Taysha Gene Therapies, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Taysha is a pre-revenue gene therapy company developing AAV-based treatments for central nervous system diseases. Its candidates remain in clinical or preclinical development.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $39.5 million | $11.1 million | $94.0 million | $19.6 million |
| General and administrative expense | $11.2 million | $4.0 million | $29.5 million | $5.0 million |
| Total operating expenses | $50.7 million | $15.0 million | $123.5 million | $24.6 million |
| Net loss | $51.2 million | $15.0 million | $124.1 million | $41.7 million |
| Net loss per share, basic and diluted | $1.35 | $1.28 | $3.31 | $3.73 |
| Cash used in operating activities | Not separately reported | Not separately reported | $76.8 million | $10.9 million |
Margins are not meaningful because the company had no revenue. At September 30, cash and cash equivalents were $188.8 million; restricted cash was $2.6 million. Current assets were $197.2 million and current liabilities $43.2 million. Total assets were $241.0 million, total liabilities $100.6 million, and stockholders’ equity $140.4 million. Accumulated deficit was $185.3 million.
The company drew $30.0 million under its Silicon Valley Bank term loan in August. The balance-sheet carrying amount was $27.8 million net of unamortized discount; principal outstanding was $30.0 million. Interest is at the greater of prime plus 3.75% or 7.00%; payments are interest-only through August 2024, with maturity in August 2026. The agreement provides potential additional borrowing, subject to clinical-program conditions or lender approval.
Cash, cash equivalents and restricted cash declined $59.8 million during the first nine months. Investing activities used $13.0 million, largely for the TSHA-120 license payment and capital expenditures; financing activities provided $30.0 million from the term loan. Management said cash and cash equivalents at quarter-end were expected to fund planned operations for at least 12 months from issuance of the statements. Separately, management estimated existing cash plus full access to the loan facility would fund operations into the second half of 2023; both estimates depend on spending and facility availability.
Material changes and notable items
- Operating expenses rose sharply year over year, reflecting increased manufacturing and raw-material purchases, employee compensation and stock-based compensation, CRO and toxicology work, and clinical and regulatory activity.
- Q3 net loss widened to $51.2 million from $15.0 million. Nine-month net loss increased to $124.1 million from $41.7 million, while loss per share improved from $3.73 to $3.31. The prior-year nine-month result included a $17.0 million noncash charge from remeasurement of a preferred-stock tranche liability; there was no comparable 2021 charge.
- Property, plant and equipment rose to $40.6 million from $0.3 million, mainly reflecting construction of the Durham manufacturing facility. The company recognized a $26.6 million build-to-suit lease liability. Durham construction is expected to be completed in 2023.
- Stock-based compensation was $13.2 million for the first nine months, versus $1.3 million in the comparable 2020 period.
- After quarter-end, the company entered into a sales agreement allowing up to $150 million of at-the-market common-stock sales. No shares had been sold under it as of the filing’s financial-statement issuance date; sales agents receive 3.0% of gross proceeds.
Outlook, risks and contingencies
Management expects significant operating losses and higher research, clinical, manufacturing, staffing and public-company costs. The company expects to need substantial additional funding and has no product revenue; it does not expect substantial revenue for at least the next few years. Management cautioned that development timing and costs are uncertain and that financing may not be available on acceptable terms.
- Clinical outlook stated in the filing: expected TSHA-120 high-dose cohort safety and functional data and TSHA-101 preliminary safety and enzyme-activity data in December 2021; TSHA-118 Phase 1/2 trial initiation by year-end 2021 and preliminary data in the first half of 2022; Rett syndrome IND/CTA filing planned for November 2021 and trial initiation by year-end 2021, with preliminary data expected by year-end 2022. CLN7 preliminary first-generation clinical data were expected by December 2021, with a planned pivotal trial using a next-generation construct in 2022. These are forward-looking expectations, not reported outcomes.
- Funding and debt risk: loan covenants restrict certain debt, liens, investments, acquisitions, asset transfers and dividends. A default could accelerate repayment and permit enforcement against collateral. Additional loan tranches depend on specified clinical-stage program criteria or lender approval. The debt is secured by company assets, excluding intellectual property, which is subject to a negative pledge.
- Clinical and operating risk: success depends on clinical efficacy and safety, regulatory review, manufacturing scale-up and execution of trials. COVID-19 had not materially affected reported results, according to management, but future effects on trials, operations and access to capital remained uncertain.
- Commitments: license agreements include potential regulatory and commercial milestone payments and royalties if products are commercialized. The company reported no material legal proceedings and no significant anticipated losses from ordinary-course indemnification arrangements.
Key facts for investors to verify
- Whether the anticipated clinical readouts and trial milestones occurred, and how regulators assessed the data.
- Cash burn, updated runway assumptions, and whether additional financing—including the $150 million ATM program—was used and on what terms.
- Availability and conditions for undrawn term-loan tranches, covenant compliance, interest costs and repayment obligations.
- Durham facility construction spending, completion timing and resulting manufacturing capacity.
- Changes in development costs, stock-based compensation, license commitments and potential milestone or royalty obligations.