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The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited condensed
consolidated financial statements and related notes included in this Quarterly
Report on Form 10-Q and the audited financial statements and notes thereto as of
and for the year ended December 31, 2021 and the related Management's Discussion
and Analysis of Financial Condition and Results of Operations, included in our
Annual Report on Form 10-K for the year ended December 31, 2021, or Annual
Report, filed with the Securities and Exchange Commission, or the SEC, on March
31, 2022. Unless the context requires otherwise, references in this Quarterly
Report on Form 10-Q to "we," "us," and "our" refer to Taysha Gene Therapies,
Inc. together with its consolidated subsidiaries.

Forward-looking statements

The information in this discussion contains forward-looking statements and
information within the meaning of Section 27A of the Securities Act of 1933, as
amended, or the Securities Act, and Section 21E of the Securities Exchange Act
of 1934, as amended, or the Exchange Act, which are subject to the "safe harbor"
created by those sections. These forward-looking statements include, but are not
limited to, statements concerning our strategy, future operations, future
financial position, future revenues, projected costs, prospects and plans and
objectives of management. The words "anticipates," "believes," "estimates,"
"expects," "intends," "may," "plans," "projects," "will," "would" and similar
expressions are intended to identify forward-looking statements, although not
all forward-looking statements contain these identifying words. We may not
actually achieve the plans, intentions, or expectations disclosed in our
forward-looking statements and you should not place undue reliance on our
forward-looking statements. Actual results or events could differ materially
from the plans, intentions and expectations disclosed in the forward-looking
statements that we make. These forward-looking statements involve risks and
uncertainties that could cause our actual results to differ materially from
those in the forward-looking statements, including, without limitation, the
risks set forth in Part II, Item 1A, "Risk Factors" in our Annual Report. The
forward-looking statements are applicable only as of the date on which they are
made, and we do not assume any obligation to update any forward-looking
statements.

Note Regarding Trademarks

All brand names or trademarks appearing in this report are the property of their
respective holders. Unless the context requires otherwise, references in this
report to the "Company," "we," "us," and "our" refer to Taysha Gene Therapies,
Inc.

Overview

We are 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, or CNS, in both rare and large patient
populations. We were founded in partnership with The University of Texas
Southwestern Medical Center, or UT Southwestern, to develop and commercialize
transformative gene therapy treatments. Together with UT Southwestern, we are
advancing a deep and sustainable product portfolio of gene therapy product
candidates, with exclusive options to acquire several additional development
programs at no cost. By combining our management team's proven experience in
gene therapy drug development and commercialization with UT Southwestern's
world-class gene therapy research capabilities, we believe we have created a
powerful engine to develop transformative therapies to dramatically improve
patients' lives. In March 2022, we announced strategic pipeline prioritization
initiatives focused on GAN and Rett syndrome. We will conduct small
proof-of-concept studies in CLN1 disease and SLC13A5 deficiency. Development of
the CLN7 program will continue in collaboration with existing partners with
future clinical development to focus on the first-generation construct. All
other research and development activities have been paused to increase
operational efficiency.

In April 2021, we acquired exclusive worldwide rights to TSHA-120, a
clinical-stage, intrathecally dosed AAV9 gene therapy program for the treatment
of giant axonal neuropathy, or GAN. A Phase 1/2 clinical trial of TSHA-120 is
being conducted by the National Institutes of Health, or NIH, under an accepted
investigational new drug application, or IND. We reported clinical safety and
functional MFM32 data from this trial for the highest dose cohort of 3.5x1014
total vg in January 2022, where we saw continued clinically meaningful slowing
of disease progression similar to that achieved with the lower dose cohorts,
which we considered confirmatory of disease modification. For Rett syndrome, we
submitted a Clinical Trial Application, or CTA, filing to Health Canada in
November 2021 and announced initiation of clinical development of TSHA-102 under
the approved CTA in March 2022. We recently completed a commercially
representative GMP batch of TSHA-120 and release testing for this batch is
currently underway. We expect to report preliminary clinical data for TSHA-102
in Rett syndrome by year-end 2022. We recently executed an exclusive option from
UT Southwestern to license worldwide rights to a clinical-stage CLN7 program.
The CLN7 program is currently in a Phase 1 clinical proof-of-concept trial run
by UT Southwestern, and we reported preliminary clinical safety data for the
first patient in history to be intrathecally dosed at 1.0x1015 total vg with the
first-generation construct in December 2021. Development of the CLN7 program
will continue in collaboration with existing partners with future clinical
development to focus on the first-generation

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construction. We will conduct small proof-of-concept studies on CLN1 disease and SLC13A5 deficiency that we believe can further validate our platform.


We have a limited operating history. Since our inception, our operations have
focused on organizing and staffing our company, business planning, raising
capital and entering into collaboration agreements for conducting preclinical
research and development activities for our product candidates. All of our lead
product candidates are still in the clinical or preclinical development
stage. We do not have any product candidates approved for sale and have not
generated any revenue from product sales. We have funded our operations
primarily through the sale of equity, raising an aggregate of $307.0 million of
gross proceeds from our initial public offering and private placements of our
convertible preferred stock. In addition, we drew down $30.0 million and $10.0
million in term loans on August 12, 2021 and December 29, 2021, respectively.

On August 12, 2021, or the Closing Date, we entered into a Loan and Security
Agreement, or the Term Loan Agreement, with the lenders party thereto from time
to time, or the Lenders and Silicon Valley Bank, as administrative agent and
collateral agent for the Lenders, or the 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 our 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, or,
collectively, the Term Loans. We drew $30.0 million in term loans on the Closing
Date and drew an additional $10.0 million term loan on December 29, 2021. The
loan repayment schedule provides for interest only payments until August 31,
2024, followed by consecutive monthly payments of principal and interest. All
unpaid principal and accrued and unpaid interest with respect to each term loan
is due and payable in full on August 1, 2026.

Since our inception, we have incurred significant operating losses. Our net
losses were $50.1 million for the three months ended March 31, 2022 and $32.0
million for the three months ended March 31, 2021. As of March 31, 2022, we had
an accumulated deficit of $285.8 million. We expect to continue to incur
significant expenses and operating losses for the foreseeable future. We
anticipate that our expenses will increase significantly in connection with our
ongoing activities, as we:
      •  continue to advance the preclinical and clinical development of our
         product candidates and preclinical and discovery programs;

• conduct our ongoing clinical trials on TSHA-102, TSHA-118, TSHA-120 and

TSHA-121, as well as initiate and complete additional clinical trials of

         TSHA-105 and any other current and future product candidates that we
         advance;

• seek regulatory approval for any successful product candidate

         complete clinical trials;


      •  continue to develop our gene therapy product candidate pipeline and
         next-generation platforms;


  • scale up our clinical and regulatory capabilities;


• manufacture current good manufacturing practices or cGMP material for

clinical trials or potential commercial sales;

• establish and validate a commercial-scale cGMP manufacturing facility;

• put in place a marketing infrastructure and intensify the

external manufacturing and distribution capabilities to market

product candidates for which we may obtain regulatory approval;

• adapt our regulatory compliance efforts to integrate the requirements

         applicable to marketed products;


  • maintain, expand and protect our intellectual property portfolio;

• hire additional clinical quality control, manufacturing, regulatory,

         manufacturing and scientific and administrative personnel;


      •  add operational, financial and management information systems and
         personnel, including personnel to support our product development and
         planned future commercialization efforts; and


      •  incur additional legal, accounting and other expenses in operating as a
         public company.


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Our Pipeline

We are advancing a deep and sustainable product portfolio of gene therapy
product candidates for monogenic diseases of the CNS in both rare and large
patient populations, with exclusive options to acquire several additional
development programs at no cost. Our portfolio of gene therapy candidates
targets broad neurological indications across three distinct therapeutic
categories: neurodegenerative diseases, neurodevelopmental disorders and genetic
epilepsies. Our current pipeline, including the stage of development of each of
our product candidates, is represented in the table below:


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RECENT DEVELOPMENTS

TSHA-120 for giant axonal neuropathy (GAN)

In March 2021, we acquired the exclusive worldwide rights to a clinical-stage,
intrathecally dosed AAV9 gene therapy program, now known as TSHA-120, for the
treatment of giant axonal neuropathy, or GAN, pursuant to a license agreement
with Hannah's Hope Fund for Giant Axonal Neuropathy, Inc., or HHF. Under the
terms of the agreement, 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 TSHA-120.

GAN is a rare autosomal recessive disease of the central and peripheral nervous systems caused by loss-of-function mutations in the gigaxonin gene. An estimated 5,000 people are affected GAN patients in addressable markets.

Symptoms and features of children with GAN usually develop around the age of
five years and include an abnormal, wide based, unsteady gait, weakness and some
sensory loss. There is often associated dull, tightly curled, coarse hair, giant
axons seen on a nerve biopsy, and spinal cord atrophy and white matter
abnormality seen on MRI. Symptoms progress and as the children grow older they
develop progressive scoliosis and contractures, their weakness progresses to the
point where they will need a wheelchair for mobility, respiratory muscle
strength diminishes to the point where the child will need a ventilator (usually
in the early to mid-teens) and the children often die during their late teens or
early twenties, typically due to respiratory failure. There is an early- and
late-onset phenotype associated with the disease, with shared physiology. The
late-onset phenotype is often categorized as Charcot-Marie-Tooth Type 2, or
CMT2, with a lack of tightly curled hair and CNS symptoms with relatively slow
progression of disease. This phenotype represents up to 6% of all CMT2
diagnosis. In the late-onset population, patients have poor quality of life but
the disease is not life-limiting. In early-onset disease, symptomatic treatments
attempt to maximize physical development and minimize the rate of deterioration.
Currently, there are no approved disease-modifying treatments available.

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TSHA-120 is an AAV9 self-complementary viral vector encoding the full length
human gigaxonin protein. The construct was invented by Dr. Steven Gray and is
the first AAV9 gene therapy candidate to deliver a functional copy of the GAN
gene under the control of a JeT promoter that drives ubiquitous expression.


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We have received orphan drug designation and rare pediatric disease designation
from the FDA for TSHA-120 for the treatment of GAN. In May 2022, we received
orphan drug designation from the European Commission for TSHA-120 for the
treatment of GAN.

There is an ongoing longitudinal prospective natural history study being led by
the NIH, that has already identified and followed a number of patients with GAN
for over five years with disease progression characterized by a number of
clinical assessments. The GAN natural history study was initiated in 2013 and
included 45 patients with GAN, aged 3 to 21 years. Imaging data from this study
have demonstrated that there are distinctive increased T2 signal abnormalities
within the cerebellar white matter surrounding the dentate nucleus of the
cerebellum, which represent one of the earliest brain imaging findings in
individuals with GAN. These findings precede the more widespread periventricular
and deep white matter signal abnormalities associated with advanced disease. In
addition, cortical and spinal cord atrophy appeared to correspond to more
advanced disease severity and older age. Impaired pulmonary function in patients
with GAN also was observed, with forced vital capacity correlating well with
several functional outcomes such as the MFM32, a validated 32-item scale for
motor function measurement developed for neuromuscular diseases. Nocturnal
hypoventilation and sleep apnea progressed over time, with sleep apnea worsening
as ambulatory function

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deteriorated. Total MFM32 score also correlated with ambulatory status, where
independently ambulant individuals performed better and had higher MFM32 scores
than the non-ambulant group, as shown in the graph below.


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Patients also reported significant autonomic dysfunction based on the COMPASS 31
self-assessment questionnaire. In addition, nerve conduction function
demonstrated progressive sensorimotor polyneuropathy with age. As would be
expected for a neurodegenerative disease, younger patients have higher baseline
MFM32 scores. However, the rate of decline in the MFM32 scores demonstrated
consistency across patients of all ages, with most demonstrating an average
8-point decline per year regardless of age and/or baseline MFM32 score, as shown
in the natural history plot below.


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A score change of 4 points in the MFM32 is considered clinically significant, suggesting that patients with GAN losing an important job every year. To date, we have up to eight years of solid data from this study.

Preclinical data

TSHA-120 performed well across in vitro and in vivo studies, and demonstrated
improved motor function and nerve pathology, and long-term safety across several
animal models. Of note, improved dorsal root ganglia, or DRG, pathology was
demonstrated in TSHA-120-treated GAN knockout mice. These preclinical results
have been published in a number of peer-reviewed journals.

Additional preclinical data from a GAN knockout rodent model that had received
AAV9-mediated GAN gene therapy demonstrated that GAN rodents treated at 16
months performed significantly better than 18-month old untreated GAN rodents
and equivalently to controls. These rodents were evaluated using a rotarod
performance test which is designed to evaluate endurance, balance, grip strength
and motor coordination in rodents. The time to fall off the rotarod, known as
latency, was also evaluated and the data below demonstrated the clear difference
in latency in treated versus untreated GAN rodents.


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A result is considered statistically significant when the probability of the
result occurring by random chance, rather than from the efficacy of the
treatment, is sufficiently low. The conventional method for determining the
statistical significance of a result is known as the "p-value," which represents
the probability that random chance caused the result (e.g., a p-value = 0.01
means that there is a 1% probability that the difference between the control
group and the treatment group is purely due to random chance). Generally, a
p-value less than 0.05 is considered statistically significant.

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With respect to DRG inflammation, a topic of considerable interest within the
gene therapy arena, the DRG have a significantly abnormal histological
appearance and function as a consequence of underlying disease pathophysiology.
Treatment with TSHA-120 resulted in considerable improvements in the
pathological appearance of the DRG in the GAN knockout mice. Shown below is
tissue from a GAN knockout mouse model with numerous abnormal neuronal
inclusions containing aggregates of damaged neurofilament in the DRG as
indicated by the yellow arrows. On image C, tissue from the GAN knockout mice
treated with an intrathecal (IT) injection of TSHA-120 had a notable improvement
in the reduction of these neuronal inclusions in the DRG.


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When a quantitative approach to reduce inclusions in the DRG was applied, it was
observed that TSHA-120 treated mice experienced a statistically significant
reduction in the average number of neuronal inclusions versus the GAN knockout
mice that received vehicle as illustrated below.


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Additionally, TSHA-120 has been shown to improve sciatic nerve pathology in the GAN knockout mice as shown below.

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Results of the ongoing phase 1/2 clinical trial

A Phase 1/2 clinical trial of TSHA-120 is being conducted by the NIH under an
accepted IND. The ongoing trial is a single-site, open-label, non-randomized
dose-escalation trial, in which patients are intrathecally dosed with one of 4
dose levels of TSHA-120 - 3.5x1013 total vg, 1.2x1014 total vg, 1.8x1014 total
vg or 3.5x1014 total vg. The primary endpoint is to assess safety, with
secondary endpoints measuring efficacy using pathologic, physiologic,
functional, and clinical markers. To date, 14 patients have been intrathecally
dosed and twelve patients have at least three years' worth of long-term follow
up data.

At 1-year post-gene transfer, a clinically meaningful and statistically
significant slowing or halting of disease progression was seen with TSHA-120 at
the highest dose of 3.5x1014 total vg (n=3). The change in the rate of decline
in the MFM32 score improved by 5 points in the 3.5x1014 total vg cohort compared
to an 8-point decline in natural history.



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Although the change in the MFM32 score was clinically meaningful, we might have
expected a greater change in the MFM32 score compared to natural history in the
first year but one patient in the high dose cohort was a delayed responder. At
the 12-month follow-up visit, the patient had a 7-point decline in the MFM32
total score that was similar to the slope of the natural history curve as shown
below. Notably, from Year 1 post gene transfer to Year 2, this patient's change
in the MFM32 score remained unchanged suggesting stabilization of disease at 2
years post-treatment. At that 2-year post treatment timepoint, there was a
9-point improvement in the patient's MFM32 score compared to the estimated
natural history decline of 16 points. The annualized estimate of natural history
over time assumes the same rate of decline as in Year 1.


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An additional analysis was performed to examine the change in the rate of
decline in the MFM32 score of all therapeutic doses combined (n=12). As shown
below, the change in the rate of decline in the MFM32 score improved by 7 points
by Year 1

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compared to the natural history decline in the MFM32 score of 8 points. This result was clinically significant and statistically significant.

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A Bayesian analysis was conducted on the 1.2x1014 total vg, 1.8x1014 total vg
and 3.5x1014 total vg dose cohorts at Year 1 to assess the probability of
clinically meaningful slowing of disease progression as compared to natural
history. This type of statistical analysis enables direct probability statements
to be made and is both useful and accepted by regulatory agencies in
interventional studies of rare diseases and small patient populations. As shown
in the table below, for all therapeutic dose cohorts, there was nearly 100%
probability of any slowing of disease and a 96.7% probability of clinically
meaningful slowing of 50% or more following treatment with TSHA-120 compared to
natural history data.

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There remained consistent improvement in TSHA-120's effect over time on the mean
change from baseline in the MFM32 score for all patients in the therapeutic dose
cohorts compared to the estimated natural history decline over the years. By
Year 3, as depicted below, there was a 10-point improvement in the mean change
from baseline in MFM32 score for all patients in the therapeutic dose cohorts.




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In addition to the compelling three-year data, there was one patient at Year 5
whose MFM32 change from baseline improved by nearly 26-points in the 1.2x1014
total vg dose cohort compared to the estimated natural history decline of 40
points by this timepoint.

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Below is an additional analysis of the mean change from baseline in MFM32 score
for the therapeutic dose cohorts compared to natural history at patients' last
visit. As shown, TSHA-120 demonstrated increasing improvement in the mean change
in MFM32 score from baseline over time.


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Secondary Endpoints

Below is pathology data from biopsies of the superficial radial sensory nerve in
5 out of 6 patient samples analyzed. The remaining patient samples are currently
being analyzed. These biopsies confirmed that treatment with TSHA-120 stimulated
active regeneration of axons. There was an increase in the number of
regenerative clusters observed at Year 1 compared to baseline, indicating active
regeneration of nerve fibers following TSHA-120 treatment.


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Loss of vision has been frequently cited by patients and caregivers as a symptom
they find particularly debilitating and would like to see improvement in
following treatment. Patients were analyzed for visual acuity using a standard
Logarithm of the Minimum Angle of Resolution, or LogMAR. An increase in LogMAR
score represents a decrease in visual acuity. A LogMAR score of 0 means normal
vision, approximately 0.3 reflects the need for eyeglasses, and a score value of
1.0 reflects blindness. Based on natural history, individuals with GAN
experience a progressive loss in visual function as indicated by an increase in
the LogMAR score. Ophthalmologic assessments following treatment with TSHA-120
demonstrated preservation of visual acuity over time compared to the loss of
visual acuity observed in natural history. Stabilization of visual acuity was
observed following treatment with TSHA-120 as demonstrated below.


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The thickness of the retinal nerve fiber layer or RNFL was also examined as an
objective biomarker of visual system involvement and overall nervous system
degeneration in GAN. Treatment with TSHA-120 resulted in stabilization of RNFL
thickness and prevention of axonal nerve degeneration compared to diffuse
thinning of RNFL observed in natural history as measured by optical coherence
tomography, or OCT. Analysis by individual dose groups, as seen on the graph
below, demonstrated relatively stable RNFL thickness which is in contrast to the
natural history of GAN, where RNFL decreases. Overall, these data provide new
evidence of TSHA-120's ability to generate nerve fibers and preserve visual
acuity.

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Safety and Tolerability

To date, there are 53 patient-years of clinical data to support TSHA-120's
favorable safety and tolerability profile. TSHA-120 has been well-tolerated at
multiple doses with no signs of significant acute or subacute inflammation, no
sudden sensory changes and no drug-related or persisting transaminitis. Adverse
events related to immunosuppression or study procedures were similar to what has
been seen with other gene therapies and transient in nature. There was no
increase in incidence of adverse events with increased dose. Importantly,
TSHA-120 was safely dosed in the presence of neutralizing antibodies as a result
of the combination of route of administration, dosing and immunosuppression
regimen.


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Currently in the GAN program, we have up to six years of longitudinal data in
individual patients and collectively 53-patient years of clinical safety and
efficacy data from our ongoing clinical study. Treatment with TSHA-120 was
well-tolerated with no significant safety issues. There was no increase in
incidence of adverse events with increased dose, no dose-limiting toxicity, no
signs

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of acute or subacute inflammation, no sudden sensory changes and no drug-related
or persistent elevation of transaminases. Adverse events related to
immunosuppression or study procedures were similar to what was seen with other
gene therapies and transient in nature.

In September 2021, we submitted a request for a Scientific Advice meeting with
an ex-US regulatory agency for TSHA-120 and had a meeting in January 2022.
Additional discussions with other Health Authorities are planned and regulatory
feedback is anticipated mid-2022.

We have finalized plans for commercial grade material and initiated development
of the comparability protocol to support regulatory submissions. We recently
completed a commercially representative GMP batch of TSHA-120 and release
testing for this batch is currently underway. We anticipate completion of a
validation lot by the third quarter of 2022. In addition, we expect to hold
discussions with major regulatory agencies focused on the registration pathway
for TSHA-120. We will continue our institutional readiness activities, patient
identification and maximizing patient access. Lastly, we anticipate several
publications of these data by the NIH in collaboration with Taysha.

TSHA-102 for Rett Syndrome

TSHA-102, a neurodevelopmental disorder product candidate, is being developed
for the treatment of Rett syndrome, one of the most common genetic causes of
severe intellectual disability, characterized by rapid developmental regression
and in many cases caused by heterozygous loss of function mutations in MECP2, a
gene essential for neuronal and synaptic function in the brain. We designed
TSHA-102 to prevent gene overexpression-related toxicity by inserting microRNA,
or miRNA target binding sites into the 3' untranslated region of viral genomes.
This overexpression of MECP2 is seen in the clinic in patients with a condition
known as MECP2 duplication syndrome, where elevated levels of MECP2 result in a
clinical phenotype similar to Rett syndrome both in terms of symptoms and
severity. TSHA-102 is constructed from a neuronal specific promoter, MeP426,
coupled with the miniMECP2 transgene, a truncated version of MECP2, and
miRNA-Responsive Auto-Regulatory Element, or miRARE, our novel miRNA target
panel, packaged in self-complementary AAV9. Currently, there are no approved
therapies for the treatment of Rett syndrome, which affects more than 350,000
patients worldwide, according to the Rett Syndrome Research Trust.

In May 2021, preclinical data from the ongoing natural history study for
TSHA-102 were published online in Brain, a highly esteemed neurological science
peer-reviewed journal. The preclinical study was conducted by the UT
Southwestern Medical Center laboratory of Sarah Sinnett, Ph.D., and evaluated
the safety and efficacy of regulated miniMECP2 gene transfer, TSHA-102
(AAV9/miniMECP2-miRARE), via IT administration in adolescent mice between four
and five weeks of age. TSHA-102 was compared to unregulated full length MECP2
(AAV9/MECP2) and unregulated miniMECP2 (AAV9/miniMECP2).

TSHA-102 extended knockout survival by 56% via IT delivery. In contrast, the
unregulated miniMECP2 gene transfer failed to significantly extend knockout
survival at either dose tested. Additionally, the unregulated full-length MECP2
construct did not demonstrate a significant extension in survival and was
associated with an unacceptable toxicity profile in wild type mice.

In addition to survival, behavioral side effects were explored. Mice were
subjected to phenotypic scoring and a battery of tests including gait, hindlimb
clasping, tremor and others to comprise an aggregate behavioral score. miRARE
attenuated miniMECP2-mediated aggravation in wild type aggregate phenotype
severity scores. Mice were scored on an aggregate severity scale using an
established protocol. AAV9/MECP2- and AAV9/miniMECP2-treated wild type mice had
a significantly higher mean (worse) aggregate behavioral severity score versus
that observed for saline-treated mice (p <0.05; at 6-30 and 7-27 weeks of age,
respectively). TSHA-102-treated wild type mice had a significantly lower
(better) mean aggregate severity score versus those of AAV9/MECP2- and
AAV9/miniMECP2-treated mice at most timepoints from 11-19 and 9-20 weeks of age,
respectively. No significant difference was observed between saline- and
TSHA-102-treated wild type mice.

miRARE-mediated genotype-dependent gene regulation was demonstrated by analyzing
tissue sections from wild type and knockout mice treated with AAV9 vectors given
intrathecally. When knockout mice were injected with a vector expressing the
mini-

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MECP2 transgene with and without the miRARE element, miRARE reduced overall miniMECP2 transgene expression compared to unregulated miniMECP2 in wild-type mice, as shown below.

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TSHA-102 demonstrated regulated expression in different regions of the brain. As
shown in the graph and photos below, in the pons and midbrain, miRARE inhibited
mean MECP2 gene expression in a genotype-dependent manner as indicated by
significantly fewer myc(+) cells observed in wild type mice compared to knockout
mice (p<0.05), thereby demonstrating that TSHA-102 achieved MECP2 expression
levels similar to normal physiological parameters.


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In preclinical animal models, intrathecal myc-tagged TSHA-102 was not associated
with early death and did not cause adverse behavioral side effects in wild type
mice demonstrating appropriate downregulation of miniMECP2 protein expression as
compared to unregulated MECP2 gene therapy constructs. In addition, preclinical
data demonstrated that miRARE reduced overall expression of miniMECP2 transgene
expression and regulated genotype-dependent myc-tagged miniMECP2 expression
across different brain regions on a cell-by-cell basis and improved the safety
of TSHA-102 without compromising efficacy in juvenile mice. Pharmacologic
activity of TSHA-102 following IT administration was assessed in the MECP2
knockout mouse model of Rett syndrome across three dose levels and three age
groups (n=252). A one-time IT injection of TSHA-102 significantly increased
survival at all dose levels, with the mid to high doses improving survival
across all age groups compared to vehicle-treated controls. Treatment with
TSHA-102 significantly improved body weight, motor function and respiratory
assessments in MECP2 knockout mice. An additional study in neonatal mice is
ongoing, and preliminary data suggest normalization of survival. Finally, An
IND/CTA-enabling 6-month GLP toxicology study (n=24) examined the
biodistribution, toxicological effects and mechanism of action of TSHA-102 when
intrathecally administered to NHPs across three dose levels. Biodistribution, as
reflected by DNA copy number, was observed in multiple areas of the brain,
sections of spinal cord and the dorsal root ganglion (DRG). Importantly, mRNA
levels across multiple tissues were low, indicating miRARE regulation is
minimizing transgene expression from the construct in the presence of endogenous
MECP2 as expected, despite the high levels of DNA that were delivered. No
toxicity from transgene overexpression was observed, confirmed by functional and
histopathologic evaluations demonstrating no detrimental change in
neurobehavioral assessments and no adverse tissue findings on necropsy.

In May 2022 at the International Rett Syndrome Foundation (IRSF) meeting, there
were two oral presentations titled "Safety and Biodistribution Assessment in
Non-Human Primates (NHPs) of a miniMeCP2 AAV9 Vector for Gene Replacement
Therapy of Rett Syndrome" and "Rett Syndrome in Adulthood: The Caregiver
Perspective." At the ASCEND National Summit, there was one oral presentation
titled "Putting Patients at the Center."

At the upcoming 25th annual meeting of the American Society for Gene and Cell Therapy (ASGCT) meeting at May 2022the following oral and poster presentations and symposium will take place:

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We have received Orphan Drug Designation and Rare Pediatric Disease Designation from the FDA and Orphan Drug Designation from the European Commission for TSHA-102 for the treatment of Rett syndrome.

We submitted a CTA for TSHA-102 in November 2021 and announced initiation of
clinical development under a CTA approved by Health Canada in March 2022. We are
advancing TSHA-102 in the REVEAL Phase 1/2 clinical trial which is an open-

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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 expect to report preliminary clinical
data for TSHA-102 in Rett syndrome by year-end 2022.


TSHA-121 for CLN7 disease

The first-generation construct for the CLN7 program was developed in the
laboratory of Steven Gray, Ph.D., Associate Professor at UT Southwestern Medical
Center and our Chief Scientific Advisor with financial support from Mila's
Miracle and Batten Hope, the leading CLN7 patient advocacy groups. We provided a
grant to Batten Hope to support patient awareness, disease education and newborn
screening initiatives. We recently executed an exclusive option from UT
Southwestern to license worldwide rights to a clinical-stage CLN7 program. The
CLN7 program is currently in a Phase 1 clinical proof-of-concept trial run by UT
Southwestern, and we reported preliminary clinical safety data for the first
patient in history to be intrathecally dosed at 1.0x1015 total vg with the
first-generation construct in December 2021. Development of the CLN7 program
will continue in collaboration with existing partners with future clinical
development to focus on the first-generation construct.

CLN7 disease is a rare, fatal and rapidly progressive neurodegenerative disease
that is a form of Batten disease. CLN7 is caused by autosomal recessive
mutations in the MFSD8 gene that results in lysosomal dysfunction. Disease onset
occurs around two to five years of age, with death often ensuing in young
adolescence. Patients experience gradual nerve cell loss in certain parts of the
brain and typically present with seizures, vision loss, speech impairment and
mental and motor regression. Currently, there are no approved therapies to treat
CLN7 disease, which impacts an estimated 4,000 patients globally. Preclinical
data in rodents supported advancement of the first-generation construct into a
Phase 1 clinical proof-of-concept study in patients with CLN7 disease. In an in
vivo efficacy study, IT administration of the first-generation construct to
MFSD8 knockout mice with high or low doses resulted in clear age and dose
effects with early intervention and high dose achieving the best therapeutic
benefits. IT high dose of the first-generation construct in younger knockout
mice resulted in: 1) widespread MFSD8 mRNA expression in all tissues assessed;
2) nearly complete normalization of impaired open field and rotarod performance
at 6 and 9 months post injection; 3) more than doubled median life expectancy
(16.82 months versus 7.77 months in untreated knockout mice); and 4) maintenance
of healthy body weight for a prolonged period of time. Toxicology studies in
wild type rodents demonstrated safety and tolerability of IT administration of
the first-generation construct.

Clinical safety data presented at WORLDSymposium in February 2022 for the
first-generation construct from the ongoing clinical trial following IT
administration further demonstrated that the first-generation construct was
well-tolerated at multiple doses including 1.0x1015 total vg, which is the
highest dose administered in humans ever for a gene therapy product. No adverse
immune responses were noted, including no evidence of dorsal root ganglion
toxicity or brain inflammation across all subjects. Moreover, stabilization in
sural nerve conduction supported the absence of dorsal root ganglia
inflammation. The ongoing trial includes three patients dosed to date, with two
patients treated at the highest dose of 1.0x1015 total vg. Complete blood counts
revealed no signs of bone marrow suppression or clinically significant bone
marrow reactivity, and CSF analysis revealed no signs of pleocytosis. A fourth
patient was recently dosed at 1.0x1015 total vg in March 2022.

TSHA-118 for CLN1 disease

CLN1 disease (one of the forms of Batten disease), a lysosomal storage disorder,
is a progressive, fatal neurodegenerative disease with early childhood onset
that has an estimated incidence of approximately 1 in 138,000 live births
worldwide. The estimated prevalence of CLN1 disease is 1,000 patients in the
United States and European Union. CLN1 disease is caused by loss-of-function
mutations in the CLN1 gene that encodes the enzyme palmitoyl-protein
thioesterase-1, or PPT1, a small glycoprotein involved in the degradation of
certain lipid-modified proteins. Loss of function mutations in the CLN1 gene
causes accumulation of these lipid-modified proteins in cells, eventually
leading to aggregation, neuronal cellular dysfunction and ultimately neuronal
cell death.

In the infantile-onset form of CLN1 disease, clinical symptoms appear between
six to 24 months and include rapid deterioration of speech and motor function,
refractory epilepsy, ataxia and visual failure. Infantile-onset CLN1 patients
are typically poorly responsive by five years of age and remain noncommunicative
until their death, which usually occurs by seven years of age.
Late-infantile-onset CLN1 disease begins between two to four years of age with
initial visual and cognitive decline followed by the development of ataxia and
myoclonus, or quick, involuntary muscle jerks. Juvenile-onset CLN1 disease
patients present between the ages of five to ten years old, with vision loss as
a first symptom followed by cognitive decline, seizures and motor decline.

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Approximately 60% of children diagnosed with CLN1 disease in United States present early infantile forms, the remaining 40% presenting late infantile forms.

All currently available therapeutic approaches for patients with CLN1 disease
are targeted towards the treatment of symptoms, and no disease-modifying
therapies have been approved. Gene therapy has shown promise in correcting forms
of neuronal ceroid lipofuscinoses, or NCL, diseases that involve mutations in
soluble enzymes, in part, due to cross-correction of neighboring non-transduced
cells.

We believe that the introduction of a functional CLN1 gene using an AAV9 vector
delivered intrathecally to the CNS offers the potential of a disease-modifying
therapeutic approach for this disease. TSHA-118 is a self-complementary AAV9
viral vector that expresses human codon-optimized CLN1 complementary
deoxyribonucleic acid under control of the chicken ß-actin hybrid promoter. We
acquired exclusive worldwide rights to certain intellectual property rights and
know-how relating to the research, development and manufacture of
TSHA-118 (formerly ABO-202) in August 2020 pursuant to a license agreement with
Abeona Therapeutics Inc., or Abeona.

TSHA-118 has received Orphan Drug Designation, Rare Pediatric Disease Designation, and Fast Track Designation from the FDA and Orphan Drug Designation from the European Medicines Agency for the treatment of CLN1 disease.

There is currently an open IND for the CLN1 program. We have submitted a CTA dossier for TSHA-118 which has been approved by Health Canada in 2021 and have initiated clinical development.

TSHA-105 for SLC13A5 deficiency

We are developing TSHA-105 for the treatment of SLC13A5 deficiency, a rare
autosomal recessive epileptic encephalopathy characterized by the onset of
seizures within the first few days of life. SLC13A5 deficiency is caused
by bi-allelic loss-of function mutations in the SLC13A5 gene, which codes for a
sodium dependent citrate transporter, or NaCT, that is largely expressed in the
brain and liver. To date, all tested mutations result in no or a greatly reduced
amount of the citrate in the cells. Diminished NaCT function leads to loss of
neuronal uptake of citrate and other metabolites such as succinate that are
critical to brain energy metabolism and function. Affected children have
impairments in gross motor function and speech production with relative
preservation of fine motor skills and receptive speech. Currently, there are no
approved therapies for SLC13A5 deficiency, and treatment is largely to address
symptoms. The estimated prevalence of SLC13A5 deficiency is 1,900 patients in
the United States and European Union.

We are developing TSHA-105 as a gene replacement therapy for SLC13A5 deficiency.
TSHA-105 is constructed from a codon-optimized human SLC13A5 gene packaged in a
self-complementary AAV9 capsid.

We have received orphan drug designation and rare pediatric disease designation
from the FDA and orphan drug designation from the European Commission for
TSHA-105 for the treatment of epilepsy caused by caused by SLC13A5 deficiency.
We expect to initiate clinical development on TSHA-105 in SLC13A5 deficiency.

License agreements

Research, collaboration and licensing agreement with University of Texas Southwestern Medical Center

In November 2019, we entered into a research, collaboration and license
agreement, or the UT Southwestern Agreement, with The Board of Regents of the
University of Texas System on behalf of UT Southwestern, as amended in April
2020.

In connection with the UT Southwestern Agreement, we 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,
we 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. We are required to use commercially reasonable efforts to
develop, obtain regulatory approval for, and commercialize at least one licensed
product.

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In connection with the UT Southwestern Agreement, we issued to UT Southwestern
2,179,000 shares of our common stock. We do not have any future milestone or
royalty obligations to UT Southwestern under the UT Southwestern Agreement,
other than costs related to the maintenance of patents.

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, we 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.

License agreement with Queen’s University

In February 2020, we entered into a license agreement, or the Queen's University
Agreement with Queen's University. In connection with the Queen's University
Agreement, we obtained an exclusive, perpetual, worldwide, royalty-bearing
license, with the right to grant sublicenses, under certain patent rights and
know-how of Queen's University, including certain improvements to the foregoing,
to make, have made, use, offer for sale, sell and import licensed products and
otherwise exploit such patents and know-how for use in certain specified
indications. We also obtained an exclusive right of first negotiation to license
certain next generation technology and improvements of Queen's University that
do not constitute an already-licensed improvement to the licensed technology.

In connection with the Queen's University Agreement, we paid Queen's University
a one-time fee of $3.0 million as an upfront fee and approximately $0.2 million
to reimburse Queen's University for certain plasmid production costs. We are
obligated to pay Queen's University up to $10.0 million in the aggregate upon
achievement of certain regulatory milestones and up to $10.0 million in the
aggregate upon achievement of certain commercial milestones, a low single digit
royalty 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 product-by-licensed
product basis and country-by-country basis until expiration of the last valid
claim of a licensed patent covering such licensed product in such country and
the expiration of any regulatory exclusivity for such licensed product in such
country. Additionally, we are obligated to pay Queen's University a low
double-digit portion of any amounts received by us in connection with the sale
of a priority review voucher related to a licensed product, not to exceed a low
eight-figure amount.

In connection with a separate research grant agreement with Queen's University,
we reimbursed Queen's University for certain manufacturing production costs
totaling $3.8 million in fiscal year 2020. No additional milestone payments were
made in connection with the Queen's University Agreement during the three months
ended March 31, 2022.

License agreement with Abeona (CLN1 disease)

In August 2020, we entered into a license agreement, or the Abeona CLN1
Agreement, with Abeona Therapeutics Inc., or Abeona. In connection with the
Abeona CLN1 Agreement, we 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 and Abeona to research, develop, manufacture, have manufactured, use, and
commercialize licensed products for gene therapy for the prevention, treatment,
or diagnosis of CLN1 Disease (one of the forms of Batten disease) in humans.

In connection with the license grant, we paid Abeona a one-time upfront license
fee of $3.0 million during fiscal year 2020. We are obligated to pay Abeona up
to $26.0 million in regulatory-related milestones and up to $30.0 million in
sales-related milestones per licensed product and high single-digit royalties on
net sales of licensed 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. In addition, concurrent with the Abeona CLN1 Agreement,
we entered into a purchase and reimbursement agreement with Abeona, pursuant to
which we purchased specified inventory from Abeona and reimbursed Abeona for
certain research and development costs previously incurred for total
consideration of $4.0 million paid in fiscal year 2020.

In December 2021 the company’s CTA filing for TSHA-118 for the treatment of CLN1 disease has been approved by Health Canada and therefore triggered a regulatory milestone payment under the Abeona CLN1 agreement, and therefore we

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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 has been classified as an investing
outflow in the condensed consolidated statements of cash flows for the three
months ended March 31, 2022. No additional milestone payments were made or
triggered during the three months ended March 31, 2022.

The Abeona CLN1 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. We may
terminate the agreement for convenience upon specified prior written notice to
Abeona.

License agreement with Abeona (Rett syndrome)

In October 2020, we entered into a license agreement, or the Abeona Rett
Agreement, with Abeona pursuant to which we 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, we are 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, we paid Abeona a one-time upfront
license fee of $3.0 million during fiscal year 2020. We are 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 product and high
single-digit royalties on net sales of licensed 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.

In March 2022, our 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 the Rett Agreement. We recorded $1.0 million within
research and development expenses in the condensed consolidated statements of
operations for the three months ended March 31, 2022. This milestone fee was not
paid as of March 31, 2022 and has been recorded in accrued expenses and other
current liabilities.

The Abeona Rett Agreement expires on a country-by-country and Licensed Product-by-Licensed Product basis upon the expiration of a Licensed Product’s last royalty term. Either party may terminate the Agreement in the event of an uncured material breach of the Agreement or the insolvency of the other party. We may terminate the contract for convenience.

Impact of COVID-19 on our business

We have been actively monitoring the COVID-19 situation and its impact globally.
Our financial results for the three months ended March 31, 2022 were not
impacted by COVID-19. We believe our hybrid and remote working arrangements have
had limited impact on our ability to maintain internal operations during the
three months ended March 31, 2022. The extent to which COVID-19 may impact our
business and operations will depend on future developments that are highly
uncertain and cannot be predicted with confidence, such as the duration of the
outbreak, the effectiveness of actions to contain and treat COVID-19, the
efficacy, availability and adoption of vaccines and other treatments, both
domestically and globally, and the impact of new variants or mutations of the
coronavirus, such as the Delta variant. Although we have not experienced any
material business shutdowns or interruptions due to the COVID-19 pandemic, we
cannot predict the scope and severity of any potential business shutdowns or
disruptions in the future, including to our planned clinical trials and
preclinical studies. Any such shutdowns or other business interruptions could
result in

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material adverse effects on our ability to conduct our business in the manner and within the timeframe currently anticipated, which could have a material adverse effect on our business, results of operations and financial condition.

Components of operating results

Revenue

To date, we have not recognized any revenue from any sources, including from
product sales, and we do not expect to generate any revenue from the sale of
products, if approved, in the foreseeable future. If our development efforts for
our product candidates are successful and result in regulatory approval, or
license agreements with third parties, we may generate revenue in the future
from product sales. However, there can be no assurance as to when we will
generate such revenue, if at all.

Functionnary costs

Research and development costs

Research and development expenses primarily consist of preclinical development
of our product candidates and discovery efforts, including conducting
preclinical studies, manufacturing development efforts, preparing for clinical
trials and activities related to regulatory filings for our product candidates.
Research and development expenses are recognized as incurred and payments made
prior to the receipt of goods or services to be used in research and development
are capitalized until the goods or services are received. Costs incurred in
obtaining technology licenses through asset acquisitions are charged to research
and development expense if the licensed technology has not reached technological
feasibility and has no alternative future use. Research and development expenses
include:

• employee-related expenses, including salaries, bonuses, benefits,

         stock-based compensation, severance costs and other related costs for
         those employees involved in research and development efforts;

• license maintenance costs and milestone costs incurred as part of

various license agreements;

• external research and development expenses incurred under contracts with

consultants, contract research organizations or CROs, investigators

sites and consultants to conduct our preclinical studies;

• costs related to the manufacture of equipment for our preclinical studies and

         clinical trials, including fees paid to contract manufacturing
         organizations, or CMOs;


  • laboratory supplies and research materials;


  • costs related to compliance with regulatory requirements; and

• facilities, depreciation and other allocated expenses, which include

direct and earmarked expenses for rent, maintenance of facilities,

insurance and equipment.


Research and development activities are central to our business model. Product
candidates in later stages of clinical development generally have higher
development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials.
We cannot determine with certainty the timing of initiation, the duration or the
completion costs of current or future preclinical studies and clinical trials of
our product candidates due to the inherently unpredictable nature of preclinical
and clinical development. Clinical and preclinical development timelines, the
probability of success and development costs can differ materially from
expectations. Due to the strategic reprioritization of programs and reduction in
force announced in March 2022, we expect overall lower research and development
expenses for the remainder of 2022 compared to 2021. We expect lower expenses
for the remainder of 2022 as certain programs have been deprioritized. Our
future expenses may vary significantly each period based on factors such as:

• expenses incurred to conduct the preclinical studies necessary to advance our

product candidates in clinical development;

• the trial costs per patient, including according to the number of doses that

         patients received;


  • the number of patients who enroll in each trial;


  • the number of trials required for approval;


  • the number of sites included in the trials;


  • the countries in which the trials are conducted;


  • the length of time required to enroll eligible patients;


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  • the drop-out or discontinuation rates of patients;

• any additional safety oversight requested by regulatory bodies;

  • the duration of patient participation in the trials and follow-up;


  • the phase of development of the product candidate;

• third-party subcontractors not complying with regulatory requirements or

fulfill their contractual obligations to us in a timely manner, or not at all;

  • the ability to manufacture of our product candidates;

• regulatory bodies or institutional review boards, or IRBs requiring us or

our investigators are suspending or stopping clinical development for various

reasons, including non-compliance with regulatory requirements or a

find that participants are exposed to unacceptable health problems

         risks; and


  • the efficacy and safety profile of our product candidates.

General and administrative expenses

General and administrative expenses consist principally of salaries and related
costs for personnel in executive and administrative functions, including
stock-based compensation, severance costs, travel expenses and recruiting
expenses. Other general and administrative expenses include professional fees
for legal, consulting, accounting and audit and tax-related services and
insurance costs.

We anticipate that our general and administrative expenses will decrease in the
future due to the strategic reprioritization and reduction in force that was
announced in March 2022. We also anticipate that our general and administrative
expenses as a result of payments for accounting, audit, legal, consulting
services, as well as costs associated with maintaining compliance with Nasdaq
listing rules and SEC requirements, director and officer liability insurance and
other expenses associated with operating as a public company will stay constant
for the near future, but may increase over time.

Operating results

Results of operations for the three months ended March 31, 2022 and 2021

The following table summarizes our operating results for the three months ended March 31, 2022 and 2021 (in thousands):

                                      For the Three Months Ended March 31,
                                          2022                    2021
Operating expenses:
Research and development            $          37,799       $          23,854
General and administrative                     11,469       $           8,236
Total operating expenses                       49,268                  32,090
Loss from operations                          (49,268 )               (32,090 )
Other income (expense):
Interest income                                    14                      66
Interest expense                                 (849 )                     -
Other expense                                      (8 )                     -
Total other income (expense), net                (843 )                    66
Net loss                            $         (50,111 )     $         (32,024 )



Research and development costs

Research and development expenses were $37.8 million for the three months ended
March 31, 2022, compared to $23.9 million for the three 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 $1.0 million of non-cash stock-based
compensation. Additionally, in the three 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 of third-party research and development consulting fees, primarily
related to GLP toxicology studies and clinical study activities.

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General and administrative expenses

General and administrative expenses were $11.5 million for the three months
ended March 31, 2022, compared to $8.2 million for the three 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.


Other Income (Expense)

Interest Expense

Interest expense for the three months ended March 31, 2022 consisted primarily of interest expense incurred under the term loan agreement.

interest income

Interest income for the three months ended March 31, 2022 and 2021 consisted mostly of interest earned on our savings account.

Cash and capital resources

Insight

Since our inception, we have not generated any revenue and have incurred
significant operating losses. As of March 31, 2022, we had cash and cash
equivalents of $96.6 million. From inception through March 31, 2022, we have
funded our operations primarily through equity financings, raising an aggregate
of $307.0 million in gross proceeds from our initial public offering and private
placements of convertible preferred stock. Specifically, between March and July
2020, we closed on the sale of an aggregate of 10,000,000 shares of Series A
convertible preferred stock for gross proceeds of $30.0 million. In July and
August 2020, we closed on the sale of an aggregate of 5,647,048 shares of Series
B convertible preferred stock for gross proceeds of $96.0 million. In September
2020, we raised gross proceeds of $181.0 million in our initial public
offering.

On August 12, 2021, or the Closing Date, we entered into a Loan and Security
Agreement, or the Term Loan Agreement, with the lenders party thereto from time
to time, or the Lenders and Silicon Valley Bank, as administrative agent and
collateral agent for the Lenders, or the 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 our 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, or,
collectively, the Term Loans. We drew $30.0 million in term loans on the Closing
Date and an additional $10.0 million in term loans on December 29, 2021. The
loan repayment schedule provides for interest only payments until August 31,
2024, followed by consecutive monthly payments of principal and interest. All
unpaid principal and accrued and unpaid interest with respect to each term loan
is due and payable in full on August 1, 2026.

On October 5, 2021, we filed a shelf registration statement on Form S-3 with the
SEC in relation to the registration of common stock, preferred stock, debt
securities, warrants and units or any combination thereof up to a total
aggregate offering price of $350.0 million. We also simultaneously entered into
a Sales Agreement, or the Sales Agreement, with SVB Leerink LLC and Wells Fargo
Securities, LLC, or the Sales Agents, pursuant to which we may issue and sell,
from time to time at our discretion, shares of our common stock having an
aggregate offering price of up to $150.0 million through the Sales Agents. In
March 2022, we amended the Sales Agreement to, among other things, include
Goldman Sachs & Co. LLC as an additional Sales Agent. As of March 31, 2022, no
shares of common stock had been issued and sold pursuant to the Sales
Agreement. In April 2022, we sold 2,000,000 shares of common stock pursuant to
the Sales Agreement and received net proceeds of $11.6 million.



Financing needs

To date, we have not generated any revenues from the commercial sale of approved
drug products, and we do not expect to generate substantial revenue for at least
the next few years. If we fail to complete the development of our product
candidates in a

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timely manner or fail to obtain their regulatory approval, our ability to
generate future revenue will be compromised. We do not know when, or if, we will
generate any revenue from our product candidates, and we do not expect to
generate significant revenue unless and until we obtain regulatory approval of,
and commercialize, our product candidates. We expect our expenses to decrease in
connection with our ongoing activities largely due to the strategic
reprioritization of product candidates and the reduction in force announced in
March 2022. We will continue the research and development of, initiate clinical
trials of and seek marketing approval for specific product candidates, as well
as continue the build out of our cGMP manufacturing facility in Durham, North
Carolina. In addition, if we obtain approval for any of our product candidates,
we then expect to incur significant commercialization expenses related to sales,
marketing, manufacturing and distribution. We anticipate that we will need
substantial additional funding in connection with our continuing operations. If
we are unable to raise capital when needed or on attractive terms, we could be
forced to delay, reduce or eliminate our research and development programs or
future commercialization efforts.

As of March 31, 2022, our material cash requirements consisted of $51.5 million
in total lease payments entered into since inception. Our most significant
purchase commitments consist of approximately $12.0 million related to the
build-out of our cGMP manufacturing facility and $8.1 million in cancellable
purchase obligations to our CROs.


We believe that our existing cash and cash equivalents, along with full access
to the term loan facility, will enable us to fund our operating expenses and
capital requirements into the fourth quarter of 2023. This estimate reflects our
strategic prioritization efforts to improve operating efficiency, including
pausing research and development activities on our preclinical programs,
limiting patient enrollment to focus on proof-of-concept studies in CLN1 and
SLC13A5, ceasing the TSHA-101 clinical trial and reducing headcount by
approximately 35% in March 2022. We will require additional capital to fund the
research and development of our product candidates, to fund our manufacturing
activities, to fund precommercial activities of our programs and for working
capital and general corporate purposes.

Due to the many risks and uncertainties associated with the research, development and commercialization of biologics, we are unable to estimate the exact amount of our working capital requirements. Our future funding needs will depend on many factors, including but not limited to:

• the scope, progress, costs and results of discovery, preclinical

         development, laboratory testing and clinical trials for TSHA-102,
         TSHA-105, TSHA-118, TSHA-120, TSHA-121 and any current and future product
         candidates that we advance;

• our ability to access sufficient additional capital on a timely basis and

on favorable terms, including with respect to our term loan facility with

Bank of Silicon Valley;


      •  the extent to which we develop, in-license or acquire other product
         candidates and technologies in our gene therapy product candidate
         pipeline;

• Costs and schedule for process development and manufacturing scale-up

activities associated with our product candidates and other programs

we advance them through preclinical and clinical development;

• the number and development requirements of product candidates that we can

to pursue;

• the costs, timing and results of regulatory review of our product candidates;

• growth in our workforce and associated costs as we develop our research and

developing capacities and establishing business infrastructure;

• the costs of establishing and maintaining our own cGMP on a commercial scale

manufacturing plant;

• the costs and timing of future marketing activities, including

         product manufacturing, marketing, sales, and distribution, for any of our
         product candidates for which we receive marketing approval;


      •  the costs and timing of preparing, filing and prosecuting patent
         applications, maintaining and enforcing our intellectual property rights
         and defending any intellectual property-related claims;

• revenue, if any, from commercial sales of our product

         candidates for which we receive marketing approval; and


  • the costs of operating as a public company.


Identifying potential product candidates and conducting preclinical studies and
clinical trials is a time-consuming, expensive and uncertain process that takes
many years to complete, and we may never generate the necessary data or results
required to obtain

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marketing approval and achieve product sales. In addition, our product
candidates, if approved, may not achieve commercial success. Our commercial
revenues, if any, will be derived from sales of product candidates that we do
not expect to be commercially available in the near term, if at all.
Accordingly, we will need to continue to rely on additional financing to achieve
our business objectives. Adequate additional financing may not be available to
us on acceptable terms, or at all. To the extent that we raise additional
capital through the sale of equity or convertible debt securities, the terms of
these equity securities or this debt may restrict our ability to operate. The
Term Loan Agreement contains negative covenants, including, among other things,
restrictions on indebtedness, liens investments, mergers, dispositions,
prepayment of other indebtedness and dividends and other distributions. Any
future additional debt financing and equity financing, if available, may involve
agreements that include covenants limiting and restricting our ability to take
specific actions, such as incurring additional debt, making capital
expenditures, entering into profit-sharing or other arrangements or declaring
dividends. If we raise additional funds through collaborations, strategic
alliances or marketing, distribution or licensing arrangements with third
parties, we may be required to relinquish valuable rights to our technologies,
future revenue streams, research programs or product candidates or to grant
licenses on terms that may not be favorable to us.

We are continuing to assess the effect that the COVID-19 pandemic may have on
our business and operations. The extent to which COVID-19 may impact our
business and operations will depend on future developments that are highly
uncertain and cannot be predicted with confidence, such as the duration of the
outbreak, the duration and effect of business disruptions and the short-term
effects and ultimate effectiveness of the travel restrictions, quarantines,
social distancing requirements and business closures in the United States and
other countries to contain and treat the disease, the efficacy, availability and
adoption of vaccines, both domestically and globally, and the impact of new
variants or mutations of the coronavirus, such as the Delta variant. While the
potential economic impact brought by, and the duration of, the COVID-19 pandemic
may be difficult to assess or predict, a continued and growing pandemic could
result in significant disruption of global financial markets, reducing our
ability to access capital, which could in the future negatively affect our
liquidity. In addition, a recession or market correction resulting from the
spread of COVID-19 could materially affect our business and the value of our
common stock.

Cash Flows

The following table presents a summary of our cash flows for the three months ended
March 31, 2022 and 2021 (in thousands):

                                                             For the Three Months Ended March 31,
                                                                 2022                    2021
Net cash used in operating activities                      $         (40,804 )     $         (22,035 )
Net cash used in investing activities                                (11,427 )                  (534 )
Net cash used in financing activities                                   (242 )                     -

Net change in cash, cash equivalents and restricted cash $ (52,473) $ (22,569)



Operating Activities

For the three months ended March 31, 2022, our net cash used in operating
activities of $40.8 million primarily consisted of a net loss of $50.1 million,
primarily attributable to our spending on research and development expenses. The
net loss of $50.1 million was partially offset by adjustments for non-cash
items, primarily stock-based compensation of $5.3 million, and the add back of
the regulatory milestone and upfront license fees of $1.3 million. The $50.1
million net loss was also partially offset by a $2.3 million increase in the
cash provided by operating assets and liabilities, primarily resulting from an
increase in accounts payable.

For the three months ended March 31, 2021, our net cash used in operating
activities of $22.0 million primarily consisted of a net loss of $32.0 million,
primarily attributable to our spending on research and development expenses. The
net loss of $32.0 million was partially offset by adjustments for non-cash
items, primarily the upfront license fee of $5.5 million to HHF related to the
acquisition of TSHA-120 and stock-based compensation of $3.6 million.

Investing activities

During the three months ended March 31, 2022, investing activities used $11.4
million of cash primarily attributable to the regulatory milestone payment of
$3.0 million paid to Abeona pursuant to the CLN1 Agreement, and capital
expenditures related to our in-house manufacturing facility and office
space. During the three months ended March 31, 2021, investing activities used
$0.5 million of cash attributable to capital expenditures related to computer
and lab equipment.

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Fundraising activities

During the three months ended March 31, 2022, financing activities used $0.2
million of cash, which is primarily attributable to the payment of shelf
registration costs, and other financing transactions, which are partially offset
by ESPP contributions.

Off-balance sheet arrangements

We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined in the rules and regulations of the
SEC.

Critical Accounting Policies and Significant Judgments and Estimates

There have been no material changes to our critical accounting policies which are disclosed in our audited consolidated financial statements for the year ended
December 31, 2021 filed with the SECOND on March 31, 2022.

Recent accounting pronouncements

See Note 2 to our unaudited condensed consolidated financial statements in “Part I – Financial Information, Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our financial statements. condensed consolidated statements.

Emerging Growth Company and Small Company Reporting Status

In April 2012, the Jumpstart Our Business Startups Act of 2012, or JOBS Act, was
enacted. Section 107 of the JOBS Act provides that an "emerging growth company"
can take advantage of the extended transition period provided in
Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with
new or revised accounting standards. Thus, an emerging growth company can delay
the adoption of certain accounting standards until those standards would
otherwise apply to private companies. We elected the extended transition period
for complying with new or revised accounting standards, which delays the
adoption of these accounting standards until they would apply to private
companies.

In addition, as an emerging growth company, we can take advantage of reduced disclosure requirements and other requirements that otherwise generally apply to public companies. These provisions include:

• an exception to meeting the auditor’s certification requirements for

Section 404 of the Sarbanes-Oxley Act of 2002, as amended;

• reduced disclosure of our executive compensation arrangements in our

         periodic reports, proxy statements and registration statements;

• exemptions from the obligation to hold non-binding advisory votes on

executive compensation or golden parachute agreements; and


      •  an exemption from compliance with the requirements of the Public Company
         Accounting Oversight Board regarding the communication of critical audit
         matters in the auditor's report on financial statements.


We may take advantage of these provisions until we no longer qualify as an
emerging growth company. We will cease to qualify as an emerging growth company
on the date that is the earliest of: (i) December 31, 2025, (ii) the last day of
the fiscal year in which we have more than $1.07 billion in total annual gross
revenues, (iii) the date on which we are deemed to be a "large accelerated
filer" under the rules of the SEC, which means the market value of our common
stock that is held by non-affiliates exceeds $700 million as of the prior
June 30th, or (iv) the date on which we have issued more than $1.0 billion of
non-convertible debt over the prior three-year period. We may choose to take
advantage of some but not all of these reduced reporting burdens. We have taken
advantage of certain reduced reporting requirements in this Quarterly Report on
Form 10-Q and our other filings with the SEC. Accordingly, the information
contained herein may be different than you might obtain from other public
companies in which you hold equity interests.

We are also a "smaller reporting company," meaning that the market value of our
shares held by non-affiliates is less than $700 million and our annual revenue
was less than $100 million during the most recently completed fiscal year. We
may continue to be a smaller reporting company if either (i) the market value of
our shares held by non-affiliates is less than $250 million or (ii) our annual
revenue was less than $100 million during the most recently completed fiscal
year and the market value of our shares held

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by non-affiliates is less than $700 million. If we are a smaller reporting
company at the time we cease to be an emerging growth company, we may continue
to rely on exemptions from certain disclosure requirements that are available to
smaller reporting companies. Specifically, as a smaller reporting company, we
may choose to present only the two most recent fiscal years of audited financial
statements in our Annual Report on Form 10-K and, similar to emerging growth
companies, smaller reporting companies have reduced disclosure obligations
regarding executive compensation.

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