Taysha Gene Therapies Inc (TSHA) 2022 Q1 法說會逐字稿

Good morning, welcome to Taysha Gene Therapies' First Quarter 2022 Financial Results and Corporate Update Conference Call. (Operator Instructions) As a reminder, this call is being recorded today, May 16, 2022.

I'll now turn the call over to Dr. Kimberly Lee, Chief Corporate Affairs Officer. Please go ahead.

Good morning, and welcome to Taysha's First Quarter 2022 Financial Results and Corporate Update Conference Call. Joining me on today's call are RA Session II, Taysha's President, Founder and CEO; Dr. Suyash Prasad, Chief Medical Officer and Head of R&D; and Kamran Alam, Chief Financial Officer.

After our formal remarks, we will conduct a question-and-answer session and instructions will follow at that time.

Earlier today, Taysha issued a press release announcing financial results for the first quarter ended March 31, 2022. A copy of this press release is available on the company's website and through our SEC filings.

Please note that on today's call, we will be making forward-looking statements, including statements relating to the safety and efficacy and the therapeutic and commercial potential of our investigational product candidates. These statements may include the effect, the timing and results of clinical trials for our product candidates, our expectations regarding the data necessary to support regulatory approval of TSHA-120; and the regulatory status and market opportunity for those programs as well as Taysha's manufacturing plans.

This call may also contain forward-looking statements relating to Taysha's growth and future operating results, discovery and development of product candidates, strategic alliances and intellectual property as well as matters that are not of historical facts or information.

Various risks may cause Taysha's actual results to differ materially from those stated or implied in such forward-looking statements. These risks include uncertainties related to the timing and results of clinical trials and preclinical studies of our product candidates or dependence upon strategic alliances and other third-party relationships; our ability to obtain patent protection for our discoveries, limitations imposed by patents owned or controlled by third parties and the requirements of substantial funding to conduct our research and development activities. For a list and a description of the risks and uncertainties that we face, please see the reports we have filed with the Securities and Exchange Commission.

This conference call contains time-sensitive information that is accurate only as of today of this live broadcast, May 16, 2022. Taysha undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call, except as may be required by applicable securities law.

I would now like to turn the call over to our President, Founder and CEO, RA Session II. RA?

Thank you, Kim. Good morning, and welcome, everyone, to our first quarter 2022 financial results and corporate update conference call. Since our last update, we have continued to advance our core development programs with particular focus on giant axonal neuropathy or GAN and Rett Syndrome. In March, we were pleased to initiate clinical development of TSHA-102 under a CTA approved by Health Canada for the first and only gene therapy in clinical development for Rett, which affects over 350,000 patients worldwide.

We look forward to reporting preliminary Phase I/II clinical safety and efficacy data by year-end. We were also pleased to recently receive orphan drug designation for TSHA-120 for giant axonal neuropathy from the European Commission, further highlighting the unmet need for treatment options in GAN and the potential of TSHA-120 to provide a disease-modifying treatment for these patients.

We look forward to providing a regulatory update by mid-2022. As we look ahead, we remain focused on executing on our strategic pipeline prioritization initiatives and expect our current capital resources, along with full access to our existing term loan facility to fund operating expenses and capital requirements into the fourth quarter of 2023.

I will now turn the call over to Suyash to provide a more detailed update on our clinical programs. Suyash, Please go ahead.

Thanks, RA. As RA noted, we have made significant recent progress in advancing our clinical programs for GAN and Rett syndrome and expect exciting milestones throughout the remainder of the year.

I will begin with Rett syndrome. TSHA-102 delivers a transgene for MECP2, which is a protein essential for neuronal development and function. The challenge in gene replacement therapy of MECP2 is finding the appropriate balance of sufficient physiological expression to correct the deficiency whilst also avoiding over-expression and the associated toxicity.

To do this, TSHA-102 regulates expression of MECP2 using a novel microRNA-Responsive Auto-Regulatory Element platform, known as miRARE, that is exclusively licensed to Taysha and developed by Doctors Sarah Sinnett and Steven Gray of UT Southwestern Medical Center. miRARE provides sophisticated regulation of transgene expression on a cell-by-cell basis, ensuring controlled expression that avoids excessive levels of MECP2.

We recently initiated clinical development of TSHA-102 under an approved CTA by Health Canada. In further support of this promising program, we presented positive IND, CTA-enabling preclinical data at the International Rett Syndrome Foundation Scientific Conference and ASCEND Rett Syndrome National Patient Advocacy Summit. These data supported the CTA acceptance, including a pharmacology study in Rett knockout mice, assessing the efficacy of TSHA-102 and a 6-month GLP toxicology study in nonhuman primates exploring the safety by distribution and mechanism of action of TSHA-102.

Collectively these preclinical results confirm the ability of TSHA-102 to regulate transgene expression to within appropriate physiological levels. This week we will have a presence at the 25th Annual Meeting of the American Society of Gene and Cell Therapy or ASGCT, where we will be presenting the safety and by distribution data in NHPs as well as safety data in rats. These presentations will further support the ability of our miRARE platform to control gene expression and address the challenge of ensuring appropriate levels of MECP2 expression that have limited effective therapeutic development with other gene replacement strategies.

As RA indicated, there are over 350,000 patients estimated to suffer from Rett syndrome worldwide, spanning patients as young as 6 months into adulthood. Currently there are no disease-modifying therapies to treat this devastating condition. We are excited to advance TSHA-102 and the REVEAL Phase I/II clinical trial as the first gene therapy in clinical development for Rett syndrome. The REVEAL study is an open-label, dose escalation, randomized, multicenter study that will examine the safety and efficacy of TSHA-102 in adult female patients with Rett syndrome, up to 18 patients will be enrolled.

In the first cohort, a single 5E14 total vg dose of TSHA-102 will be given intrathecally. The second cohort will be given a 1E15 total vg dose of TSHA-102. Key assessments will include Rett specific and global assessments, quality of life, biomarkers and neurophysiology and imaging assessments. Sainte-Justine Mother and Child University Hospital Center in Montreal, Quebec, Canada, has been selected as the initial clinical trial site under the direction of Dr. Elsa Rossignol, Assistant Professor, neuroscience and pediatrics and principal investigator. We look forward to reporting preliminary first-in-human data by the end of 2022. TSHA-102 has been granted rare pediatric disease designation and orphan drug designation from the FDA and more recently orphan drug designation from the European Commission.

Turning to TSHA-120 for the treatment of GAN, earlier this year, we reported positive clinical efficacy and safety data for the high-dose cohort of 3.5E14 total vg delivered intrathecally as well as long-term safety and durability across all therapeutic doses. Treatment with TSHA-120 achieved a clinically meaningful and statistically significant slowing or halting of disease progression across all therapeutic dose cohorts that was further confirmed by long-term data demonstrating sustained durability.

Notably, nerve biopsy data provided new evidence of active regeneration of nerve fibers following treatment with TSHA-120. In addition, we observed preservation of visual acuity as measured by the LogMAR scale and optical coherence tomography. There were no significant safety issues, no increase in adverse events at higher doses and no dose-limiting toxicities. All adverse events related to immunosuppression or study procedures were comparable to other gene therapies and transient in nature. Lastly, there was no evidence of dorsal root ganglion inflammation or thrombocytopenia.

We've recently completed a commercially representative GMP batch for TSHA-120 and release testing for this batch is currently underway. Also in April, TSHA-120 received orphan drug designation from the European Commission, further supporting the large unmet need for treatment options in GAN and potentially expedited support in regulatory approval. As a reminder, TSHA-120 previously received orphan drug and rare pediatric disease designations from the FDA.

Partnerships with genetics testing leader, GeneDx to sponsor the inclusion of a genetic marker for GAN testing in the GeneDx routine hereditary neuropathy screening panel free of charge are ongoing as well as a collaboration with the Hereditary Neuropathy Foundation and the Charcot-Marie-Tooth Association Centers of Excellence, healthcare professionals and patient advocacy groups to help raise awareness on the early diagnosis of GAN.

We remain well positioned to further advance TSHA-120 through regulatory approval and believe the comprehensive gene therapy dataset generated to date in GAN offers TSHA-120 a potentially derisk regulatory path that meets most registration requirements of the FDA and EMA. We look forward to our continued discussions with major regulatory agencies on potential registration pathways for TSHA-120 and anticipate providing a regulatory update by mid-2022.

At the upcoming ASGCT meeting, Dr. Rachel Bailey, Assistant Professor at the Department of Pediatrics at UTSW, will be presenting data on vagus nerve delivery of TSHA-120 to treat the autonomic nervous system dysfunction in GAN. There will also be other presentations on some of our earlier-stage programs, including preclinical data in tauopathy, Prader-Willi syndrome and Angelman syndrome. There will also be a symposium on innovative approaches and translational strategies in gene therapy development.

In addition to expected regulatory feedback for TSHA-120 and GAN by mid-2022 and first-in-human preliminary Phase I/II safety and efficacy data for TSHA-102 and Rett syndrome by year-end, we remain focused on continued clinical development of the first-generation construct for CLN7 disease in partnership with UT Southwestern under the leadership of Dr. Ben Greenberg, Vice Chair of Clinical and Translational Research and Principal Investigator during the course of 2022.

Clinical development of TSHA-118 in CLN1 disease also remains ongoing and we intend to initiate clinical development for our small proof-of-concept study for TSHA-105 in SLC13A5 deficiency.

With that, I'll turn the call over to Kamran to review our financial results. Kamran?

Thank you, Suyash. This morning, I will discuss key aspects of our financial results for the first quarter ended on March 31, 2022. More details can be found in our Form 10-Q, which will be filed with the SEC shortly. As indicated in our press release today, research and development expenses were $37.8 million for the 3 months ended March 31, 2022, compared to $23.9 million for the 3 months ended March 31, 2021.

The $13.9 million increase was primarily attributable to an increase of $9.3 million in employee compensation, which included $2.2 million of severance and one-time termination costs in connection with the strategic reprioritization of programs completed in March 2022 and $1 million of non-cash stock-based compensation.

Additionally, in the 3 months ended March 31, 2022, we incurred an increase of $2.9 million of expenses in research and development, manufacturing and other raw material purchases. We also incurred an increase of $1.7 million in third-party research and development consulting fees, primarily related to GLP toxicology studies and clinical study activities.

General and administrative expenses were $11.5 million for the 3 months ended March 31, 2022, compared to $8.2 million for the 3 months ended March 31, 2021. The increase of approximately $3.3 million was primarily attributable to $2.9 million of incremental compensation expense, which included $0.4 million of severance and one-time termination costs and $0.7 million of non-cash stock-based compensation.

We also incurred an increase of $0.4 million in professional fees related to insurance, investor relations, communications, accounting and market research. Net loss for the 3 months ended March 31, 2022, was $50.1 million or $1.31 per share as compared to a net loss of $32 million or $0.87 per share for the 3 months ended March 31, 2021.

As of March 31, 2022, Taysha had $96.6 million in cash and cash equivalents. This cash balance excludes $12 million in gross proceeds generated from the sale of common shares under our existing at-the-market facility or ATM, in April. Current cash and cash equivalents, along with full access to our existing term loan facility is expected to fund operating expenses and capital requirements into the fourth quarter of 2023.

And with that, I will hand the call back to RA.

Thanks, Kamran. Our focus for 2022 continues to be on executing across our core development programs, and I am extremely proud of our team's progress and accomplishments this quarter. We continue to maintain a strong cash position that should provide runway into the fourth quarter of 2023. We would like to thank our Taysha employees, Board of Directors, Scientific Advisory Board, collaborators and the patients and advocates for their ongoing support of our mission to develop curative gene therapies to eradicate devastating monogenic CNS disease.

I will now ask the operator to begin our Q&A session. Operator?

(Operator Instructions) Our first question comes from the line of Joon Lee with Truist Securities.

This is [Matthew] on for Joon. So what is the probability by which you think FDA might ask you to have efficacy data on new patients using commercial-grade material? And how long would you think it takes to provide such data?

I think we've gone through this when we actually presented the definitive dataset earlier this year really around kind of the current scenarios and how we look at them. We essentially cut them in 2 parts, one being ex U.S., one being the U.S., particularly for the FDA, we -- that breaks down to about 3 scenarios. The first being able to immediately file off the data that we've generated thus far. Again, we've reported data from all therapeutic dose cohorts, including the high dose of 3.5E14 earlier this year where we really see really nice efficacy and safety, durability. And now we have really nice pathological data with the biopsy showing nerve fiber regeneration, which essentially we view as a game changer.

And so we're pretty excited about this dataset not only because we show clinical, but we show really nice clinical data, but also safety and efficacy data, but also really the biopsy data and the natural history, which essentially has been going on for close to 10 years, and each patient rolling over from that natural history study provides 3 levels of control. The patient has a comparison between their own pre-treatment and post-treatment performance because of such a large natural history study over 50 patients at this point. We're able to show age-matched controls and then you're able to compare the entire cohort to a patient's performance. So we're really excited, again, about the breadth of this data.

As I mentioned, our base case is most likely that the FDA would ask you to dose a few more patients using the commercial grade material. And this is a similar pathway of what they asked AveXis to do during the registration of Zolgensma. Most likely it would be what we would consider a handful of patients, somewhere between probably 3 to 5 patients, those patients are already identified.

So from a timing perspective, this would shorten any type of recruitment effort to get these patients into the study because essentially they would roll over from the natural history study. So these patients are already identified and our partners at the NIH is under the leadership of Carsten Bonnemann, who has done a fantastic job keeping that study moving and the wealth of data that we've generated from that study.

So we really see the difference between filing immediately based off the current dataset and dosing a few more patients. We're probably looking at about a 6 month time difference. It's not a huge time difference because, again, we don't have to go out and identify patients. Those patients are already identified. And so we think by dosing a few more patients, that would probably set us up for an approval towards the end of 2023. This is again the FDA scenario.

The EMA, our going in position is that we meet all the requirements for conditional approval. And the hope is to initiate a MAA filing by the end of the year. We would also ask, just shifting focus back to the FDA, based off the current dataset we would ask the FDA, as a default, to initiate a rolling submission based off of the data that we've generated. The preclinical data won't change. The clinical dataset is -- it would be near final if they asked us to dose a few more patients, so we would be able to start the review of the current dataset. And obviously we would have completed the release testing and the analytical panel for our commercial grade material, which we've already completed the manufacture of, this currently undergoing release testing. And we're quite excited about not only the yields, but also the product purity from that run.

So that's kind of our going-in strategy. We're going to go in and ask for approval based off the current dataset. But our base case would be dosing a few more patients that would immediately roll over from the NIH natural history study. And so this is something that we previously stated before and continues to be our base case.

Our next question comes from the line of Gil Blum with Needham & Company.

Maybe another quick one on TSHA-120. So what more is there to do on your commercial grade product? What more things do you need to do there? And maybe you can give us an idea of how many patients can be treated with this batch?

Yes, it's actually a really good question, Gil. Thanks for asking. And I'll start and Suyash, please chime in if you'd like. But essentially there's not much more to do on this commercial grade material. We initiated the manufacturing run earlier this year. We have now completed that manufacturing run. It was quite successful, both from a yield perspective and a purity perspective. The current analytics that we've run around comparability to the original clinical material are spot on, and those tests continue to be ongoing.

The team, Suyash's team, along with Fred's team are continuing to work on key assays, key release assays that will support the BLA, including the definitive potency assay, which the team has made significant progress on, which I'm quite pleased about. And just to give you an idea on just the yields from this run. The team has done just a fantastic job around manufacturability and depending on the dose, and I'll just go with a high dose of 3.5E14, we're over 50 patients worth of drug.

And so that gives you an idea around just, one, the strength of our platform. This is using our HEK293 suspension triple plasma transfection platform that we use across the entire portfolio, but also just really the strength of the team that we have in CMC. So I couldn't be even more proud. So what we'll do is, this run will continue to go -- undergo release testing, stability testing and whatnot, and the team will continue to gather data to support the BLA. But really this -- the progress that the team has made in this manufacture of this commercial grade material has gone, it's gone even better as we could imagine. So I'll stop there. Suyash, do you have anything to add?

No, I think I would just echo the fact that the batches made, there was plenty of product majors or high-yielding run and release testing is underway, looking at the characterization of the product, and it's all looking very promising thus far. RA is quite correct. The only thing really that's outstanding is to finalize the potency assay. And just to remind you, potency assay essentially exists to demonstrate on the molecule that we're administering closely mimics and what's effectively in the clinical settings it does and the lab setting and every lot needs to be tested, there's certain predefined acceptance character that need to be met. And the FDA and the regulators are pretty keen to ensure, obviously, that the product we make on an ongoing basis is consistent and highly -- the appropriate level of quality. And as RA said, we have made a lot of progress in finalizing the potency assay. So everything is looking great, release testing is underway and drugs are going to be available to be treating patients imminently.

Our next question comes from the line of Salveen Richter with Goldman Sachs.

This is Elizabeth on for Salveen. Maybe just switching over to Rett, if you could comment on the nature of the first clinical data we expect to see and how many patients we can expect to see data from? And then a second one from us are what kind of assumptions have been baked into the 4Q '23 cash runway guidance?

Sure. Let me take the question about the clinical trial and then Kamran or RA can handle the second question. So with regard to the Rett clinical trial, this is a trial in adult females with Rett syndrome. To remind you, we just felt, given -- just given the concerns about potential over-expression, which we show we can actually down-regulate very nicely in our NHP data. We still want to be a little bit conservative. And so we're starting off in adults and the plan will be to move into children, pediatric females with Rett at some point thereafter. And then we want to plan a small study in boys, the very rare population of boys with Rett surely thereafter.

Now in terms of expectations with regard to what we're going to have coming out of the clinical trial data of the adult study, which we anticipate sharing data from by the end of the year. The life of it is going to be safety data and perhaps some preliminary efficacy data. We're not sure at the moment. We will, as is the case for these first enhanced studies with these definitive products, we have to stagger dosing. We can't dose several patients all at once, we have to dose 1 patient, leave with a period of time and then dose the second patient after DMC review and then leave a period of time before dosing the next patient.

So my guess is it's going to be a small number of patients, safety data by the end of this year, potentially some preliminary efficacy data if we're starting to see some early signs of that. But I think that's where we're -- that's what we're focusing on for the clinical trial at the moment.

With regards to assumptions, I'll let RA and Kamran take that question.

Sure. And thanks, Liz, for the question. I was actually talking on mute. So just to reiterate what Suyash mentioned, we're quite excited about the Rett data, the preclinical dataset that supports the CTA. And again, really excited about what this means to the Rett community being the first and only gene therapy actually in clinical development for Rett syndrome. And I think just to echo what Suyash mentioned, it will really be on the totality of data. The amount of endpoints that are being collected are immense, both from physician-reported Rett syndrome, outcomes, patient reported outcomes, respiratory measures, obviously, some neuro-developmental measures as well as movement. So it's really going to be a whole host of endpoints that we'll share, including safety. And safety is going to be probably one of the most important ones because there's always this notion around over-expression.

And the data from our NHP study, our NHP tox study, not only demonstrated the safety of our construct at doses up to fourfold above what the starting dose will be in the clinical setting, but also proof of mechanism, the ability to down-regulate the expression of MECP2 in the presence of wild type -- in the presence of wild-type MECP2. And so, again, for us, it's quite exciting. But certainly this is one of the reasons why we decided to start into adults.

So I would probably characterize it similarly the way that Suyash did and it will be on the totality of data. It will be safety with some preliminary efficacy in there. From an assumption perspective on cash runway, the way that we're thinking about this is we have -- with the full drawdown of our current term loan facility from Silicon Valley Bank, we have the ability to be able to extend runway into Q4 of 2023 with our -- along with our existing cash. And that's kind of the assumption, the base case assumption that's gone in. As you are aware, we executed on a pipeline prioritization exercise earlier this year, which we announced at our year-end earnings call, which also included a rip of 35% and essentially kind of a rightsizing based off of a clear focus on 2 key programs, and that's our Rett syndrome program and our giant axonal neuropathy program, which we're both quite excited about.

And then taking 2 of the additional clinical development assets and moving those from more of a registration-directed trial to more of a proof of -- kind of small proof-of-concept study, that being CLN1 and then SLC13A5. What I would also say though is, again, I'm quite excited about the progress that the team has made just in the short period of time. And really the ability to be able to get through this prioritization analysis and kind of refocus the company and still execute has just been something that I've been immensely proud of. It's not easy for anyone out there in biotech and particularly in gene therapy, but the team is really nose to the grind and executing. And so for us, all of this has been baked into our cash analysis, and we continue to look at ways to augment and extend runway.

Our next question comes from the line of Kevin DeGeeter with Oppenheimer & Company.

Just on the GAN regulatory update, RA, can you comment on your confidence sort of that mid-2022 update timeline? I guess sort of underlying this question is, is it reasonable to conclude that you have had the necessary meetings with FDA and other regulatory agencies and are waiting for feedback at this point? Or are there kind of open scheduling components that could impact that timeline and cause some uncertainty there?

Yes, thanks, Kevin, for the question. So I think we're confident in reiterating that guidance around the mid-2022 from a regulatory feedback perspective. Again, I think most people going to have conversations with the FDA and the EMA in a COVID environment and other regulatory agencies in a COVID environment, obviously, there's been some -- there's been a little bit of flex in scheduling. But with that being said, we're quite excited in the promise of the dataset that we presented thus far, the reproducibility of that data. And the fact of the matter that the product is not only efficacious, but durable and safe at multiple doses, including a really robust natural history study.

And now really -- now the beginnings of what would be a really nice data package from a module 3 perspective, from a CMC comparability. So we're going to go in with that dataset. And obviously our going in strategy is to be able to file off of the current dataset and as a default base case. We essentially default to being prepared to dose a few more patients with the commercial grade material. So we're reiterating that guidance. We've done that in our communications and look forward to updating you guys here closer to later this year. But again, midyear 2022 is our guidance around having that feedback in here.

Our next question comes from the line of Jack Allen with Baird.

Congratulations on all the progress. I wanted to shift gears back to Rett really briefly and talk about the dose there. I know you mentioned that you're starting at 5E14 total vg and then moving up to 1E15 and that, I guess, the preclinical package showed safety at 4x the first dose. I'm just curious, was there a dose in the preclinical package where you did see tolerability issues? And how much coverage do you think you have to dose escalate as you move through the study based on the existing preclinical package?

Thanks, Jack. Great question. I'll turn it over to Suyash to answer that question.

Yes. Hello, Jack. Thanks for the question. So it's a really important question. The dose selection for the clinical trial for a gene therapy study, getting the dose right the first time is really important because you've got to make sure you've given that drug to make sure the drug is effective, the dose, make sure there's no safety or tolerability issues because once you've given the gene therapy drugs, you can't take it away again. So it's a really critical decision that needs to be made. And in particular for Rett where there is this risk of over-expression toxicities, you have to get the amount of protein being produced appropriate, within these appropriate physiological limit, enough to make sure you're having efficacy, but not so much protein that it causes a toxic side effect.

Because of that we actually did a very, very disciplined preclinical package, which included a mouse pharmacology study, so a mouse model pharmacology study. We did a rat toxicology study. We did an NHP toxicology study. All of the studies were very extensive and very comprehensive. The mouse study was over 250 mice. The rat study was over 120 rats. The NHP study was 24 NHPs. And the mouse pharmacology study is where you look for a dose that's going to be efficacious. And we were able to identify that very clearly in terms of demonstrating enough drug causing an improvement in survival, motor assessments, respiratory assessments and other assessments. So the 5E14 total vg dose is above that level.

And then on the other hand, both in the rat tox and the NHP tox, we tested doses up to an equivalent of 2E15 total vg, human equivalent. So that's fourfold over the starting dose. And to answer your question specifically, there was no adverse events of any note at the 2E15 dose. So it's possible we could go even higher than that. But we didn't test higher than that because we didn't think there'll be a need to go higher than 2E15. Similarly because we saw efficacy at a much lower amount in the mass pharmacology study. And I think it was that combination of studies that really persuaded Health Canada to allow the CTA to be opened. And I think there's one other important piece around this NHP study that, it is really, really important.

And I'll actually be discussing this at poster presentation at ASGCT, I think its tomorrow, tomorrow, Wednesday -- I think Tuesday actually, yes, presenting it Tuesday. And I actually presented at the big Rett Syndrome Scientific Conference that's organized by the IRSF about 3 or 4 weeks ago. And the NHP tox did just 3 things; it shows a full absence of any kind of tox effects, which is important that the fourfold higher than the clinical dose. It also shows really excellent bio-distribution from intrathecal dose throughout the brain and the spinal cord.

So you're getting back to copy numbers in a very nice range, 1 to 2 copies per diploid genome in different parts of the brain and the spinal cord, in the ganglia, in the peripheral nervous system. But it also shows correspondingly low levels of RNA. And don't forget, these are wild-type NHPs. So what that means is you're getting great delivery of drug into the brain and spinal cord, but actually very high down-regulation, meaning not much RNA being produced, which is appropriate given it's a wild-type NHP.

So that NHP study shows safety, it shows bio-distribution, but importantly mechanism of action and as I said I'll be going through that data in more detail at the ASGCT meeting tomorrow. So that group of studies together was really very persuasive to Health Canada to allow us work in CTA.

Our next question comes from the line of Yun Zhong with BTIG.

This is actually a follow-up question on just what you said just now, Suyash. So on Rett syndrome, has anyone looked at comparability between nonhuman primates and human patients in terms of bio-distribution? And also given that this is not cross-correction to be expected. So are there any data to suggest the transduction efficiency or do you have an estimate on how many cells will need to be transduced to see reasonable efficacy?

2 very good questions. So the first question was about the translatability of NHP bio-distribution to human bio-distribution. It's a good question. No one's done it specifically in Rett. What we've done is we've shown very nice bio-distribution with our Rett program with an intrathecal dose into an NHP, which is, of course, smaller than a human being, but the anatomy is very similar. And it's probably the best corollary looking at bio-distribution in any animal model to the human. And we get really nice bio-distribution throughout the brain and the spinal cord with an intrathecal dose for injection. Now in the human setting, the only way to really ascertain bio-distribution is in the sad situation if a patient was to pass away and to look at DNA and RNA and protein in that individual.

And that did happen very early on in one of the GAN patients, one of the low-dose GAN patients who sadly passed away through progression of disease. This data has been presented by Carsten Bonnemann and Stephen Gray at the ASGCT meeting a few years ago. And they showed that with an intrathecal dose of the AAV9 gene therapy for GAN, you actually got nice bio-distribution, although it's a low level because it was a low dose throughout all target organ tissues. And the other thing I will say from -- that we learned from the GAN program and don't forget, GAN AAV9 is HEK293 and its intrathecally delivered so, lots of similarities to the Rett program.

The other thing I'll say about GAN is that we've demonstrated more recently in our January presentation that we see improvements in the peripheral nerves, in the nerve biopsies. Now these are nerve biopsies that are performed in the radial superficial nerve, which is a nerve in the wrist. And what this means is that drug is getting down into the peripheral nervous system down to the wrist from an intrathecal dose of injection. So for those reasons, we're confident that an intrathecal dose of drug will actually deliver drug in Rett syndrome very nicely to all the tissues that needs to be transduced, which are brain in particular, and spinal cord and brainstem. That's the answer to the first question.

The second question you had was about what proportion of cells need to be transduced? And it's difficult to know, but we certainly believe that with this 50-50 ratio of mosaics versus non-mosaics --sorry, wild-type versus null cells in the mosaic setting, we certainly know that if we transduce some of the cells, you're going to get some clinical benefit. And the likelihood is the more cells that are (inaudible) transduced, the better clinical benefit you get.

So our approach, once again, is to give a high dose of drug intrathecally to enhance bio-distribution. And we know -- we have confidence that given high doses of drug, you still see a nice down-regulation of the protein being produced, which for the wild-type cells. So once again, we don't know exactly how many cells need to be transduced, but I think a small number will give you some clinical benefit, a large number will give you more benefit. But we're quite confident giving high doses to enhance bio-distribution because we see our down-regulation package working nicely. Hopefully, that answers your question, Yun.

The only thing that I would add, Suyash, to what you mentioned are just 2 examples. I would say the preclinical dataset that we've been able to generate, particularly the NHP dataset really gives us the opportunity to maximize transduction efficiency. And Suyash mentioned this before. I just wanted to reiterate this. The fact of the matter is that we didn't see -- we didn't observe tox at any dose that was actually given, including 2E15. You always have the ability to be able to increase dose to really maximize transduction efficiency and to be able to get really nice bio-distribution. We see nice bio-distribution at the levels that we're starting at. But again, if we wanted to be able to maximize that, we obviously have the ability to be able to go higher.

The second point that I just wanted to make, and I think it's something that does get overlooked is a nice correlation to our CLN7 study, which is being done under a collaboration with our partners at UT Southwestern. This is, again, a membrane-bound protein, similar to MECP2, so it's not -- there is no cross-correction here. And we've shown the ability to be able to dose patients up to 1E15 and to be able to do that successfully and safely. Some of that early preliminary data was presented at World Symposium earlier this year. And since that data has been presented, there's been an additional patient that has been dosed at the high dose, which is 1E15.

So again, I think I'd like to remind the field around the number of firsts that's really come out of this collaboration with Taysha and UT Southwestern, where you have the first intrathecally dosed gene therapy in history. That's our giant axonal neuropathy study, the first gene therapy in development for Rett syndrome. You now have the first gene therapy with the self-regulatory feedback loop in clinical development to control expression on a cell-by-cell basis. The first to be able to dose intrathecally at 1E15 and to be able to do that safely and to demonstrate safety of an AAV9 construct.

So just in the short period of time that the company has been in existence, there's been a number of firsts that have been generated. And it's something that I'm very proud of, and I always remind our employees to be proud of the number of firsts for the field of gene therapy that's been generated by the company and our partners at UT Southwestern.

Our next question comes from the line of Laura Chico with Wedbush Securities.

I wanted to circle back with regards to the spend. I'm wondering if you can offer a little bit more clarity on perhaps the breakdown between R&D and G&A. And RA, I think you made an earlier comment too about kind of exploring additional channels for monetization. Just wondering if you could kind of expand on that a little bit?

Sure. Thanks, Laura. So I'll start with your last question first, really around just ways that we're thinking about extending cash runway. Obviously having business development opportunities continue to remain an opportunity for us to be able to go and bring in non-dilutive forms of capital. What I would say to that is that we're constantly looking at potential strategic collaborations with parties, whether those are regional collaborations or collaborations around specific assets. But it's something that we consistently look at and we've been fortunate to essentially get a lot of calls after we've made our announcement in -- at the year-end earnings call. And so we continue to explore those as a potential way of bringing in non-dilutive capital.

What I would also say is, again, we look very carefully around which programs that would continue in and what the company would actually focus on from a clinical development perspective. And essentially what we decided to do is once -- for programs that have hit proof-of-concept, we've essentially ceased with those. And for -- and again, for the ones that are currently in clinical development and haven't yet hit proof-of-concept, we'll continue to move forward with those until we hit that milestone, particularly with a focus on CLN1 and SLC13A5.

Going away from that registration speed to registration pathway, which is going to be a lot more expensive from a CMC perspective and a clinical development perspective and really just, again, continuing to validate the platform from a proof-of-concept perspective. And then still focus with our 2 lead programs on the fastest pathway to approval. And that's giant axonal neuropathy and our Rett syndrome program, which we continue to be all in on, but still doing -- from a totality of our portfolio, really looking with an eye to preserve cash and long-term runway. And so that's the way that we're kind of looking at this.

I think, again, as I mentioned earlier, we executed on a strategic pipeline prioritization earlier this year, which is starting to play out, where essentially we paused work on a lot of our preclinical programs. And essentially kind of, again, reconstituted a number of our clinical programs, continuing to move them forward, done for an effort to preserve cash runway. And I think you'll start to see R&D expense come down over the next few quarters and start to get to a certain run rate as we get into the second half of the year that we'll be able to hold constant.

Ways to augment that, obviously, if there is a turnaround in the capital markets, we should be able to go and raise capital through our currently available ATM, which we've already done since our year-end earnings call, we've been able to successfully draw down some capital from that ATM, that extended cash runway, and we'll continue to be strategic in the way that we look at that.

But I would probably say non-dilutive forms of capital, our current term loan facility, which, again, allows us to have cash into Q4 2023 and then obviously the ability to be able to tap our ATM, which we've already done. I think all of those things being consistent are ways that we would look to extend runway.

Maybe Kamran, you'd want to comment on just the breakdown between R&D and G&A.

Yes, sure, happy to. Thanks, RA. And thanks for the question, Laura. So over 75% of our operating expenses are R&D related. And as RA mentioned, because of the strategic pipeline prioritization efforts, we'll be able to reduce that R&D expense burn significantly over the next coming quarters as a result of pausing research and development activities on our preclinical program as well as significant reduction in our CMC expenses. Ultimately, as a reminder, we conducted 6 GMP batches last year, some of which were completed in Q1 of this year in terms of product release. And we're only doing GMP manufacturing on our GAN program this year. So you can expect a significant reduction in our CMC expense year-over-year in subsequent quarters as a result. So again, a lot of nice work to really focus our resources and our efforts primarily on, of course, GAN and Rett.

Our next question comes from the line of Yanan Zhu with Wells Fargo.

A couple on the Rett syndrome clinical trial. What is the waiting period for safety observation once patient 1 is dosed? And how would you ascertain whether there is MECP2 over-expression associated toxicity, given that the MECP2 duplication syndrome share a lot of the same manifestations with Rett syndrome?

Hello, Yanan. I'll turn that question over to Suyash to provide some context. Suyash?

Sure. So the target specifically is 8 weeks. So after the patient's dosed for review at the 8-week time point and discussions with DMC, with MCU, and the absence of any safety issues, we will then go ahead and dose the next patient. That's between patients 1 and 2. As time progresses, the staggering changes in the clinical trial of course, and we need less staggering as the study progresses. Specifically with regard to size of over-expression toxicity, it's a good question and it's one we've discussed at length, both with regulators and with key opinion leaders. And the bottom line is this, most patients or in fact all patients in the adult study certainly and like in the pediatric study will be in the Phase III of Rett syndrome, i.e. they're stable, are not declining. You may recollect that there's 4 phases to the clinical progress of patients with Rett.

The first is where they get the diagnosis. Phase II is when there's a rapid decline in functionality. Phase III is that when they're in a stable phase, i.e., stable with a very comprised level of functioning and then they can be in that phase for years, sometimes decades, and then they end up into a late deterioration phase. So all patients in the study will be in the Phase III, i.e., they're stable. So what we're looking for clinically is any kind of deterioration, okay? Because it's -- there is such a poor state, they have been stable for a while, that if there's any deterioration seen in terms of Rett syndrome-type behaviors or rather neurological features, is likely to be due to over-expression than a progression of Rett syndrome.

Now will we know if it's definite? No, we wouldn't because we can't biopsy brain tissue of course in the clinical trial in patients. But the way we observe specifically MECP2 over-expression toxicity is by looking for a change in the mental status and the change of neurological status and neurobehavioral status and central nervous system, peripheral nervous system deterioration after dosing with the gene therapy because that's unlikely to be due to progression of Rett, is likely to be due to over-expression toxicity of MECP2.

Having said all of that, we anticipate that's highly unlikely given no NHP tox data and/or Rett tox data where we gave very high doses of the drug, fourfold over the presenting clinical dose and saw no toxicity even at that high level.

Ladies and gentlemen, we've come to the end of our time allowed for questions. I'll turn the floor back to Mr. Session for any final question -- to comment.

Thank you, operator. And again, thank you for everybody for joining our Q1 call today. As we iterated earlier, the company has performed quite nicely coming out of Q1 and our strategic pipeline prioritization, also a refocus on continuing to move forward our GAN program, our Rett program from a speed to registration aspect and then morphing some of our earlier clinical programs to more proof-of-concept studies.

I couldn't be prouder of the execution of the team. I couldn't be prouder of the focus of the team. And we continue to invite you guys to follow the progress as the company continues to make strides later this year. With that, I wish you guys a wonderful week. Many of us will be at ASGCT. So I would ask you guys to come by, say hello, and I look forward to seeing many of you there.

With that, we'll end today's call. Thank you.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.