Six weeks after taking on additional duties as CEO of Taysha Gene Therapies (TSHA), board Chair Sean P. Nolan delivered some unfavorable news Tuesday to investors, analysts, and observers of the gene therapy market alike: Earlier expectations of FDA approval late this year or early next for the company’s lead gene therapy candidate TSHA-120 in giant axonal neuropathy (GAN) have to be put on hold.

In mapping a regulatory approval path for TSHA-120 in GAN, the FDA is recommending a placebo-controlled randomized clinical trial that the company says is beyond its means.

“We don’t have a randomized placebo controlled trial in the budget,” Nolan told analysts Tuesday on a conference call. “From a feasibility perspective, we don’t think that particular design is feasible.”

The FDA acknowledged as acceptable Taysha’s endpoint of improvement in the rate of decline in the 32-item Motor Function Measure (MFM32), an assessment of motor function used to evaluate fine and gross motor ability in patients with neuromuscular disorders. But the agency told Taysha that MFM32 may have subjective bias unless evaluated in a blinded, placebo-controlled trial.

That recommendation emerged in a Type B meeting between agency officials and Taysha executives. Nolan said Taysha is awaiting an FDA response to additional questions submitted by the company, focused on trial design and totality of evidence being sought by the agency. The questions include how many patients would need to be recruited, and how to control for the natural unblinding that would occur due to the use of immunosuppression in the trial.

Among attendees at the Type B meeting were executives from Astellas Gene Therapy, which holds a 15% stake in Taysha after investing $50 million in the Dallas gene therapy developer. As part of that deal, announced in October 2022, Astellas gained options for exclusive licenses for TSHA-120 and another Taysha clinical-phase adeno-associated virus (AAV)-based gene therapy candidate, TSHA-102 for Rett syndrome.

Astellas also gained an effective right of first refusal to acquire Taysha. The Astellas deal extended Taysha’s cash runway into the first quarter of 2024.

Asked by Silvan Tuerkcan, PhD, a director and equity research analyst covering the biotechnology and biopharmaceuticals industries for JMP Securities, whether FDA insistence on a randomized clinical trial would mark the end of the GAN program or a hand-off of the program to Astellas, Nolan replied: “What we would do is reassess all strategic options for program and determine the best options for our patients and for the company.”

Nolan also said Astellas executives “were involved in some of the planning going into that meeting. They attended the meeting. They are aware of everything we are doing. We have a very collaborative relationship with them.”

“I’d say we’re aligned with them (Astellas). That’s about all I should say,” Nolan added.

Job cuts, Personnel changes

Nolan also disclosed on the call that Taysha—a developer of gene therapies for monogenic diseases of the central nervous system in both rare and large patient populations—has implemented “operational, structural and personnel changes” following a “thorough” review of its business, in order to enhance the company’s execution of its plans.

Investors seeking further information during the conference call heard Nolan acknowledge that the changes to operations included job cuts and changes to responsibilities for many remaining staffers, though he did not disclose how many positions the company eliminated, or in what areas of Taysha.

“Operational actions taken include cross functional team formation, meeting cadence changes, and modifications to governance structure intended to improve coordination, collaboration and facilitate information flow. Steps were also taken to further rationalize headcount and expense,” Nolan said. “Organizational structure was consolidated, flattened, and further modified to streamline decision making and bolster accountability. Personnel changes included both reductions in some areas and expansions of responsibility in other areas to facilitate company execution.”

“I believe that the operational, structural, and personnel actions recently implemented position us well as we endeavor to execute across our near-term milestones,” Nolan said.

Nolan was appointed CEO in December 2022, succeeding company founder RA Session II, who resigned from the day-to-day helm but remains on the board. At the same time, Taysha named Sukumar (Suku) Nagendran, MD, a director on Taysha’s board and veteran biotech executive, as President and Head of R&D.

“Little compelling reason”

Analysts reacted swiftly to news of the FDA meeting and company cutbacks, with at least seven lowering their 12-month price targets on Taysha shares.

Tuerkcan of JMP Securities cut his firm’s price target from $6 to $4. Jefferies analyst Eun Yang, PhD, went further, downgrading the firm’s rating on Taysha stock from “Buy” to “Hold”—and slashing the firm’s price target 89%, from $14 to $1.50.

“We see little compelling reason to buy the shares,” Yang concluded Tuesday in a research note. “While we expect a further FDA update on TSHA-120 & preliminary human data of 2nd asset in 1H23, we do not believe these offer meaningful upside from here.”

Yang referred to Taysha’s current expectation that it will offer initial clinical data—primarily safety data from the first two adult patients—by the end of June for “second asset” TSHA-102, now under study in a Phase I/II trial in adult Rett syndrome (NCT05606614).

Taysha has also disclosed plans to file a Clinical Trial Application in the U.K. in mid-2023, to be followed by an IND filing to the FDA in the second half of this year. Those filings could expand the clinical program of TSHA-102 into pediatric patients.

Increased risk

Jack K. Allen, CFA, senior research analyst with Baird, lowered his firm’s price target on Taysha from $10 to $6, citing the increased risk surrounding the GAN program as a result. Allen maintained Baird’s “Outperform” rating on the stock, since “we do see room for regulators to be open to a smaller study after further discussion with Taysha management.”

“We have reduced our probability of success for the TSHA-120 program to 40% given this regulatory update, which leads us to reduce price target to $6.

Four other analysts joined Allen, Tuerkcan, and Yang in cutting their price targets on Taysha stock:

  • Gil Blum, PhD, a senior analyst with Needham’s Biotech research team, from $16 to $6.
  • Whitney Ijem, managing director and senior biotechnology analyst with Canaccord Genuity, from $17 to $13.
  • Joon Lee, MD, PhD, director and senior biotech analyst at Truist Securities, from $15 to $4
  • Geulah Livshits PhD, a senior research analyst with Chardan covering biotech companies, from $16 to $6. Nearly three months earlier on November 9, 2022, Livshits halved Chardan’s price target for Taysha from $32 to $16.

Investors followed the lead of the analysts, responding with a stock selloff that sent Taysha share prices tumbling 26%, falling from $1.64 to $1.21. The stock began rebounding soon after the market closed, rising 4% to $1.26 nearly four hours later in after-hours trading, but dipped 1% to $1.198 on Thursday as of 11:40 a.m.

TSHA-102 is a self-complementary intrathecally delivered AAV serotype 9 (AAV9) gene replacement therapy, and the first-and-only gene therapy for Rett syndrome to have reached the clinic. TSHA-102 applies Taysha’s novel miRNA-Responsive Auto-Regulatory Element (miRARE) platform, designed to regulate transgene expression genotypically on a cell-by-cell basis. miRARE technology is intended to prevent toxicity associated with transgene overexpression and can be potentially utilized across other indications.

TSHA-120 is an intrathecally dosed AAV9 gene replacement therapy delivering the gene gigaxonin for the treatment of giant axonal neuropathy (GAN). TSHA-120 is currently being evaluated in an ongoing Phase I/II clinical trial (NCT02362438).

Both candidates have received the FDA’s Orphan Drug and Rare Pediatric Disease designations, as well as the European Commission’s Orphan Drug designation.

Leaders and laggards

  • Evelo Biosciences (EVLO) shares plummeted 25% on Wednesday, from $1.04 to $0.7789, after the company disclosed it is reducing its workforce among cost-cutting measures expected to extend its cash runway into Q3. The moves followed Evelo acknowledging that its Phase II trial (NCT05121480) assessing EDP1815 in atopic dermatitis missed its primary endpoint due to unusually high placebo response rate in the first three cohorts evaluated. The primary endpoint was the proportion of patients who achieve an outcome of at least a 50% improvement from baseline in Eczema Area and Severity Index (EASI50), compared to placebo at week 16. Data from the fourth cohort is expected in the second quarter.
  • Hillstream BioPharma (HILS) shares more than doubled, zooming 156% Tuesday, to $1.72 at 10:02 a.m., before ending the day rising 79%, to $1.20 from $0.671. Hillstream said it signed an exclusive agreement of undisclosed value granting Dana-Farber Cancer Institute an option to access Hillstream’s Quatramer™ tumor targeting platform to target the MUC1-C oncoprotein. Should Dana-Farber exercise its option, Hillstream will develop anti-MUC1-C antibodies to selectively deliver its lead candidate, the iron mediated cell death (IMCD) modulator HSB-1216, designed to target cancer stem cells via induction of ferroptosis. Hillstream reasons MUC1-C could fight cancers such as metastatic triple negative breast cancer, small cell lung cancer, Merkel cell carcinoma, and neuroendocrine prostate cancer.
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