Investment Overview
Taysha Gene Therapies (NASDAQ:TSHA) stock hit the skids yesterday as the Dallas, Texas headquartered biotech reported data from its Phase 1/2 REVEAL study of its lead and only gene therapy TSHA-102 in patients with Rett Syndrome – an indication the company discusses as follows in its 2023 annual report / 10K submission:
a rare progressive neurodevelopmental disorder caused by mutations in the X-linked MECP2 gene encoding methyl CpG-binding protein 2 (MeCP2), which is essential for regulating neuronal and synaptic function in the brain.
The disorder is characterized by loss of communication and hand function, slowing and/or regression of development, motor and respiratory impairment, seizures, intellectual disabilities and shortened life expectancy. Rett syndrome progression is divided into four key stages, beginning with early onset stagnation at 6 to 18 months of age followed by rapid regression, plateau and late motor deterioration.
Rett syndrome primarily occurs in females and is one of the most common genetic causes of severe intellectual disability.
TSHA-102 is a “a self-complementary intrathecally delivered AAV9 gene transfer therapy”, that uses an adeno associated virus to deliver a functional form of MECP2 to cells in the central nervous system. Intrathecal means the therapy is injected directly into the spinal cord. Taysha says:
Because of the risks associated with both under- and over-expression of MeCP2, we have combined high-throughput microRNA (miRNA), profiling and genome mining to create miRNA-Responsive Auto-Regulatory Element (miRARE), our novel miRNA target panel. The miRARE element includes binding sites for endogenous miRNA, which are responsive to MeCP2 levels to prevent over-expression.
Research suggests Rett syndrome affects ~350k patients worldwide, while there are, Taysha estimates, ~15k – 20k patients in the US and Europe with Rett caused by pathogenic or likely pathogenic MECP2 mutations.
There are no disease modifying therapies approved to treat Rett Syndrome, although the FDA approved a drug developed by Acadia Pharmaceuticals (ACAD), Trofinetide – a water-soluble analogue of glycine-proline-glutamate (“GPE”) – in March last year, based on its ability to improve Rett syndrome behavioral questionnaire (“RSBQ”) scores versus placebo in a 187-patient study.
Taysha’s Data Disappoints Market – But Management Is Encouraged
The data Taysha presented came from just two adult patients with stage four Rett Syndrome, and two pediatric patients, however in a presentation given yesterday, Taysha shared a large amount of detailed data, which resulted in its share price falling >25%.
The presentation begins by observing that TSHA-102 was “generally well tolerated”, with no serious adverse events (“SAEs”) or dose-limiting toxicities observed, that “improvements across multiple efficacy measures” were observed, and sustained through longer-term assessments, and finally, that there were “improvements across multiple clinical domains”, including motor skills, communication / socialisation, autonomic function, and, and seizures.
Below is a slide from Taysha’s presentation describing the condition of the two adult patients:
adult patient overview (presentation)
Improved hand function (motor), increased social interest and eye communications (socialisation), improved breathing patterns (autonomic) were observed by the study investigator, and while seizure events were “stable” in one patient, they were “significantly reduced” in the other.
multiple efficacy measure scores (presentation)
The above table provides a detailed overview of both patients monitored over time and evaluated using different scoring systems, with some notable improvements observed, and scores trending towards improvement over time.
The two pediatric patients had stage three Rett Syndrome, and were judged “markedly ill”, and “moderately ill”. Results – taken from a 12-week evaluation period, as opposed to 52-weeks with the adult patients, were broadly similar to the adult patients, in terms of e.g. improving hand function, social interest, breathing, and a decrease or stabilisation in seizures. Patient efficacy measure scores trended downward in the same incrementally positive way as for the adult patients, albeit over a shorter timeframe.
A first patient has now been dosed in the higher dose Cohort 2 of the adult reveal study, which will enroll three patients, with a Cohort 3 dose expansion part planned after that, using multiple ascending dose / maximum tolerated dose (“MTD”). The same is true of the pediatric study.
Analysis – Taysha’s Comeback Checked Amid Ongoing Volatility
Taysha IPO’d in September 2020, raising ~$181m at $20 per share, and gained a rare pediatric disease and orphan drug designation from the FDA in October 2020 for TSHA-102. The company was, at that time, developing other candidates, also, such as TSHA-105, indicated for epilepsy, TSHA-101 for gangliosidosis, and TSHA-120 in giant axonal neuropathy.
Nevertheless, the company’s stock price made heavy losses throughout 2021 and 2022, falling from >$30 per share early in 2021, to ~$2 per share at the end of 2022, as the biotech industry experienced a torrid bear market.
The share price was briefly lifted when Japanese Pharma giant Astellas took a 15% stake in the company to support the GAN and Rett programs, investing $50m, but sank again as the FDA refused the company permission to submit a marketing application for TSHA-120, requesting more data. Astellas has since walked away from the collaboration.
In August last year, Taysha’s share price had slipped <$1 per share, but then the company shared its first TSHA-102 data, from a single patient, displaying a tolerable safety profile and improvements in the patient’s condition as measured by RSBQ.
By September 2023, Taysha stock traded >$3, had regained compliance with Nasdaq listing laws (which insists on a share price value >$1), and received a Fast Track designation from the FDA for TSHA-102.
Taysha discontinued all of its remaining programs bar TSHA-102, transferring them back to their original licensors, and gained some support from Wall Street analysts – Piper Sandler set a price target of $9, speculating that the Rett opportunity could be worth as much as $900m in peak annual sales. Analysts at Jefferies suggested in May that TSHA-102 could generate as much as $2.2bn in peak annual sales.
Having surpassed $4 per share this month – a >450% share price gain in less than 12 months – Taysha’s share price is now falling again, in response to some of its most comprehensive, and arguably, best data yet.
Looking Ahead – Speculating On Where Taysha’s Share Price Heads Next
As of the end of Q1 2024, Taysha’s accumulated deficit stood at $537m. The company’s net loss for the quarter stood at $(24m), up from $(17.6m) in the prior year period, while cash position stood at $124m.
At current cash burn rate, then, Taysha’s funds could be exhausted before the end of 2025, meaning the pressure is on the company to try to generate some positive data that impresses the market, lifts the share price, and allows the company to raise funds without severely diluting existing shareholder’s holdings.
With only one asset in development, however, and only a handful of patients enrolled or to be enrolled in its studies, it’s tough to see where such positive data may come from, based on the market’s lukewarm reaction to yesterday’s presentation.
It is not necessarily that Taysha’s data is poor, but there is no placebo arm to compare the data to, and when we consider that Trofinetide – now marketed and sold as Dayvue, earning $76m of revenues in Q1 2024 – was approved based on a 187-patient study with a placebo arm, the prospect of TSHA-102 being approval worthy without a much larger scale study seems questionable.
Gene therapies tend to be highly expensive, i.e. Zolgensma in spinal muscular atrophy, which costs >$2m, but does offer a tangible treatment benefit, as its pivotal study results show. Even those companies that do secure approval for gene therapies may struggle in the commercial setting – witness Bluebird Bio, which markets and sells a gene therapy, lyfgenia, which can provide a permanent cure for Sickle Cell Disease patients. Forced to price Lyfgenia at ~$2.2m to recoup development costs, Bluebird shares have fallen <$1 per share, even as it is promising >85 patient starts on the drug in 2024.
As such, I see several problems with the bull side on an investment thesis for Taysha. It seems clear that the company will need to collect substantially more data from a larger number of patients before it will be in position to push for a marketing approval, but funds are low and future fundraising could result in the share price falling significantly, making initiating pivotal stage studies tricky.
Additionally, although positive signs have been observed at 52 weeks in adult patients, and in pediatric patients at 12 weeks, the overall treatment effect must be a substantial improvement on e.g. Dayvue for the gene therapy to merit the premium price it must carry to recoup development costs and allow Taysha to flourish as a commercial stage company.
It seems Wall Street is unconvinced that the treatment effects shared to date are compelling enough to support that view. The treatment effect of e.g. zolgensma may be life-changing or even life-saving – this may not be the case with TSHA-102.
It’s difficult to criticise Taysha for the work it is doing because it is still early days and there is at least some evidence to suggest TSHA-102 could be of substantial benefit to Rett Syndrome patients. With that said, several other companies have Rett Syndrome programs, as Taysha observes in its annual report:
With respect to TSHA-102, we are aware that Neurogene (NGNE) has a clinical stage gene therapy program for the treatment of Rett syndrome. We are also aware that Alcyone Therapeutics, the Rett Syndrome Research Trust, Amicus Therapeutics (FOLD), Shape Therapeutics and Sarepta Therapeutics (SRPT) have disclosed the existence of discovery-stage gene therapy programs for the treatment of Rett syndrome.
In my view, Taysha management was right to cease development of its other projects and focus on TSHA-102, but I wonder if the data collected to date is compelling enough, given all of the other issues the company faces with funding, single asset risk, competitors, and development path, to keep the share price buoyant in the short-to-medium term, or stave off escalating issues in the long term.
Hence, I would award the stock a “sell” recommendation at this time, but there will be more safety and efficacy data reported towards the end of this year, so there is still a good chance the company can reinvigorate its program and its share price, which it will need to do, as the path to a potential approval does look arduous at this time, in my view.
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