Taysha Gene Therapies(TSHA) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Taysha Gene Therapies, Inc. as of September 30, 2021, reflecting a significant increase in operating losses and cash used in operations driven by escalated research and development activities Condensed Consolidated Balance Sheets As of September 30, 2021, the company's total assets were $241.0 million, a decrease from $258.9 million at year-end 2020, mainly due to a reduction in cash and cash equivalents, while total liabilities increased substantially to $100.6 million from $7.6 million, primarily driven by a new term loan and a build-to-suit lease liability, consequently decreasing total stockholders' equity to $140.4 million from $251.3 million Condensed Consolidated Balance Sheet Highlights (in thousands) | | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $188,785 | $251,253 | | Total current assets | $197,170 | $257,879 | | Total assets | $241,042 | $258,881 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $43,214 | $7,129 | | Build-to-suit lease liability | $26,607 | $— | | Term loan | $27,812 | $— | | Total liabilities | $100,648 | $7,579 | | Total stockholders' equity | $140,394 | $251,302 | | Total liabilities and stockholders' equity | $241,042 | $258,881 | Condensed Consolidated Statements of Operations For the three months ended September 30, 2021, the company reported a net loss of $51.2 million, compared to a $15.0 million loss in the same period of 2020, with the nine-month net loss significantly increasing to $124.1 million from $41.7 million year-over-year, primarily due to a substantial rise in research and development expenses to $94.0 million from $19.6 million Operating Results (in thousands, except per share data) | | For the Three Months Ended Sep 30, | For the Nine Months Ended Sep 30, | | :--- | :--- | :--- | | | 2021 | 2020 | 2021 | 2020 | | Research and development | $39,528 | $11,057 | $94,025 | $19,633 | | General and administrative | $11,153 | $3,984 | $29,518 | $5,002 | | Loss from operations | $(50,681) | $(15,041) | $(123,543) | $(24,635) | | Net loss | $(51,187) | $(15,042) | $(124,137) | $(41,693) | | Net loss per common share | $(1.35) | $(1.28) | $(3.31) | $(3.73) | Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) These statements detail the changes in stockholders' equity, showing a decrease from $251.3 million to $140.4 million for the nine months ended September 30, 2021, primarily driven by a net loss of $124.1 million, partially offset by $13.2 million in stock-based compensation Changes in Stockholders' Equity for the Nine Months Ended Sep 30, 2021 (in thousands) | Description | Amount | | :--- | :--- | | Balance as of December 31, 2020 | $251,302 | | Stock-based compensation | $13,229 | | Net loss | $(124,137) | | Balance as of September 30, 2021 | $140,394 | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2021, net cash used in operating activities significantly increased to $76.8 million from $10.9 million in the prior-year period, with net cash used in investing activities at $13.0 million, while financing activities provided $30.0 million from a new term loan, resulting in an overall decrease of $59.8 million in cash, cash equivalents, and restricted cash Summary of Cash Flows for the Nine Months Ended Sep 30 (in thousands) | | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(76,784) | $(10,881) | | Net cash used in investing activities | $(13,034) | $(3,031) | | Net cash provided by financing activities | $29,978 | $292,546 | | Net (decrease) increase in cash | $(59,840) | $278,634 | Notes to Financial Statements The notes provide detailed explanations of the company's financial status and operations, including its liquidity position, significant transactions like a new term loan and acquisition of TSHA-120 rights, and a subsequent 'at the market' offering agreement - The company had cash and cash equivalents of $188.8 million as of September 30, 2021, which management believes is sufficient to fund planned operations for at least the next twelve months[35] - In August 2021, the company entered into a Loan and Security Agreement with Silicon Valley Bank for a term loan facility of up to $100.0 million, and drew $30.0 million on the closing date[49] - In March 2021, the company acquired exclusive worldwide rights to TSHA-120 for the treatment of Giant Axonal Neuropathy (GAN) from Hannah's Hope Fund for an upfront payment of $5.5 million[71][72] - In October 2021, the company entered into a Sales Agreement for an 'at the market' offering to sell up to $150.0 million of its common stock[112] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, results of operations, and business outlook, highlighting the advancement of a portfolio of 27 gene therapy candidates for CNS diseases, significant increases in operating losses to $124.1 million due to higher R&D and G&A expenses, and the belief that existing cash and term loan access will fund operations into the second half of 2023 Overview and Recent Developments Taysha, a patient-centric gene therapy company focused on CNS diseases, is advancing a portfolio of 27 product candidates, recently acquiring exclusive worldwide rights to TSHA-120 for GAN and securing a term loan agreement for up to $100 million, drawing an initial $30 million to bolster its financial position, while expecting continued significant operating losses as it advances its pipeline - The company is advancing a deep portfolio of 27 gene therapy product candidates for monogenic CNS diseases, with options to acquire four additional programs[117][123] - In April 2021, the company acquired exclusive worldwide rights to TSHA-120, a clinical-stage AAV9 gene therapy for giant axonal neuropathy (GAN)[117] - In August 2021, the company entered into a term loan agreement for up to $100 million and drew an initial $30 million[120] Our Pipeline The company's pipeline targets a broad range of neurological indications, with detailed updates on key programs including TSHA-120 for GAN showing dose-dependent slowing of disease progression, TSHA-102 for Rett Syndrome demonstrating regulated gene expression and improved safety in preclinical models, and other programs like TSHA-101 and TSHA-118 advancing with expected clinical data - TSHA-120 (GAN): Phase 1/2 trial data showed a statistically significant improvement versus historical controls, with the 1.8x10¹⁴ vg dose halting disease progression, and a Bayesian analysis confirmed these findings[144][148][149] - TSHA-102 (Rett Syndrome): Preclinical data published in 'Brain' showed the miRARE platform extended knockout survival by 56% and attenuated behavioral side effects compared to unregulated constructs, with an IND/CTA submission is planned for November 2021[175][176][177] - TSHA-101 (GM2 Gangliosidosis): A Phase 1/2 trial is ongoing in Canada, with preliminary clinical safety and HEX A enzyme activity data expected in December 2021[117][166] - TSHA-118 (CLN1 Disease): The company plans to initiate a Phase 1/2 clinical trial by year-end 2021 and expects preliminary clinical data in the first half of 2022[117][173] Results of Operations This section provides a comparative analysis of the company's financial performance, showing that for the nine-month period, R&D expenses increased by $74.4 million to $94.0 million due to higher manufacturing costs, employee compensation, and third-party research expenses, while G&A expenses increased by $24.5 million to $29.5 million, primarily from increased compensation and professional fees Comparison of Operating Expenses (in thousands) | | For the Nine Months Ended Sep 30, | | :--- | :--- | | | 2021 | 2020 | | Research and development | $94,025 | $19,633 | | General and administrative | $29,518 | $5,002 | | Total operating expenses | $123,543 | $24,635 | - The $74.4 million increase in nine-month R&D expenses was primarily due to a $29.7 million increase in manufacturing and raw material costs, a $24.4 million increase in employee compensation, and a $20.3 million increase in third-party R&D consulting fees[219] - The $24.5 million increase in nine-month G&A expenses was mainly attributable to a $13.2 million increase in compensation (including $6.2 million in stock-based compensation) and an $11.3 million increase in professional fees[220] Liquidity and Capital Resources The company has historically funded operations through equity and debt, holding $191.4 million in cash, cash equivalents, and restricted cash as of September 30, 2021, and believes existing cash combined with full access to its term loan facility will fund operations into the second half of 2023, though substantial additional funding will be required for future development and commercialization - As of September 30, 2021, the company had cash, cash equivalents, and restricted cash of $191.4 million[225] - The company believes its existing cash and cash equivalents, along with full access to the term loan facility, will fund operations into the second half of 2023[228] - Future funding requirements are substantial and depend on the progress of clinical trials, manufacturing scale-up, and potential commercialization activities[227][228] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Taysha Gene Therapies is not required to provide the information requested under this item - The company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this Item[242] Item 4. Controls and Procedures Management, with the participation of the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded that as of September 30, 2021, these controls were effective, with no material changes in internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2021, the company's disclosure controls and procedures were effective[243] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[244] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company states that it is not currently subject to any material legal proceedings - The company is not currently a party to any legal proceedings that are likely to have a material adverse effect on its business[248] Item 1A. Risk Factors This section updates previously disclosed risk factors, highlighting a new risk concerning indebtedness from the August 2021 Term Loan Agreement, which contains restrictive covenants that could limit operational flexibility, and a breach could result in an event of default and acceleration of debt repayment - The Term Loan Agreement entered into on August 12, 2021, contains various covenants that limit the company's ability to, among other things, incur debt, merge, dispose of assets, make investments, and pay dividends[250][253] - A breach of these covenants could result in an event of default, allowing lenders to declare all outstanding amounts immediately due and payable[251] - The ability to draw down an additional $60.0 million under the term loan is subject to meeting specified conditions or obtaining lender approval, which may not be achieved[252] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period and confirms there has been no material change in the planned use of proceeds from its Initial Public Offering - There were no recent sales of unregistered equity securities[255] - There has been no material change in the planned use of proceeds from the company's initial public offering[257] Item 3. Defaults Upon Senior Securities This item is not applicable to the company - Not applicable[259] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[260] Item 5. Other Information The company reports no information for this item - None[261] Item 6. Exhibits This section lists the exhibits filed with the quarterly report, which include the company's Amended and Restated Certificate of Incorporation and Bylaws, the Loan and Security Agreement dated August 12, 2021, and certifications by the Principal Executive Officer and Principal Financial Officer - The exhibits list includes key corporate documents and the Loan and Security Agreement from August 12, 2021[264]