UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission File Number: 001-39536 Taysha Gene Therapies, Inc. (Exact Name of Registrant as Specified in its Charter) Delaware 84-31995 ...

PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Taysha's unaudited Q1 2021 consolidated financial statements report a **$32.0 million** net loss, primarily from increased R&D and G&A [Condensed Consolidated Balance Sheets](index=3&type=section&id=Balance%20Sheets) Balance sheets show total assets decreased to **$242.8 million** by March 31, 2021, with liabilities rising and equity falling Metric | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $228,684 | $251,253 | | Total current assets | $239,629 | $257,879 | | Total assets | $242,829 | $258,881 | | Total current liabilities | $18,958 | $7,129 | | Total liabilities | $19,957 | $7,579 | | Total stockholders' equity | $222,872 | $251,302 | - Cash and cash equivalents decreased by **$22.6 million** from December 31, 2020, to March 31, 2021[11](index=11&type=chunk) - Total current liabilities increased by **$11.8 million**, primarily due to increases in accounts payable and accrued expenses[11](index=11&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Statements%20of%20Operations) Net loss significantly increased in Q1 2021, primarily due to higher R&D and G&A expenses Metric | Metric | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :----------- | | Research and development | $23,854 | $5,514 | +$18,340 | | General and administrative | $8,236 | $70 | +$8,166 | | Total operating expenses | $32,090 | $5,584 | +$26,506 | | Net loss | $(32,024) | $(5,431) | -$(26,593) | | Net loss per common share (basic & diluted) | $(0.87) | $(0.50) | -$(0.37) | | Weighted average common shares outstanding | 36,992,377 | 10,894,999 | +26,097,378 | - Research and development expenses increased by **$18.3 million** (**332%**) year-over-year[14](index=14&type=chunk) - General and administrative expenses increased by **$8.2 million** (**11666%**) year-over-year[14](index=14&type=chunk) [Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)](index=5&type=section&id=Statements%20of%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity%20(Deficit)) Accumulated deficit increased to **$93.2 million** by March 31, 2021, primarily due to net loss, while paid-in capital rose Metric | Metric | December 31, 2020 (in thousands) | March 31, 2021 (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | | Additional Paid-in Capital | $312,428 | $316,022 | | Accumulated Deficit | $(61,126) | $(93,150) | | Total Stockholders' Equity | $251,302 | $222,872 | - Stock-based compensation for the three months ended March 31, 2021, was **$3.6 million**[17](index=17&type=chunk) - Net loss for the period was **$32.0 million**, directly increasing the accumulated deficit[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Statements%20of%20Cash%20Flows) Cash and cash equivalents decreased by **$22.6 million** in Q1 2021, mainly from operating activities and license fees Cash Flow Activity | Cash Flow Activity | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :--------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash used in operating activities | $(22,035) | $(1,699) | | Net cash used in investing activities | $(534) | $0 | | Net cash provided by financing activities | $0 | $18,027 | | Net (decrease) increase in cash and cash equivalents | $(22,569) | $16,328 | | Cash at the end of the period | $228,684 | $16,328 | - Operating activities used **$22.0 million** in cash in Q1 2021, a significant increase from **$1.7 million** in Q1 2020[23](index=23&type=chunk) - Investing activities used **$0.5 million** in Q1 2021 for property, plant, and equipment purchases, with no activity in Q1 2020[23](index=23&type=chunk) [Notes to Financial Statements](index=8&type=section&id=Notes%20to%20Financial%20Statements) The notes provide comprehensive details on the company's financial structure, operational agreements, and accounting practices [Note 1—Organization and Description of Business Operations](index=8&type=section&id=Note%201%E2%80%94Organization%20and%20Description%20of%20Business%20Operations) Taysha, a gene therapy company, completed its IPO in September 2020, reporting a **$93.2 million** accumulated deficit and **$228.7 million** cash - Taysha Gene Therapies, Inc. was formed in September **2019** and converted to a Delaware corporation in February **2020**[25](index=25&type=chunk) - The company focuses on developing AAV-based gene therapies for monogenic diseases of the central nervous system[26](index=26&type=chunk) - Completed an IPO on September **28**, **2020**, issuing **9,050,000** shares of common stock for net proceeds of **$165.9 million**[28](index=28&type=chunk) - Accumulated deficit as of March **31**, **2021**, was **$93.2 million**[32](index=32&type=chunk) - Cash of **$228.7 million** as of March **31**, **2021**, is expected to fund operations for at least **twelve months**[34](index=34&type=chunk) [Note 2—Summary of Significant Accounting Policies](index=9&type=section&id=Note%202%E2%80%94Summary%20of%20Significant%20Accounting%20Policies) Financial statements adhere to GAAP, with key estimates for common stock, accruals, and tranche liability; no material policy changes - Financial statements are prepared in conformity with GAAP for interim information[36](index=36&type=chunk) - Significant estimates relate to fair value of common stock, preclinical manufacturing accruals, and preferred stock tranche liability[38](index=38&type=chunk) - No changes in significant accounting policies from the **2020** Annual Report[39](index=39&type=chunk) - Evaluating the impact of ASU No. **2016-02**, Leases (Topic **842**), effective for annual periods beginning after December **15**, **2021**[40](index=40&type=chunk)[41](index=41&type=chunk) [Note 3—Balance Sheet Components](index=10&type=section&id=Note%203%E2%80%94Balance%20Sheet%20Components) Balance sheet components are detailed, showing increases in prepaid R&D, accrued license fees, and construction in progress Prepaid Expenses and Other Current Assets | Prepaid Expenses and Other Current Assets (in thousands) | March 31, 2021 | December 31, 2020 | | :------------------------------------------------------- | :------------- | :---------------- | | Prepaid research and development | $6,281 | $2,462 | | Total prepaid expenses and other current assets | $10,817 | $6,626 | Property, Plant and Equipment, net | Property, Plant and Equipment, net (in thousands) | March 31, 2021 | December 31, 2020 | | :------------------------------------------------ | :------------- | :---------------- | | Construction in progress | $1,889 | $201 | | Property, plant and equipment, net | $2,497 | $287 | Accrued Expenses and Other Current Liabilities | Accrued Expenses and Other Current Liabilities (in thousands) | March 31, 2021 | December 31, 2020 | | :------------------------------------------------------------ | :------------- | :---------------- | | Accrued research and development | $5,672 | $2,106 | | Accrued license fees | $5,500 | $0 | | Accrued construction in progress | $1,029 | $173 | | Total accrued expenses and other current liabilities | $14,875 | $5,135 | [Note 4—Research, Collaboration and License Agreements](index=10&type=section&id=Note%204%E2%80%94Research,%20Collaboration%20and%20License%20Agreements) This note details key research and license agreements, including the **$5.5 million** acquisition of TSHA-120 rights for GAN - UT Southwestern Agreement (November **2019**): Exclusive worldwide, royalty-free license for AAV-based gene therapies for CNS monogenic diseases. Issued **2,179,000** common shares to UT Southwestern as partial consideration[44](index=44&type=chunk)[46](index=46&type=chunk)[49](index=49&type=chunk) - Queen's Agreement (February **2020**): Exclusive, perpetual, royalty-bearing license for certain patent rights and know-how. Paid **$3.0 million** upfront cash payment in April **2020**. Obligated to pay up to **$10.0 million** in regulatory milestones and up to **$10.0 million** in commercial milestones, plus low single-digit royalties[51](index=51&type=chunk)[52](index=52&type=chunk) - Abeona CLN1 Agreements (August **2020**): Worldwide exclusive rights for ABO-202 (TSHA-118) for CLN1 disease. Initial cash payments of **$3.0 million** license fee and **$4.0 million** for clinical materials. Obligated to pay up to **$26.0 million** in regulatory milestones and **$30.0 million** in sales milestones, plus high single-digit royalties[53](index=53&type=chunk) - Abeona Rett Agreement (October **2020**): Exclusive worldwide license for Rett syndrome gene therapy (TSHA-102). Paid **$3.0 million** upfront license fee. Obligated to pay up to **$26.5 million** in regulatory milestones and **$30.0 million** in sales milestones, plus high single-digit royalties[55](index=55&type=chunk)[57](index=57&type=chunk) - Acquisition of Worldwide Rights for TSHA-120 for GAN (March **2021**): Acquired exclusive worldwide rights from Hannah's Hope Fund (HHF). Upfront payment of **$5.5 million** recorded as R&D expense, not yet paid as of March **31**, **2021**. Eligible for up to **$19.3 million** in clinical, regulatory, and commercial milestones, plus low single-digit royalties[60](index=60&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk) [Note 5—Stockholders' Equity (Deficit), Convertible Preferred Stock and Tranche Liability](index=13&type=section&id=Note%205%E2%80%94Stockholders'%20Equity%20(Deficit),%20Convertible%20Preferred%20Stock%20and%20Tranche%20Liability) Capital structure changes are detailed, including the **$181.0 million** IPO, preferred stock conversion, and a **$0.2 million** tranche liability gain - Authorized common stock increased to **200,000,000** shares and preferred stock to **10,000,000** shares as of September **28**, **2020**[64](index=64&type=chunk) - IPO in September **2020** resulted in gross proceeds of **$181.0 million** from the sale of **9,050,000** common shares[65](index=65&type=chunk) - Series A and B convertible preferred stock (totaling **15,647,048** shares) converted into **17,047,378** common shares upon IPO closing[70](index=70&type=chunk) - A preferred stock tranche liability of **$1.1 million** was recorded at the Series A issuance date, and a **$0.2 million** gain was recognized from its remeasurement at March **31**, **2020**[72](index=72&type=chunk) [Note 6—Stock-Based Compensation](index=14&type=section&id=Note%206%E2%80%94Stock-Based%20Compensation) Stock-based compensation plans are detailed, with **1,621,900** options granted in Q1 2021 and **$3.6 million** total expense - The New Plan became effective upon IPO, with **3,390,168** new shares and **209,841** remaining shares from the Existing Plan available for issuance[74](index=74&type=chunk) - On January **1**, **2021**, the board increased shares reserved under the New Plan by **1,434,934**[74](index=74&type=chunk) - **1,621,900** stock options were granted in Q1 **2021** with a weighted-average grant date fair value of **$18.75** per share[77](index=77&type=chunk) - Total unrecognized compensation for unvested stock options was **$37.0 million**, for RSUs **$15.4 million**, and for RSAs **$3.0 million** as of March **31**, **2021**[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) Stock-Based Compensation Expense | Stock-Based Compensation Expense (in thousands) | Three Months Ended March 31, 2021 | | :---------------------------------------------- | :-------------------------------- | | Research and development expense | $1,579 | | General and administrative expense | $2,015 | | Total | $3,594 | [Note 7—Net Loss Per Common Share](index=16&type=section&id=Note%207%E2%80%94Net%20Loss%20Per%20Common%20Share) Basic and diluted net loss per common share were both **$(0.87)** in Q1 2021, with anti-dilutive equivalents excluded Metric | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :---------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(32,024) | $(5,431) | | Weighted-average shares of common stock outstanding | 36,992,377 | 10,894,999 | | Net loss per common share, basic and diluted | $(0.87) | $(0.50) | Anti-Dilutive Common Stock Equivalents | Anti-Dilutive Common Stock Equivalents | March 31, 2021 | March 31, 2020 | | :------------------------------------- | :------------- | :------------- | | Unvested RSUs | 2,850,053 | — | | Unvested RSAs | 769,058 | — | | Stock options | 2,286,142 | — | | Series A convertible preferred stock | — | 6,000,000 | | Total | 5,905,253 | 6,000,000 | [Note 8—Related Party Transactions](index=17&type=section&id=Note%208%E2%80%94Related%20Party%20Transactions) Related party transactions are disclosed, including CEO RA Session II's repaid notes and PBM Capital Group's administrative services - RA Session II, President and CEO, personally guaranteed a research grant agreement with Queen's and provided **$1.67 million** in secured promissory notes, which were repaid by July **2020**[83](index=83&type=chunk) - PBM Capital Group, LLC, an affiliate of a major stockholder, provides accounting and administrative services for **$2,500** per month[84](index=84&type=chunk) [Note 9—Income Taxes](index=17&type=section&id=Note%209%E2%80%94Income%20Taxes) No income tax provision was recorded due to operating losses and a full valuation allowance, with no material changes to tax positions - No provision for income taxes due to operating losses and a full valuation allowance against net deferred tax assets[85](index=85&type=chunk) - No material changes to uncertain tax positions as of March **31**, **2021**[86](index=86&type=chunk) [Note 10—Commitments and Contingencies](index=18&type=section&id=Note%2010%E2%80%94Commitments%20and%20Contingencies) No material legal proceedings; significant lease commitments for Durham manufacturing and Dallas office facilities are detailed - Not a party to any material legal proceedings[87](index=87&type=chunk) - Durham Lease: Commenced April **1**, **2021**, for a **187,500** sq ft manufacturing facility with a **15.5-year** term. Incurred **$0.8 million** in initial direct costs[89](index=89&type=chunk)[91](index=91&type=chunk) - Dallas Lease: Expected to commence May **15**, **2021**, for **15,000** sq ft office space with a **10-year** term. Total future minimum lease payments are approximately **$4.9 million**. Recognized **$0.6 million** lease construction incentive[92](index=92&type=chunk)[93](index=93&type=chunk)[96](index=96&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Taysha's financial condition, AAV-based gene therapy pipeline, increased R&D, and future funding needs beyond **2023** [Overview](index=20&type=section&id=Overview) Taysha, a gene therapy company with **26** candidates, incurred a **$32.0 million** net loss in Q1 2021, with expenses expected to rise for development - Taysha is a patient-centric gene therapy company focused on AAV-based gene therapies for monogenic diseases of the central nervous system[101](index=101&type=chunk) - Advancing a product portfolio of **26** gene therapy product candidates[101](index=101&type=chunk) - Incurred net losses of **$32.0 million** for Q1 **2021** and **$5.4 million** for Q1 **2020**, with an accumulated deficit of **$93.2 million** as of March **31**, **2021**[104](index=104&type=chunk) - Expects significant expense increases due to advancing preclinical/clinical development, manufacturing, regulatory approvals, and operating as a public company[105](index=105&type=chunk) [Our Pipeline](index=22&type=section&id=Our%20Pipeline) Taysha is developing a broad pipeline of **26** gene therapy candidates for neurodegenerative, neurodevelopmental, and genetic epilepsy disorders - The company is advancing a portfolio of **26** gene therapy product candidates for monogenic CNS diseases[106](index=106&type=chunk) - Pipeline targets neurodegenerative diseases, neurodevelopmental disorders, and genetic epilepsies[106](index=106&type=chunk) [Recent Developments](index=22&type=section&id=Recent%20Developments) In March 2021, Taysha acquired exclusive worldwide rights to TSHA-120 for GAN, involving a **$5.5 million** upfront payment and potential milestones - Acquired exclusive worldwide rights to TSHA-120 for GAN in March **2021**[107](index=107&type=chunk) - Upfront payment of **$5.5 million** to Hannah's Hope Fund (HHF)[107](index=107&type=chunk) - HHF is eligible for up to **$19.3 million** in milestones and low, single-digit royalties on net sales[107](index=107&type=chunk) [TSHA-120 for Giant Axonal Neuropathy](index=22&type=section&id=TSHA-120%20for%20Giant%20Axonal%20Neuropathy) TSHA-120, an AAV9 gene therapy for GAN, shows statistically significant slowing of disease progression in Phase 1/2 trials - TSHA-120 is an AAV9 gene therapy for Giant Axonal Neuropathy (GAN), a rare autosomal recessive CNS disease with an estimated prevalence of **2,400** patients in the US and EU[108](index=108&type=chunk)[109](index=109&type=chunk) - Received orphan drug and rare pediatric disease designations from the FDA[112](index=112&type=chunk) - Preclinical studies demonstrated improved motor function, nerve pathology, and long-term safety in animal models[115](index=115&type=chunk) - Phase **1/2** clinical trial: **14** patients dosed; **1.8x10^14** total vg dose showed an **8-point** improvement in MFM32 vs. historical control, and **1.2x10^14** total vg dose showed a **6-point** improvement, both statistically significant[121](index=121&type=chunk)[122](index=122&type=chunk) - 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**[123](index=123&type=chunk) - Bayesian analysis confirmed a nearly **100%** probability of clinically meaningful slowing of disease progression for the **1.8x10^14** total vg dose and approximately **85%** for the **1.2x10^14** total vg dose[126](index=126&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) [Preclinical Program Updates](index=29&type=section&id=Preclinical%20Program%20Updates) Taysha provides updates on several preclinical programs, including AAV9 redosing, and gene therapies for Rett syndrome, Leigh syndrome, and other CNS disorders [Vagus Nerve Redosing](index=29&type=section&id=Vagus%20Nerve%20Redosing) Preclinical research supports AAV9 redosing via direct vagus nerve injection, showing robust expression and immune privilege in rats - Direct injection into the vagus nerve allows for AAV9 redosing after intrathecal administration in preclinical models[132](index=132&type=chunk) - Robust GFP expression was observed in the injected vagus nerve and associated nodose ganglia in rats[133](index=133&type=chunk) - The vagus nerve space appears immune privileged enough to permit redosing, even with pre-existing neutralizing antibodies[137](index=137&type=chunk) [TSHA-102 for Rett Syndrome](index=32&type=section&id=TSHA-102%20for%20Rett%20Syndrome) TSHA-102 for Rett syndrome uses miRARE, extending knockout survival by **56%** and regulating gene expression in preclinical studies - TSHA-102 uses miRARE (miRNA-Responsive Auto-Regulatory Element) to prevent MECP2 gene overexpression-related toxicity[138](index=138&type=chunk) - Preclinical studies showed TSHA-102 extended knockout survival by **56%** via intrathecal delivery[140](index=140&type=chunk) - miRARE attenuated miniMECP2-mediated aggravation in wild type aggregate phenotype severity scores[141](index=141&type=chunk) - TSHA-102 demonstrated regulated expression in brain regions, achieving MECP2 expression levels similar to normal physiological parameters[142](index=142&type=chunk)[143](index=143&type=chunk) - Plans to submit an IND/CTA for TSHA-102 in the second half of **2021** and initiate a clinical trial by year-end[144](index=144&type=chunk) [TSHA-104 for SURF1-Associated Leigh Syndrome](index=33&type=section&id=TSHA-104%20for%20SURF1-Associated%20Leigh%20Syndrome) TSHA-104 for SURF1-associated Leigh syndrome, an orphan drug, showed restored mitochondrial function and SURF1 expression in preclinical models - TSHA-104 is a gene replacement therapy for SURF1-associated Leigh syndrome, caused by mutations in the SURF1 gene[145](index=145&type=chunk)[146](index=146&type=chunk) - Received orphan drug and rare pediatric disease designations from the FDA[147](index=147&type=chunk) - Preclinical studies in SURF1 knockout mice showed TSHA-104 was well-tolerated, induced SURF1 expression in the brain, partially rescued COX activity, and restored blood lactate levels on exhaustive exercise[148](index=148&type=chunk)[150](index=150&type=chunk) - Plans to submit an IND/CTA for TSHA-104 in the second half of **2021** and initiate a Phase **1/2** clinical trial by year-end[147](index=147&type=chunk) [TSHA-113 for Tauopathies](index=35&type=section&id=TSHA-113%20for%20Tauopathies) TSHA-113 for tauopathies aims for lifelong tau protein reduction, showing significant mRNA and protein level reductions in preclinical models - TSHA-113 aims to deliver life-long reduction of tau protein levels in neurons using AAV-mediated gene silencing[153](index=153&type=chunk) - Preclinical studies in transgenic mouse models showed TSHA-113 significantly reduced tau mRNA and protein levels[154](index=154&type=chunk) - Mice dosed with TSHA-113 demonstrated widespread function and GFP expression in neurons and glia[156](index=156&type=chunk) [TSHA-105 for SLC13A5 Deficiency](index=37&type=section&id=TSHA-105%20for%20SLC13A5%20Deficiency) TSHA-105 for SLC13A5 deficiency, an orphan drug, normalized EEG activity and reduced seizures in preclinical knockout mouse models - TSHA-105 is a gene replacement therapy for SLC13A5 deficiency, a rare epileptic encephalopathy[158](index=158&type=chunk)[160](index=160&type=chunk) - Received orphan drug and rare pediatric disease designations from the FDA[161](index=161&type=chunk) - Preclinical studies in SLC13A5 knockout mice showed TSHA-105 significantly decreased plasma citrate levels, normalized EEG activity, and reduced seizure susceptibility[163](index=163&type=chunk)[165](index=165&type=chunk)[167](index=167&type=chunk) [TSHA-103 for SLC6A1 Haploinsufficiency Disorder](index=40&type=section&id=TSHA-103%20for%20SLC6A1%20Haploinsufficiency%20Disorder) TSHA-103 for SLC6A1 haploinsufficiency disorder, an orphan drug, improved nesting and EEG activity in preclinical mouse models - TSHA-103 is a gene replacement therapy for SLC6A1 haploinsufficiency disorder, a monogenic cause of epilepsy and intellectual disability[168](index=168&type=chunk)[173](index=173&type=chunk) - Received orphan drug and rare pediatric disease designations from the FDA[174](index=174&type=chunk) - Preclinical studies in SLC6A1 knockout and heterozygous mouse models showed TSHA-103 improved nesting, EEG activity, and reduced spike train activity[175](index=175&type=chunk)[176](index=176&type=chunk) [License Agreements](index=42&type=section&id=License%20Agreements) Key license agreements with UT Southwestern, Queen's, and Abeona grant Taysha exclusive worldwide rights to gene therapy programs - UT Southwestern Agreement: Exclusive, worldwide, royalty-free license for certain patent rights and know-how; issued **2,179,000** common shares as consideration[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) - Queen's University Agreement: Exclusive, perpetual, worldwide, royalty-bearing license; paid **$3.0 million** upfront fee and obligated for up to **$20.0 million** in milestones plus low single-digit royalties[181](index=181&type=chunk)[182](index=182&type=chunk) - Abeona CLN1 Agreement: Exclusive, worldwide, royalty-bearing license for CLN1 Disease; paid **$3.0 million** upfront license fee and **$4.0 million** for inventory/reimbursement; obligated for up to **$56.0 million** in milestones plus high single-digit royalties[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk) - Abeona Rett Agreement: Exclusive, worldwide, royalty-bearing license for Rett syndrome; paid **$3.0 million** upfront license fee; obligated for up to **$56.5 million** in milestones plus high single-digit royalties[188](index=188&type=chunk)[190](index=190&type=chunk) [Impact of COVID-19 on Our Business](index=43&type=section&id=Impact%20of%20COVID-19%20on%20Our%20Business) COVID-19 did not significantly impact Q1 2021 financial results, but future effects on business and operations remain uncertain - Financial results for Q1 **2021** were not significantly impacted by COVID-19[192](index=192&type=chunk) - Remote working and travel restrictions had limited impact on internal operations[192](index=192&type=chunk) - Future impacts of COVID-19 remain highly uncertain and could adversely affect business and operations[192](index=192&type=chunk) [Components of Results of Operations](index=43&type=section&id=Components%20of%20Results%20of%20Operations) No revenue has been generated; operating expenses, particularly R&D and G&A, are expected to increase significantly as the pipeline advances - No revenue generated from product sales to date, and none expected in the foreseeable future[193](index=193&type=chunk) - Research and development expenses are recognized as incurred and include preclinical development, manufacturing, and clinical trial preparation[194](index=194&type=chunk) - Expects substantial increases in R&D expenses for the foreseeable future due to pipeline advancement[195](index=195&type=chunk) - General and administrative expenses are expected to increase due to headcount growth, expanded infrastructure, and public company operating costs (estimated **$6.0-$7.0 million** annually)[199](index=199&type=chunk) [Results of Operations for the Three Months Ended March 31, 2021 and for the Three Months Ended March 31, 2020](index=45&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031,%202021%20and%20for%20the%20Three%20Months%20Ended%20March%2031,%202020) Net loss increased to **$32.0 million** in Q1 2021, driven by higher R&D and G&A expenses, and reduced other income Metric | Metric | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :----------- | | Research and development | $23,854 | $5,514 | +$18,340 | | General and administrative | $8,236 | $70 | +$8,166 | | Total operating expenses | $32,090 | $5,584 | +$26,506 | | Net loss | $(32,024) | $(5,431) | -$(26,593) | - R&D increase of **$18.4 million** was due to **$3.1 million** in manufacturing/raw materials, **$3.1 million** in licensing fees (TSHA-120), **$5.2 million** in employee compensation (including **$1.6 million** stock-based), and **$2.4 million** in sponsored research[201](index=201&type=chunk) - G&A increase of **$8.1 million** was due to **$4.2 million** in compensation (including **$2.0 million** stock-based), **$1.5 million** in consulting/professional fees, and **$0.9 million** in legal expenses[202](index=202&type=chunk) - Other income decreased due to a **$0.2 million** non-cash gain from preferred stock tranche liability remeasurement in Q1 **2020** not recurring in Q1 **2021**[203](index=203&type=chunk)[204](index=204&type=chunk) [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) Taysha had **$228.7 million** cash as of March 31, 2021, expected to fund operations into **2023**, but substantial additional funding is anticipated - Cash and cash equivalents were **$228.7 million** as of March **31**, **2021**[205](index=205&type=chunk) - Funded operations through **$307.0 million** in gross proceeds from IPO (**$181.0 million**) and private placements of convertible preferred stock (**$30.0 million** Series A, **$96.0 million** Series B)[205](index=205&type=chunk) - Existing cash and cash equivalents are believed to fund operating expenses and capital requirements into **2023**[207](index=207&type=chunk) - Substantial additional funding will be required for continued operations, clinical studies, and potential commercialization[206](index=206&type=chunk)[208](index=208&type=chunk) Cash Flow Activity | Cash Flow Activity | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :--------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash used in operating activities | $(22,035) | $(1,699) | | Net cash used in investing activities | $(534) | $0 | | Net cash provided by financing activities | $0 | $18,027 | [Off-Balance Sheet Arrangements](index=48&type=section&id=Off-Balance%20Sheet%20Arrangements) No off-balance sheet arrangements were present during the reported periods - No off-balance sheet arrangements were present during the reported periods[217](index=217&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=48&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) No material changes to critical accounting policies were reported from the 2020 Annual Report - No material changes to critical accounting policies from the **2020** Annual Report[218](index=218&type=chunk) [Recent Accounting Pronouncements](index=48&type=section&id=Recent%20Accounting%20Pronouncements) Refer to Note 2 for details on recent accounting pronouncements - Refer to Note **2** for details on recent accounting pronouncements[219](index=219&type=chunk) [Emerging Growth Company and Smaller Reporting Company Status](index=48&type=section&id=Emerging%20Growth%20Company%20and%20Smaller%20Reporting%20Company%20Status) Taysha qualifies as an 'emerging growth company' and 'smaller reporting company,' benefiting from reduced disclosure and compliance - Qualifies as an 'emerging growth company' and has elected the extended transition period for new accounting standards[220](index=220&type=chunk)[221](index=221&type=chunk) - Benefits from reduced disclosure requirements, including an exception from auditor attestation for Section **404** of Sarbanes-Oxley Act and reduced executive compensation disclosures[222](index=222&type=chunk) - Also qualifies as a 'smaller reporting company' due to market value and annual revenue thresholds, allowing for further reduced disclosure obligations[223](index=223&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Taysha is exempt from providing quantitative and qualitative market risk disclosures - The company is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a smaller reporting company[224](index=224&type=chunk) [Item 4. Controls and Procedures](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated disclosure controls and procedures as effective, with no material changes to internal controls over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of March **31**, **2021**[225](index=225&type=chunk) - No material changes in internal control over financial reporting were identified during the period[226](index=226&type=chunk) - Management recognizes that internal controls provide reasonable, not absolute, assurance[227](index=227&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=51&type=section&id=Item%201.%20Legal%20Proceedings) The company is not a party to any material legal proceedings or aware of any adverse pending claims - The company is not subject to any material legal proceedings[230](index=230&type=chunk) [Item 1A. Risk Factors](index=51&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported from the **2020** Annual Report on Form **10-K** - No material changes to risk factors described in the Annual Report on Form **10-K** for December **31**, **2020**[231](index=231&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=51&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No recent unregistered equity sales; the **$165.9 million** IPO net proceeds' planned use remains materially unchanged - No recent unregistered sales of equity securities[232](index=232&type=chunk) - IPO closed on September **28**, **2020**, with aggregate net proceeds of **$165.9 million**[233](index=233&type=chunk)[234](index=234&type=chunk) - No material change in the planned use of IPO proceeds[234](index=234&type=chunk) [Item 3. Defaults Upon Senior Securities](index=51&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Not applicable - Not applicable[236](index=236&type=chunk) [Item 4. Mine Safety Disclosures](index=51&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable - Not applicable[237](index=237&type=chunk) [Item 5. Other Information](index=51&type=section&id=Item%205.%20Other%20Information) Not applicable - Not applicable[238](index=238&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section lists exhibits, including corporate documents, officer certifications, and XBRL taxonomy documents - Includes Amended and Restated Certificate of Incorporation and Bylaws[240](index=240&type=chunk) - Contains certifications of Principal Executive Officer and Principal Financial Officer[240](index=240&type=chunk) - XBRL Instance Document and Taxonomy Extension documents are filed[240](index=240&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk) SIGNATURES The report is duly signed by President and CEO RA Session II and CFO Kamran Alam as of May 11, 2021 - Report signed by RA Session II, President and Chief Executive Officer, and Kamran Alam, Chief Financial Officer[246](index=246&type=chunk) - Signatures dated May **11**, **2021**[246](index=246&type=chunk)

Taysha Gene Therapies, Inc. (NASDAQ:TSHA) Q1 2021 Earnings Conference Call May 11, 2021 8:00 AM ET Company Participants Kimberly Lee – Senior Vice President of Corporate Communications and Investor Relations RA Session II – President, Founder, and Chief Executive Officer Suyash Prasad – Chief Medical Officer and Head-R&D Kamran Alam – Chief Financial Officer Fred Porter – Chief Technical Officer Conference Call Participants Salveen Richter – Goldman Sachs Raju Prasad – William Blair Eun Yang – Jefferies Ope ...

GAN Program Acquisition Highlights - The GAN program transforms Taysha into a pivotal-stage gene therapy company[13, 103] - TSHA-120 has shown clear arrest of disease progression and long-term durability in patients treated for 3+ years[13, 68, 103] - TSHA-120 is well-tolerated with efficacy established at multiple doses in an ongoing clinical trial[13, 61, 103] - The estimated prevalence of GAN is 2,400 patients in the US & EU, representing a potentially greater than $2 billion near-term commercial opportunity[13, 21, 25, 31, 103] TSHA-120 Clinical Data - Clinical data demonstrated arrest of disease progression[16] - Bayesian analysis confirmed documented natural history data of an 8-point decline in the MFM32 total % score per year[70] - TSHA-120 dose of 1.8x10^14 total vg resulted in an arrest of disease progression that was statistically significant[70, 71] - 1.8x10^14 total vg dose confirmed nearly 100% probability of clinically meaningful slowing of disease compared to natural history decline of GAN patients[83, 84] - 1.2x10^14 total vg dose confirmed approximately 85% probability of clinically meaningful slowing of disease and 100% probability of any slowing of disease[83, 84] Vagus Nerve Redosing Platform - There is an opportunity to achieve human POC for vagus nerve redosing platform with previously treated low dose patients[13, 89, 103]

Gene Therapy Pipeline - The company has a pipeline of 25 gene therapy product candidates targeting neurological indications, with the potential to address over 500,000 patients in the U.S. and EU[20] - The product portfolio currently consists of 25 gene therapy product candidates targeting various CNS indications, with exclusive options to acquire four additional development programs from UT Southwestern at no cost[41] - The company is advancing four new undisclosed programs focused on neurodevelopmental disorders and genetic epilepsies into preclinical development in 2021[20] - The company plans to advance four undisclosed programs into preclinical development in 2021[41] Clinical Trials - TSHA-101 is in development for GM2 gangliosidosis, with a Phase 1/2 clinical trial initiated in Canada, and preliminary safety data expected in the second half of 2021[25] - TSHA-118, targeting CLN1 disease, plans to initiate a Phase 1/2 clinical trial in the second half of 2021 under an open IND[26] - TSHA-102, for Rett syndrome, is set to submit an IND/CTA in the second half of 2021 and initiate a clinical trial by the end of 2021[27] - The company anticipates submitting INDs for multiple product candidates in the second half of 2021, including TSHA-102 and TSHA-104[20] - The company plans to submit an IND/CTA for TSHA-104 in the second half of 2021 and initiate a Phase 1/2 clinical trial by the end of 2021[29] - A Phase 1/2 clinical trial of TSHA-101 was initiated by Queen's University, with preliminary safety and biomarker data expected in the second half of 2021[41] - The global Phase 1/2 trial for TSHA-118 is expected to enroll up to 18 patients, focusing on safety, tolerability, and developmental milestones[93] - The Phase 1/2 clinical trial for TSHA-101 is expected to report preliminary safety and biomarker data in the second half of 2021 and preliminary clinical data by the end of 2021[82] Manufacturing and Facilities - The company is establishing a commercial-scale, GMP-compliant manufacturing facility in Durham, North Carolina, to meet clinical demand[19] - The manufacturing process utilizes scalable suspension HEK293 cell culture, which is expected to support the full pipeline of product candidates[19] - The company intends to utilize scalable manufacturing technologies, including a 187,000-square-foot commercial-scale cGMP manufacturing facility in Durham, North Carolina, expected to meet clinical and commercial demand[41] - An approximately 187,000-square-foot commercial-scale cGMP manufacturing facility is being configured in Durham, North Carolina, to support commercial scale manufacturing of pipeline programs[198] Partnerships and Collaborations - The partnership with UT Southwestern allows for exclusive, royalty-free access to develop and commercialize gene therapies, enhancing the speed and scale of development[21] - The company has established a strategic partnership with UT Southwestern, providing access to a GMP viral vector manufacturing facility capable of supporting multiple preclinical and early clinical development efforts[34][36] - The company has entered into a Sponsored Research Agreement with UT Southwestern to fund the discovery and development of novel gene therapy candidates[39] - The company has entered into a research, collaboration, and license agreement with UT Southwestern, which includes 15 product candidates and options for additional indications[199] - Under the UT Southwestern Agreement, the company issued 2,179,000 shares of common stock to UT Southwestern, with no future milestone or royalty obligations other than patent maintenance costs[201] - The Queen's University Agreement includes a one-time upfront fee of $3.0 million and potential milestone payments totaling up to $20.0 million, along with royalties on net sales of licensed products[205] Preclinical Studies and Efficacy - In preclinical studies, TSHA-101 demonstrated a significant improvement in survival rates, with high, medium, and low doses increasing survival by 3.4-fold, 2.3-fold, and 1.5-fold, respectively, compared to vehicle control[74] - Preclinical studies showed a dose-dependent decrease in GM2 ganglioside accumulation, indicating restoration of Hex A enzyme activity[78] - TSHA-118 has shown significant improvements in survival rates in preclinical studies, with treated CLN1 knockout mice surviving an average of 18.7 months compared to approximately 8 months for untreated mice[90] - TSHA-118 treatment resulted in supraphysiological levels of active PPT1 enzyme in serum, indicating effective restoration of enzyme activity[92] - Preclinical studies for TSHA-104 demonstrated restoration of mitochondrial function and reduction of elevated blood lactate levels in SURF1 knockout mice[102] - Preclinical studies for TSHA-111 showed effective knockdown of GYS1 expression and reduced insoluble glycogen in brain tissue[111] - TSHA-119 demonstrated a dose-dependent reduction of GM2 gangliosides in preclinical studies, indicating potential efficacy for the GM2 AB variant[120] - In preclinical studies, TSHA-102 extended survival in MECP2 knockout mice by 56%[144] - TSHA-102 demonstrated a favorable tolerability profile with no deaths associated with treatment in wild type mice[141] Regulatory Designations - The company has received orphan drug designation and rare pediatric disease designation from the FDA for TSHA-101[71] - The company has received orphan drug designation and rare pediatric disease designation from the FDA for both TSHA-103 and TSHA-105[169][172] Targeted Therapies and Conditions - TSHA-101 is designed to express the HEXA and HEXB genes in a 1:1 ratio to ensure therapeutic efficacy, addressing the critical threshold for normal hydrolysis of GM2 ganglioside[65] - TSHA-106 is being developed for Angelman syndrome, which affects approximately 55,000 patients in the United States and European Union[147] - TSHA-114 is being developed for Fragile X syndrome, with an estimated prevalence of 100,000 patients in the United States and European Union[151] - TSHA-116 is being developed for Prader-Willi syndrome, with an estimated prevalence of 40,000 patients in the United States and European Union[156] - TSHA-117 is being developed for FOXG1 syndrome, which has an estimated prevalence of 20,000 patients in the United States and European Union[157] - The company is also developing TSHA-103 for SLC6A1 haploinsufficiency disorder and TSHA-105 for SLC13A5 deficiency[162] - Approximately 81% of patients with SLC6A1 haploinsufficiency disorder have epilepsy, with 91% exhibiting developmental delays and over 80% characterized as having mild or moderate intellectual disability[165] - The estimated prevalence of SLC6A1 haploinsufficiency disorder is 17,000 patients in the United States and European Union, with an incidence of approximately 1 in 36,000 live births[167] - TSHA-103 is a gene replacement therapy for SLC6A1 haploinsufficiency disorder, currently in preclinical studies[168] - TSHA-105 is being developed for SLC13A5 deficiency, with an estimated prevalence of 1,900 patients in the United States and European Union[170] - TSHA-110 is planned for development targeting KCNQ2 Developmental and Epileptic Encephalopathy, with an estimated prevalence of 37,000 patients in the United States and European Union[176] Innovative Technologies - The company is utilizing a novel AAV dosing platform that allows for redosing by administering therapies directly to the vagus nerve, showing promising results in preclinical studies[55] - The company is developing a novel AAV capsid platform using machine learning and directed evolution to improve targeted delivery of gene therapies[58] - AAV9 delivery to the vagus nerve has shown efficient targeting of vagal neurons in preclinical studies, facilitating potential redosing of gene therapies[179] - The company is developing a novel miRNA target panel, miRARE, to regulate transgene expression levels in the brain for disorders requiring dose-sensitive gene replacement[183] - The company has access to a state-of-the-art AAV production facility through collaboration with UT Southwestern, equipped for both research-grade and GMP-grade AAV vector production[195][196]

Product Development - Taysha Gene Therapies has a product portfolio of 18 gene therapy candidates and exclusive options for four additional programs [106]. - Taysha plans to initiate a Phase 1/2 clinical trial of TSHA-101 for GM2 gangliosidosis by the end of 2020 and submit INDs for four programs by the end of 2021 [106]. - The company has entered into a license agreement with Queen's University, involving a $3.0 million upfront fee and potential milestone payments totaling up to $20.0 million [113]. - Under the Abeona CLN1 Agreement, Taysha will pay a one-time fee of $3.0 million and up to $56.0 million in regulatory and sales-related milestones per licensed product [116]. Financial Performance - Net losses were $1.1 million from inception through December 31, 2019, and $41.7 million for the nine months ended September 30, 2020, with an accumulated deficit of $42.8 million as of that date [108]. - Taysha has not recognized any revenue from product sales to date and does not expect to generate revenue in the foreseeable future [119]. - The net loss for the nine months ended September 30, 2020, was $41.7 million, compared to a net loss of $31,000 for the same period in 2019 [129]. - Total operating expenses for the nine months ended September 30, 2020, were $24.6 million, compared to $31,000 for the same period in 2019 [129]. - The company anticipates an increase in general and administrative expenses by $6.0 million to $7.0 million annually due to expanded infrastructure and compliance costs [125]. - The company expects to need substantial additional funding for ongoing operations and research and development activities [136]. Research and Development - Research and development expenses are expected to increase significantly as the company advances its product candidates and manufacturing processes [121]. - Research and development expenses for the three months ended September 30, 2020, were $11.1 million, compared to no expenses for the same period in 2019 [127]. Cash Flow and Financing - Cash and cash equivalents as of September 30, 2020, were $278.6 million, funded through equity financings totaling $307.0 million [135]. - Financing activities generated $292.5 million in cash during the nine months ended September 30, 2020, primarily from $167.1 million in net proceeds from the initial public offering [145]. - Net cash used in operating activities for the nine months ended September 30, 2020, was $10.9 million, primarily due to research and development spending [143]. - Investing activities used $3.0 million of cash for the upfront fee paid pursuant to the Queen's University Agreement during the nine months ended September 30, 2020 [144]. - The company believes existing cash will fund operations into 2023, but estimates may prove imprecise [137]. Operational Challenges - The company has incurred significant operating losses and anticipates continued losses as it scales its operations [108]. - The company has not experienced material impacts from COVID-19 on its financial results for 2020, but future developments remain uncertain [118]. - General and administrative expenses for the three months ended September 30, 2020, were $4.0 million, a significant increase from less than $0.1 million for the same period in 2019 [128]. Accounting and Compliance - The company qualifies as an "emerging growth company," allowing it to delay the adoption of certain accounting standards until they apply to private companies [153]. - The company is classified as a "smaller reporting company," with a market value of shares held by non-affiliates below $700 million and annual revenue under $100 million [155]. - The company has not included milestone or royalty payments in its financial statements due to their uncertain timing and amounts [147]. - There are no off-balance sheet arrangements currently in place [148]. - The company evaluates its estimates and judgments on an ongoing basis, which may affect the reported amounts of assets and liabilities [149]. Market Risks - The primary market risk exposure is interest rate sensitivity, influenced by changes in U.S. interest rates [156]. - The company has not engaged in hedging foreign currency transactions, with most assets and liabilities denominated in U.S. dollars [157]. - Inflation has not materially affected the company's business or financial condition for the nine months ended September 30, 2020 [158].