Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes.
Overview
We are a clinical-stage biotechnology company focused on advancing AAV-based gene therapies for the treatment of severe monogenic diseases of the central nervous system, or CNS. Our lead clinical program TSHA-102 is in development for the treatment of Rett syndrome, a rare neurodevelopmental disorder with no approved disease-modifying therapies that address the genetic root cause of the disease. With a singular focus on developing transformative medicines, we aim to address severe unmet medical needs and dramatically improve the lives of patients and their caregivers. Our management team has proven experience in gene therapy development and commercialization. We leverage this experience, our manufacturing process and a clinically and commercially proven AAV9 capsid in an effort to rapidly translate treatments from bench to bedside.
We are evaluating TSHA-102 for the treatment of females with Rett syndrome in our REVEAL and ASPIRE clinical trials.
The REVEAL Phase 1/2 Adolescent and Adult Trial, also known as Part A, is a first-in-human, open-label, randomized, dose-escalation and dose-expansion study evaluating the safety and preliminary efficacy of TSHA-102 as a single lumbar intrathecal administration in adolescent and adult females aged 12 years and older with Rett syndrome due to MECP2 loss-of-function mutation. The trial is taking place in Canada and the United States. A total of six participants aged 15 to 21 years were treated with TSHA-102 in this study, and enrollment for this trial is complete. Part A also includes the REVEAL Phase 1/2 Pediatric Trial, which is a first-in-human, open-label, randomized, dose-escalation and dose-expansion study evaluating the safety and preliminary efficacy of TSHA-102 as a single lumbar intrathecal administration in pediatric females aged 5 to 8 years with Rett syndrome due to MECP2 loss-of-function mutation. The trial is taking place in the United States and Canada. A total of six participants aged 6 to 8 years were treated with TSHA-102 in this study, and enrollment for this trial is also complete.
We have completed dosing of the 12 patients in Part A of both REVEAL trials, which includes eight patients in cohort two (high dose, 1x10 15 total vg) and four patients in cohort one (low dose, 5.7x10 14 total vg). We reported positive clinical data in May 2025, demonstrating that all patients gained or regained one or more developmental milestone across communication, fine motor and gross motor function following administration of TSHA-102 as of the May 19, 2025, data cutoff. Patients also showed improvements across multiple standardized Rett syndrome assessments. There have been no treatment-related serious adverse events or dose-limiting toxicities across the 12 patients treated with TSHA-102 as of the March 2026 data cutoff. An update on longer-term safety and efficacy data from the Part A REVEAL Phase 1/2 trials is expected in the second quarter of 2026.
The TSHA-102 clinical development program is designed to support the potential future approval of TSHA-102 for a broad population of patients aged 2 years and older with Rett syndrome through an efficient and rigorously designed pathway. In close collaboration with the FDA, Taysha designed the TSHA-102 pivotal program so that efficacy data from the REVEAL pivotal trial in participants aged 6 to <22 years who have reached developmental plateau can be used to represent patients aged 2 to <6 years, while safety data in younger children are generated through the separate ASPIRE trial to support the potential for a broad label for TSHA-102.
The REVEAL pivotal trial, also known as Part B, is a single-arm, open-label study evaluating the efficacy and safety of TSHA-102 in females with Rett syndrome, with each patient serving as their own control. Each participant will receive a single administration of the high dose (1x10 15 total vg) of TSHA-102 delivered by lumbar intrathecal injection. The study will enroll 15 females aged 6 to <22 years in the developmental plateau population of Rett syndrome; these patients have an exceedingly low likelihood (0% to <6.7%) of gaining new or regaining developmental milestones that were lost after a defined number of years, based on our analysis of the NIH-funded International Rett Syndrome Foundation’s natural history study data. The primary endpoint will assess response rate, defined as the percentage of patients who gain or regain at least one developmental milestone from a list of 28 defined milestones across the core functional domains of communication, fine motor and gross motor, following administration of TSHA-102. Standardized milestone assessments will be administered and captured on video at pre- and post-treatment timepoints, with determination of milestone gain/regain upon video-evidence review by independent, blinded central raters based on prespecified definitions of achievement for each milestone.
We have finalized FDA alignment on the REVEAL pivotal trial protocol and statistical analysis plan, which includes a 6-month interim analysis that may serve as the basis for BLA submission. Multiple patients have been dosed in the REVEAL pivotal trial, with the first patient dosed in the fourth quarter of 2025. Additional patient enrollment continues to advance across multiple clinical trial sites. There have been no treatment-related serious adverse events or dose-limiting toxicities across the participants
treated with TSHA-102 in the REVEAL pivotal trial as of the March 2026 cutoff. We expect to complete dosing of all patients in the REVEAL pivotal trial in the second quarter of 2026.
We also obtained written alignment from the FDA on an extrapolation approach in a separate safety-focused study, the ASPIRE trial, and the data for inclusion in the planned BLA submission to enable broad labeling of TSHA-102 for patients aged ≥2 years with Rett syndrome. ASPIRE will enroll three females aged 2 to <4 years with Rett syndrome to evaluate the safety and preliminary efficacy of a single IT administration of high dose TSHA-102 (1x10 15 total vg), scaled to account for the lower brain volume in 2 to <4‑year‑olds. A minimum of three months of ASPIRE safety data will be included in the planned BLA submission, while efficacy in the 2 to <4-year-old population will be extrapolated from data collected in the REVEAL pivotal trial, to support the potential for a broad label for TSHA-102 in patients aged ≥2 years with Rett syndrome. We expect to complete dosing in the ASPIRE trial in the second quarter of 2026.
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 and clinical development activities for our product candidates. Our lead product candidate is still in the clinical stage. We do not have any product candidates approved for sale and have not generated any revenue from product sales. Through December 31, 2025, we have funded our operations primarily through: (i) the sale of equity, raising an aggregate of $961.0 million of gross proceeds from our initial public offering, or the IPO, sales of common stock pursuant to our Sales Agreement (as defined below), our October 2022 follow-on offering, our 2023 private placement, our June 2024 Offering (as defined below) and our May 2025 Offering (as defined below); (ii) pre-IPO private placements of our convertible preferred stock; (iii) our 2023 Term Loan Agreement (as defined below) and subsequently the 2025 Trinity Term Loan Agreement (as defined below); and (iv) the Astellas Transactions.
On November 13, 2023, or the 2023 Trinity Closing Date, we entered into a Loan and Security Agreement, or the 2023 Trinity Term Loan Agreement, by and among us, the lenders party thereto from time to time, or the Trinity Lenders, and Trinity Capital Inc., as administrative agent and collateral agent for the Trinity Lenders, or Trinity. The 2023 Trinity Term Loan Agreement provided for, on the 2023 Trinity Closing Date, $40.0 million aggregate principal amount of term loans, or, collectively, the 2023 Trinity Term Loans. We drew the 2023 Trinity Term Loans in full on the 2023 Trinity Closing Date. On August 7, 2025, we entered into the 2025 Trinity Term Loan Agreement (as defined below) with the 2025 Trinity Lenders (as defined below). We drew $50.0 million in term loans on the Trinity Refinance Date (as defined below). The existing 2023 Trinity Term Loan Agreement with the Trinity Lenders was terminated and the existing 2023 Trinity Term Loans were repaid in full concurrently with entry into the 2025 Trinity Term Loans (as defined below).
Since our inception, we have incurred significant operating losses. Our net losses were $109.0 million for the year ended December 31, 2025 and $89.3 million for the year ended December 31, 2024. As of December 31, 2025, we had an accumulated deficit of $711.3 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 clinical development of our product candidates and, if we determine to do so in the future, reprioritize the advancement of our preclinical and discovery programs;
conduct our ongoing clinical trials of TSHA-102 and any other current and future product candidates that we advance;
seek regulatory approval for any product candidates that successfully complete clinical trials;
work with CMOs for the manufacture of cGMP material for clinical trials or potential commercial sales;
establish a commercialization infrastructure and scale up internal and external manufacturing and distribution capabilities to commercialize any product candidates for which we may obtain regulatory approval;
continue to develop our gene therapy product candidate pipeline;
scale up our clinical and regulatory capabilities;
adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products;
maintain, expand and protect our intellectual property portfolio;
hire additional clinical, manufacturing quality control, 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.
License Agreements
Research, Collaboration and License Agreement with The University of Texas Southwestern Medical Center
In November 2019, we entered into 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 right of first refusal to negotiate for an exclusive license under certain additional patent rights and know-how of UT Southwestern. We are required to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize at least one licensed product.
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. In December 2023 and throughout 2024 and 2025, we transferred rights to specific indications back to UT Southwestern.
License Agreement with Abeona (Rett Syndrome)
In October 2020, we entered into 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 Abeona Rett Agreement. We recorded a $1.0 million charge within research and development expenses in the consolidated statements of operations for the year ended December 31, 2022. In May 2023, we dosed the first patient with TSHA-102 in the Phase 1/2 REVEAL trial evaluating the safety and preliminary efficacy of TSHA-102 in adult patients with Rett syndrome and therefore triggered a milestone payment of $3.5 million in connection with the Abeona Rett Agreement. In December 2025, we dosed the first patient with TSHA-102 in the Phase 1/2 Part B REVEAL pivotal trial and therefore triggered a milestone payment of $3 million in connection with this agreement. This pivotal milestone fee was paid in January 2026. We recorded $3.0 million within research and development expenses in the consolidated statements of operations for the year ended December 31, 2025. No other milestone payments were made or triggered in connection with this agreement during the year ended December 31, 2025.
The Abeona Rett 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 in such country. 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 (CLN1 Disease)
In August 2020, we entered into the Abeona CLN1 Agreement with 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 February 2026, the Abeona CLN1 Agreement was mutually terminated.
Option Agreement with Astellas
On October 21, 2022, or the Effective Date, we entered into the Option Agreement with Astellas. In October 2025, the Rett Option expired without being exercised. Following the expiration of the Option Agreement, we now hold unencumbered rights to the TSHA-102 program.
Under the Option Agreement, we granted to Astellas the GAN Option. Subject to certain extensions, the GAN Option was exercisable from the Effective Date through a specified period of time following Astellas’ receipt of (i) the formal minutes from the Type B end-of-Phase 2 meeting between us and the FDA in response to our meeting request sent to the FDA on September 19, 2022 for the 120 GAN Product, (ii) all written feedback from the FDA with respect to the Type B end-of-Phase 2 Meeting, and (iii) all briefing documents sent by us to the FDA with respect to the Type B end-of-Phase 2 Meeting. Following the receipt of Type C meeting feedback from the FDA regarding a registrational path for TSHA-120 in September 2023, Astellas elected not to exercise the GAN Option.
Under the Option Agreement, we also granted to Astellas an exclusive option to obtain an exclusive, worldwide, royalty and milestone-bearing right and license (A) to Exploit any Rett Product (as defined below), and (B) under any intellectual property rights controlled by us or any of our affiliates with respect to such Exploitation, or the Rett Option. Subject to certain extensions, the Rett Option was exercisable from the Effective Date through a specified period of time following Astellas’ receipt of (1) certain clinical data from the female pediatric trial and (2) certain specified data with respect to TSHA-102, such data package the “Rett Data Package” and such period the Rett Option Period, related to (i) the product known, as of the Effective Date, as TSHA-102 and any backup products with respect thereto for use in the treatment of Rett syndrome, and (ii) any other gene therapy product for use in the treatment of Rett syndrome that is controlled by us or any of our affiliates or with respect to which we or any of our affiliates controls intellectual property rights covering the Exploitation thereof, or a Rett Product. We delivered the Rett Data Package to Astellas in mid-2025. Under the Option Agreement, Astellas was required to decide whether to exercise the Rett Option within 90 days after Astellas’ receipt of the Rett Data Package. In October 2025, the Rett Option expired without being exercised. Following the expiration of the Option Agreement, we now hold unencumbered rights to the TSHA-102 program.
Components of Results of Operations
Revenue
Revenue for the years ended December 31, 2025 and 2024 was derived from the Astellas Transactions. We recognized revenue as research and development activities related to our Rett program were performed. Revenue related to the material rights associated with the Rett Option and the GAN Option were recognized at a point in time when the option was exercised or the option period expired. In September 2023, Astellas elected not to exercise the GAN Option, therefore we recognized revenue related to the GAN Option during the year ended December 31, 2023. In October 2025, Astellas elected not to exercise the Rett Option, therefore we recognized revenue related to the Rett Option during the year ended December 31, 2025.
To date, we have not recognized any revenue 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.
Operating Expenses
Research and Development Expenses
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 or could include:
employee-related expenses, including salaries, bonuses, benefits, stock-based compensation, other related costs for those employees involved in research and development efforts;
license maintenance fees and milestone fees incurred in connection with various license agreements;
external research and development expenses incurred under agreements with consultants, contract research organizations, or CROs, investigative sites and consultants to conduct our preclinical studies;
costs related to manufacturing material for our preclinical studies and clinical trials, including fees paid to CMOs;
laboratory supplies and research materials;
costs related to compliance with regulatory requirements; and
facilities, depreciation and other allocated expenses, which include direct and allocated 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 have increased, and expect to continue to increase for the foreseeable future, our research and development spend with respect to the Rett clinical trials as we continue the development of TSHA-102 and manufacturing processes and begin commercialization activities and conduct discovery and research activities for our preclinical programs. 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. We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential. We will need to raise substantial additional capital in the future. Our clinical development costs are expected to increase significantly as we commence clinical trials. Our future expenses may vary significantly each period based on factors such as:
expenses incurred to conduct preclinical studies required to advance our product candidates into clinical development;
per patient trial costs, including based on 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;
the drop-out or discontinuation rates of patients;
potential additional safety monitoring requested by regulatory agencies;
the duration of patient participation in the trials and follow-up;
the phase of development of the product candidate;
third-party contractors failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
the cost to manufacture our product candidates;
the ability of our CMOs to manufacture our product candidates;
regulators or institutional review boards requiring that we or our investigators suspend or terminate clinical development for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health 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, 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 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, investor and public relations activities and other expenses associated with operating as a public company may increase in the near future. In addition, we expect to incur legal fees in connection with the shareholder derivative lawsuit against certain of our current and former directors in the Court of Chancery of the State of Delaware. See “Part II, Item 8, Note 13—Commitments and Contingencies” in this Annual Report.
Impairment of Long-lived Assets
Impairment of long-lived assets are the result of an asset group's carrying value exceeding the fair value. In November 2022, we decided not to continue building out our manufacturing facility in North Carolina. We recorded a non-cash impairment charge related to the construction in progress and right-of-use lease assets at the manufacturing facility. We recorded additional impairment charges related to the construction in progress at the manufacturing facility in the year ended December 31, 2024.
Other Income (Expense)
Other income (expense) consists primarily of dividends earned from our money market fund and interest income on our cash and cash equivalents and non-cash changes in the fair value of our warrant liability and the 2025 Trinity Term Loan.
Results of Operations
Results of Operations for the Year Ended December 31, 2025 and 2024
The following table summarizes our results of operations for the years ended December 31, 2025 and 2024 (in thousands):
For the Year
Ended December 31,
Revenue
Operating expenses:
Research and development
General and administrative
Impairment of long-lived assets
Total operating expenses
Loss from operations
Other income (expense):
Change in fair value of warrant liability
Change in fair value of term loan
Interest income
Interest expense
Other expense
Total other income, net
Net loss
Revenue
Revenue was $9.8 million for the year ended December 31, 2025, compared to $8.3 million for the year ended December 31, 2024. Revenue for the years ended December 31, 2025 and 2024 was derived entirely from the Astellas Transactions. The revenue recorded for the year ended December 31, 2025 is the result of Rett syndrome research and development activities performed during the year of $4.3 million and the expiration of the material right associated with the Rett Option of $5.5 million. The revenue recorded for the year ended December 31, 2024 is the result of Rett syndrome research and development activities performed during the year of $8.3 million.
Research and Development Expenses
Research and development expenses were $86.4 million for the year ended December 31, 2025, compared to $66.0 million for the year ended December 31, 2024. The $20.4 million increase was primarily driven by higher compensation expenses due to increased research and development headcount. Clinical trial and GMP expenses also increased during the year ended December 31, 2025 due to ongoing clinical trial activities in the TSHA-102 REVEAL adolescent/adult and pediatric studies and BLA-enabling process performance qualification manufacturing initiatives.
General and Administrative Expenses
General and administrative expenses were $33.9 million for the year ended December 31, 2025, compared to $29.0 million for the year ended December 31, 2024. The increase of $4.9 million was primarily due to higher compensation expenses and legal and professional fees as well as debt issuance costs incurred in connection with the 2025 Trinity Term Loan that are recorded in general and administrative expense under the fair value option.
Impairment of Long-lived Assets
We did not record any non-cash impairment charge in the year ended December 31, 2025. We recorded a non-cash impairment charge of $4.8 million related to our manufacturing facility for the year ended December 31, 2024.
Other Income (Expense)
Change in fair value of warrant liability
Change in fair value of warrant liability was a non-cash loss totaling $1.2 million for the year ended December 31, 2025 related to the SSI Warrants (as defined below) compared to a non-cash gain of less than $0.1 million for the year ended December 31, 2024 related to the SSI Warrants.
Change in fair value of term loan
We elected the fair value option for the 2025 Trinity Term Loan and changes to fair value, other than changes that are directly attributed to instrument-specific credit risk, were recorded as a component of other income (expense). The change in fair value was $6.2 million for the year ended December 31, 2025 compared to $4.6 million for the year ended December 31, 2024.
Interest income
Interest income was $9.2 million for the year ended December 31, 2025 compared to $6.9 million for the year ended December 31, 2024. The increase in income is primarily attributable to dividends earned from our money market fund and interest earned on our savings account following the investment of proceeds raised in our May 2025 Offering and proceeds from the ATM program.
Interest expense
Interest expense was $0.1 million for each of the years ended December 31, 2025 and 2024. No interest expense was recorded on the term loans for the years ended December 31, 2025 and 2024 due to the election of the fair value option.
Liquidity and Capital Resources
Overview
Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses. As of December 31, 2025, we had cash and cash equivalents of $319.8 million. Through December 31, 2025, we have funded our operations primarily through equity financings, raising an aggregate of $961 million in gross proceeds from equity financings,
including from pre-IPO private placements of convertible preferred stock, our IPO, and subsequent sales of common stock in public and private securities offerings, proceeds from a warrant exercise, our term loans and the Astellas Transactions.
On August 7, 2025, or the Trinity Refinance Date, we entered into a Loan and Security Agreement, or the 2025 Trinity Term Loan Agreement, by and among us, the lenders party thereto from time to time, or the 2025 Trinity Lenders, and Trinity Capital Inc., as administrative agent and collateral agent for the 2025 Trinity Lenders, or Trinity. The 2025 Trinity Term Loan Agreement provides for (i) on the Trinity Refinance Date, $50.0 million aggregate principal amount of term loans, or Tranche A (ii) from the Trinity Refinance Date until March 31, 2028 an additional $25.0 million term loan facility contingent on delivering evidence satisfactory to Trinity that we have submitted a BLA acceptance to the FDA for TSHA-102 in Rett Syndrome, or Tranche B, (iii) from the Trinity Refinance Date until March 31, 2029, an additional $25.0 million term loan facility contingent on delivering evidence satisfactory to Trinity that we have received BLA approval from the FDA for TSHA-102 in Rett Syndrome, or collectively, the 2025 Trinity Term Loans, and, together with the 2023 Trinity Term Loans, the Trinity Term Loans. We drew $50.0 million in term loans on the Trinity Refinance Date. The existing 2023 Trinity Term Loan Agreement was terminated and the existing 2023 Trinity Term Loans were repaid concurrently with entry into the 2025 Trinity Term Loan Agreement and the draw of Tranche A. The interest rate applicable to the 2025 Trinity Term Loans is the greater of (a) the WSJ Prime Rate plus 4.00% or (b) 11.50% per annum. The 2025 Trinity Term Loans are interest only from the Trinity Refinance Date through 48 months from the Trinity Refinance Date, which may be extended to 60 months from the Trinity Refinance Date upon the satisfaction of certain milestones set forth in the 2025 Trinity Term Loan Agreement, after which we are required to pay equal monthly installments of principal through August 1, 2030, or the New Maturity Date.
The 2025 Trinity Term Loans may be prepaid in full (i) from the Trinity Refinance Date through August 7, 2026, with payment of a 3.00% prepayment premium, (ii) from August 8, 2026 through August 7, 2027, with payment of a 2.00% prepayment premium, and (iii) from August 8, 2027 through, but excluding, the New Maturity Date, with payment of a 1.00% prepayment premium. Upon repayment in full of the 2025 Trinity Term Loans, we will pay to Trinity an end of term payment equal to 5.00% of the original principal amount of the 2025 Trinity Term Loans.
In connection with the 2025 Trinity Term Loan Agreement, we entered into a Success Fee Agreement with Trinity which specifies the terms regarding a fee in the amount of $0.5 million plus 5% of the principal amount of the funded 2025 Trinity Term Loans under Tranche B, or the 2025 Success Fee. The 2025 Success Fee is payable upon the achievement of certain corporate development value-inflection milestones. The 2025 Success Fee survives the termination of the 2025 Trinity Term Loans and expires on the earlier of ten years from the Trinity Refinance Date, or payment in full in cash of the 2025 Success Fee.
The obligations under the 2025 Trinity Term Loan Agreement are secured by a perfected security interest in all of our assets except for certain customarily excluded property pursuant to the terms of the 2025 Trinity Term Loan Agreement. There are no financial covenants and no warrants associated with the 2025 Trinity Term Loan Agreement. The 2025 Trinity Term Loan Agreement contains various covenants that limit our ability to engage in specified types of transactions without the consent of Trinity and the 2025 Trinity Lenders which include, among others, incurring or assuming certain debt; merging, consolidating or acquiring all or substantially all of the capital stock or property of another entity; changing the nature of our business; changing our organizational structure or type; licensing, transferring or disposing of certain assets; granting certain types of liens on our assets; making certain investments; paying cash dividends; and entering into certain transactions with our affiliates, in each case subject to customary exceptions.
On October 21, 2022, we entered into the Option Agreement with Astellas granting Astellas an exclusive option to obtain exclusive, worldwide, royalty and milestone-bearing rights and licenses related to TSHA-120 and TSHA-102. As partial consideration for the rights granted to Astellas under the Option Agreement, Astellas paid us a one-time payment in the amount of $20.0 million, or the Upfront Payment, in November 2022.
Also on October 21, 2022, we entered into the Securities Purchase Agreement with Astellas, pursuant to which we issued and sold to Astellas in a private placement, or the Private Placement, an aggregate of 7,266,342 shares of our common stock, or the Private Placement Shares, for aggregate proceeds of $30.0 million. Pursuant to the Securities Purchase Agreement, in connection with the Private Placement, Astellas has the right to designate one individual to attend all meetings of the Board in a non-voting observer capacity. We also granted Astellas certain registration rights with respect to the Private Placement Shares.
In October 2022, we sold an aggregate of 14,765,226 shares of our common stock in an underwritten public offering, including the exercise in part of the underwriters’ option to purchase additional shares, for aggregate net proceeds of approximately $27.4 million after deducting underwriting discounts and commissions payable by us.
In April 2023, we entered into a securities purchase agreement, or the SSI Securities Purchase Agreement, with two affiliates of SSI Strategy Holdings LLC, or SSI, named therein, or the SSI Investors, pursuant to which we issued and sold to the SSI Investors
in a private placement, or the SSI Private Placement, 705,218 shares of our common stock, or the SSI Shares, and warrants, or the SSI Warrants, to purchase an aggregate of 525,000 shares of our common stock, or the Warrant Shares. SSI provides certain consulting services to us. Each SSI Warrant has an exercise price of $0.7090 per Warrant Share. The SSI Warrants issued in the SSI Private Placement provide that the holder of the SSI Warrants will not have the right to exercise any portion of its SSI Warrants until the achievement of certain clinical and regulatory milestones related to our clinical programs. Gross proceeds of the SSI Private Placement were $0.5 million. During the year ended December 31, 2025, SSI exercised all 316,667 vested and outstanding Warrant Shares. We received proceeds of $0.2 million upon exercise.
In August 2023, we sold an aggregate of 122,412,376 shares of our common stock and pre-funded warrants to purchase up to 44,250,978 shares of our common stock for aggregate net proceeds of approximately $140.3 million after deducting placement agent commissions and offering expenses payable by us.
On June 26, 2024, we entered into an underwriting agreement, or the June 2024 Underwriting Agreement, with Jefferies LLC and Goldman Sachs & Co. LLC, as representatives of the several underwriters set forth therein, or, collectively, the Underwriters, to issue and sell 14,361,113 shares of our common stock and pre-funded warrants to purchase 18,972,221 shares of our common stock, or the June 2024 Pre-Funded Warrants, pursuant to an effective shelf registration statement on Form S-3 and a related prospectus and prospectus supplement, or the June 2024 Offering. The offering price to the public was $2.25 per share of common stock and $2.249 per June 2024 Pre-Funded Warrant, which is the price to the public of each share of common stock sold in the June 2024 Offering, minus the $0.001 exercise price per June 2024 Pre-Funded Warrant. The Underwriters purchased the shares and the June 2024 Pre-Funded Warrants from us pursuant to the June 2024 Underwriting Agreement at a price of $2.115 per share and $2.114 per pre-funded warrant, respectively. The initial closing of the June 2024 Offering occurred on June 27, 2024 and we received net proceeds of $70.0 million, after deducting underwriting discounts and commissions and offering expenses. In addition, we granted the Underwriters an option to purchase, for a period of 30 days, up to an additional 5,000,000 shares of our common stock. On July 9, 2024, the Underwriters exercised their option to purchase an additional 3,235,000 shares of common stock and we received additional net proceeds of $6.7 million, after deducting underwriting discounts and commissions and offering expenses. The total net proceeds received from the June 2024 Offering were $76.7 million after deducting underwriting discounts, commissions and other offering expenses payable by us.
On May 28, 2025, we entered into an underwriting agreement, or the May 2025 Underwriting Agreement, with Jefferies LLC, BofA Securities, Inc., Piper Sandler & Co. and Barclays Capital Inc., as representatives of the several underwriters set forth therein, or, collectively, the Underwriters, to issue and sell 46,868,687 shares of our common stock and pre-funded warrants to purchase 25,858,586 shares of our common stock, or the May 2025 Pre-Funded Warrants, pursuant to an effective shelf registration statement on Form S-3 and a related prospectus and prospectus supplement, or the May 2025 Offering. The offering price to the public was $2.75 per share of common stock and $2.749 per May 2025 Pre-Funded Warrant, which is the price to the public of each share of common stock sold in the May 2025 Offering, minus the $0.001 exercise price per May 2025 Pre-Funded Warrant. The Underwriters purchased the shares and the May 2025 Pre-Funded Warrants from us pursuant to the May 2025 Underwriting Agreement at a price of $2.585 per share and $2.584 per pre-funded warrant, respectively. The initial closing of the May 2025 Offering occurred on May 30, 2025. In addition, we granted the Underwriters an option to purchase, for a period of 30 days, up to an additional 10,909,090 shares of our common stock, which the Underwriters exercised in full on June 6, 2025. The total net proceeds received from the May 2025 Offering were $215.6 million after deducting underwriting discounts, commissions and other offering expenses payable by us.
In October 2021, we 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. In March 2022, we amended the Sales Agreement to, among other things, include Goldman Saches & Co. LLC as an additional Sales Agent. 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. On November 4, 2025, we and Leerink Partners LLC entered into an Amendment to the Sales Agreement pursuant to which the Sales Agreement was terminated solely with respect to Leerink Partners LLC. In addition, on November 4, 2025, we and Goldman Sachs & Co. LLC and Wells Fargo Securities, LLC, as sales agents, or the Remaining Sales Agents, entered into an amendment to the Sales Agreement and, together with the Sales Agreement, or, the Amended Sales Agreement, to provide for an increase in the aggregate offering amount under the Sales Agreement, such that as of November 4, 2025, we may offer and sell shares of common stock having an aggregate offering price of up to $212.0 million under the Amended Sales Agreement. The material terms and conditions of the Sales Agreement otherwise remain unchanged. In November and December 2025, we sold 10,230,186 shares of common stock under the Amended Sales Agreement and received $48.4 million in net proceeds. Also on November 4, 2025, we filed a new shelf registration statement on Form S-3ASR in relation to the registration of common stock, preferred stock, debt securities, warrants and units or any combination thereof, which became effective automatically upon filing.
Funding Requirements
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 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 have increased, and expect to continue to increase for the foreseeable future, our research and development expenses, particularly with respect to our Rett clinical trials, as we continue the development of our product candidates and manufacturing processes and conduct discovery and research activities for our preclinical programs. If we obtain approval for any of our product candidates, we 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 December 31, 2025, our material cash requirements consisted of $28.5 million in total lease payments under our noncancelable leases for equipment, laboratory space and office space. These leases are described in further detail in Note 5 to our audited consolidated financial statements located in Part IV, Item 15 of this Annual Report on Form 10-K. Our most significant purchase commitments consist of $38.8 million in cancellable purchase obligations to our manufacturing vendors, CROs and other clinical trial vendors.
We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital requirements into 2028. 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. The assessment of our ability to meet our future obligations is inherently judgmental, subjective and susceptible to change.
Because of the numerous risks and uncertainties associated with research, development and commercialization of biological products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements 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 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;
the extent to which we develop, in-license or acquire other product candidates and technologies in our gene therapy product candidate pipeline;
the costs and timing of process development and manufacturing scale-up activities associated with our product candidates and other programs as we advance them through preclinical and clinical development;
the number and development requirements of product candidates that we may pursue;
the costs, timing and outcome of regulatory review of our product candidates;
our headcount growth and associated costs as we expand our research and development capabilities and establish a commercial infrastructure;
the costs and timing of future commercialization 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;
the costs incurred in defending ourselves in any legal proceedings that we may be subject to;
the revenue, if any, received 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 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 may restrict our ability to operate. The 2025 Trinity 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.
Cash Flows
The following table shows a summary of our cash flows for the years ended December 31, 2025 and 2024 (in thousands):
For the Year Ended December 31,
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
Net change in cash, cash equivalents and restricted cash
Operating Activities
For the year ended December 31, 2025, our net cash used in operating activities of $93.1 million primarily consisted of a net loss of $109.0 million, primarily attributable to our spending on research and development expenses. The net loss of $109.0 million was partially offset by $21.3 million in adjustments for non-cash items and other adjustments to reconcile net loss to net cash used in operating activities, primarily due to stock-based compensation expense and research and development license expense. Additional cash used in operating activities of $5.4 million, resulting from changes in operating assets and liabilities was primarily due to a decrease in deferred revenue related to the Astellas Transactions which was partially offset by an increase in accrued expenses and other liabilities.
For the year ended December 31, 2024, our net cash used in operating activities of $81.2 million primarily consisted of a net loss of $89.3 million, primarily attributable to our spending on research and development expenses. The net loss of $89.3 million was partially offset by $20.5 million in adjustments for non-cash items and other adjustments to reconcile net loss to net cash used in operating activities, primarily due to stock-based compensation expense and impairment of long-lived assets. Additional cash used in operating activities of $12.4 million, resulting from changes in operating assets and liabilities was primarily due to a decrease in deferred revenue related to the Astellas Transactions.
Investing Activities
During the year ended December 31, 2025, investing activities used $0.6 million of cash primarily attributable to the purchase of lab equipment and computer equipment.
During the year ended December 31, 2024, investing activities used $0.4 million of cash primarily attributable to the purchase of lab equipment.
Financing Activities
During the year ended December 31, 2025, financing activities provided $274.6 million of cash, which was primarily attributable to the closing of the May 2025 Offering, net proceeds from the 2025 Trinity Term Loans and net proceeds from our ATM program.
During the year ended December 31, 2024, financing activities provided $76.7 million of cash, which was primarily attributable to the closing of the June 2024 Offering.
Critical Accounting Policies and Significant Judgments and Estimates
This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. In accordance with U.S. GAAP, we evaluate our estimates and judgments on an ongoing basis, including those related to research and development expenses, stock-based compensation, the Astellas Transactions and accounting for the Trinity Term Loans at fair value. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We define our critical accounting policies as those accounting principles that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. While our significant accounting policies are more fully described in Note 2 to our audited consolidated financial statements located in Part IV, Item 15 of this Annual Report on Form 10-K, we believe the following are the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments.
Research and Development Costs
We have entered into research and development contracts with research institutions and other companies. These agreements are generally cancelable, and related payments are recorded as research and development expenses as incurred. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected on the balance sheet as prepaid or accrued expenses. We record accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, we analyze progress of the studies, including the phase or completion of events, invoices received and contracted costs.
Research and development costs primarily consist of payroll, stock-based compensation, clinical trial expense, certain manufacturing costs, laboratory costs and other supplies, and the cost to acquire third-party licenses.
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.
To date, we have not experienced significant changes in our estimates of accrued research and development liabilities after a reporting period. However, due to the nature of estimates, there is no assurance that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical studies and other research activities.
Stock‑Based Compensation
We account for all stock-based payments to employees and non-employees, including grants of stock options, restricted stock awards, or “RSAs” and restricted stock units or, “RSUs” based on their respective grant date fair values. We estimate the fair value of stock option grants using the Black-Scholes option pricing model, which is affected principally by the estimated fair value of shares of our common stock and requires management to make a number of other assumptions, including the expected life of the option, the volatility of the underlying shares, the risk-free interest rate and expected dividends. Expected volatility is based on the historical share volatility of a set of comparable publicly traded companies over a period of time equal to the expected term of the options. Due to the lack of historical exercise history, the expected term of our stock options is determined using the “simplified” method. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero based on the fact that we have never paid cash dividends and do not expect to pay any cash dividends in the foreseeable future.
Prior to September 23, 2020, the fair value of common stock underlying our stock options, RSAs and RSUs was estimated by our board of directors considering, among other things, contemporaneous valuations of our common stock prepared by unrelated third-party valuation firms. After the IPO, the fair value of common stock is based on the closing price of our common stock on the Nasdaq Global Select Market as reported on the date of the grant.
The RSAs and RSUs are valued based on the fair value of our common stock on the date of grant. We expense stock-based compensation related to stock options, RSAs and RSUs, which contain service-based vesting conditions, over the requisite service period using the straight-line method. For awards with both performance and service conditions, we recognize expense based on the
fair value of the performance awards over the estimated service period using the accelerated attribution method to the extent the achievement of the related performance criteria is estimated to be probable. At each reporting date, we evaluate whether any performance conditions related to a performance-based award have changed. The effect of any change in performance conditions is recognized as a cumulative catch-up adjustment in the period such change occurs. Stock-based compensation costs are generally recorded in research and development expense or general and administrative expense in the consolidated statements of operations based upon the respective employee’s roles within our Company. Forfeitures are recorded as they occur.
Astellas Transactions
In October 2022, we entered into the Securities Purchase Agreement with Astellas, pursuant to which we agreed to issue and sell to Astellas an aggregate of 7,266,342 shares of our common stock, for aggregate proceeds of $30.0 million. Upon closing of the Private Placement and transferring 7,266,342 shares to Astellas, we recorded the issuance of shares at fair value. Fair value of the shares transferred to Astellas was calculated in accordance with ASC 820, Fair Value Measurement by analyzing our stock price for a period of time prior to and after the transaction date as traded on the NASDAQ. The NASDAQ trading data is considered an active market and a Level 1 measurement under ASC 820. The fair value was determined to be $13.95 million or $1.92 per share. The $16.1 million difference between the $30.0 million paid by Astellas and the fair market value of shares issued was allocated to the transaction price of the Option Agreement.
We determined that the Option Agreement falls within the scope of ASC 606, Revenue from Contracts with Customers as the development of TSHA-102 for the treatment of Rett Syndrome and TSHA-120 for the treatment of GAN are considered ordinary activities for us. In accordance with ASC 606, we evaluated the Option Agreement and identified three separate performance obligations: (1) option to obtain licensing right to GAN, (2) option to obtain licensing right to Rett and (3) performance of research and development activities associated with our Rett program. The transaction price is determined to be $36.1 million which is comprised of the $20.0 million Upfront Payment and the $16.1 million allocated from the Private Placement.
To determine the standalone selling price, or the SSP, of the Rett and GAN options which we concluded represent material rights, we utilized the probability-weighted expected return, or PWERM, method. The PWERM method contemplates the probability and timing of an option exercise. At contract inception, we used significant judgment to estimate the probability of exercise of each option at 50%. The SSP of the Rett research and development activities was estimated using an expected cost-plus margin approach. The standalone selling prices of the material rights and Rett research and development activities were then used to proportionately allocate the $36.1 million transaction price to the three performance obligations.
Revenue allocated to the material rights was recognized at a point in time when each option period expired or when a decision was made by Astellas to exercise or not exercise each option. Revenue from the Rett research and development activities was recognized as activities were performed using an input method, according to the costs incurred as related to the total costs expected to be incurred to satisfy the performance obligation. The transfer of control occurred over this time period and is a reliable measure of progress towards satisfying the performance obligation. During the year ended December 31, 2024, we determined that the total estimated costs to be incurred to satisfy the performance obligation associated with the Rett research and development activities had increased from the cost estimate used for the year ended December 31, 2023.
Fair Value Option
On August 7, 2025 we entered into the 2025 Trinity Term Loan Agreement with the 2025 Trinity Lenders. The 2025 Trinity Term Loan Agreement provides for, on the Trinity Refinance Date, $50.0 million aggregate principal amount of term loans, or Tranche A (ii) from the Trinity Refinance Date until March 31, 2028 an additional $25.0 million term loan facility contingent on delivering evidence satisfactory to Trinity that we have submitted a BLA acceptance to the FDA for TSHA-102 in Rett Syndrome, or Tranche B, (iii) from the Trinity Refinance Date until March 31, 2029, an additional $25.0 million term loan facility contingent on delivering evidence satisfactory to Trinity that we have received BLA approval from the FDA for TSHA-102 in Rett Syndrome. We drew Tranche A of the 2025 Trinity Term Loans in full on the Trinity Refinance Date. The existing 2023 Trinity Term Loan Agreement was terminated and the existing 2023 Trinity Term Loans were repaid concurrently with entry into the 2025 Trinity Term Loan Agreement and the draw of Tranche A.
We assessed the terms and features of the 2025 Trinity Term Loans and determined that the 2025 Trinity Term Loans constituted a debt modification under ASC 470-50, Debt - Modifications and Extinguishments , or ASC 450. As such, the 2025 Trinity Term Loans are accounted for as a continuation of the original debt, and no gain or loss on extinguishment was recognized. We continue to apply the fair value option under ASC 825, Financial Instruments , or ASC 825, which was initially elected at the time of the 2023 Trinity Term Loan Agreement. The 2025 Trinity Term Loans contains various embedded features and the election of the fair value option allows us to bypass analysis of potential embedded derivatives and further analysis of bifurcation of any recognized financial liabilities. Under the fair value option, the financial liability is initially measured at its fair value on the issue date and
subsequently remeasured at estimated fair value on a recurring basis at each reporting date. Changes in the fair value of the 2025 Trinity Term Loans, which include accrued interest, if any, are recorded as a component of other expense (income) in the consolidated statements of operations and comprehensive loss. We have not elected to present interest expense separately from changes in fair value and therefore will not present interest expense associated with the 2025 Trinity Term Loans. Any changes in fair value caused by instrument-specific credit risk are presented separately in other comprehensive income or loss if material. Under the fair value option, debt issuance costs are expensed as incurred.
In connection with the 2025 Trinity Term Loans, we entered into the 2025 Success Fee Agreement with Trinity which specifies the terms regarding a fee in the amount of $0.5 million plus 5% of the principal amount of the funded 2025 Trinity Term Loans under Tranche B. The 2025 Success Fee is payable upon the achievement of certain corporate development value-inflection milestones. The 2025 Success Fee survives the termination of the 2025 Trinity Term Loans and expires on the earlier of ten years, or payment in full in cash of the 2025 Success Fee. In connection with the 2023 Trinity Term Loans, we entered into the 2023 Success Fee Agreement with Trinity which specifies the terms regarding a fee in the amount of 10% of the principal amount of the funded 2023 Trinity Term Loans. The 2023 Success Fee is payable upon the achievement of certain corporate development value-inflection milestones. The 2023 Success Fee survives the termination of the 2023 Trinity Term Loans and expires on the earlier of ten years, or payment in full in cash of the 2023 Success Fee. We determined that the Success Fees represents a freestanding financial instrument and should be accounted for as a derivative liability under ASC 815 and recorded a liability within other non-current liabilities on the consolidated balance sheet, at fair value on the 2025 Trinity Closing Date and will be marked-to-market at the end of each reporting period with gains and losses recognized as a component of other income (expense) in the consolidated statements of operations. The proceeds from the 2025 Trinity Term Loans were allocated to the 2025 Success Fee and 2025 Trinity Term Loans based on their respective fair values on the Trinity Refinance Date. The fair values were determined utilizing a probability-weighted income approach, including variables for the timing of a success event and other probability estimates. The fair value of the 2025 Trinity Term Loans is determined to be $49.8 million and the fair value of the Success Fees liability is determined to be $0.2 million in the consolidated balance sheet at issuance. We calculated the discounted cash flows of the Success Fees liability, then adjusted for the probability of achievement of certain corporate development value-inflection milestones.
Recent Accounting Pronouncements
See Note 2 to our audited consolidated financial statements located in Part IV, Item 15 of this Annual Report on Form 10-K for a description of recent accounting pronouncements applicable to our financial statements.
Smaller Reporting Company Status
We are 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 by non-affiliates is less than $700 million. We will 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.
Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 8. Financial Statemen ts and Supplementary Data.
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Taysha Gene Therapies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Taysha Gene Therapies, Inc. and subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows, for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Fair Value of Term Loan — Refer to Notes 3 and 7 to the financial statements
Critical Audit Matter Description
The Company entered into a Loan and Security Agreement (the “2025 Trinity Term Loan Agreement”) and drew $50.0 million in term loans (the “Trinity Term Loan”) on August 7, 2025. The Company elected to apply the fair value option to the Trinity Term Loan under ASC 825, which resulted in the Trinity Term Loan being measured at its fair value of $50.1 million as of December 31, 2025. The fair value of the Trinity Term Loan was measured using a probability weighted income approach. The Company calculated the discounted cash flows for the Trinity Term Loan using a discount rate of 14.24% and adjusted for the probability of achievement of certain corporate development value-inflection milestones.
We identified management’s estimate of the fair value of the Trinity Term Loan as a critical audit matter due to the significant estimates and assumptions made by management to determine the fair value. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s assumptions.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the fair value of the term loan included the following, among others:
With the assistance of our fair value specialists, we:
evaluated the appropriateness of management’s application of the probability weighted income approach.
evaluated the reasonableness of the valuation assumptions including the discount rate by developing an independent range and comparing that to the valuation assumption selected by management.
We evaluated the reasonableness of management’s cash flow projections and probabilities assigned to the various repayment scenarios by comparing:
the cash flow projections to the terms of the 2025 Trinity Term Loan Agreement.
confirming the terms of the 2025 Trinity Term Loan Agreement directly with the counterparty.
the probabilities utilized against historical estimates and internal communications to management and the Board of Directors.
We tested the source information underlying the determination of the valuation assumptions as well as the mathematical accuracy of the calculation.
/s/ Deloitte & Touche LLP
Chicago, IL
March 19, 2026
We have served as the Company’s auditor since 2020.
Taysha Gene Therapies, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
December 31,
December 31,
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Prepaid expenses and other current assets
Total current assets
Restricted cash
Property, plant and equipment, net
Operating lease right-of-use assets
Other non-current assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Deferred revenue
Total current liabilities
Term loan, net
Operating lease liability, net of current portion
Other non-current liabilities
Total liabilities
Commitments and contingencies - Note 13
Stockholders' equity
Preferred stock, $ 0.00001 par value per share; 10,000,000 shares authorized and no shares issued and outstanding as of December 31, 2025 and December 31, 2024
Common stock, $ 0.00001 par value per share; 700,000,000 shares authorized and 285,051,648 issued and outstanding as of December 31, 2025 and 400,000,000 shares authorized and 204,943,306 issued and outstanding as of December 31, 2024
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders' equity
The accompanying notes are an integral part of these consolidated financial statements.
Taysha Gene Therapies, Inc.
Consolidated Statements of Operations
(in thousands, except share and per share data)
For the Year
Ended December 31,
Revenue
Operating expenses:
Research and development
General and administrative
Impairment of long-lived assets
Total operating expenses
Loss from operations
Other (expense) income:
Change in fair value of warrant liability
Change in fair value of term loan
Interest income
Interest expense
Other expense
Total other income, net
Net loss
Net loss per common share, basic and diluted
Weighted average common shares outstanding, basic and diluted
The accompanying notes are an integral part of these consolidated financial statements.
Taysha Gene Therapies, Inc.
Consolidated Statements of Comprehensive Loss
(in thousands)
For the Year Ended December 31,
Net loss
Other comprehensive income (loss):
Change in fair value of term loan attributable to instrument specific credit risk
Comprehensive loss
The accompanying notes are an integral part of these consolidated financial statements.
Taysha Gene Therapies, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)
Common Stock
Shares
Amount
Additional Paid-in Capital
Accumulated Deficit
Accumulated Other Comprehensive Loss
Total Stockholders' Equity
Balance as of December 31, 2023
Stock-based compensation
Issuance of common stock and pre-funded warrants upon closing of underwritten public offering, net of underwriting discounts and commissions, and other offering costs of $ 5,566
Issuance of common stock upon vesting and settlement of restricted stock units, net
Issuance of common stock under ESPP
Issuance of common stock upon exercise of stock options
Loss on instrument-specific credit risk
Net loss
Balance as of December 31, 2024
Stock-based compensation
Issuance of common stock and pre-funded warrants upon closing of underwritten public offering, net of underwriting discounts and commissions, and other offering costs of $ 14,329
Issuance of common stock pursuant to ATM Agreement, net of sales commissions and other offering costs of $ 1,565
Issuance of common stock upon exercise of pre-funded warrants
Issuance of common stock upon exercise warrants
Issuance of common stock upon vesting and settlement of restricted stock units, net
Issuance of stock upon exercise of stock options
Issuance of common stock under ESPP
Gain on instrument-specific credit risk
Net loss
Balance as of December 31, 2025
The accompanying notes are an integral part of these consolidated financial statements.
Taysha Gene Therapies, Inc.
Consolidated Statements of Cash Flows
(in thousands)
For the Year
Ended December 31,
Cash flows from operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense
Stock-based compensation
Research and development license expense
Change in fair value of warrant liability
Non-cash change in fair value of term loan
Debt issuance costs expensed under the fair value option
Impairment of long-lived assets
Non-cash lease expense
Other
Changes in operating assets and liabilities:
Prepaid expenses and other assets
Accounts payable
Accrued expenses and other liabilities
Deferred revenue
Net cash used in operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Other
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of common stock and pre-funded warrants from underwritten public offering, net of underwriting discounts and sales commissions and other offering costs
Proceeds from issuance of common stock pursuant to at-the-market offering, net of sales commissions and other offering costs
Prepayment of 2023 Trinity term loan
Proceeds from 2025 Trinity term loan, net
Proceeds from issuance of common stock upon exercise of warrants
Debt issuance costs for term loan
Proceeds from common stock issuances under ESPP
Proceeds from stock option exercises
Other
Net cash provided by financing activities
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at the beginning of the period
Cash, cash equivalents and restricted cash at the end of the period
Cash and cash equivalents
Restricted cash
Cash, cash equivalents and restricted cash at the end of the period
Supplemental disclosure of cash flow information:
Cash paid for interest
Supplemental disclosure of noncash investing and financing activities:
Proceeds allocated to Success Fee liability
Right-of-use assets obtained in exchange for lease liabilities
Purchase of research and development license not yet paid
Non-cash impact of exercise of liability classified warrants
Property, plant and equipment in accounts payable and accrued expenses
Offering costs not yet paid
The accompanying notes are an integral part of these consolidated financial statements.
Taysha Gene Therapies, Inc.
Notes to Consolidated Financial Statements
Note 1—Organization and Description of Business Operations
Taysha Gene Therapies, Inc. (the “Company” or “Taysha”) was originally formed under the laws of the State of Texas on September 20, 2019. Taysha converted to a Delaware corporation on February 13, 2020 , which had no impact to the Company’s par value or issued and authorized capital structure.
Taysha is a clinical-stage biotechnology company focused on advancing AAV-based gene therapies for severe monogenic diseases of the central nervous system.
Sales Agreement
On October 5, 2021, the Company entered into a Sales Agreement (the “Sales Agreement”) with SVB Securities LLC (f/k/a SVB Leerink LLC) and Wells Fargo Securities, LLC (collectively, the “Sales Agents”), pursuant to which the Company may issue and sell, from time to time in its sole discretion, shares of its common stock having an aggregate offering price of up to $ 150.0 million through the Sales Agents. In March 2022, the Company amended the Sales Agreement to, among other things, include Goldman Sachs & Co. LLC as an additional Sales Agent. The Sales Agents may sell common stock by any method permitted by law deemed to be an “at-the-market offering” as defined in Rule 415(a)(4) of the Securities Act, (the “ATM”), including sales made directly on or through the Nasdaq Global Select Market or any other existing trade market for the common stock, in negotiated transactions at market prices prevailing at the time of sale or at prices related to prevailing market prices, or any other method permitted by law. The Sales Agents are entitled to receive 3.0 % of the gross sales price per share of common stock sold under the Sales Agreement. In April 2022, the Company sold 2,000,000 shares of common stock under the Sales Agreement and received $ 11.6 million in net proceeds.
On December 13, 2024, the Company filed a new shelf registration statement on Form S-3 following the expiration of its prior registration statement, 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 $ 300.0 million, including up to $ 100.0 million shares of common stock that could be offered and sold pursuant to the Sales Agreement.
On November 4, 2025, the Company and Leerink Partners LLC entered into an Amendment to the Sales Agreement pursuant to which the Sales Agreement was terminated solely with respect to Leerink Partners LLC. In addition, on November 4, 2025, the Company and Goldman Sachs & Co. LLC and Wells Fargo Securities, LLC, as sales agents (the “Remaining Sales Agents”), entered into an Amendment to the Sales Agreement (together with the Sales Agreement, the “Amended Sales Agreement”), to provide for an increase in the aggregate offering amount under the Sales Agreement, such that as of November 4, 2025, the Company may offer and sell shares of common stock having an aggregate offering price of up to $212.0 million under the Amended Sales Agreement. The material terms and conditions of the Sales Agreement otherwise remain unchanged. In November and December 2025, the Company sold 10,230,186 shares of common stock under the Amended Sales Agreement and received $48.4 million in net proceeds.
Liquidity and Capital Resources
The Company has incurred operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. Losses are expected to continue as the Company continues to invest in its research and development activities. As of December 31, 2025, the Company had an accumulated deficit of $ 711.3 million. The Company expects to continue to incur significant expenses and operating losses for the foreseeable future.
On May 28, 2025, the Company entered into an underwriting agreement (the “May 2025 Underwriting Agreement”) with Jefferies LLC, BofA Securities, Inc., Piper Sandler & Co. and Barclays Capital Inc, as representatives of the several underwriters set forth therein (collectively, the “Underwriters”), to issue and sell 46,868,687 shares of the Company’s common stock and, in lieu of common stock to certain investors, pre-funded warrants to purchase 25,858,586 shares of its common stock in an underwritten public offering (the “May 2025 Offering”), pursuant to an effective shelf registration statement on Form S-3 and a related prospectus and prospectus supplement. The offering price to the public was $ 2.75 per share of common stock and $ 2.749 per pre-funded warrant, which was the price to the public of each share of common stock sold in the May 2025 Offering minus the $ 0.001 exercise price per pre-funded warrant. The Underwriters purchased the shares and the pre-funded warrants from the Company pursuant to the May 2025 Underwriting Agreement at a price of $ 2.585 per share and $ 2.584 per pre-funded warrant, respectively. See Note 10 for additional information. The initial closing of the May 2025 Offering occurred on May 30, 2025. In addition, the Company granted the Underwriters an option to purchase, for a period of 30 days, up to an additional 10,909,090 shares of common stock, which the Underwriters exercised in full on June 6, 2025. The total net proceeds from the May 2025 Offering were approximately $ 215.6 million, including full exercise of the Underwriters’ option to purchase additional shares, after deducting underwriting discounts and commissions and offering expenses.
Future capital requirements will depend on many factors, including the timing and extent of spending on research and development and the market acceptance of the Company’s products. The Company will need to obtain additional financing in order to complete clinical
studies and launch and commercialize any product candidates for which it receives regulatory approval. There can be no assurance that such financing will be available or will be on terms acceptable to the Company. As of December 31, 2025, the Company had cash and cash equivalents of $ 319.8 million which the Company believes will be sufficient to fund its planned operations for a period of at least twelve months from the date of issuance of these consolidated financial statements. The Company has based this estimate on assumptions that may prove to be wrong, and its operating plan may change as a result of many factors currently unknown to it. As a result, the Company could deplete its capital resources sooner than it currently expects. The Company expects to finance its future cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances or licensing arrangements. If the Company is unable to obtain funding, the Company would be forced to delay, reduce or eliminate some or all of its research and development programs, preclinical and clinical testing or commercialization efforts, which could adversely affect its business prospects.
Note 2—Significant Accounting Policies
Basis of Presentation
The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Taysha and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Smaller Reporting Company
We are a smaller reporting company as defined in the Exchange Act. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) the value of our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our most recently completed second fiscal quarter or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and our the value of voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our most recently completed second fiscal quarter.
As a smaller reporting 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.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The most significant estimates and assumptions in the Company’s financial statements relate to estimating manufacturing accruals and accrued or prepaid research and development expenses, the measurement of impairment of long-lived assets, and the valuation of the Trinity Term Loans that are carried at fair value. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.
Risks and Uncertainties
The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, development by the Company or its competitors of technological innovations, risks of failure of clinical studies, dependence on key personnel, protection of proprietary technology, compliance with government regulations, and ability to transition from preclinical manufacturing to commercial production of products.
The Company’s product candidates require approvals from the FDA and comparable foreign regulatory agencies prior to commercial sales in their respective jurisdictions. There can be no assurance that any product candidates will receive the necessary approvals. If the Company was denied approval, approval was delayed or the Company was unable to maintain approval for any product candidate, it could have a materially adverse impact on the Company.
Segments
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business as a single operating segment, the gene therapy segment, which is the business of developing AAV-based gene therapies for the treatment of rare monogenic diseases of the central nervous system. See Note 15 for additional information.
As of December 31, 2025 and 2024, the Company did no t have any significant long-lived assets located outside of the United States.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, (“ASC 606”). Revenues consist of activities in connection with the Astellas Transactions, including the exclusive option to license intellectual property and the performance of research and development activities. See Note 7 for additional information.
The Company evaluates the agreement to determine if the other party is a customer, and then determines the units of account within the agreement to determine which promised goods or services are distinct. In order for a promised good or service to be considered “distinct” under ASC 606, the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).
For any units of account that fall within the scope of ASC 606, where the other party is a customer, the Company (i) evaluates the separate performance obligation(s) under each contract, (ii) determines the transaction price, (iii) allocates the transaction price to each performance obligation considering the estimated standalone selling prices of the services and (iv) recognizes revenue when, or as, the Company satisfies the performance obligation(s).
At the inception of an arrangement that includes options for a customer to purchase additional services or products at agreed upon prices in the future, the Company evaluates whether each option provides a material right. An option that provides a material right will be accounted for as a separate performance obligation.
As part of the accounting for arrangements under ASC 606, the Company must use significant judgment to determine the performance obligations, the transaction price, and the standalone selling price (“SSP”) for each performance obligation identified in the contract for the allocation of the transaction price. The SSP is the price at which an entity would sell a promised good or service separately to a customer. Management estimates the SSP of each of the identified performance obligations, maximizing the use of observable inputs. Because the Company has not sold the same goods or services in its contracts separately to any customers on a standalone basis, the Company utilizes similar observable transactions in the marketplace or estimates the SSP of each performance obligation in its customer arrangements at contract inception based on either (1) its estimate of costs to be incurred to fulfill its obligations associated with the performance obligation, plus a reasonable margin, or (2) an estimate that reflects the discount that the customer would obtain when exercising its option adjusted for (i) any discount that the customer could receive without exercising the option and (ii) the likelihood that the option will be exercised. The Company allocates the transaction price to each performance obligation in proportion to its SSP.
A performance obligation is satisfied and revenue is recognized when “control” of the promised good or service is transferred, either over time or at a point in time, to the customer. A customer obtains control of a good or service if it has the ability to (1) direct its use and (2) obtain substantially all of the remaining benefits from it.
Amounts received prior to satisfying the revenue recognition criteria listed above are recorded as deferred revenue in the accompanying consolidated balance sheets. Amounts expected to be recognized as revenue within 12 months of the balance sheet date are classified as current deferred revenue, including the amounts allocated to material rights which are subject to customer exercise at any point. Amounts not expected to be recognized as revenue within the following 12 months of the balance sheet date are classified as deferred revenue, net of current portion. The Company does not incur commission or other costs to fulfill customer contracts and as such, no capitalized contract costs are recorded on the consolidated balance sheets.
Cash and Cash Equivalents
Cash and cash equivalents consist of funds held in a standard checking account, a standard savings account and a money market fund. The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. As of December 31, 2025 and 2024, the Company had $ 317.1 million and $ 138.3 million in cash equivalents, respectively.
Restricted Cash
Restricted cash consists of cash that the Company has placed in an escrow account which is pledged as collateral under certain lease agreements and letters of credit.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents. Periodically, the Company may maintain deposits in financial institutions in excess of government insured limits. Management believes that the Company is not exposed to significant credit risk as the Company’s deposits are held at financial institutions that management continues to believe to be of high credit quality. The Company has not experienced any losses on these deposits.
Fair Value of Financial Instruments
The Company’s financial assets and liabilities are accounted for in accordance with ASC 820, Fair Value Measurements which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs when measuring fair value and classifies those inputs into three levels:
Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the instrument’s anticipated life.
Level 3—Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The carrying values reported in the Company’s consolidated balance sheets for cash and cash equivalents, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities are reasonable estimates of their fair values due to the short-term nature of these items.
Fair Value Option
The fair value option provides an election that allows a company to irrevocably elect to record certain financial assets and liabilities at fair value on an instrument-by-instrument basis at initial recognition. The Company has elected to apply the fair value option to the Trinity Term Loans.
The term loans accounted for under the fair value option election are each a debt host financial instrument containing embedded features that would otherwise be required to be bifurcated from the debt-host and recognized as separate derivative liabilities subject to initial and subsequent periodic estimated fair value measurements in accordance with GAAP. Notwithstanding, when the fair value option election is applied to financial liabilities, bifurcation of an embedded derivative is not required, and the financial liability is initially measured at its issue-date estimated fair value and then subsequently remeasured at estimated fair value on a recurring basis as of each reporting period date.
The portion of the change in fair value attributed to a change in the instrument-specific credit risk is recognized as a component of other comprehensive income or loss if material and the remaining amount of the fair value adjustment is recognized as a component of other income (expense) in the consolidated statements of operations.
Deferred Offering Costs
The Company capitalizes costs directly associated with equity financings until such financings are consummated, at which time such costs are recorded in additional paid-in capital against the gross proceeds of the equity financings. Costs associated with the shelf registration statement on Form S-3, filed with the SEC on December 13, 2024 were capitalized and reclassified to additional paid-in capital on a pro rata basis when the Company completed offerings under the shelf registration. On November 2, 2025, the Company entered into a new shelf registration on Form S-3. The Company capitalized costs associated with the shelf registration statement on Form S-3 filed with
the SEC on November 2, 2025 and reclassifies to additional paid-in capital on a pro rata basis as the Company completes offering under the shelf registration. At the end of the three-year term of the shelf registration, the remaining deferred offering costs, if any, will be charged to operations.
Property, Plant and Equipment, net
Property, plant and equipment, net are stated at cost less accumulated depreciation and consist of computer equipment, laboratory equipment and leasehold improvements. Depreciation expense is recognized using the straight-line method over its estimated useful life of three to seven years .
Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in loss from operations. Expenditures for repairs and maintenance are charged to expense as incurred.
Leases
The Company accounts for its lease agreements in accordance with ASC 842, Leases. At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease liabilities, as applicable.
Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease term. Certain adjustments to the right-of-use asset may be required for items such as incentives received. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment. To estimate its incremental borrowing rate, a credit rating applicable to the Company is estimated using a synthetic credit rating analysis since the Company does not currently have a rating agency-based credit rating.
The Company has elected not to recognize leases with an original term of one year or less on the balance sheet. The Company typically only includes an initial lease term in its assessment of a lease arrangement. Options to renew a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew. Assumptions made by the Company at the commencement date are re-evaluated upon occurrence of certain events, including a lease modification. A lease modification results in a separate contract when the modification grants the lessee an additional right of use not included in the original lease and when lease payments increase commensurate with the standalone price for the additional right of use. When a lease modification results in a separate contract, it is accounted for in the same manner as a new lease.
The Company has elected to account for lease and non-lease components together as a single lease component for all underlying assets.
Impairment of Long-Lived Assets
The Company evaluates its long-lived assets, which consist of property, plant and equipment as well as right-of-use assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. The Company performed an undiscounted cash flow analysis over the long-lived assets associated with the manufacturing facility and determined that the carrying value of the asset group is not recoverable. During the year ended December 31, 2024, the Company recorded a non-cash impairment charge of $ 4.8 million in connection with the North Carolina manufacturing facility. The impairment charge was estimated using a discounted cash flow model. Significant assumptions used to determine this non-recurring fair value measurement include the time to sublease the facility, the amount of sublease income expected to be generated over the remaining lease term, and the discount rate used to measure the present value of the net cash flows associated with this asset group. See Note 4 for additional information.
Debt Issuance Costs
Debt issuance costs related to the Trinity Term Loans are expensed as incurred due to the election of the fair value option.
Research and Development
The Company has entered into research and development contracts with research institutions and other companies. These agreements are generally cancelable, and related payments are recorded as research and development expenses as incurred. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected
on the consolidated balance sheets as prepaid or accrued expenses. The Company records accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies, including the phase or completion of events, invoices received and contracted costs.
Research and development costs primarily consist of payroll, stock-based compensation, certain manufacturing costs, laboratory costs and other supplies, and the cost to acquire third-party licenses. 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. Payments of such upfront license fees and subsequent development milestones are included as investing cash outflows in the consolidated statements of cash flows.
Stock-Based Compensation
The Company accounts for all stock-based payments to employees and non-employees, including grants of stock options, restricted stock awards (“RSAs”), and restricted stock units (“RSUs”), based on their respective grant date fair values. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, which is affected principally by the estimated fair value of shares of the Company’s common stock and requires management to make a number of other assumptions, including the expected life of the option, the volatility of the underlying shares, the risk-free interest rate and expected dividends. Expected volatility is based on the historical share volatility of a set of comparable publicly traded companies over a period of time equal to the expected term of the options. Due to the lack of historical exercise history, the expected term of the Company’s stock options is determined using the “simplified” method. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.
The RSAs and RSUs are valued based on the fair value of the Company’s common stock on the date of grant. The Company expenses stock-based compensation related to stock options, RSAs and RSUs which contain only service-based vesting conditions over the requisite service period using the straight-line method. For awards which contain only performance conditions, the Company recognizes expense based on the fair value of the awards in the period in which the achievement of the related performance conditions is estimated to be probable. For awards with both performance and service conditions, the Company recognizes expense based on the fair value of the performance awards over the estimated service period using the accelerated attribution method to the extent the achievement of the related performance criteria is estimated to be probable. At each reporting date, the Company evaluates whether any performance conditions related to a performance-based award have changed. The effect of any change in performance conditions is recognized as a cumulative catch-up adjustment in the period such change occurs. Stock-based compensation costs are initially recorded in research and development expense or general and administrative expense in the consolidated statements of operations in a manner consistent with the classification of the respective employee’s payroll costs. Forfeitures are recorded as they occur.
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent reporting period while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance, or when the conditions for equity classification are met, and are not remeasured. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Liability-classified warrants are recorded at their fair value, and the Company adjusts such warrants to fair value at each reporting period. This liability is subject to remeasurement at each balance sheet date until the warrants are exercised or expire, and any change in fair value is recognized in the Company’s consolidated statements of operations.
Income Taxes
Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse, and net operating loss (“NOL”) carryforwards and research and development tax credit (“R&D Credit”) carryforwards. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all
of the deferred tax assets will not be realized. The Company has recorded a full valuation allowance to reduce its net deferred income tax assets to zero. In the event the Company were to determine that it would be able to realize some or all of its deferred income tax assets in the future, an adjustment to the deferred income tax asset valuation allowance would increase income in the period such determination was made.
The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. During the year ended December 31, 2025 the Company recorded increases in the amount of gross unrecognized tax benefits of $ 2.2 million. During the year ended December 31, 2024, the Company recorded increases in the amount of unrecognized tax benefits of $ 1.8 million. The Company also reduced its uncertain tax positions during 2023 by $ 7.8 million related to prior year positions largely as a result of the Section 382 ownership shift analysis performed during 2023 (see Note 12). The unrecognized tax benefits, if recognized, would not affect the effective income tax rate due to the valuation allowance that currently offsets deferred tax assets. The Company does no t expect the unrecognized tax benefits to change significantly over the next 12 months. The Company would recognize any corresponding interest and penalties associated with its income tax positions in income tax expense. There was no income tax interest or penalties incurred for the years ended December 31, 2025 and 2024.
Comprehensive Loss
Comprehensive income includes charges and credits to shareholders' equity that are not the result of transactions with shareholders. Our total comprehensive loss consists of net income and changes in fair value attributed to instrument-specific credit risk from the 2025 Trinity Term Loans (as defined below). The items of comprehensive loss, with the exception of net loss, are included in accumulated other comprehensive loss in the consolidated balance sheets and statements of shareholders' equity.
Recently Adopted Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which focuses on the rate reconciliation and income taxes paid. ASU No. 2023-09 requires a public business entity (“PBE”) to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5 % of total income tax payments, net of refunds received. For PBEs, the new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all period presented. As of December 31, 2025 , the Company adopted this new ASU retrospectively with all the revised disclosures as required by this ASU in Note 12.
Recently Issued Accounting Pronouncements
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures , to improve expense disclosure requirements under ASC 220, Income Statement - Reporting Comprehensive Income , through enhancing disclosures about significant segment expenses. The guidance requires entities to provide additional disclosure about specific expenses by requiring entities to disaggregate, in a tabular presentation, each relevant expense caption on the face of the income statement that includes any of the following natural expenses (1) purchases of inventory, (2) employees compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion and amortization recognized as part of oil - and gas - producing activities or other types of depletion expenses. The tabular disclosure would also include certain other expenses, when applicable. The ASU also enhances interim segment reporting requirements by aligning interim disclosures with information that must be disclosed annually in accordance with ASC 220. The guidance is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, applied either prospectively or retrospectively with early adoption permitted. The Company is still evaluating the impact this ASU will have on its disclosures.
Note 3—Fair Value Measurements
The Company’s financial instruments that are measured at fair value on a recurring basis consist of money market funds, the Trinity Term Loans, a success fee derivative liability and certain of the Company’s warrant liabilities.
The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values (in thousands):
December 31, 2025
Total
Level 1
Level 2
Level 3
Assets:
Cash equivalents – money market funds
Total assets
Liabilities:
Trinity Term Loans
Success Fee Derivative liabilities
Total liabilities
December 31, 2024
Total
Level 1
Level 2
Level 3
Assets:
Cash equivalents – money market funds
Total assets
Liabilities:
Trinity Term Loans
Success Fee Derivative liability
SSI Warrant liability
Total liabilities
The Company classifies its money market funds, which are valued based on quoted market prices in an active market with no valuation adjustment, as Level 1 assets within the fair value hierarchy.
The Company’s Trinity Term Loans and Success Fee liabilities are classified as Level 3 measurements under the fair value hierarchy as the fair values were determined based on significant inputs not observable in the market. The fair values were determined utilizing a probability-weighted income approach, including variables for the timing of a success event and other probability estimates. See Note 6 for additional information on the Trinity Term Loans and Success Fees (as defined below).
The Company’s SSI Warrant liability was classified as Level 3 measurements under the fair value hierarchy as the fair values were determined based on significant inputs not observable in the market. The fair values were determined using the Black-Scholes-Merton option pricing model to determine the fair value of the SSI Warrants (as defined below). In December 2025, all outstanding liability classified warrants were exercised. See Note 10 for additional information on the SSI Warrants.
Note 4—Supplemental Financial Information
Property, plant and equipment, net consisted of the following (in thousands):
December 31,
December 31,
Leasehold improvements
Laboratory equipment
Computer equipment
Furniture and fixtures
Construction in progress
Accumulated depreciation
Property, plant and equipment, net
Property, plant and equipment, net includes $ 0.3 million and $ 0.7 million of assets capitalized as finance leases as of December 31, 2025 and December 31, 2024, respectively. During the year ended December 31, 2025, the Company sold equipment with a book value of zero and recorded a gain on the disposal of $ 0.1 million.
De preciation expense was $ 1.1 million and $ 1.2 million for the years ended December 31, 2025 and 2024, respectively.
In September 2024, the Company recorded an impairment loss of $ 4.8 million in connection with its North Carolina manufacturing facility. The impairment charge was estimated using a discounted cash flow model and recorded in the consolidated statements of operations for the year ended December 31, 2024.
Accrued expenses and other current liabilities consisted of the following (in thousands):
December 31,
December 31,
Accrued compensation
Accrued research and development
Accrued clinical trial
Lease liabilities, current portion
Warrant liability
Accrued professional and consulting fees
Accrued property, plant and equipment
Other
Total accrued expenses and other current liabilities
Prepaid expenses and other current assets consisted of the following (in thousands):
December 31,
December 31, 2024
Prepaid research and development
Prepaid clinical trial
Deferred offering costs
Prepaid insurance
Other
Total prepaid expenses and other current assets
Note 5— Leases
The Company leases certain office, laboratory, and manufacturing space.
Dallas Lease
On January 11, 2021, the Company entered into a lease agreement (the “Dallas Lease”) with Pegasus Park, LLC, a Delaware limited liability company (the “Dallas Landlord”), pursuant to which the Company leases approximately 15,000 square feet of office space at 3000 Pegasus Park Drive, Dallas, Texas 75247 (the “Office Space”).
The Dallas Lease commenced on May 27, 2021 , and has a term of approximately ten years . The Company has an option to extend the term of the Dallas Lease for one additional period of five years .
The Dallas Landlord has the right to terminate the Dallas Lease, or the Company’s right to possess the Office Space without terminating the Dallas Lease, upon specified events of default, including the Company’s failure to pay rent in a timely manner and upon the occurrence of certain events of insolvency with respect to the Company.
Dallas Lease Expansion
On December 14, 2021, the Company amended the Dallas Lease (the “Dallas Lease Amendment”) with the Dallas Landlord, pursuant to which the Company leases approximately 18,000 square feet of office space adjacent to the Office Space at 3000 Pegasus Park Drive, Dallas, Texas 75247 (the “Expansion Premises”).
The Dallas Lease Amendment commenced on July 1, 2022, and has a term of ten years .
The Company is obligated to pay operating costs and utilities applicable to the Expansion Premises. Total future minimum lease payments under the Dallas Lease Amendment over the initial 10-year term are approximately $ 6.0 million. The Company is responsible for costs of constructing interior improvements within the Expansion Premises that exceed a $ 40.00 per rentable square foot construction allowance provided by the Dallas Landlord.
The Company has a right of first refusal with respect to certain additional office space on the 15 th floor at 3000 Pegasus Park Drive, Dallas, Texas 75247 before the Dallas Landlord accepts any offer for such space.
Durham Lease
On December 17, 2020, the Company entered into a lease agreement (the “Durham Lease”) with Patriot Park Partners II, LLC, a Delaware limited liability company (the “Durham Landlord”), pursuant to which the Company agreed to lease approximately 187,500 square feet of a manufacturing facility located at 5 National Way, Durham, North Carolina (the “Facility”). The Durham Lease commenced on April 1, 2021 and is expected to have a term of approximately fifteen years and six months . The Company has two options to extend the term of the Durham Lease, each for a period of an additional five years .
The Company was not required to provide a security deposit in connection with its entry into the Durham Lease. The Company was responsible for constructing interior improvements within the Facility. The Company was required to place $ 2.6 million in an escrow account which was to be released when the improvements were substantially complete. In December 2023, the Company entered into an agreement with the landlord whereby the Company agreed to remove specified leasehold improvements which will be funded by the escrowed funds. The escrow funds are recorded as restricted cash on the consolidated balance sheets as of December 31, 2025 and 2024 with $ 0.5 million recorded in current assets and $ 2.1 million in noncurrent assets. The Durham Landlord has the right to terminate the Durham Lease upon specified events of default, including the Company’s failure to pay rent in a timely manner and upon the occurrence of certain events of insolvency with respect to the Company.
Summary of all lease costs recognized under ASC 842
The following table summarizes the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases for the year ended December 31, 2025 and 2024 (in thousands):
For the Year Ended December 31,
Operating lease cost
Variable lease cost
Total lease cost
Supplemental information related to the remaining lease term and discount rate are as follows:
December 31, 2025
December 31, 2024
Weighted average remaining lease term (in years) – Finance leases
Weighted average remaining lease term (in years) – Operating leases
Weighted average discount rate – Finance leases
Weighted average discount rate – Operating leases
Supplemental cash flow information related to the Company’s operating leases are as follows (in thousands):
For the Year Ended December 31,
Operating cash flows for operating leases
As of December 31, 2025, future minimum commitments under ASC 842 under the Company’s operating and finance leases were as follows (in thousands):
Year Ending December 31,
Operating
Finance
Thereafter
Total lease payments
Less: imputed interest
Total lease liabilities
Lease liabilities, current
Lease liabilities, non-current
Total lease liabilities
Note 6 – Term Loans
2025 Loan with Trinity Capital
On August 7, 2025 (the “Trinity Refinance Date”), the Company entered into a Loan and Security Agreement (the “2025 Trinity Term Loan Agreement”), by and among the Company, the lenders party thereto from time to time (the “2025 Trinity Lenders”) and Trinity Capital Inc., as administrative agent and collateral agent for the 2025 Trinity Lenders (“Trinity”). The 2025 Trinity Term Loan Agreement provides for (i) on the Trinity Refinance Date, $ 50.0 million aggregate principal amount of term loans (“Tranche A”), (ii) from the Trinity Refinance Date until March 31, 2028 an additional $ 25.0 million term loan facility contingent on delivering evidence satisfactory to Trinity that the Company has submitted a biologics license application (“BLA”) to the FDA for TSHA-102 in Rett Syndrome (“Tranche B”), (iii) from the Trinity Refinance Date until March 31, 2029 , an additional $ 25.0 million term loan facility contingent on delivering evidence satisfactory to Trinity that the Company has received BLA approval from the FDA for TSHA-102 in Rett Syndrome (collectively, the “2025 Trinity Term Loans”). The Company drew $ 50.0 million in term loans on the Trinity Refinance Date. The existing 2023 Trinity Term Loan Agreement was terminated and the existing 2023 Trinity Term Loans were repaid concurrently with entry into the 2025 Trinity Term Loan Agreement and the draw of Tranche A.
The interest rate applicable to the 2025 Trinity Term Loans is the greater of (a) the WSJ Prime Rate plus 4.00 % or (b) 11.50 % per annum. The 2025 Trinity Term Loans are interest only from the Trinity Refinance Date through 48 months from the Trinity Refinance Date, which may be extended to 60 months from the Trinity Refinance Date upon the satisfaction of certain milestones set forth in the 2025 Trinity Term Loan Agreement, after which the Company is required to pay equal monthly installments of principal through August 1, 2030 (the “New Maturity Date”). As of December 31, 2025, $ 50.0 million was outstanding on the 2025 Trinity Term Loans, recorded as Term Loan, net on the consolidated balance sheet.
Future principal debt payments on the 2025 Trinity Term Loan Agreement as of December 31, 2025 are as follows (in thousands):
Year Ending December 31,
Total principal payments
On the Trinity Refinance Date, the Company paid a commitment fee of $ 0.1 million to Trinity. Upon any future draw of 2025 Trinity Term Loans, the Company is required to pay an additional commitment fee of 1.00 % of the aggregate principal amount of such 2025 Trinity Term Loans then funded.
The 2025 Trinity Term Loans may be prepaid in full (i) from the Trinity Refinance Date through August 7, 2026, with payment of a 3.00 % prepayment premium, (ii) from August 8, 2026 through August 7, 2027, with payment of a 2.00 % prepayment premium, and (iii) from August 8, 2027 through, but excluding, the New Maturity Date, with payment of a 1.00 % prepayment premium. Upon repayment in full of the 2025 Trinity Term Loans, the Company will pay to Trinity an end of term payment equal to 5.00 % of the original principal amount of the 2025 Trinity Term Loans.
The obligations under the 2025 Trinity Term Loan Agreement are secured by a perfected security interest in all of the Company’s assets except for certain customarily excluded property pursuant to the terms of the 2025 Trinity Term Loan Agreement. There are no financial or minimum cash balance covenants and no warrants associated with the 2025 Trinity Term Loan Agreement. The 2025 Trinity Term Loan Agreement contains various covenants that limit the Company’s ability to engage in specified types of transactions without the consent of Trinity and the 2025 Trinity Lenders which include, among others, incurring or assuming certain debt; merging, consolidating or acquiring all or substantially all of the capital stock or property of another entity; changing the nature of the Company’s business; changing the Company’s organizational structure or type; licensing, transferring or disposing of certain assets; granting certain types of liens on the Company’s assets; making certain investments; paying cash dividends; and entering into certain transactions with the Company’s affiliates, in each case subject to customary exceptions.
The 2025 Trinity Term Loan Agreement contains customary representations and warranties, affirmative and negative covenants and events of default, including payment default, breach of covenants, change of control, and material adverse effects. Upon the occurrence of an event of default, a default interest rate of an additional 5.00 % per annum may be applied to the outstanding loan balances, and the 2025 Trinity Lenders may declare all outstanding obligations immediately due and payable and exercise all of its rights and remedies as set forth in the 2025 Trinity Term Loan Agreement and under applicable law.
The Company assessed the terms and features of the 2025 Trinity Term Loans and determined that the 2025 Trinity Term Loan constituted a debt modification under ASC 470-50, Debt - Modifications and Extinguishments (“ASC 450”). As such, the 2025 Trinity Term Loans are accounted for as a continuation of the original debt, and no gain or loss on extinguishment was recognized. The Company continues to apply the fair value option under ASC 825, Financial Instruments (“ASC 825”) which was initially elected at the time of the 2023 Trinity Term Loan Agreement.
Under the fair value option, the 2025 Trinity Term Loans are measured at fair value on a recurring basis, with changes in fair value recognized in other income (expense) in the consolidated statements of operations. The Company has not elected to present interest expense separately from changes in fair value and therefore will not present interest expense associated with the 2025 Trinity Term Loans. Any changes in fair value attributable to instrument-specific credit risk are presented in other comprehensive income or loss, if material. Under the fair value option, debt issuance costs are expensed as incurred. The Company incurred $ 1.1 million of debt issuance costs, of which $ 0.1 million were paid to Trinity and $ 1.0 million were paid to third parties associated with the 2025 Trinity Term Loans. The debt issuance costs were recorded within general and administrative expense in the consolidated statements of operations for the year ended December 31, 2025.
In c onnection with the 2025 Trinity Term Loan Agreement, the Company entered into a Success Fee Agreement with Trinity which specifies the terms regarding a fee in the amount of $ 0.5 million plus 5 % of the principal amount of the funded 2025 Trinity Term Loans under Tranche B (the “2025 Success Fee”). The 2025 Success Fee is payable upon the achievement of certain corporate development value-inflection milestones. The 2025 Success Fee survives the termination of the 2025 Trinity Term Loans and expires on the earlier of ten years from the Trinity Refinance Date, or payment in full in cash of the 2025 Success Fee. The Company determined that the 2025 Success Fee represents a freestanding financial instrument and should be accounted for as a derivative liability under ASC 815, Derivatives and Hedging (“ASC 815”) and recorded a liability within other non-current liabilities on the consolidated balance sheet, at fair value on the Trinity Refinance Date and will be marked-to-market at the end of each reporting period with gains and losses recognized as a component of other income (expense) in the consolidated statements of operations.
The proceeds from the 2025 Trinity Term Loans were allocated to the 2025 Success Fee and 2025 Trinity Term Loans based on their respective fair values on the Trinity Refinance Date. The fair values were determined utilizing a probability-weighted income approach, including variables for the timing of a success event and other probability estimates.
The Company determined the fair value of the 2025 Trinity Term Loans and the 2025 Success Fee using a probability-weighted income approach and recorded the loan at fair value of $ 49.8 million and the 2025 Success Fee liability at fair value of $ 0.2 million in the consolidated balance sheet at issuance. The Company calculated the discounted cash flows of the 2025 Trinity Term Loans using a discount rate of 13.86 % and adjusted for the probability of various repayment scenarios. The Company calculated the discounted cash flows of the 2025 Success Fee liability using a discount rate of 13.86 % then adjusted for the probability of achievement of certain corporate development value-inflection milestones.
2023 Loan with Trinity Capital
On November 13, 2023 (the “Trinity Closing Date”), the Company entered into a Loan and Security Agreement (the “2023 Trinity Term Loan Agreement”), by and among the Company, the lenders party thereto from time to time (the “Trinity Lenders”) and Trinity Capital Inc., as administrative agent and collateral agent for the Trinity Lenders (“Trinity”). The 2023 Trinity Term Loan Agreement provided for, on the Trinity Closing Date, $ 40.0 million aggregate principal amount of term loans (collectively, the “2023 Trinity Term Loans”). The Company drew the Trinity Term Loans in full on the Trinity Closing Date.
The interest rate applicable to the 2023 Trinity Term Loans was the greater of (a) the Wall Street Journal (“WSJ”) Prime Rate plus 4.50 % or (b) 12.75 % per annum. The 2023 Trinity Term Loans were interest only from the Trinity Closing Date through 36 months from the Trinity Closing Date, which could have been extended to 48 months from the Trinity Closing Date upon the satisfaction of certain milestones set forth in the 2023 Trinity Term Loan Agreement, after which the Company was required to pay equal monthly installments of principal through November 13, 2028 (the “Maturity Date”).
The 2023 Trinity Term Loans could have been prepaid in full (i) from the Trinity Closing Date through November 13, 2024, with payment of a 3.00 % prepayment premium, (ii) from November 13, 2024 through November 13, 2025, with payment of a 2.00 % prepayment premium, and (iii) from November 13, 2025 through, but excluding, the Maturity Date, with payment of a 1.00 % prepayment premium. On the Trinity Closing Date, the Company paid to Trinity a commitment fee of 1.00 % of the original principal amount of the 2023 Trinity Term Loans. Upon repayment in full of the 2023 Trinity Term Loans, the Company paid to Trinity an end of term payment equal to $ 0.6 million.
The obligations under the 2023 Trinity Term Loan Agreement were secured by a perfected security interest in all of the Company’s assets except for certain customarily excluded property pursuant to the terms of the 2023 Trinity Term Loan Agreement.
The Company assessed the terms and features of the 2023 Trinity Term Loans and determined that the Company was eligible to elect the fair value option under ASC 825. The 2023 Trinity Term Loans contain various embedded features and the election of the fair
value option allowed the Company to bypass analysis of potential embedded derivatives and further analysis of bifurcation of any recognized financial liabilities. Under the fair value option, the financial liability is initially measured at its fair value on the issue date and subsequently remeasured at estimated fair value on a recurring basis at each reporting date. Changes in the fair value of the 2023 Trinity Term Loans, which include accrued interest, if any, are recorded as a component of other expense (income) in the consolidated statements of operations. The Company did not elect to present interest expense separately from changes in fair value and therefore did not present interest expense associated with the 2023 Trinity Term Loans. Any changes in fair value caused by instrument-specific credit risk were presented separately in other comprehensive income or loss if material.
In connection with the 2023 Trinity Term Loans, the Company entered into a Success Fee Agreement with Trinity which specifies the terms regarding a fee in the amount of 10 % of the principal amount of the funded 2023 Trinity Term Loans (the “2023 Success Fee”). The 2023 Success Fee is payable upon the achievement of certain corporate development value-inflection milestones. The 2023 Success Fee survives the termination of the 2023 Trinity Term Loans and expires on the earlier of ten years , or payment in full in cash of the Success Fee. The 2023 Success Fee remains in effect after the termination of the 2023 Trinity Term Loans upon entry into the 2025 Trinity Term Loan Agreement and the draw of Tranche A.
The Company determined that the 2023 Success Fee represents a freestanding financial instrument and should be accounted for as a derivative liability under ASC 815 and recorded a liability within other non-current liabilities on the consolidated balance sheet, at fair value on the Trinity Closing Date and will be marked-to-market at the end of each reporting period with gains and losses recognized as a component of other income (expense) in the consolidated statements of operations.
Fair Value
The 2025 Trinity Term Loans are accounted for as a continuation of the original debt in accordance with ASC 450, and the Company continues to apply the fair value option under ASC 825, which was initially elected at the time of the 2023 Trinity Term Loan Agreement. The Company remeasured the 2025 Trinity Term Loans, 2025 Success Fee and 2023 Success Fee as of December 31, 2025 using a probability weighted income approach. The Company calculated the discounted cash flows of the 2025 Trinity Term Loans using a discount rate of 14.24 % and adjusted for the probability of various repayment scenarios. The Company calculated the discounted cash flows of the 2023 Success Fee and 2025 Success Fee, (the “Success Fees”), using a discount rate of 14.24 % then adjusted for the probability of achievement of certain corporate development value-inflection milestones. As of December 31, 2025, the Company recorded the Tranche A Loan at a fair value of $ 50.1 million and the Success Fees at $ 1.5 million in the consolidated balance sheet.
The following table reconciles the change in fair value of the 2023 Trinity Term Loans and 2025 Trinity Term Loans, (the “Trinity Term Loans”), during the years ended December 31, 2025 and 2024 (in thousands):
Trinity Term Loans
Beginning fair value balance as of January 1, 2024
Principal payments
Change in fair value reported in statements of operations
Change in fair value reported in comprehensive loss
Beginning fair value balance as of January 1, 2025
Repayment of 2023 Term Loan
Beginning fair value balance of 2025 Trinity Term Loan on August 7, 2025
Change in fair value reported in statements of operations
Change in fair value reported in comprehensive loss
Ending fair value balance as of December 31, 2025
During the year ended December 31, 2025 the Company recorded $ 5.4 million of interest expense within change in fair value of term loans, all of which was paid as of December 31, 2025. During the year ended December 31, 2024 the Company recorded $ 5.2 million of interest expense within change in fair value of term loans, all of which was paid as of December 31, 2024.
The following table reconciles the change in fair value of the Success Fees liability during the years ended December 31, 2025 and 2024 (in thousands):
Success Fees
Beginning fair value balance at January 1, 2024
Change in fair value of 2023 Success Fee
Ending fair value balance as of December 31, 2024
Beginning fair value balance of 2025 Success Fee on August 7, 2025
Change in fair value of Success Fees
Ending fair value balance as of December 31, 2025
Note 7—Astellas Agreements
On October 21, 2022 (the “Effective Date”), the Company entered into the Option Agreement (the “Option Agreement”) with Astellas Gene Therapies, Inc. (f/k/a Audentes Therapeutics, Inc. (d/b/a Astellas Gene Therapy))(“Astellas”), pursuant to which the Company granted to Astellas an exclusive option to obtain an exclusive, worldwide, royalty and milestone-bearing right and license (A) to research, develop, make, have made, use, sell, offer for sale, have sold, import, export and otherwise exploit, or, collectively, exploit, the product known, as of the Effective Date, as TSHA-120 (the “120 GAN Product”), and any backup products with respect thereto for use in the treatment of Giant Axonal Neuropathy (“GAN”) or any other gene therapy product for use in the treatment of GAN that is controlled by Taysha or any of its affiliates or with respect to which the Company or any of its affiliates controls intellectual property rights covering the exploitation thereof (a “GAN Product”), and (B) under any intellectual property rights controlled by Taysha or any of its affiliates with respect to such exploitation (the “GAN Option”). Subject to certain extensions, the GAN Option was exercisable from the Effective Date through a specified period of time following Astellas’ receipt of (i) the formal minutes from the Type B end-of-Phase 2 meeting between Taysha and the FDA in response to the Company’s meeting request sent to the FDA on September 19, 2022 for the 120 GAN Product (the “Type B end-of-Phase 2 Meeting”), (ii) all written feedback from the FDA with respect to the Type B end-of-Phase 2 Meeting, and (iii) all briefing documents sent by Taysha to the FDA with respect to the Type B end-of-Phase 2 Meeting. In September 2023, Astellas provided written notice of its decision not to exercise the GAN Option.
Under the Option Agreement, the Company also granted to Astellas an exclusive option to obtain an exclusive, worldwide, royalty and milestone-bearing right and license (A) to exploit any Rett Product (as defined below), and (B) under any intellectual property rights controlled by Taysha or any of its affiliates with respect to such exploitation (the “Rett Option”). Subject to certain extensions, the Rett Option was exercisable from the Effective Date through a specified period of time following Astellas’ receipt of (i) certain clinical data from the female pediatric trial and (ii) certain specified data with respect to TSHA-102, such data package the “Rett Data Package” and such period, the “Rett Option Period,” related to (i) the product known, as of the Effective Date, as TSHA-102 and any backup products with respect thereto for use in the treatment of Rett syndrome, and (ii) any other gene therapy product for use in the treatment of Rett syndrome that is controlled by Taysha or any of its affiliates or with respect to which the Company or any of its affiliates controls intellectual property rights covering the exploitation thereof (a “Rett Product”). The Company delivered the Rett Data Package to Astellas in mid-2025. Under the Option Agreement, Astellas was required to decide whether to exercise the Rett Option within 90 days after Astellas’ receipt of the Rett Data Package. In October 2025, the Rett Option expired without being exercised. Following the expiration of the Option Agreement, the Company now holds unencumbered rights to the TSHA-102 program.
During the Rett Option Period, which has now expired, the Company agreed to (A) not solicit or encourage any inquiries, offers or proposals for, or that could reasonably be expected to lead to, a Change of Control (as defined in the Option Agreement), or (B) otherwise initiate a process for a potential Change of Control, in each case, without first notifying Astellas and offering Astellas the opportunity to submit an offer or proposal to the Company for a transaction that would result in a Change of Control. If Astellas failed or declined to submit any such offer within a specified period after the receipt of such notice, the Company would have the ability to solicit third party bids for a Change of Control transaction. If Astellas delivered an offer to the Company for a transaction that would result in a Change of Control, the Company and Astellas would have attempted to negotiate in good faith the potential terms and conditions for such potential transaction that would have resulted in a Change of Control for a specified period, which period may have been shortened or extended by mutual agreement. All of Astellas’ rights with respect to a Change of Control of the Company terminated as a result of the expiration of the Rett Option Period and the Option Agreement in October 2025.
As partial consideration for the rights granted to Astellas under the Option Agreement, Astellas paid the Company an upfront payment of $ 20.0 million (the “Upfront Payment”). Astellas or any of its affiliates had the right, in its or their discretion and upon written notice to the Company, to offset the amount of the Upfront Payment (in whole or in part, until the full amount of the Upfront Payment has been offset) against (a) any payment(s) owed to Taysha or any of its affiliates (or to any third party on behalf of the Company) under or in connection with any license agreement entered into with respect to any GAN Product or Rett Product, including, any upfront payment, milestone payment or royalties owed to Taysha or any of its affiliates (or to any third party on behalf of the Company) under or in connection with any such license agreement or (b) any amount owed to Taysha or any of its affiliates in connection with a Change of Control transaction with Astellas or any of its affiliates. As further consideration for the rights granted to Astellas under the Option Agreement, the Company and Astellas also entered into the Astellas Securities Purchase Agreement (as defined below).
Astellas Securities Purchase Agreement
On October 21, 2022, the Company entered into a securities purchase agreement with Astellas (the “Astellas Securities Purchase Agreement”), pursuant to which the Company agreed to issue and sell to Astellas in a private placement (the “Astellas Private Placement”), an aggregate of 7,266,342 shares (the “Astellas Private Placement Shares”), of its common stock, for aggregate gross proceeds of $ 30.0 million. The Astellas Private Placement closed on October 24, 2022. Pursuant to the Astellas Securities Purchase Agreement, in connection with the Astellas Private Placement, Astellas has the right to designate one individual to attend all meetings of the Board in a non-voting observer capacity. The Company also granted Astellas certain registration rights with respect to the Astellas Private Placement Shares.
Accounting Treatment
In October 2022, upon closing of the Astellas Private Placement and transferring the 7,266,342 shares to Astellas, the Company recorded the issuance of shares at fair value. Fair value of the shares transferred to Astellas was calculated in accordance with ASC 820, Fair Value Measurement by analyzing the Company’s stock price for a short period of time prior to and after the transaction date as traded on the NASDAQ. The NASDAQ trading data is considered an active market and a Level 1 measurement under ASC 820. The fair value was determined to be approximately $ 13.95 million or $ 1.92 per share. The $ 16.1 million difference between the $ 30.0 million paid by Astellas and the fair market value of shares issued was allocated to the transaction price of the Option Agreement.
The Company determined that the Option Agreement falls within the scope of ASC 606, Revenue from Contracts with Customers as the development of TSHA-102 for the treatment of Rett Syndrome and TSHA-120 for the treatment of GAN are considered ordinary activities for the Company. In accordance with ASC 606, the Company evaluated the Option Agreement and identified three separate performance obligations: (1) option to obtain licensing right to GAN, (2) option to obtain licensing right to Rett and (3) performance of research and development activities in the Rett development plan. The transaction price is determined to be $ 36.1 million which is comprised of the $ 20.0 million Upfront Payment and the $ 16.1 million allocated from the Astellas Private Placement.
To determine the standalone selling price (“SSP”) of the Rett and GAN options, which the Company concluded to be material rights, the Company utilized the probability-weighted expected return (“PWERM”) method. The PWERM method contemplates the probability and timing of an option exercise. At contract inception, the Company estimated that the probability of exercise was 50 % for each of the GAN and Rett options. The SSP of the Rett research and development activities was estimated using an expected cost-plus margin approach. The standalone selling prices of the material rights and Rett research and development activities were then used to proportionately allocate the $ 36.1 million transaction price to the three performance obligations. The $ 36.1 million transaction price was recorded as deferred revenue on the consolidated balance sheet at the inception of the Astellas Transactions.
The following table summarizes the allocation of the transaction price to the three performance obligations at contract inception (in thousands):
Transaction Price Allocation
Option to obtain license for Rett
Option to obtain license for GAN
Rett research and development activities
Total
Revenue allocated to the material rights was recognized at a point in time when each option period expired or when a decision was made by Astellas to exercise or not exercise each option. Revenue from the Rett research and development activities was recognized as activities were performed using an input method, according to the costs incurred as related to the total costs expected to be incurred to satisfy the performance obligation. The transfer of control occurred over this time period and was a reliable measure of progress towards satisfying the performance obligation.
The Company recognized revenue of $ 4.3 million and $ 8.3 million from Rett research and development activities for the year ended December 31, 2025 and 2024, respectively. In October 2025, Astellas provided written notice of its decision not to exercise the Rett Option. The Company recognized revenue of $ 5.5 million from the Rett Option during the year ended December 31, 2025.
Note 8—Research, Collaboration and License Agreements
UT Southwestern Agreement
On November 19, 2019, the Company entered into a research, collaboration and license agreement (“UT Southwestern Agreement”) with the Board of Regents of the University of Texas System on behalf of The University of Texas Southwestern Medical Center (“UT Southwestern”). Under the UT Southwestern Agreement, UT Southwestern is primarily responsible for preclinical development activities with respect to licensed products for use in certain specified indications (up to IND-enabling studies), and the Company is responsible for all subsequent clinical development and commercialization activities with respect to the licensed products. UT Southwestern will conduct such preclinical activities for a two-year period under mutually agreed upon sponsored research agreements that were entered into beginning in April 2020. During the initial research phase, the Company has the right to expand the scope of specified indications under the UT Southwestern Agreement.
In connection with the UT Southwestern Agreement, the Company 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, the Company 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. The Company is required to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize at least one licensed product.
On April 2, 2020, the Company amended the UT Southwestern Agreement to include the addition of another licensed product and certain indications, and a right of first refusal to the Company over certain patient dosing patents. No additional consideration was transferred in connection with this amendment. In March 2022, the Company and UT Southwestern mutually agreed to revise the payment schedules and current performance expectations of the current sponsored research agreements under the UT Southwestern Agreement and defer payments by fifteen months. In December 2023, the Company and UT Southwestern mutually agreed to terminate specific sponsored research agreements.
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, the Company 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. In December 2023 and throughout 2024 and 2025, we transferred rights to specific indications back to UT.
In November 2019, as partial consideration for the license rights granted under the UT Southwestern Agreement, the Company issued 2,179,000 shares of its common stock, or 20 % of its then outstanding fully-diluted common stock, to UT South western. The Company does not have any future milestone or royalty obligations to UT Southwestern under the UT Southwestern Agreement other than costs related to maintenance of patents.
Abeona CLN1 Agreements
In August 2020, the Company entered into license and inventory purchase agreements with Abeona Therapeutics Inc. (“Abeona”) for worldwide exclusive rights to certain intellectual property rights and know-how relating to the research, development and manufacture of ABO-202, an AAV-based gene therapy for CLN1 disease (also known as infantile Batten disease). Under the terms of the agreements, the Company made initial cash payments to Abeona of $ 3.0 million for the license fee and $ 4.0 million for purchase of clinical materials and reimbursement for previously incurred development costs in October 2020. In exchange for the license rights, the Company recorded an aggregate of $ 7.0 million within research and development expenses in the consolidated statements of operations for the year ended December 31, 2020 since the acquired license or acquired inventory do not have an alternative future use. The Company is obligated to make up to $ 26.0 million in regulatory-related milestones and up to $ 30.0 million in sales-related milestones per licensed CLN1 product. The Company will also pay an annual earned royalty in the high single digits on net sales of any licensed CLN1 products. The license 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. The Company may terminate the license agreement for convenience upon specified prior written notice to Abeona.
In December 2021, a regulatory milestone was triggered in connection with this agreement and therefore the Company 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 classified as an investing cash outflow in the consolidated statements of cash flows. No additional milestone payments were triggered in connection with this agreement during the years ended December 31, 2025 and 2024. In February 2026, the Abeona CLN1 Agreement was mutually terminated.
Abeona Rett Agreement
On October 29, 2020, the Company entered into a license agreement (the “Abeona Rett Agreement”) with Abeona pursuant to which the Company 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, the Company is 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, the Company paid Abeona a one-time upfront license fee of $ 3.0 million which was recorded in research and development expenses in the consolidated statements of operations for the year ended December 31, 2020 since the acquired license does not have an alternative future use. The Company is 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 Rett product and high single-digit royalties on net sales of licensed Rett 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.
The Abeona Rett 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. The Company may terminate the agreement for convenience upon specified prior written notice to Abeona.
In March 2022, the Company’s 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 this agreement. The Company recorded $ 1.0 million within research and development expenses and classified the payment as an investing cash outflow in the consolidated statements of cash flows. In May 2023, the Company dosed the first patient with TSHA-102 in the Phase 1/2 REVEAL trial evaluating the safety and preliminary efficacy of TSHA-102 in adult patients with Rett syndrome and therefore triggered a milestone payment in connection with the Abeona Rett Agreement. The Company recorded $ 3.5 million within research and development expenses in the consolidated statements of operations for the year ended December 31, 2023. In December 2025, the Company dosed the first patient with TSHA-102 in the Phase 1/2 Part B REVEAL pivotal trial and therefore triggered a milestone payment in connection with the Abeona Rett Agreement. The Company recorded $ 3.0 million within research and development expenses in the consolidated statements of operations for the year ended December 31, 2025. This milestone fee was paid in January 2026. No additional milestone payments were made or triggered in connection with this agreement during the year ended December 31, 2025.
Note 9—Stock-Based Compensation
On July 1, 2020, the Company’s board of directors approved the 2020 Equity Incentive Plan (“Previous Plan”) which permitted the granting of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and other stock-based awards to employees, directors, officers and consultants. As of September 16, 2020, the approval date of the New Plan (as defined below), no additional awards will be granted under the Previous Plan. The terms of the Previous Plan will continue to govern the terms of outstanding equity awards that were granted prior to approval of the New Plan.
On September 16, 2020, the Company’s stockholders approved the 2020 Stock Incentive Plan (“New Plan”), which became effective upon the execution of the underwriting agreement in connection with the IPO. The number of shares of common stock reserved for issuance under the New Plan automatically increases on January 1 of each year, for a period of ten years , from January 1, 2021 , continuing through January 1, 2030 , by 5 % of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Company’s board of directors (the “New Plan Evergreen Provision”). Pursuant to this provision, on January 1, 2026, the Company increased the number of shares of common stock reserved for issuance under the New Plan by 14,252,582 shares.
Furthermore, on September 16, 2020, the Company’s stockholders approved the Employee Stock Purchase Plan (“ESPP”), which became effective upon the execution of the underwriting agreement in connection with the IPO. The maximum number of shares of common stock that may be issued under the ESPP will not exceed 362,000 shares of common stock, plus the number of shares of common stock that are automatically added on January 1st of each year for a period of up to ten years , commencing on the first January 1 following the IPO and ending on (and including) January 1, 2030 , in an amount equal to the lesser of (i) one percent ( 1.0 %) of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year, and (ii) 724,000 shares of common stock. Pursuant to this provision, on January 1, 2026, the Company increased the number of shares of common stock reserved for issuance under the ESPP by 724,000 . The Company has issued an aggregate of 358,514 shares of common stock under the ESPP as of December 31, 2025.
On December 15, 2023, the Company’s board of directors adopted the Taysha Gene Therapies, Inc. 2023 Inducement Plan (the “Inducement Plan”). The Inducement Plan was adopted without stockholder approval pursuant to Nasdaq Listing Rule 5635(c)(4). The Board reserved 4,000,000 shares of the Company’s common stock for issuance under the Inducement Plan. On December 12, 2024, the Company reserved an additional 2,000,000 shares of the Company’s common stock for issuance under the Inducement Plan. On November 14, 2025, the Company reserved an additional 3,000,000 shares of the Company’s common stock for issuance under the Inducement Plan.
The only persons eligible to receive grants of Inducement Awards (as defined below) under the Inducement Plan are individuals who satisfy the standards for inducement grants under Nasdaq Listing Rule 5635(c)(4). The Inducement Plan will be administered by the Board and the Company’s Compensation Committee. Inducement Awards may only be granted by: (i) the Compensation Committee, provided such committee is comprised solely of “independent directors” (as defined by Nasdaq Listing Rule 5605(a)(2)) or (ii) a majority of the Company’s “independent directors.” An “Inducement Award” means any right to receive the Company’s common stock, cash or other
property granted under the Inducement Plan (including nonstatutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards, performance cash awards or other stock-based awards).
The number of shares available for grant under the Company’s incentive plans were as follows:
New
Inducement
Plan
Plan
Total
Available for grant - January 1, 2024
Plan adjustments and amendments
Grants
Forfeitures
Available for grant - December 31, 2024
Plan adjustments and amendments
Grants
Forfeitures
Available for grant net of reserve - December 31, 2025
In August 2025, the Company’s board of directors approved the grant of 5,765,000 PSUs (as defined below) under the New Plan that are eligible to vest upon the achievement of various clinical and regulatory performance conditions. The grant of these awards exhausted the existing share reserve under the New Plan, and the Company used 3,915,288 shares of the shares to be issued on January 1, 2026 under the New Plan Evergreen Provision, which is permissible under section 2(c) of the New Plan, which limits the number of shares of common stock that may be issued pursuant to awards but does not limit the granting of awards. The Company increased the shares of common stock reserved for issuance under the New Plan by 14,252,582 on January 1, 2026 pursuant to the New Plan Evergreen Provision.
Stock Options
For the year ended December 3 1, 2025, 11,005,584 sh ares of common stock under the New Plan and Inducement Plan were awarded with a weighted-average grant date fair value per share of $ 1.59 . The stock options vest over one to four years and have a ten-year contractual term.
The following weighted-average assumptions were used to estimate the fair value of time-based vesting stock options that were granted during the years ended December 31, 2025 and 2024:
Year Ended December 31,
Risk-free interest rate
Expected dividend yield
Expected term (in years)
Expected volatility
The following table summarizes time-based vesting stock option activity, during the years ended December 31, 2025 and 2024:
Weighted
Weighted
Average
Aggregate
Average
Remaining
Intrinsic
Stock
Exercise
Contractual
Value
Options
Price
Life (in years)
(in thousands)
Outstanding at January 1, 2024
Options granted
Options exercised
Options cancelled or forfeited
Options expired
Outstanding at December 31, 2024
Options granted
Options exercised
Options cancelled or forfeited
Options expired
Outstanding at December 31, 2025
Options exercisable at December 31, 2025
The aggregate intrinsic value in the above table is calculated as the difference between the fair value of the Company’s common stock at the respective reporting date and the exercise price of the stock options. As of December 31, 2025, the total unrecognized
compensation related to unvested time-based vesting stock option awards granted was $ 21.0 million, which the Company expects to recognize over a weighted-average period of approximate ly 2.7 ye ars. During the years ended December 31, 2025 and 2024, 629,478 and 58,832 stock options were exercised, respectively.
Performance Stock Options
In February 2023, the Company issued options to purchase 70,235 shares of common stock to employees under the New Plan that contain performance-based vesting conditions, subject to continued employment through each anniversary and achievement of the performance conditions. The grant date fair value of these awards was not material. During the year ended December 31, 2025, 1,065 performance-based stock options were exercised. As of December 31, 2025, 57,281 of the shares subject to the performance-based options were vested and outstanding. No performance-based stock options were exercised during the year ended December 31, 2024.
In May 2023, the Company issued options to purchase 2,166,653 shares of common stock to employees under the New Plan that contain both service and performance-based vesting conditions (the “Original Options”), with a weighted average grant date fair value per share of $ 0.50 . These Original Options were expected to vest over a 3.6 year term if a combination of clinical, regulatory and financing performance conditions were achieved . No compensation expense was recognized in 2023 related to the Original Options as achievement of the performance conditions was not considered probable. The following weighted-average assumptions were used to estimate the fair value of the options granted in February 2023 and the Original Options that were granted in May 2023:
Risk-free interest rate
Expected dividend yield
Expected term (in years)
Expected volatility
In December 2023, the Company modified all of the Original Options to amend the clinical and regulatory performance conditions and decreased the number of options granted to 1,516,655 (the “Modified Options”). The Company accounted for the changes in award terms as a modification in accordance with ASC 718, Compensation - Stock Compensation . Total compensation cost is equal to the modification date fair value. The Modified Options have a grant date fair value per share of $ 1.28 . The following assumptions were used to estimate the fair value of the Modified Options:
Risk-free interest rate
Expected dividend yield
Expected term (in years)
Expected volatility
The Modified Options will vest over 3.0 years. The Company recognized stock-based compensation expense of $ 0.5 million and $ 1.2 million for the years ended December 31, 2025 and 2024, respectively, related to the Modified Options. As of December 31, 2025, the total unrecognized compensation expense related to the Modified Options was $ 0.2 million, which the Company expects to recognize over a weighted average period of approximately 1.0 year using the accelerated attribution method. During the year ended December 31, 2025, 123,717 of the Modified Options were exercised. As of December 31, 2025, 1,392,938 of the Modified Options were outstanding, of which 887,386 were vested.
Restricted Stock Units
For the year ended December 31, 2025, the Company issued 3,370,992 RSUs to employees under the New Plan. The RSUs are subject to a service-based vesting condition. The service-based RSUs vest in equal annual installments over a one to four-year period. The Company at any time may accelerate the vesting of the RSUs. Such shares are not accounted for as outstanding until they vest.
The Company’s default tax withholding method for RSUs granted prior to 2023 is the sell-to-cover method, in which shares with a market value equivalent to the tax withholding obligation are sold on behalf of the holder of the RSUs upon vesting and settlement to cover the tax withholding liability and the cash proceeds from such sales are remitted by the Company to taxing authorities. For RSUs granted in 2023, the Company’s tax withholding policy allows the RSU holder to choose to either pay cash to the Company for the tax withholding obligation or elect the net withholding method, in which shares with a market equivalent to the tax withholding obligation are withheld and the net shares are issued to the RSU holder. For RSUs granted in 2024 and later, the Company’s tax withholding policy allows the RSU holder to choose to either pay cash to the Company for the tax withholding obligation or to elect the sell-to-cover method, in which shares with a market value equivalent to the tax withholding obligation are sold on behalf of the holder of the RSUs upon vesting and settlement to cover the tax withholding liability and the cash proceeds from such sales are remitted by the Company to taxing authorities. The Company adopted a mandatory sell-to-cover policy for settlement of any outstanding RSUs vesting on or after January 1, 2026.
The Company’s RSU activity for the years ended December 31, 2025 and 2024 was as follows:
Weighted
Average
Grant Date
Number
Fair Value
of Shares
per Share
Nonvested at January 1, 2024
Restricted units granted
Vested
Cancelled or forfeited
Nonvested at December 31, 2024
Restricted units granted
Vested
Cancelled or forfeited
Nonvested at December 31, 2025
As of December 31, 2025, the total unrecognized compensation cost related to the unvested RSUs was $ 8.1 million which is expected to be amortized on a straight-line basis over a weighted-average period of approximately 2.5 years.
Performance-based Restricted Stock Units
In August 2025, the Company issued 5,765,000 performance-based restricted stock units (“PSUs”) to employees under the New Plan that are eligible to vest upon the achievement of certain clinical and regulatory performance conditions. The grant date fair value of the PSUs was $ 17.3 million, which is expected to be recognized at a point in time when achievement of the underlying performance conditions is considered probable, using management’s best estimates, which consider the inherent risk and uncertainty regarding the future outcomes of the performance conditions. During the year ended December 31, 2025, no compensation expense was recorded related to the PSUs as achievement of the performance conditions was not considered probable. As of December 31, 2025, 5,765,000 of the PSUs were unvested and outstanding.
Employee Stock Purchase Plan
In February 2022, the Company’s board of directors authorized the first offering under the ESPP. Under the ESPP, eligible employees may purchase shares of Taysha common stock through payroll deductions at a price equal to 85 % of the lower of the fair market values of the stock as of the beginning or the end of six-month offering periods. An employee’s payroll deductions under the ESPP are limited to 15 % of the employee’s compensation and employees may not purchase more than 1,800 shares of Taysha common stock during any offering period. During the years ended December 31, 2025 and 2024, stock-based compensation expense related to the ESPP was not material.
Stock-based Compensation Expense
The following table summarizes the total stock-based compensation expense for the stock options, ESPP and RSUs recorded in the consolidated statements of operations for the years ended December 31, 2025 and 2024 (in thousands):
For the Year Ended December 31,
Research and development expense
General and administrative expense
Total
Note 10—Warrants
Pre-Funded Warrants
Pre-Funded Warrants Issued in May 2025
On May 28, 2025, the Company entered into the May 2025 Underwriting Agreement with the Underwriters to issue and sell 46,868,687 shares of common stock, and, in lieu of common stock to certain investors, pre-funded warrants to purchase 25,858,586 shares of common stock (the “May 2025 Pre-Funded Warrants”) in the May 2025 Offering. The offering price to the public was $ 2.75 per share of common stock and $ 2.749 per May 2025 Pre-Funded Warrant, which was the price to the public of each share of common stock sold in the May 2025 Offering, minus the $ 0.001 exercise price per May 2025 Pre-Funded Warrant. The Underwriters agreed to purchase the shares and the May 2025 Pre-Funded Warrants from the Company pursuant to the May 2025 Underwriting Agreement at a price of $ 2.585 per
share and $ 2.584 per May 2025 Pre-Funded Warrant, respectively. The initial closing of the May 2025 Offering occurred on May 30, 2025; no additional May 2025 Pre-Funded Warrants were sold upon the exercise of the Underwriters’ option in June 2025.
Each May 2025 Pre-Funded Warrant has an initial exercise price per share of $ 0.001 , subject to certain adjustments. The May 2025 Pre-Funded Warrants may be exercised at any time until exercised in full, except that a holder will not be entitled to exercise any portion of any pre-funded warrant, which, upon giving effect to such exercise would cause (i) the aggregate number of shares of the Company’s common stock beneficially owned by the holder (together with its affiliates) to exceed 4.99 % or 9.99 %, as the case may be, of the number of shares of the Company’s common stock outstanding immediately prior to or after giving effect to the exercise, or (ii) the combined voting power of the Company’s securities beneficially owned by the holder (together with its affiliates) to exceed 4.99 % or 9.99 %, as the case may be, of the combined voting power of all of the Company’s securities then outstanding immediately prior to or after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the pre-funded warrants, subject to such holder’s rights under the May 2025 Pre-Funded Warrant to increase or decrease such percentage to another percentage not in excess of 19.99 % upon at least 61 days’ prior notice from such holder to the Company.
The Company concluded that the May 2025 Pre-Funded Warrants meet the criteria for equity classification at issuance and were recorded as a component of stockholders’ equity within additional paid-in capital. The May 2025 Pre-funded Warrants are equity classified because they (i) are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, (ii) are immediately exercisable, (iii) do not embody an obligation for the Company to repurchase its shares, (iv) permit the holders to receive a fixed number of shares of common stock upon exercise, (v) are indexed to the Company’s common stock and (vi) meet the equity classification criteria. In addition, such pre-funded warrants do not provide any guarantee of value or return.
Pre-Funded Warrants Issued in June 2024
On June 26, 2024, the Company entered into the June 2024 Underwriting Agreement with the Underwriters to issue and sell 14,361,113 shares of common stock, and, in lieu of common stock to certain investors, pre-funded warrants to purchase 18,972,221 shares of common stock (the “June 2024 Pre-Funded Warrants”) in the June 2024 Offering. The offering price to the public was $ 2.25 per share of common stock and $ 2.249 per June 2024 Pre-Funded Warrant, which was the price to the public of each share of common stock sold in the June 2024 Offering, minus the $ 0.001 exercise price per June 2024 Pre-Funded Warrant. The Underwriters agreed to purchase the shares and the June 2024 Pre-Funded Warrants from the Company pursuant to the June 2024 Underwriting Agreement at a price of $ 2.115 per share and $ 2.114 per June 2024 Pre-Funded Warrant, respectively. The initial closing of the June 2024 Offering occurred on June 27, 2024; no additional June 2024 Pre-Funded Warrants were sold upon the exercise of the Underwriters’ option in July 2024.
Each June 2024 Pre-Funded Warrant has an initial exercise price per share of $ 0.001 , subject to certain adjustments. The June 2024 Pre-Funded Warrants may be exercised at any time until exercised in full, except that a holder will not be entitled to exercise any portion of any pre-funded warrant, which, upon giving effect to such exercise would cause (i) the aggregate number of shares of the Company’s common stock beneficially owned by the holder (together with its affiliates) to exceed 4.99 % or 9.99 %, as the case may be, of the number of shares of the Company’s common stock outstanding immediately prior to or after giving effect to the exercise, or (ii) the combined voting power of the Company’s securities beneficially owned by the holder (together with its affiliates) to exceed 4.99 % or 9.99 %, as the case may be, of the combined voting power of all of the Company’s securities then outstanding immediately prior to or after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the pre-funded warrants, subject to such holder’s rights under the June 2024 Pre-Funded Warrant to increase or decrease such percentage to another percentage not in excess of 19.99 % upon at least 61 days ’ prior notice from such holder to the Company.
The Company concluded that the June 2024 Pre-Funded Warrants meet the criteria for equity classification at issuance and were recorded as a component of stockholders’ equity within additional paid-in capital. The June 2024 Pre-funded Warrants are equity classified because they (i) are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, (ii) are immediately exercisable, (iii) do not embody an obligation for the Company to repurchase its shares, (iv) permit the holders to receive a fixed number of shares of common stock upon exercise, (v) are indexed to the Company’s common stock and (vi) meet the equity classification criteria. In addition, such pre-funded warrants do not provide any guarantee of value or return.
Pre-Funded Warrants Issued in August 2023
On August 14, 2023, the Company entered into a Securities Purchase Agreement (the “August 2023 Purchase Agreement”) with certain institutional and other accredited investors (the “Purchasers”), pursuant to which the Company agreed to sell and issue to the Purchasers in a private placement transaction (the “August 2023 Private Placement”) (i) 122,412,376 shares (the “PIPE Shares”) of the Company’s common stock, and (ii) with respect to certain Purchasers, pre-funded warrants to purchase 44,250,978 shares of the Company’s common stock (the “2023 Pre-Funded Warrants”) in lieu of shares of the Company’s common stock. The purchase price per share of common stock was $ 0.90 per share (the “PIPE Purchase Price”), and the purchase price for the 2023 Pre-Funded Warrants was the PIPE Purchase Price minus $ 0.001 per 2023 Pre-Funded Warrant.
The 2023 Pre-Funded Warrants have a per share exercise price of $ 0.001 , subject to proportional adjustments in the event of stock splits or combinations or similar events. The 2023 Pre-Funded Warrants will not expire until exercised in full. The 2023 Pre-Funded Warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof immediately
following such exercise would exceed a specified beneficial ownership limitation; provided, however, that a holder may increase or decrease the beneficial ownership limitation by giving 61 days ’ notice to the Company, but not to any percentage in excess of 19.99 %.
The closing of the August 2023 Private Placement occurred on August 16, 2023 (the “PIPE Closing”). The total gross proceeds to the Company at the PIPE Closing were $ 150.0 million, and after deducting placement agent commissions and offering expenses payable by the Company, net proceeds were $ 140.3 million.
In April 2025, 9,615,000 of the 2023 Pre-Funded Warrants were exercised on a cashless basis in exchange for 9,607,145 shares of common stock.
SSI Warrants
In April 2023, the Company entered into a securities purchase agreement (the “SSI Securities Purchase Agreement”), with two affiliates of SSI Strategy Holdings LLC (“SSI”), named therein (the “SSI Investors”) pursuant to which the Company agreed to issue and sell to the SSI Investors in a private placement (the “SSI Private Placement”), 705,218 shares of its common stock (the “SSI Shares”) and warrants (the “SSI Warrants”) to purchase an aggregate of 525,000 shares of the Company’s common stock (the “Warrant Shares”). SSI provides certain consulting services to the Company. Each SSI Warrant has an exercise price of $ 0.7090 per Warrant Share, which was the closing price of the Company’s common stock on the Nasdaq Global Market on April 4, 2023 and expire ten years after issuance. The SSI Warrants issued in the SSI Private Placement provide that the holder of the SSI Warrants will not have the right to exercise any portion of its SSI Warrants until the achievement of certain clinical and regulatory milestones related to the Company’s clinical programs. The SSI Private Placement closed on April 5, 2023. Gross proceeds of the SSI Private Placement were $ 0.5 million.
The Company concluded that the SSI Warrants do not meet the criteria for equity classification under the guidance of ASC 815 due to settlement provisions that permit the holder to receive a variable number of shares in the event of a specified fundamental transaction as well as provisions that permit the holder to participate in dividends. As the SSI Warrants do not meet the criteria for equity classification, the Company recorded the warrants as liabilities at their fair value. This liability is subject to remeasurement at each balance sheet date until the warrants are exercised or expire, and any change in fair value is recognized in the Company’s consolidated statements of operations.
In December 2025, all 316,667 of the SSI Warrants were exercised and the Company received proceeds of $ 0.2 million. The Company remeasured the fair value of the SSI Warrants at each balance sheet date and immediately prior to the exercise and recorded fair value adjustments of $ 1.2 million for the year ended December 31, 2025, using the Black-Scholes-Merton option pricing model. After the SSI Warrants were exercised, the Company reclassified the warrant liability to additional paid-in capital as a component of stockholders’ equity. There were no outstanding liability classified warrants as of December 31, 2025.
The Company estimated the fair value of the SSI Warrant liability prior to the exercise using the following assumptions:
Risk-free interest rate
Expected dividend yield
Expected term (in years)
Expected volatility
Market value of common stock (per share)
The fair value adjustment was less than $ 0.1 million as of December 31, 2024, using the Black-Scholes-Merton option pricing model. The Company estimated the fair value of the SSI Warrant liability using the following assumptions as of December 31, 2024:
Risk-free interest rate
Expected dividend yield
Expected term (in years)
Expected volatility
Market value of common stock (per share)
The following table summarizes changes in the Company’s warrant liability during the years ended December 31, 2025 and 2024 (in thousands):
Warrant Liability
Balance at January 1, 2024
Change in fair value
Balance at December 31, 2024
Change in fair value
Exercise of SSI Warrants
Balance at December 31, 2025
Note 11—Net Loss Per Common Share
Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Since the Company had a net loss in both periods presented, basic and diluted net loss per common share are the same.
In accordance with ASC 260, Earnings Per Share , shares issuable for little to no cash consideration should be included in the number of outstanding shares used to calculate basic loss per share as long as all conditions necessary for exercise are met. The 2023 Pre-Funded Warrants, the June 2024 Pre-Funded Warrants and the May 2025 Pre-Funded Warrants are therefore included as outstanding shares as of December 31, 2025 to calculate the weighted average number of shares outstanding to calculate basic loss per share.
The following table represents the calculation of basic and di luted net loss per common share for the years ended December 31, 2025 and 2024, respectively (in thousands, except share and per share data):
For the Year Ended December 31,
Net loss
Weighted-average shares of common stock outstanding used to compute net loss per common share, basic and diluted
Net loss per common share, basic and diluted
The following common stock equivalents outstanding as of December 31, 2025 and 2024, respectively, were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti‑dilutive:
December 31,
December 31,
Unvested RSUs
Stock options
SSI Warrants
Total
Note 12—Income Taxes
Provision for income taxes
There is no provision for income taxes because the Company has incurred operating losses and capitalized certain items for income tax purposes since its inception and maintains a full valuation allowance against its net deferred tax assets. The reported amount of income tax expense for the period differs from the amount that would result from applying the federal statutory tax rate to net loss before taxes primarily because of the change in valuation allowance.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA includes significant changes, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to certain aspects of the international tax framework and the restoration of favorable tax treatment for certain business expense provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The OBBBA did not have a material impact on the Company’s consolidated financial statements. The Company generated a deferred tax asset for capitalized R&E expenditures for the years ended December 31, 2025 and 2024 which are fully offset by valuation allowances for each period.
The effective tax rate of the Company’s provision (benefit) for income taxes differs from the federal statutory rate as follows (in thousands):
For the Year Ended December 31,
Amount
Percent
Amount
Percent
US Federal Statutory Tax Rate
State and local income taxes, net of federal benefit
Tax Credits:
Research and development tax credits
Change in valuation allowance
Nondeductible items:
Change in fair value of Warrant Liability and note
Stock-based compensation
Other
Worldwide changes in unrecognized tax benefits
Total
Deferred tax assets and valuation allowance
Deferred tax assets reflect the tax effects of NOLs, tax credit carryovers, and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. At December 31, 2025 and 2024, the significant components of the Company’s net deferred tax assets and liabilities are as follows (in thousands):
For the Year Ended December 31,
Deferred tax assets:
Net operating loss carryforwards
Tax credit carryforwards
Accruals and reserves
Other
Intangibles
Non-qualified stock options
R&E expenditures
Lease liabilities
Impairment of long-lived assets
Total deferred tax assets
Deferred tax liabilities
Right-of-use assets
Other
Total deferred tax liabilities
Valuation allowance
Net deferred taxes
The valuation allowance is equal to the total net deferred tax asset amounts as of December 31, 2025 and 2024. ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s recent history of operating losses, management believes that recognition of the deferred tax assets net of liabilities arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance.
The valuation allowance increased by $ 23.6 million during the year ended December 31, 2025, and increased by $ 22.1 million during the year ended December 31, 2024.
As of December 31, 2025, there were gross federal NOLs of $ 327.1 million, gross state NOLs of $ 13.6 million, federal tax credit carryforward of $ 17.4 million, and state tax credit carryforward of $ 1.3 million. The net operating losses and state tax credit carryforward do not expire. As of December 31, 2024, there were gross federal NOLs of $ 268.3 million, gross state NOLs of $ 11.7 million, federal tax credit carryforward of $ 8.7 million, and state tax credit carryforward of $ 1.3 million. The federal tax credit carryforward will expire in 2040 . The Company files federal, foreign and state income tax returns and, in the normal course of business, the Company is subject to examination by these taxing authorities. All periods since inception are subject to examination by these taxing authorities, where applicable. There are currently no pending income tax examinations.
Pursuant to Section 382 of the Internal Revenue Code, certain substantial changes in the Company’s ownership may result in a limitation on the amount of NOL carryforwards and tax credit carryforwards that may be used in future years. Utilization of the NOL and tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership change limitations that have occurred previously or that could occur in the future. These ownership changes may limit the amount of NOL and tax credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. The Company has completed studies to assess whether an ownership change has occurred through December 31, 2023. Based on these analyses, several ownership changes were identified in 2020 and an additional ownership change occurred in 2023. As a result of the ownership shift that occurred in August 2023, the Company has determined that $ 217.9 million of its gross federal NOLs are subject to an annual utilization limitation of $ 3.1 million, which can be increased in the five year period post change date for any realized built-in gain. Additionally, there were $ 27.1 million of research credits that will expire due to such limitations, resulting in a write-off of the related deferred tax assets and reversal of the corresponding uncertain tax positions and valuation allowance in 2023. The Company will continue to monitor equity movement and its impact on the utilization of the NOLs and credits as the Company could experience additional ownership changes subsequent to December 31, 2023, which may result in additional limitations on the utilization of NOL carryforwards and credits.
Note 13—Commitments and Contingencies
Litigation
From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities. The Company records a liability when a particular contingency is probable and estimable.
In January 2024 and April 2024, the Company was named a nominal defendant in two putative stockholder derivative actions filed by stockholders of the Company in the Court of Chancery of the State of Delaware. The lawsuits have since been consolidated and a lead plaintiff has been appointed. In October 2024, the lead plaintiff filed an amended complaint asserting claims relating to the Company’s August 2023 Private Placement against (i) certain of the Company’s current and former directors and officers for breach of fiduciary duty and unjust enrichment; and (ii) certain participants in the Company’s August 2023 Private Placement for aiding and abetting breach of fiduciary duty and unjust enrichment. Among other things, the complaints seek an unspecified award of damages in the Company’s favor, plus pre-judgment and post-judgment interest, and an award to the plaintiffs for the costs and disbursement of the action, including fees for their attorneys and experts. The board of directors of the Company has formed a special litigation committee to investigate the claims and allegations in the amended complaint. On March 3, 2026, the special litigation committee moved to terminate the action, stating its conclusion that dismissal is in the best interest of the company and its stockholders. The Company has not recorded a liability related to these lawsuits because, at this time, the Company is unable to reasonably estimate possible losses or gains or determine whether an unfavorable outcome is either probable or remote.
In connection with an investigation captioned In the Matter of Taysha Gene Therapies, Inc. (D-04192), Taysha and certain of its officers and directors received subpoenas in late 2024 from the United States Securities and Exchange Commission (“SEC”) for materials relating to Taysha’s August 2023 PIPE and certain public offerings. Production of materials in response to the subpoenas was completed in April 2025. The SEC investigation is neither a determination that the Company or any individuals have violated any law nor a charge of any wrongdoing.
Commitments
In the normal course of business, the Company enters into contracts that contain a variety of indemnifications with its directors, officers, employees, licensors, suppliers and service providers. The Company’s maximum exposure under these arrangements is unknown at December 31, 2025. The Company does not anticipate recognizing any significant losses relating to these arrangements.
Note 14– Retirement Plan
In July 2021, the Company adopted a 401(k) retirement savings plan that provides retirement benefits to all full-time employees. Eligible employees may contribute a percentage of their annual compensation, subject to Internal Revenue Service limitations. The Company contribu ted $ 0.5 million to the 401(k) retirement savings plan for each of the years ended December 31, 2025 and 2024.
Note 15—Segment Information
The Company’s Chief Executive Officer (“CEO”) is the Chief Operating Decision Maker (“CODM”). The CODM allocates resources and makes operating decisions based on financial information presented on a consolidated basis. The CODM does not evaluate profitability below the level of the consolidated company. Accordingly, the Company has determined that it has a single reportable segment and operating segment structure. The Company views its operations and manages its business as a single operating segment, the gene therapy segment, which is the business of developing AAV-based gene therapies for the treatment of rare monogenic diseases of the central nervous system.
The gene therapy segment derives revenue solely from the Astellas Agreements (see Note 7). The accounting policies of the gene therapy segment are the same as those described in the summary of significant accounting policies.
The CODM reviews significant segment expenses including direct program expenses and compensation expenses as part of the assessment of segment profit and loss. The measure of segment assets is reported on the balance sheet as total consolidated assets.
The following table presents significant segment expenses for the years ended December 31, 2025 and 2024 (in thousands):
For the Twelve Months Ended December 31,
Revenue
Less:
Research and development program expense
Program expense
Consultants and contractors expense
Compensation expense
Other segment expense (a)
Consolidated net loss
(a) Other segment expense included in consolidated net loss includes interest income, depreciation, insurance, travel, software and subscription services, legal, professional and consulting expense, rent and facilities expense, other general and administrative expense, impairment of long-lived assets, change in fair value of term loan, change in fair value of warrant liability and other expense.
Note 16—Subsequent Events
In January 2026, the Company granted options under the New Plan to purchase an aggregate of 2.5 million shares of its common stock at an exercise price of $ 4.86 per share, and also granted 5.8 million RSUs. These equity awards vest over a four-year period and are subject to service-based vesting conditions.
In February and March 2026, the Company issued 0.5 million RSUs to employees under the Inducement Plan. The RSUs vest in equal annual installments over a four-year period and are subject to service-based vesting conditions. In March 2026, the Company granted options under the Inducement Plan to purchase 0.1 million shares of its common stock at an exercise price of $ 4.53 per share. These equity awards vest over a four-year period and are subject to service-based vesting conditions.
