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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, 2022

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

84-3199512

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

3000 Pegasus Park Drive Ste 1430

Dallas, Texas

75247

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (214) 612-0000

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.00001 per share

 

TSHA

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  

As of August 11, 2022, the registrant had 41,093,159 shares of common stock, $0.00001 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

1

 

Balance Sheets

1

 

Statements of Operations

2

 

Statements of Stockholders’ Equity

3

 

Statements of Cash Flows

5

 

Notes to Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

51

Item 4.

Controls and Procedures

51

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

53

Item 1A.

Risk Factors

53

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

54

Item 3.

Defaults Upon Senior Securities

54

Item 4.

Mine Safety Disclosures

54

Item 5.

Other Information

54

Item 6.

Exhibits

55

Signatures

56

 

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Taysha Gene Therapies, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

2022

 

 

December 31,

2021

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

66,239

 

 

$

149,103

 

Prepaid expenses and other current assets

 

 

10,596

 

 

 

10,499

 

Total current assets

 

 

76,835

 

 

 

159,602

 

Restricted cash

 

 

2,637

 

 

 

2,637

 

Deferred lease asset

 

 

643

 

 

 

667

 

Property, plant and equipment, net

 

 

61,011

 

 

 

50,610

 

Other non-current assets

 

 

1,206

 

 

 

440

 

Total assets

 

$

142,332

 

 

$

213,956

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

23,967

 

 

$

21,763

 

Accrued expenses and other current liabilities

 

 

18,986

 

 

 

29,983

 

Total current liabilities

 

 

42,953

 

 

 

51,746

 

Build-to-suit lease liability

 

 

25,609

 

 

 

25,900

 

Term loan, net

 

 

37,580

 

 

 

37,192

 

Other non-current liabilities

 

 

3,480

 

 

 

3,735

 

Total liabilities

 

 

109,622

 

 

 

118,573

 

Commitments and contingencies - Note 9

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Preferred stock, $0.00001 par value per share; 10,000,000 shares authorized and no shares issued and outstanding as of June 30, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.00001 par value per share; 200,000,000 shares authorized and 41,020,086 and 38,473,945 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

 

 

1

 

 

 

 

Additional paid-in capital

 

 

352,342

 

 

 

331,032

 

Accumulated deficit

 

 

(319,633

)

 

 

(235,649

)

Total stockholders’ equity

 

 

32,710

 

 

 

95,383

 

Total liabilities and stockholders' equity

 

$

142,332

 

 

$

213,956

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

1


 

Taysha Gene Therapies, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

 

 

 

 

For the Three Months

Ended June 30,

 

 

For the Six Months

Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

23,118

 

 

$

30,643

 

 

$

60,917

 

 

$

54,497

 

General and administrative

 

 

9,867

 

 

 

10,129

 

 

 

21,336

 

 

 

18,365

 

Total operating expenses

 

 

32,985

 

 

 

40,772

 

 

 

82,253

 

 

 

72,862

 

Loss from operations

 

 

(32,985

)

 

 

(40,772

)

 

 

(82,253

)

 

 

(72,862

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

27

 

 

 

40

 

 

 

41

 

 

 

106

 

Interest expense

 

 

(912

)

 

 

(194

)

 

 

(1,761

)

 

 

(194

)

Other expense

 

 

(3

)

 

 

 

 

 

(11

)

 

 

 

Total other expense, net

 

 

(888

)

 

 

(154

)

 

 

(1,731

)

 

 

(88

)

Net loss

 

$

(33,873

)

 

$

(40,926

)

 

$

(83,984

)

 

$

(72,950

)

Net loss per common share, basic and diluted

 

$

(0.84

)

 

$

(1.09

)

 

$

(2.14

)

 

$

(1.96

)

Weighted average common shares outstanding, basic and diluted

 

 

40,142,403

 

 

 

37,479,164

 

 

 

39,163,996

 

 

 

37,237,115

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

2


 

Taysha Gene Therapies, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(Unaudited)

 

For the Three Months Ended June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance as of March 31, 2022

 

 

38,473,945

 

 

$

 

 

$

336,485

 

 

$

(285,760

)

 

$

50,725

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,249

 

 

 

 

 

 

4,249

 

Issuance of common stock, net of sales commissions and other offering costs of $392

 

 

2,000,000

 

 

 

1

 

 

 

11,608

 

 

 

 

 

 

11,609

 

Issuance of common stock upon vesting and settlement of restricted stock units

 

 

546,141

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(33,873

)

 

 

(33,873

)

Balance as of June 30, 2022

 

 

41,020,086

 

 

$

1

 

 

$

352,342

 

 

$

(319,633

)

 

$

32,710

 

 

 

For the Three Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance as of March 31, 2021

 

 

37,761,435

 

 

$

 

 

$

316,022

 

 

$

(93,150

)

 

$

222,872

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,549

 

 

 

 

 

 

4,549

 

Issuance of common stock upon vesting and settlement of restricted stock units

 

 

629,730

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(40,926

)

 

 

(40,926

)

Balance as of June 30, 2021

 

 

38,391,165

 

 

$

 

 

$

320,571

 

 

$

(134,076

)

 

$

186,495

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

3


 

Taysha Gene Therapies, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(Unaudited)

 

 

For the Six Months Ended June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2021

 

 

38,473,945

 

 

$

 

 

$

331,032

 

 

$

(235,649

)

 

$

95,383

 

Stock-based compensation

 

 

 

 

 

 

 

 

9,702

 

 

 

 

 

 

9,702

 

Issuance of common stock, net of sales commissions and other offering costs of $392

 

 

2,000,000

 

 

 

1

 

 

 

11,608

 

 

 

 

 

 

11,609

 

Issuance of common stock upon vesting and settlement of restricted stock units

 

 

546,141

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(83,984

)

 

 

(83,984

)

Balance as of June 30, 2022

 

$

41,020,086

 

 

$

1

 

 

$

352,342

 

 

$

(319,633

)

 

$

32,710

 

 

 

For the Six Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2020

 

 

37,761,435

 

 

$

 

 

$

312,428

 

 

$

(61,126

)

 

$

251,302

 

Stock-based compensation

 

 

 

 

 

 

 

 

8,143

 

 

 

 

 

 

8,143

 

Issuance of common stock upon vesting and settlement of restricted stock units

 

 

629,730

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(72,950

)

 

 

(72,950

)

Balance as of June 30, 2021

 

 

38,391,165

 

 

$

 

 

$

320,571

 

 

$

(134,076

)

 

$

186,495

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 

 

4


 

Taysha Gene Therapies, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

For the Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(83,984

)

 

$

(72,950

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation expense

 

 

531

 

 

 

117

 

Research and development license expense

 

 

1,250

 

 

 

5,500

 

Stock-based compensation

 

 

9,470

 

 

 

8,143

 

Other

 

 

387

 

 

 

194

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

80

 

 

 

(3,282

)

Accounts payable

 

 

6,212

 

 

 

2,382

 

Accrued expenses and other liabilities

 

 

(7,958

)

 

 

15,053

 

Due to related party

 

 

 

 

 

(8

)

Net cash used in operating activities

 

 

(74,012

)

 

 

(44,851

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchase of research and development license

 

 

(3,250

)

 

 

(5,500

)

Purchase of property, plant and equipment

 

 

(16,290

)

 

 

(3,532

)

Net cash used in investing activities

 

 

(19,540

)

 

 

(9,032

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Payment of shelf registration costs

 

 

(227

)

 

 

 

ESPP contributions

 

 

321

 

 

 

 

Proceeds from issuance of common stock, net of sales commissions

 

 

11,640

 

 

 

 

Other

 

 

(1,046

)

 

 

 

Net cash provided by financing activities

 

 

10,688

 

 

 

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(82,864

)

 

 

(53,883

)

Cash, cash equivalents and restricted cash at the beginning of the period

 

 

151,740

 

 

 

251,253

 

Cash, cash equivalents and restricted cash at the end of the period

 

$

68,876

 

 

$

197,370

 

Cash and cash equivalents

 

 

66,239

 

 

 

197,370

 

Restricted cash

 

 

2,637

 

 

 

 

Cash, cash equivalents and restricted cash at the end of the period

 

$

68,876

 

 

$

197,370

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

935

 

 

$

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

 

 

 

Property, plant and equipment in accounts payable and accrued expenses

 

 

2,722

 

 

 

3,308

 

Acquisition of property, plant and equipment funded by landlord

 

 

 

 

 

606

 

Deferred offering costs not yet paid

 

 

109

 

 

 

 

Purchase of research and development license not yet paid

 

 

1,000

 

 

 

 

Build-to-suit lease liability

 

 

 

 

 

26,250

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 

 

5


 

 

Note 1—Organization and Description of Business Operations

Taysha Gene Therapies, Inc. (the “Company” or “Taysha”) was originally formed under the laws of the State of Texas on September 20, 2019 (“Inception”). Taysha converted to a Delaware corporation on February 13, 2020, which had no impact to the Company’s par value or issued and authorized capital structure.

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

Sales Agreement

On October 5, 2021, the Company entered into a Sales Agreement (the “Sales Agreement”) with SVB Securities LLC (f/k/a SVB Leerink LLC) and Wells Fargo Securities, LLC (collectively, the “Sales Agents”), pursuant to which the Company may issue and sell, from time to time in its sole discretion, shares of its common stock having an aggregate offering price of up to $150.0 million through the Sales Agents. In March 2022, the Company amended the Sales Agreement to, among other things, include Goldman Sachs & Co. LLC as an additional Sales Agent. The Sales Agents may sell common stock by any method permitted by law deemed to be an “at-the-market offering” as defined in Rule 415(a)(4) of the Securities Act, including sales made directly on or through the Nasdaq Global Select Market or any other existing trade market for the common stock, in negotiated transactions at market prices prevailing at the time of sale or at prices related to prevailing market prices, or any other method permitted by law. The Sales Agents are entitled to receive 3.0% of the gross sales price per share of common stock sold under the Sales Agreement. In April 2022, the Company sold 2,000,000 shares of common stock under the Sales Agreement and received $11.6 million in net proceeds. No other shares of common stock have been issued and sold pursuant to the Sales Agreement as of June 30, 2022.

Going Concern

The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

 

The Company has incurred operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of June 30, 2022, the Company had an accumulated deficit of $319.6 million and cash and cash equivalents of $66.2 million. Losses are expected to continue as the Company continues to invest in its research and development activities. Management believes that there is presently insufficient funding available to allow the Company to fund its currently planned research and discovery programs and the build-out of its GMP manufacturing facility for a period exceeding one year from the date of this filing with the Securities and Exchange Commission. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.

 

In response to these conditions and to meet the Company’s capital requirements, management plans to use its current cash on hand, along with access to the term loan facility (see Note 4), and some combination of the following: (i) dilutive and/or non-dilutive financings, (ii) out-licensing or strategic alliances/collaborations, and (iii) out-licensing or sale of its non-core assets. If the Company raises additional funds through collaborations, strategic alliances, business development or licensing arrangements with third parties, the Company might have to relinquish valuable rights to its technologies, future revenue streams, research programs or product candidates. However, these plans have not yet been finalized and are not within the Company’s control, and therefore cannot be deemed probable. As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.

 

The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

 

 

6


 

 

Note 2—Summary of Significant Accounting Policies

Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("GAAP") as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X and are consistent in all material respects with those included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission ("SEC") on March 31, 2022 (the “2021 Annual Report”). In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. The consolidated balance sheet as of December 31, 2021 is derived from audited financial statements, however, it does not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes in the Company’s 2021 Annual Report.

Principles of Consolidation

The accompanying interim condensed consolidated financial statements include the accounts of Taysha and its inactive wholly owned U.S. subsidiaries as well as two foreign subsidiaries incorporated during 2021. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The most significant estimates and assumptions in the Company’s financial statements relate to the determination of the fair value of the common stock prior to the Company’s initial public offering (“IPO”) in September 2020 (as an input into stock-based compensation), and estimating preclinical manufacturing accruals and accrued or prepaid research and development expenses. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected. In response to the ongoing and rapidly evolving COVID-19 pandemic, management considered the impact of the estimated economic implications on the Company’s critical and significant accounting estimates, including assessment of impairment of long-lived assets.

Significant Accounting Policies

There have been no changes in the Company’s significant accounting policies as disclosed in Note 2 to the audited consolidated financial statements included in the 2021 Annual Report.

Comprehensive Loss

Comprehensive loss is equal to net loss as presented in the accompanying condensed consolidated statements of operations.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), as amended, with guidance regarding the accounting for and disclosure of leases. This update requires lessees to recognize the liabilities related to all leases, including operating leases, with a term greater than 12 months on the balance sheets. This update also requires lessees and lessors to disclose key information about their leasing transactions. This guidance will become effective for the Company for annual reporting periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. The new standard requires the use of one of the following two approaches, either (1) retrospectively to each prior reporting period presented in the financial statements with the cumulative effect recognized at the beginning of the earliest comparative period presented, or (2) retrospectively at the beginning of the period of adoption through a cumulative-effect adjustment. The Company has not yet concluded which approach will be utilized to adopt the new standard and is currently evaluating the impact of this standard on its condensed consolidated financial statements.

7


 

Note 3—Balance Sheet Components

Prepaid expenses and other current assets consisted of the following (in thousands):

 

 

 

June 30,

2022

 

 

December 31,

2021

 

Prepaid research and development

 

$

6,128

 

 

$

5,218

 

Prepaid clinical trial

 

 

2,934

 

 

 

3,298

 

Deferred offering costs

 

 

698

 

 

 

545

 

Prepaid insurance

 

 

108

 

 

 

148

 

Prepaid bonus

 

 

51

 

 

 

427

 

Other

 

 

677

 

 

 

863

 

Total prepaid expenses and other current assets

 

$

10,596

 

 

$

10,499

 

 

Property, plant and equipment consisted of the following (in thousands):

 

 

 

June 30,

2022

 

 

December 31,

2021

 

Leasehold improvements

 

$

2,090

 

 

$

2,067

 

Laboratory equipment

 

 

1,438

 

 

 

1,095

 

Computer equipment

 

 

1,129

 

 

 

1,098

 

Furniture and fixtures

 

 

896

 

 

 

845

 

Construction in progress

 

 

56,474

 

 

 

46,004

 

 

 

 

62,027

 

 

 

51,109

 

Accumulated depreciation

 

 

(1,016

)

 

 

(499

)

Property, plant and equipment, net

 

$

61,011

 

 

$

50,610

 

 

Included in construction in progress at June 30, 2022 was $56.3 million of costs associated with the Build-to-Suit lease (see Note 9), which includes $3.1 million of capitalized payroll and payroll-related costs.

Depreciation expense was $0.3 million and $0.5 million for the three and six months ended June 30, 2022, respectively. Depreciation expense was less than $0.1 million and $0.1 million for the three and six months ended June 30, 2021, respectively.

 

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

 

 

June 30,

2022

 

 

December 31,

2021

 

Accrued research and development

 

$

8,918

 

 

$

11,895

 

Accrued compensation

 

 

4,620

 

 

 

7,703

 

Accrued license fees

 

 

1,500

 

 

 

3,500

 

Accrued property, plant and equipment

 

 

1,224

 

 

 

2,644

 

Accrued clinical trial

 

 

807

 

 

 

1,659

 

Accrued professional and consulting fees

 

 

439

 

 

 

1,091

 

Other

 

 

1,478

 

 

 

1,491

 

Total accrued expenses and other current liabilities

 

$

18,986

 

 

$

29,983

 

 

Note 4—Loan with Silicon Valley Bank

On August 12, 2021 (the “Closing Date”), the Company entered into a Loan and Security Agreement (the “Term Loan Agreement”), by and among the Company, the lenders party thereto from time to time (the “Lenders”) and Silicon Valley Bank, as administrative agent and collateral agent for the Lenders (“Agent”). The Term Loan Agreement provides for (i) on the Closing Date, $40.0 million aggregate principal amount of term loans available through December 31, 2021, (ii) from January 1, 2022 until September 30, 2022, an additional $20.0 million term loan facility available at the Company’s option upon having three distinct and active clinical stage programs, determined at the discretion of the Agent, at the time of draw, (iii) from October 1, 2022 until March 31, 2023, an additional $20.0 million term loan facility available at 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 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 (collectively, the “Term Loans”). The Company drew $30.0 million in term loans on the Closing Date and $10.0 million in term loans in December 2021.

8


 

 

The interest rate applicable to the Term Loans is the greater of (a) the WSJ Prime Rate plus 3.75% or (b) 7.00% per annum. The Term Loans are interest only from the Closing Date through August 31, 2024, after which the Company is required to pay equal monthly installments of principal through August 1, 2026, the maturity date.

 

The Term Loans may be prepaid in full through August 12, 2022 with payment of a 2.00% prepayment premium, after which they may be prepaid in full through August 12, 2023 with payment of a 1.00% prepayment premium, after which they may be prepaid in full with no prepayment premium. An additional final payment of 7.5% of the amount of Terms Loans advanced by the Lenders (“Exit Fee”) will be due upon prepayment or repayment of the Term Loans in full. The Exit Fee of $3.0 million was recorded as debt discount and has also been fully accrued within non-current liabilities as of June 30, 2022. The debt discount is being accreted using the effective interest method over the term of the Term Loans within interest expense in the condensed consolidated statements of operations.

The obligations under the Term Loan Agreement are secured by a perfected security interest in all of the Company’s assets except for intellectual property and certain other customarily excluded property pursuant to the terms of the Term Loan Agreement. There are no financial covenants and no warrants associated with the Term Loan Agreement. The Term Loan Agreement contains various covenants that limit the Company’s ability to engage in specified types of transactions without the consent of the Lenders which include, among others, incurring or assuming certain debt; merging, consolidating or acquiring all or substantially all of the capital stock or property of another entity; changing the nature of the Company’s business; changing the Company’s organizational structure or type; licensing, transferring or disposing of certain assets; granting certain types of liens on the Company’s assets; making certain investments; and paying cash dividends.

The Term Loan Agreement also contains customary representations and warranties, and also includes customary events of default, including payment default, breach of covenants, change of control, and material adverse effects. The Company was in compliance with all covenants under the Term Loan Agreement as of June 30, 2022. Upon the occurrence of an event of default, a default interest rate of an additional 5% per annum may be applied to the outstanding loan balances, and the Lenders may declare all outstanding obligations immediately due and payable and exercise all of its rights and remedies as set forth in the Term Loan Agreement and under applicable law.

During the six months ended June 30, 2022, the Company recognized interest expense related to the Term Loan of $1.4 million.

Future principal debt payments on the loan payable as of June 30, 2022 are as follows (in thousands):

 

Year Ending December 31,

 

 

 

 

2022

 

 

 

2023

 

 

 

2024

 

 

6,667

 

2025

 

 

20,000

 

2026

 

 

13,333

 

Total principal payments

 

 

40,000

 

Unamortized debt discount

 

 

(2,420

)

Term Loan, net

 

$

37,580

 

 

Note 5—Research, Collaboration and License Agreements

UT Southwestern Agreement

On November 19, 2019, the Company entered into a research, collaboration and license agreement (“UT Southwestern Agreement”) with the Board of Regents of the University of Texas System on behalf of The University of Texas Southwestern Medical Center (“UT Southwestern”). Under the UT Southwestern Agreement, UT Southwestern is primarily responsible for preclinical development activities with respect to licensed products for use in certain specified indications (up to investigational new

9


 

drug application-enabling studies), and the Company is responsible for all subsequent clinical development and commercialization activities with respect to the licensed products. UT Southwestern will conduct such preclinical activities for a two-year period under mutually agreed upon sponsored research agreements that were entered into beginning in April 2020. During the initial research phase, the Company has the right to expand the scope of specified indications under the UT Southwestern Agreement.

In connection with the UT Southwestern Agreement, the Company obtained an exclusive, worldwide, royalty-free license under certain patent rights of UT Southwestern and a non-exclusive, worldwide, royalty-free license under certain know-how of UT Southwestern, in each case to make, have made, use, sell, offer for sale and import licensed products for use in certain specified indications. Additionally, the Company obtained a non-exclusive, worldwide, royalty-free license under certain patents and know-how of UT Southwestern for use in all human uses, with a right of first refusal to obtain an exclusive license under certain of such patent rights and an option to negotiate an exclusive license under other of such patent rights. The Company is required to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize at least one licensed product.

On April 2, 2020, the Company amended the UT Southwestern Agreement to include the addition of another licensed product and certain indications, and a right of first refusal to the Company over certain patient dosing patents. No additional consideration was transferred in connection with this amendment. In March 2022, the Company and UT Southwestern mutually agreed to revise the payment schedules and current performance expectations of the current sponsored research agreements under the UT Southwestern Agreement and defer payments by fifteen months.

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, the Company 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.

In November 2019, as partial consideration for the license rights granted under the UT Southwestern Agreement, the Company issued 2,179,000 shares of its common stock, or 20% of its then outstanding fully-diluted common stock, to UT Southwestern. As additional consideration, UT Southwestern was entitled to receive additional shares if their holdings fell below 10% on a fully-diluted basis before or as a result of the completion of a qualified financing. In March 2020, following the initial closing of the Series A convertible preferred stock agreement, which met the definition of such qualified financing, the anti-dilution feature expired and no additional shares were issued. UT Southwestern no longer owns such shares of common stock as of January 2022. The Company does not have any future milestone or royalty obligations to UT Southwestern under the UT Southwestern Agreement other than costs related to maintenance of patents.

Queen’s Agreement

On February 21, 2020, the Company entered into a license agreement with Queen’s (the “Queen’s Agreement”) to obtain the exclusive perpetual, royalty-bearing license, with the right to sublicense through multiple tiers, under certain patent rights and know-how of Queen’s, including certain improvements to such patent rights and know-how, to develop products in any field which use one or more valid claims of the patents licensed under the Queen’s Agreement (the “Licensed Patents”), or the technology, information and intellectual property related to the patents licensed under the Queen’s Agreement (together with the Licensed Patents, the “Licensed Products”), and to make, have made, use, sell, offer for sale, import and export Licensed Products and otherwise exploit such patents and know-how for use in certain specified indications. In exchange for the rights granted to the Company, the Company made a cash payment of $3.0 million in April 2020 which was recorded within research and development expenses in the consolidated statements of operations for the year ended December 31, 2020 since the acquired license does not have an alternative future use. The Company is obligated to make aggregate cash payments of up to $10.0 million upon the completion of a combination of regulatory milestones and up to $10.0 million upon the completion of a combination of commercial milestones. In further consideration of the rights granted, beginning with the Company’s first commercial sale of the Licensed Products, the Company will also pay an annual earned royalty in the low single digits on net sales of Licensed Products, subject to certain customary reductions, and a percentage of non-royalty sublicensing revenue ranging in the low double digits. Royalties are payable, on a Licensed Products-by-Licensed Products and a country-by-country basis, until expiration of the last valid claim of a Licensed Patent covering such Licensed Products in such country and the expiration of any regulatory exclusivity for such Licensed Products in such country.

No additional milestone payments were made in connection with the Queen’s Agreement during the six months ended June 30, 2022.

 

10


 

 

Abeona CLN1 Agreements

In August 2020, the Company entered into license and inventory purchase agreements (collectively, the “Abeona Agreements”) with Abeona Therapeutics Inc. (“Abeona”) for worldwide exclusive rights to certain intellectual property rights and know-how relating to the research, development and manufacture of ABO-202, an AAV-based gene therapy for CLN1 disease (also known as infantile Batten disease). Under the terms of the Abeona Agreements, the Company made initial cash payments to Abeona of $3.0 million for the license fee and $4.0 million for purchase of clinical materials and reimbursement for previously incurred development costs in October 2020. In exchange for the license rights, the Company recorded an aggregate of $7.0 million within research and development expenses in the consolidated statements of operations for the year ended December 31, 2020 since the acquired license or acquired inventory do not have an alternative future use. The Company is obligated to make up to $26.0 million in regulatory-related milestones and up to $30.0 million in sales-related milestones per licensed CLN1 product. The Company will also pay an annual earned royalty in the high single digits on net sales of any licensed CLN1 products. The license agreement with Abeona (the “Abeona License 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. Either party may terminate the Abeona License Agreement upon an uncured material breach of the agreement or insolvency of the other party. The Company may terminate the Abeona License Agreement for convenience upon specified prior written notice to Abeona.

In December 2021, the Company’s Clinical Trial Application (“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 this agreement. The Company 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 classified as an investing cash outflow in the condensed consolidated statements of cash flows for the six months ended June 30, 2022.

 

Abeona Rett Agreement

On October 29, 2020, the Company entered into a license agreement (the “Abeona Rett Agreement”) with Abeona pursuant to which the Company obtained an exclusive, worldwide, royalty-bearing license, with the right to grant sublicenses under certain patents, know-how and materials originally developed by the University of North Carolina at Chapel Hill, the University of Edinburgh and Abeona to research, develop, manufacture, have manufactured, use, and commercialize licensed products for gene therapy and the use of related transgenes for Rett syndrome.

Subject to certain obligations of Abeona, the Company is required to use commercially reasonable efforts to develop at least one licensed product and commercialize at least one licensed product in the United States.

In connection with the Abeona Rett Agreement, the Company paid Abeona a one-time upfront license fee of $3.0 million which was recorded in research and development expenses in the consolidated statements of operations for the year ended December 31, 2020 since the acquired license does not have an alternative future use. The Company is obligated to pay Abeona up to $26.5 million in regulatory-related milestones and up to $30.0 million in sales-related milestones per licensed Rett product and high single-digit royalties on net sales of licensed Rett products. 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.

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. Either party may terminate the agreement upon an uncured material breach of the agreement or insolvency of the other party. The Company may terminate the agreement for convenience upon specified prior written notice to Abeona.

In March 2022, the Company’s 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 this agreement. The Company recorded $1.0 million within research and development expenses in the condensed consolidated statements of operations for the six months ended June 30, 2022. The $1.0 million regulatory milestone fee was paid in July 2022.

 

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Acquisition of Worldwide Rights for TSHA-120 for the treatment of GAN

In March 2021, the Company acquired the exclusive worldwide rights to a clinical-stage AAV9 gene therapy program, now known as TSHA-120, for the treatment of Giant Axonal Neuropathy (“GAN”). TSHA-120 is an intrathecally dosed AAV9 gene therapy currently being evaluated in a clinical trial for the treatment of GAN. The trial is being conducted by the National Institutes of Health (“NIH”) in close collaboration with a leading patient advocacy group focused on finding treatments and cures for GAN. TSHA-120 has received rare pediatric disease and orphan drug designations from the U.S. Food and Drug Administration for the treatment of GAN. The worldwide rights were acquired through a license agreement, effective March 29, 2021, between Hannah’s Hope Fund for Giant Axonal Neuropathy, Inc. (“HHF”) and the Company (the “GAN Agreement”).

Under the terms of the GAN Agreement, in exchange for granting the Company the exclusive worldwide rights to TSHA-120, HHF received an upfront payment of $5.5 million and will be eligible to receive clinical, regulatory and commercial milestones totaling up to $19.3 million, as well as a low, single-digit royalty on net sales upon commercialization of the product.

In exchange for the license rights, the Company recorded an aggregate of $5.5 million within research and development expenses in the condensed consolidated statements of operations for the six months ended June 30, 2021, since the acquired license does not have an alternative future use. This license fee was paid in April 2021 and has been classified as an investing outflow in the condensed consolidated statements of cash flows for the six months ended June 30, 2021. No additional milestone payments were made in connection with the GAN Agreement during the six months ended June 30, 2022.

 

License Agreement for CLN7

 

In March 2022, the Company entered into a license agreement with UT Southwestern (the “CLN7 Agreement”) pursuant to which the Company obtained an exclusive worldwide, royalty-bearing license with right to grant sublicenses to develop, manufacture, use, and commercialize licensed products for gene therapy for CLN7, a form of Batten Disease In connection with the CLN7 Agreement, the Company paid one-time up-front license fee of $0.3 million. The Company recorded the up-front license fee in research and development expense in the condensed consolidated statements of operations since the acquired license does not have an alternative future use. The up-front license fee was classified as an investing cash outflow in the condensed consolidated statements of cash flows for the six months ended June 30, 2022. The Company is obligated to pay UT Southwestern up to $7.7 million in regulatory-related milestones and up to $7.5 million in sales-related milestones, as well as a low, single-digit royalty on net sales upon commercialization of the product.

 

Note 6—Stock-Based Compensation

On July 1, 2020, the Company’s board of directors approved the 2020 Equity Incentive Plan (“Existing Plan”) which permits the granting of incentive stock options, non-statutory stock options, stock appreciation rights, RSAs, RSUs and other stock-based awards to employees, directors, officers and consultants. On July 1, 2020, 3,529,412 shares of common stock were authorized for issuance under the Existing Plan. On September 16, 2020, the Company increased the number of shares of common stock authorized for issuance under the Existing Plan to 3,845,294. As of September 16, 2020, the approval date of the New Plan (as defined below), no additional awards will be granted under the Existing Plan. The terms of the Existing Plan will continue to govern the terms of outstanding equity awards that were granted prior to approval of the New Plan.

On September 16, 2020, the Company’s stockholders approved the 2020 Stock Incentive Plan (“New Plan”), which became effective upon the execution of the underwriting agreement in connection with the IPO. Initially, the number of shares available for future issuance under the New Plan was the sum of (1) 3,390,168 new shares of common stock, (2) 209,841 remaining shares of common stock reserved under the Existing Plan that became available for issuance upon the effectiveness of the New Plan and (3) the number of shares of common stock subject to outstanding awards under the Existing Plan when the New Plan became effective that thereafter expire or are forfeited, canceled, withheld to satisfy tax withholding or to purchase or exercise an award, repurchased by the Company or are otherwise terminated. The number of shares of common stock reserved for issuance under the New Plan automatically increases on January 1 of each year, for a period of ten years, from January 1, 2021 continuing through January 1, 2030, by 5% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Company’s board of directors. On January 1, 2021 the Company’s board of directors increased the number of shares of common stock reserved for issuance under the New Plan by 1,434,934 shares. On January 1, 2022 the Company’s board of directors increased the number of shares of common stock reserved for issuance under the New Plan by 1,923,697 shares.

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Furthermore, on September 16, 2020, the Company’s stockholders approved the Employee Stock Purchase Plan (“ESPP”), which became effective upon the execution of the underwriting agreement in connection with the IPO. The maximum number of shares of common stock that may be issued under the ESPP will not exceed 362,000 shares of common stock, plus the number of shares of common stock that are automatically added on January 1st of each year for a period of up to ten years, commencing on the first January 1 following the IPO and ending on (and including) January 1, 2030, in an amount equal to the lesser of (i) one percent (1.0%) of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year, and (ii)