revocation or complete rejection of the last licensed patent covering such licensed product in the country where the licensed product is sold, the loss of market exclusivity in such country where the product is sold, or, if no licensed product exists in such country and no market exclusivity exists in such country, ten years from first commercial sale of such licensed product in such country.

In March 2022, our CTA filing for TSHA-102 for the treatment of Rett Syndrome was approved by Health Canada and therefore triggered a regulatory milestone payment in connection with the Rett Agreement.

We recorded $1.0 million within research and development expenses in the condensed consolidated statements of operations for the three months ended March 31, 2022.

This milestone fee was not paid as of March 31, 2022 and has been recorded in accrued expenses and other current liabilities.

The Abeona Rett Agreement expires on a country-by-country and licensed product-by-licensed product basis upon the expiration of the last royalty term of a licensed product.

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

Our financial results for the nine months ended September 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 nine months ended September 30, 2021.

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.

Our financial results for the three months ended March 31, 2022 were not impacted by COVID-19.

We believe our hybrid and remote working arrangements have had limited impact on our ability to maintain internal operations during the three months ended March 31, 2022.

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 and other treatments, 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.

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.

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.

Components of Results of Operations

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

Research and development expenses include or could include:

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

Research and development expenses include:

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

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

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Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

We plan to substantially increase our research and development expenses for the foreseeable future as we continue the development of our product candidates and manufacturing processes and conduct discovery and research activities for our preclinical programs.

We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of our product candidates due to the inherently unpredictable nature of preclinical and clinical development.

Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations.

We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential.

We will need to raise substantial additional capital in the future.

Our clinical development costs are expected to increase significantly as we commence clinical trials.

Due to the strategic reprioritization of programs and reduction in force announced in March 2022, we expect overall lower research and development expenses for the remainder of 2022 compared to 2021.

We expect lower expenses for the remainder of 2022 as certain programs have been deprioritized.

Our future expenses may vary significantly each period based on factors such as:

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General and Administrative Expenses

General and administrative expenses consist or will consist principally of salaries and related costs for personnel in executive and administrative functions, including stock-based compensation, travel expenses and recruiting expenses.

General and administrative expenses consist principally of salaries and related costs for personnel in executive and administrative functions, including stock-based compensation, severance costs, travel expenses and recruiting expenses.

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

We anticipate that our general and administrative expenses will 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

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.

We anticipate that our general and administrative expenses will decrease in the future due to the strategic reprioritization and reduction in force that was announced in March 2022.

We also anticipate that our general and administrative expenses as a result of payments for accounting, audit, legal, consulting services, as well as costs associated with maintaining compliance with Nasdaq listing rules and SEC requirements, director and officer liability insurance and other expenses associated with operating as a public company will stay constant for the near future, but may increase over time.

Results of Operations

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 September 30, 2021

For the Three Months

Ended September 30, 2020

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense):

Interest income

Interest expense

Total other expense, net

Research and Development Expenses

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 $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 $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

Results of Operations for the Three Months ended March 31, 2022 and 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021 (in thousands):

For the Three Months Ended March 31,

Operating expenses:

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Other income (expense):

Change in fair value of preferred stock tranche liability

Interest income

Interest expense

Total other expense, net

Other expense

Total other income (expense), net

Research and Development Expenses

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.

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.

Research and development expenses were $37.8 million for the three months ended March 31, 2022, compared to $23.9 million for the three months ended March 31, 2021.

The $13.9 million increase was primarily attributable to an increase of $9.3 million in employee compensation, which included $2.2 million of severance and one-time termination costs in connection with the strategic reprioritization of programs completed in March 2022 and $1.0 million of non-cash stock-based compensation.

Additionally, in the three months ended March 31, 2022 we incurred an increase of $2.9 million of expenses in research and development manufacturing and other raw material purchases.

We also incurred an increase of $1.7 million of third-party research and development consulting fees, primarily related to GLP toxicology studies and clinical study activities.

General and Administrative Expenses

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

General and administrative expenses were $11.5 million for the three months ended March 31, 2022, compared to $8.2 million for the three months ended March 31, 2021.

The increase of approximately $3.3 million was primarily attributable to $2.9 million of incremental compensation expense, which included $0.4 million of severance and one-time termination costs and $0.7 million of non-cash stock-based compensation.

We also incurred an increase of $0.4 million in professional fees related to insurance, investor relations/communications, accounting, and market research.

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

On March 4, 2020, the Company entered into a purchase agreement (the “Series A Purchase Agreement”) providing for a private placement of up to 10,000,000 shares of Series A convertible preferred stock at an original issuance price of $3.00 per share, subject to separate closings, including:

(1) 6,000,000 shares at the initial closing on March 4, 2020, and (2) 2,000,000 shares at each of two subsequent closings triggered by the achievement of specific clinical milestones.

The Series A Purchase Agreement obligated the Company to issue and sell and the Series A investors to purchase up to a total of 4,000,000 additional shares of Series A convertible preferred stock (the “Milestone Shares”) at the same price per share upon the achievement of certain defined clinical milestones (the “tranche liability”).

We determined that our obligation to issue, and the investors’ right to purchase, additional shares of Series A convertible preferred stock pursuant to the milestone closings represented a freestanding financial instrument, or the tranche liability.

The tranche liability was initially recorded at fair value.

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.

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.

Interest expense for the three months ended March 31, 2022 primarily consisted of interest expense incurred under the Term Loan Agreement.

Interest Income

Interest income for the three months ended March 31, 2022 and 2021 primarily consisted of interest earned on our savings account.

Liquidity and Capital Resources

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

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.

As of March 31, 2022, we had cash and cash equivalents of $96.6 million.

From inception through March 31, 2022, 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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We drew $30.0 million in term loans on the Closing Date.

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

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

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 March 31, 2022, no shares of common stock had been issued and sold pursuant to the Sales Agreement.

In April 2022, we sold 2,000,000 shares of common stock pursuant to the Sales Agreement and received net proceeds of $11.6 million.

Funding Requirements

To date, we have not generated any revenues from the commercial sale of approved drug products, and we do not expect to generate substantial revenue for at least the next few years.

If we fail to complete the development of our product candidates in a timely manner or fail to obtain their regulatory approval, our ability to generate future revenue will be compromised.

If we fail to complete the development of our product candidates in a

timely manner or fail to obtain their regulatory approval, our ability to generate future revenue will be compromised.

We do not know when, or if, we will generate any revenue from our product candidates, and we do not expect to generate significant revenue unless 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, as well as build out of our cGMP manufacturing facility in Durham, North Carolina.

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 expect our expenses to decrease in connection with our ongoing activities largely due to the strategic reprioritization of product candidates and the reduction in force announced in March 2022.

W e will continue the research and development of, initiate clinical trials of and seek marketing approval for specific product candidates, as well as continue the build out of our cGMP manufacturing facility in Durham, North Carolina .

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

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

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

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

As of March 31, 2022, our material cash requirements consisted of $51.5 million in total lease payments entered into since inception.

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.

This estimate reflects our strategic prioritization efforts to improve operating efficiency, including pausing research and development activities on our preclinical programs, limiting patient enrollment to focus on proof-of-concept studies in CLN1 and SLC13A5, ceasing the TSHA-101 clinical trial and reducing 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, 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-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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the costs of operating as a public company.

Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales.

marketing approval and achieve product sales.

In addition, our product candidates, if approved, may not achieve commercial success.

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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 nine months ended September 30, 2021 and 2020 (in thousands):

For the Nine Months Ended September 30,

The following table shows a summary of our cash flows for the three months ended March 31, 2022 and 2021 (in thousands):

For the Three Months Ended March 31,

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net cash used in financing activities

Net change in cash, cash equivalents and restricted cash

Operating Activities

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.

For the three months ended March 31, 2022, our net cash used in operating activities of $40.8 million primarily consisted of a net loss of $50.1 million, primarily attributable to our spending on research and development expenses.

The net loss of $50.1 million was partially offset by adjustments for non-cash items, primarily stock-based compensation of $5.3 million, and the add back of the regulatory milestone and upfront license fees of $1.3 million.

The $50.1 million net loss was also partially offset by a $2.3 million increase in the cash provided by operating assets and liabilities, primarily resulting from an increase in accounts payable.

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

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

Investing Activities

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.

During the three months ended March 31, 2022, investing activities used $11.4 million of cash primarily attributable to the regulatory milestone payment of $3.0 million paid to Abeona pursuant to the CLN1 Agreement, and capital expenditures related to our in-house manufacturing facility and office space.

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

Financing Activities

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.

During the three months ended March 31, 2022, financing activities used $0.2 million of cash, which is primarily attributable to the payment of shelf registration costs, and other financing transactions, which are partially offset by ESPP contributions.

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.

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.

We elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.

In addition, as an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies.

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We are also a “smaller reporting company,” meaning that the market value of our shares held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year.

We may continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700 million.

by non-affiliates is less than $700 million.

If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

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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