Taysha Gene Therapies, Inc. (TSHA) Q3 2022 Earnings Report, Transcript and Summary

Thank you for standing by. Welcome to Taysha Gene Therapies Third Quarter 2022 Financial Results and Corporate Update Conference Call. At this time, all participants are in listen-only mode. Following management's prepared remarks, we will hold a brief question-and-answer session. As a reminder, this call is being recorded today, November 8, 2022. I will now turn the call over to Dr. Kimberly Lee, Chief Corporate Affairs Officer. Please go ahead.

Good morning, and welcome to Taysha's third quarter 2022 financial results and corporate update conference call. Joining me on today's call are RA Session, II Taysha's President, Founder and CEO; Dr. Suyash Prasad, Chief Medical Officer and Head of R&D; and Kamran Alam, Chief Financial Officer. After our formal remarks, we will conduct a question-and-answer session and instructions will follow at that time. Earlier today, Taysha issued a press release announcing financial results for the second quarter ending September 30, 2022. A copy of this press release is available on the company's website and through our SEC filings. Please note that, on today's call, we will be making forward-looking statements, including statements relating to the safety and efficacy and the therapeutic and commercial potential of our investigational product candidates, as well as the strategic investment by Astellas, including the potential for Astellas to exercise any other options we granted to them. This call may also contain forward-looking statements relating to Taysha's growth and future operating results, discovery and development of product candidates, strategic alliances and intellectual property, as well as matters that are not of historical facts or information. Various risks may cause Taysha's actual results to differ materially from those stated or implied in such forward-looking statements. These risks include uncertainties related to the timing and results of clinical trials and preclinical studies of our product candidates or dependence upon strategic alliances and other third-party relationships, our ability to obtain patent protection for our discoveries, limitations imposed by patents owned or controlled by third parties and the requirements of substantial funding to conduct our research and development activities. For a list and description of the risks and uncertainties that we face, please see the reports we have filed with the Securities and Exchange Commission. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, November 8, 2022. Taysha undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call, except as may be required by applicable securities law. I would now like to turn the call over to our President, Founder and CEO, RA Session II. RA?

Thank you, RA. And good morning, everyone. Our two lead clinical programs have generated a significant amount of compelling evidence and have exciting upcoming milestones that could support their potential to make lifechanging impacts for patients worldwide. I'll begin with a recent update on TSHA-120 for GAN. Our GAN program includes a comprehensive and robust clinical package that is supported by evidence generated across multiple clinical, functional, neurophysiological, and pathological endpoints. These include the MFM32 motor function assessment, demonstrating clinically meaningful slowing of disease progression across all therapeutic dose cohorts compared to natural history decline, with a durability of effect observed up to five years post dosing. The progressive loss of visual acuity towards blindness, as assessed by LogMAR, stabilized after treatment with TSHA-120. This was supported by the findings in retinal nerve fiber layer thickness, or RNFL, as assessed by optical coherence tomography, which demonstrated stabilization and prevention of further retinal tissue loss following TSHA-120 treatment. Electrophysiologic nerve conduction studies that support recoverability, stabilization and, in some cases, improvement in sensory response in patients treated with TSHA-120. Nerve biopsies confirmed that treatment with TSHA-120 result in active regeneration of nerve fibers. And lastly, CMC comparability testing validated that our clinical and commercial grade material are comparable via our release assays and next generation sequencing. We have a Type B end of Phase 2 meeting scheduled with the FDA via teleconference on December 13, which will enable us to have discussions regarding a pathway to a BLA filing. We expect receipt of the formal meeting minutes by mid-January, at which time we will provide an update. Next slide, please. We continue to work with regulatory agencies with the goal of achieving conditional approval in Europe and accelerated approval in the United States based on EMA and FDA industry guidance for gene therapies in neurodegenerative diseases. Based on key registrational requirements from regulatory agencies, including the FDA and the EMA, we have outlined some possible scenarios for approval. In Europe, we believe there's potential to follow conditional approval based on current data set for EMA guidance documents. In the US, the first scenario is immediate filing for approval based on the current data set and comparability. The second scenario, which we view as our base case, sees us dosing a few more patients to demonstrate comparability of clinical effects between clinical and commercial grade material, which was a similar approval pathway for Zolgensma in spinal muscular atrophy. The last scenario is to initiate a new pivotal trial, which we think is unlikely, given the published final guidance document on human gene therapies for neurodegenerative diseases and extensive long term safety and efficacy datasets available. Next slide please. Let's move on now to TSHA-102, the first and only gene therapy in clinical development for Rett syndrome. TSHA-102 utilizes the novel and micro RNA, or mRNA, responsive autoregulatory element platform to regulate trans gene expression phenotypically on a cell by cell basis. The totality of preclinical data generated to date for TSHA-102 represents the most robust data package supporting the clinical advancement of a gene therapy in Rett syndrome. This includes preclinical data and neonatal Rett knockout mice demonstrating near normalization of survival, normalization of body weight and normalization of behavior as assessed by the Bird Score. Pharmacology data demonstrated significant improvement in survival, body weight, motor function and respiratory health across treatment ages in Rett knockout mice. Toxicology data supported a favorable safety profile of TSHA-102 in wild type rats up to doses fourfold over the clinical starting dose. Nerve conduction studies remained at the normal range, signifying no evidence of dorsal root ganglia inflammation or other neuropathic deterioration. And lastly, toxicology data in non-human primates demonstrated that all doses studied are well tolerated, while showing broad biodistribution to the brain and spinal cord. Importantly, NHP studies demonstrated that the down regulatory miRARE platform worked well with low levels of RNA and minimal expression of MECP2 in wild type cells, which have normal pre-existing levels of MECP2. These four preclinical studies together represent a comprehensive and robust package supporting the clinical advancement of TSHA-102 For Rett syndrome. Our first-in-human Phase 1/2 trial of TSHA-102 for Rett syndrome, also known as the REVEAL study is ongoing. Considering our partnership with Astellas and our intent to provide them with a more comprehensive dataset, we now expect to report preliminary clinical safety and efficacy data from the entire first cohort that includes up to six adult patients with Rett syndrome in the first half of 2023. Also in the first half of 2023, we intend to initiate a female pediatric study in Rett syndrome. As a reminder, TSHA-102 has received orphan drug and rare pediatric disease designations from the FDA and has been granted orphan drug designation from the European Commission. In summary, we believe we have a compelling and robust clinical package for TSHA-120 in GAN and preclinical package for TSHA-102 in Rett syndrome. We are extremely excited about the strategic investment and support from Astellas, and look forward to providing additional updates in the first half of 2023 for our two lead clinical programs. With that, I'll turn the call over to Kamran to review our financial results. Kamran?

Thank you, Suyash. This morning, I will discuss key aspects of our financial results for the third quarter ended September 30 2022. More details can be found in our Form 10-Q, which will be filed with the SEC shortly. As indicated in our press release today, research and development expenses were $16.4 million for the three months ended September 30, 2022 compared to $39.5 million for the three months ended September 30, 2021. The $23.1 million decrease was due to a reduction of $11.7 million in research and development, GMP, manufacturing and other raw material purchases. Additionally, we incurred $6.7 million less expense in third-party research and development consulting fees, primarily related to non-clinical GLP toxicology studies and a decrease of $4.7 million in employee compensation expenses. General and administrative expenses were $8.7 million for the three months ended September 30, 2022 compared to $11.2 million for three months ended September 30, 2021. The decrease of approximately $2.5 million was primarily due to a reduction of $1.3 million in professional fees related to pre-commercialization, recruiting and patient advocacy activities. Additionally, compensation expense decreased by $1.2 million compared to the same period in 2021. Net loss for the three months ended September 30, 2022 was $26.3 million or $0.64 per share as compared to a net loss of $51.2 million or $1.35 per share for the three months ended September 30, 2021. As of September 30, 2022, the company had cash and cash equivalents of $34.3 million, which does not include the recent $50 million strategic investment from Astellas or the net proceeds of $25.6 million generated from the follow-on offering closed in October 2022. We expected that the existing cash and cash equivalents, along with the investment from Astellas and the net proceeds received from the public offering, will enable funding of operating expenses and capital requirements into the first quarter of 2024. And with that, I'll hand the call back to RA.

[Operator Instructions]. Our first question is from Gil Blum with Needham & Company.

Maybe one on Astellas here. Can you remind us if Astellas has experience in manufacturing of AAV9 ACE genetic medicine? I can't remember exactly what the Audentes vector was.

I certainly agree with you. I think while Astellas' main experiences in AAV8, the platform manufacturing approach that Astellas is taking and we are developing at Taysha are really complementary. It's our intention that, as we move forward our programs, that it's really our know-how that will follow these programs through in partnership with Astellas or independently. So, I think it's still again very well suited to a collaboration.

The next question is from Eun Yang with Jefferies.

This is Matt Chandler [ph] on for Eun Yang. Just want to know, with Astellas' option for TSHA-120 available for a period of time following the receipt of those minutes, are there any specified outcomes from the end of that Phase 2 meeting or that Type 2 meeting with the FDA for Astellas to opt in, or are you expecting anything there?

The next question is from Geulah Livshits with Chardan.

I'm wondering if you could give some color on how a potential registrational trial design would be similar or different from the ongoing Phase 1 or 2 in Rett syndrome in terms of the control group, patient types and endpoints. And if you have a an understanding of, among the several functional outcome buckets, if there are any particular ones that carry more weight in the eyes of regulators or experts in the space.

I think it's an interesting one. We actually know we're moving forward to the adult study. Currently, this clinical trial is ongoing, and we intend to strive for the pediatric study in the first half of next year. I think a registration labeling study will really focus on the pediatric population more than anything. I think this is the key population that is of interest. But that also will be applicable to the wider population because we do feel the gene therapy will be applicable to all populations across the age spectrum in Rett syndrome. In terms of differences between registration enabling pediatric study and an adult study, the buckets are the same. The buckets of assessments are the same, i.e. one big bucket is looking at seizures, how frequent are the seizures, how severe are they, how long are they, and how we reduce the burden there. Another bucket is looking at specific Rett type behavioral assessments, such as the Rett Syndrome Hand Function Scale, the Rett Syndrome Behavior Questionnaire, and there's two or three others that we include in with the adults study and the pediatric study. Another big bucket is looking at autonomic features of disease, i.e. the respiratory outcomes, which we've demonstrated very clearly, an improvement in the animal studies in which we know from a patient family perspective is incredibly distressing to both adults with the disease and children with the disease. We're also looking at communication capability as a bucket and also a mix of different biomarkers, whether exploratory CSF or blood-based biomarkers or EEG neurophysiological biomarkers. So the buckets are the same from the adults to the children. Some of the specific assessments are a little bit different, i.e. there are some specific assessments that are more relevant for children and for adults. One example would be the baby's developmental assessment, which looks at development progression across early childhood. So, that's a scale that will be included within the actual pediatric study that is not in the adult study. So I think there's a lot we can learn from the adult study, the move into the pediatric study. I do think that the likelihood is that registration enabling study – and we're looking a long way out now here. Our registration enabling study will most likely be in the pediatric population. But the buckets of endpoints are generally the same. I'll stop there.

The next question is from Joon Lee with Truist Securities.

This is Mehdi on for Joon. Congrats on the quarter and the deal with Astellas. So, about the buffering capacity of the miRARE system, what is the range of tolerated viral copy numbers per cell? And basically, what is the expected translatability of the outcomes from adult patients to pediatrics? Would the same dosing be used in this group?

The first question is a really interesting one. The way the construct was designed, it was over-engineered. So there are six micro RNA binding sites in the actual construct itself, plus an additional three in the untranslated region of the construct. These are binding sites to down regulatory micro RNA. Now, you only need one, to be frank, to be able to keep the level of MECP2 within the appropriate physiological range. But because of this issue of maybe ACE targeting two, three or four copies, Steve Gray, our Chief Scientific Adviser, in partnership with Sarah Sinnett built in kind of an overabundance of these down regulatory micro RNA binding sites in order to make sure we really are truly going to make sure that we do not over express any MECP2. Now, the exact number of genome copies, we don't know that. What we do know from the toxicology studies is that we've given a fourfold dose over the initial starting dose. The initial stuff, there's 5E14 total vg. And in both NHPs and in rats, over a three and six month period, we gave three doses in both toxicology dose, all the way up to 2E15 human equivalent. And so, we know that sort of fourfold overdosing of the initial clinical starting dose, you actually see minimal adverse – or, well, no adverse toxicological findings. And we know that there's high numbers of gene copies getting to the cells with an intrathecal dose of that high. So we have absolute confidence that going into the 5E14 level in the humans, which is far below the highest dose given the toxicology studies, is not going to result in overexpression. I hope that answered your first question. The second question about dose translatability from children to adults or from adults down to children, in this case, it's very interesting. Most of the time, when you give a drug systemically, i.e. into a vein, you dose on a vg per kilos basis. So, for example, a six year old boy will generally weigh 20 kilos. So, if you're giving, I don't know, 1E14 vg per kilo, you multiply that by the 20 kilos that he weighs, and obviously, a larger boy or girl, a 12 year old who may weighed 30, 35 kilos, an adult may weigh 60, 70 kilos, so you multiply that number and you do the dose translatability on the weight. It's different for a CNS delivered drug, an intrathecally delivered drug because you're giving the gene therapy – it's a very limited space. And the other thing that's different is that, as children develop from babies through toddlerhood into teenage years, their organs all grow at different rates, and the organ that grows the fastest, almost the biggest in proportion to the rest of the body is the brain. And so, dose translatability is only really an issue between the ages of zero and four. Once a child hits four years of age, the CSF volume and brain volume are pretty similar to adults. And so, we've done a lot of animal modeling and we've done a lot of looking at the literature, and we've got an approach for kind of moderating the pediatric and the adult doses. And after the age of about four years of age, we give every patient, whether they're a child or an adult, the same dose. Below the age of four, we ratio the dose down dependent on both the CSF volume and the brain volume. And we've got a very thoughtful way of doing this, and it's been discussed with the FDA and other regulators. So, they're very much in agreement. But as I say, I think the vast majority of patients who will be enrolling in the pediatric study will probably be over the age of three or four. And it's likely we're not going to change that dose, therefore, because the size of a three or four year old, by the time a child reaches three or four years of age, they've reached the brain size of an adult. So, it's likely to be – the way the current pediatric protocol is designed, it's going to be as the same 5E14 total vg starting dose. Sorry, there were too long answers. But hopefully I gave you comprehensive answers to your questions.

The next question is from Salveen Richter with Goldman Sachs.

This is Mason [ph] on for Salveen. Along the endpoints that are given for the first clinical data in Rett, what's your view on the bar for success and what threshold you would view as clinically meaningful?

I could add a little bit more color. Everything you say is absolutely accurate. And thanks for the question. It's exactly the right question to be asking. First and foremost, we've got to clear the bar of safety, as RA says. Secondly, we are expecting to, and hoping to, see preliminary efficacy. What I will say, to set expectation is that, when you look at adults versus children, we expect the children to do better than the adults from an efficacy perspective. And we say that for two reasons. First of all, in general, treating a developing brain seems to result in better clinical outcomes, and also functional outcomes in animal studies than an adult brain. And also, from our animal studies where we did a very large pharmacology study looking at dosing, many different ages of Rett knockout mice, and it was clear that the younger mice performed better than the older mice. So, that's one thing. One important point I'll make. But I think, from a clinical meaningfulness perspective, we spend a lot of time talking to patients and families. And it's clear that subtle improvements, some of which if they're translates in the adults, from the animals to the humans, will be beneficial. For example, we've already mentioned the autonomic dysfunction, this breathing dysrhythmia that both children and adults with the Rett have, and it's due to autonomic dysfunction in the brain, when they have these alternating periods of very rapid breathing, which is correlated with high levels of anxiety, and then hypoxic excess, where they don't breathe at all for a while and start to go a little blue and cyanosed, and this causes incredible stress to the family. So, anything that can help moderate even that dysfunctional rhythm in a subtle way, and which we saw significant improvement in the animal models, I think will be clinically meaningful to the patients and the families. In addition, if we can reduce the seizure burden at all, or even bring in some functionality, a modicum of functionality in hand function, for example, all these things will be clinically meaningful. But I think another way to look at it is we're looking at many, many different outcome measures because this is a global neurological developmental disease, and even the subtle change across several different outcome measures will be very, very impactful to the patients and the families.

The next question is from Mike Ulz with Morgan Stanley.

Just given the importance of the pediatric Rett data to the Astellas decision, can you maybe comment on what the trigger is to starting the pediatric study in the first half of 2023. Just curious if you're looking to the adult study in terms of a certain number of patients or certain level of follow-up prior to deciding to start the pediatric study.

The next question is from David Hoang with SMBC.

I just had one. In the case of Rett syndrome, if you were to get MECP2 overexpression to a toxic level with the construct, can you just give us an idea about what that toxicity might look like based on your animal studies? And then how quickly and definitively would it manifest?

Yeah, I will just reemphasize that we gave very high doses in the toxicology study and saw no evidence of any toxicity due to overexpression. And in fact, measured in all the tissues in the animals, DNA, RNA, and protein, we've got high levels of DNA, meaning we're getting good distribution of TSHA-102 into all the tissues in the NHP, but very low levels of RNA, and correspondingly low levels of MECP2, meaning the down regulatory system is working well. Having said that, it's a very good question to ask. Just in case you see some kind of neurological toxicity that's totally not predicted, what might that look like? And in theory, there's two ways of really drawing that parallel. The first is by looking at what's happened in the clinical situation. And the second is looking at the animal situation. So, in the clinical situation, there is a condition known as MECP2 duplication syndrome, where children inherit two copies of the MECP2 genes. So, they have double the amount of MECP2 and they have associated neurobehavioral and neurological issues related to that. And in fact, it doesn't look that different to Rett syndrome. These are children who – it's actually a little more severe than Rett and the symptoms come on a little earlier. But basically, you see a whole host of evidence of developmental regression, a lack of milestones, you get seizures, problems with autonomic nervous system dysfunction as well. So, from a clinical perspective, you see neurological and neurobehavioral outcomes that are global in nature. And that's also true for the animal situation where you encourage overexpression of MECP2. In a mouse model, for example, you will see significant neurobehavioral toxicity and also a drop in survival. Once again, I emphasize these are highly theoretical. We've not seen anything of that nature whatsoever in our rat or toxicology studies, even when we've been giving very high doses.

The next question is from Jack Allen with Baird.

This is Benjamin Paluch calling in from Jack Allen. How quickly could you begin dosing patients with a commercial product of TSHA-120? And will the commercial product require a new IND?

The next question is Yanan Zhu with Wells Fargo.

On the Rett syndrome, could you talk about, from this panel of endpoints, which might be the earliest from which you can you expect to see signals? And also, is the adult study a three plus three design, in that you have the opportunity to expand the treatment cohort, should you see any safety events? And lastly, is there a pre-specified duration at which point the delayed treatment patients are supposed to be crossed over to treatment?

Yeah. Just to clarify, Yanan, the way the protocol is designed, RA is quite correct that we're having up to six patients in the cohort. However, there is a proviso to extend that further, if indeed there is some kind of adverse event that's seen, which, as you know, is a relatively common proviso in most of these Phase 1/2 clinical trials. So, that proviso is there as part of the adaptive study design. In terms of endpoints that might improve, I think that it's an interesting one. I think for the animal studies, what we expect to improve quickly is the breathing dysfunction that I've already mentioned previously. There is these alternating patterns of rapid and shallow breathing. And in our animal studies, we saw that improve relatively quickly. So that's one possibility, although, frankly, we'll wait and see what happens. But we assume that's one of the changes that may happen relatively quickly. The other point I will make is that, the other precedent is in the – if you look at the Acadia trofinetide study where they use an analogue of IGF-1to try and encourage the growth of synapses in the brain, which are missing in Rett syndrome, as you know, they saw changes in the Clinical Global Impression of severity scale and in the RSBQ, which is a caregiver rated Rett syndrome general development questionnaire. And both of those showed improvements relatively quickly. Within about four to five weeks, you can see the separation from placebo. So, I would say what we'd be looking for are the physiological changes in breathing and some of the global Rett syndrome behaviors improving within a few weeks after dosing. What I will say, as a comparison to the Acadia trofinetide data is that – don't forget, for the gene therapy, we've got to about two or three weeks to get maximal transgene expression. So it may not be quite as rapid as an IGF-1 analog being dosed, but I still think it's going to be – we're going to see potential signs within a matter of weeks.

Next question is from Sami Corwin with William Blair.

This is Tiffany on for Sami. For the GAN 120 program, in sort of your base case scenario outcome for the FDA meeting, with dose more patients for comparability, can you provide any color on maybe how quickly you might feel enroll these patients? Have already been identified? And also, like, what sort of range of follow-up could you imagine you might reasonably need to demonstrate comparability? And just as a quick second, do you still have any plans for filing MMA (sic) [MAA] with the EU? Thanks,

The next question is from Whitney Ijem with Canaccord Genuity.

A follow-up on the Rett study update in the first half of next year. I guess, can you talk about what you mean when you say complete cohort that we'll be getting? Or is there a specific amount of follow-up you're waiting for in all of the patients? Or are we waiting for early data from the delayed treatment controls or just kind of help us understand what you mean when you say complete cohort?

That's all the time we have for questions. I'll turn the call back over to Mr. Session for closing remarks.

Ladies and gentlemen, this concludes today's presentation. Thank you once again for your participation. You may now disconnect.