Lysogene (LYS.PA) For analyst certification and disclosures please see page 33. Initiating Coverage April 19, 2017.

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1 Initiating Coverage April 19, 2017 Lysogene (LYS.PA) Initiation Report LifeSci Investment Abstract Lysogene (Euronext Paris: LYS.PA) is a French biotechnology Company focused on developing novel gene therapies for lysosomal storage disorders. The Company s lead candidate, LYS-SAF302, is an adeno-associated virus (AAV) capable of delivering a missing gene into patients with mucopolysaccharidosis type IIIA (MPS IIIA), an orphan indication for which there are no approved treatments. The Company recently went public through an IPO on the Euronext Paris exchange and plans to initiate a pivotal Phase II/III trial in MPS IIIA patients by the first quarter of Lysogene is also pursing a treatment for GM1 gangliosidosis, another orphan indication, and may opt to leverage their platform and expertise to move into additional rare CNS diseases. Key Points of Discussion Lysogene Plans to Initiate a Pivotal Study for MPS IIIA in the First Quarter of Lysogene s lead program is a gene therapy for MPS IIIA, a lysosomal storage disorder with no approved therapies. Mucopolysaccharidosis type III is characterized by an inability to break down glycosaminoglycans (GAGs) in the lysosome due to an enzyme deficiency. The therapy uses an adeno-associated virus (AAV) to deliver the SGSH gene, which encodes the missing protein. The Company has demonstrated the safety and tolerability of the treatment in a Phase I/II study and plans to launch a pivotal Phase II/III trial by the first quarter of Developing Gene Therapies for Rare CNS Diseases. Lysogene intends to use its viral vector technology and expertise to address unmet needs in the treatment of lysosomal storage disorders that have CNS involvement. The Company has chosen to first pursue MPS IIIA as well as GM1 gangliosidosis, but may expand their development pipeline into other rare CNS diseases. The lack of approved therapies and potential for premium pricing in these orphan indications provide for an attractive market opportunity for the Company. Analysts David Sherman, Ph.D. (AC) (212) dsherman@lifescicapital.com Market Data Price $5.79 Market Cap (M) $70 EV (M) $42 Shares Outstanding (M) 12.1 Avg Daily Vol 2, week Range: $ $8.01 Cash (M) $28.9 Net Cash/Share $2.33 Annualized Cash Burn (M) $5.8 Years of Cash Left >2.0 Debt (M) $0.7 Financials FY Dec 2014A 2015A 2016A EPS H1 NA NA NA H2 NA NA NA FY (1.68)A (5.49)A NA Expected Upcoming Milestones Q IND submission for LYS-SAF302. Early 2018 One-year data from natural history study for MPS IIIA. Q Launch of pivotal Phase II/III study for LYS-SAF302 in MPS IIIA. Q IND submission for LYS-GM101. Q Initiation of a Phase I/II study for LYS-GM101. Q Last patient enrolled into pivotal Phase II/III study for LYS-SAF302. Q Topline results from Phase II/III study for LYS-SAF302. Q Regulatory filings for LYS-SAF302 expected. For analyst certification and disclosures please see page 33 Page 1

2 Lysogene Has Designed Pivotal Study Based on Feedback from US and EU Regulators. This pivotal Phase II/III study is designed to evaluate the safety and efficacy of LYS-SAF302 in patients with MPS IIIA. The Company has discussed this trial with US and EU regulators and it has been designed to satisfy the provided guidance. This pivotal study will compare the disease progression of patients treated with LYS-SAF302 to a control cohort of patients evaluated in the Company s ongoing natural history study. The primary endpoint of this trial will be an assessment of neurocognitive and motor development. Secondary endpoints are expected to include assessments of behavior, sleep, quality of life, AEs, and MRI scans. The primary efficacy analysis will be conducted at 12 months with a secondary efficacy analysis to follow at 24 months. Treated patients will be followed for a total of 5 years. Lysogene plans to launch this study by the first quarter of 2018 and expects to enroll up to 20 patients. This could provide for a data readout by the middle of Direct Delivery into the Brain May Be Critical. Lysogene has one primary competitor, Abeona Therapeutics (NasdaqCM: ABEO), that is developing a competing AAV-based gene therapy to treat MPS IIIA. While the companies have similar approaches, there are several key differences, particularly in terms of route of administration, that may benefit Lysogene: Direct Delivery into the Brain Lysogene s strategy involves the direct injection of an AAV encoding the missing enzymes into the brain, compared with Abeona s intravenous approach. Direct delivery is critical for ensuring viral titers sufficient for strong transfection. Viral delivery using IV administration can be problematic when trying to treat a CNS disorder, since viruses don t readily cross the blood-brain barrier (BBB). Abeona uses AAV9, which has an enhanced ability to cross the BBB. However, the doses required for IV administration may increase the risk of systemic effects and other adverse events (AEs). Potential for Off-Target Effects Direct injection into the brain corrects the enzyme deficiency where the toxicity occurs and minimizes the exposure of other cell types to the virus. In contrast, IV administration exposes the whole body to the AAV. In the case of Abeona s vector, AAV9 has broad tropisms for several peripheral tissue types, including liver, heart, and skeletal muscle, in addition to neurons and glia. 1 This increases the likelihood of off-target effects or immune reactions. Since Abeona s vector uses a non-specific promoter, there would be transcription and translation of the SGSH gene in other peripheral tissues. While IV administration is less invasive than intraparenchymal injection, it does also result in much broader viral exposure in peripheral tissues. Neutralizing Antibodies AAV is a naturally-occurring virus, and up to 80% of humans have antibodies against AAV serotype 2, 5, or The presence of neutralizing antibodies can greatly reduce transduction efficiency, since the immune system can clear out large quantities of virus. This is primarily an issue for IV administration. Lysogene uses AAVrh10, an AAV serotype isolated from rhesus monkeys, which may be more suitable for gene therapy due to the lack of endogenous anti-aavrh10 antibodies found in humans. 4 Proper Viral Titers In their Phase I/II trial, Lysogene s vector was delivered at a concentration of vg/ml, which is in the range of what is typically used for direct viral injections into the brain. Abeona is using 1 Inagaki, K, et al., Robust systemic transduction with AAV9 vectors in mice: efficient global cardiac gene transfer superior to that of AAV8. Molecular Therapeutics, 14(1), pp Boutin, S, et al., Prevalence of serum IgG and neutralizing factors against adeno-associated virus (AAV) types 1, 2, 5, 6, 8, and 9 in the healthy population: implications for gene therapy using AAV vectors. Human Gene Therapy, 21(6), pp Haas, MJ, MPS IIIA: gene therapy for brain and body. SciBX, 6(28). 4 Gao, GP, et al., Novel adeno-associated viruses from rhesus monkeys as vectors for human gene therapy. Proceedings of the National Academy of Sciences, 99, pp Page 2

3 a low dose of vg/kg and a high dose of vg/kg. Considering the dilution in the blood, the presence of the BBB, and uptake by cells in peripheral organs, this may not be sufficient to induce high levels of SGSH expression in the brain. Due to the broad tropism of AAV9, Abeona is very likely to have better transduction efficiency of the liver and other organs compared to the brain. This poses a substantial risk to this clinical program, because they must select a dosage that gets sufficient virus into the brain while not causing toxicity in the liver or other organs. Lysogene is Conducting IND-Enabling Studies to Support Development in GM1 Gangliosidosis. LYS- GM101 is an AAVrh10-based gene therapy to treat GM1 gangliosidosis by direct delivery of the gene encoding the beta-galactosidase enzyme into the CNS. Lysogene has collaborative agreements with investigators from the University of Massachusetts Medical School (UMMS) and Auburn University to conduct IND-enabling preclinical studies. The Company expects to launch a Phase I/II study to evaluate the safety and efficacy of LYS-GM101. Lysogene has received Orphan Drug designation of FDA and EMA and Rare Pediatric Disease designation form the FDA for LYS- GM101. Financial Discussion Initial Public Offering. In February, Lysogene announced the completion of an initial public offering (IPO) on the Euronext Paris exchange. The Company sold 3.3 million new shares priced at 6.80 ($7.31) per share, and the deal raised a total of 22.6 million ($24.3 million) in net proceeds. Immediately following the IPO, Lysogene had a market capitalization of roughly 82.1 million ($88.3 million). Page 3

4 Table of Contents Company Description... 5 LYS-SAF302: A Gene Therapy to Treat Mucopolysaccharidosis Type IIIA (MPA IIIA)... 5 Mechanism of Action... 6 Comparison with Abeona Therapeutics Approach for MPSIIIA... 6 Preclinical Studies... 7 Safety Profile Mucopolysaccharidosis Type III Causes & Pathogenesis Symptoms & Diagnosis Treatment Disease Market Information Epidemiology Market Size Pricing and Market Share Analysis Clinical Data Discussion Planned Pivotal Phase II/III Trial Other Drugs in Development LYS-GM101: A Gene Therapy to Treat GM1 Gangliosidosis GM1 Gangliosidosis Causes & Pathogenesis Symptoms & Diagnosis Planned Clinical Program for LYS-GM Other Drugs in Development Intellectual Property & Licensing Management Team Risk to an Investment Analyst Certification Disclosures Page 4

5 Company Description Lysogene is a French biotechnology Company that was founded in 2009 to harness the potential of gene therapy to address unmet needs in the orphan disease space and, in particular, lysosomal storage disorders. The Company has also established a US presence with the launching of a subsidiary in Cambridge, Massachusetts. Lysogene completed an initial public offering (IPO) in February 2017, raising net proceeds of 22.6 million ($24.3 million). Lysogene s lead program is a gene therapy for mucopolysaccharidosis type IIIA (MPS IIIA), a lysosomal storage disorder with no approved therapies. The therapy uses an adeno-associated virus (AAV) to deliver the SGSH gene, which encodes a protein that these patients are missing. The Company has discussed plans for a pivotal Phase II/III study with US and EU regulators and expects to launch this trial by the first quarter of Lysogene is also currently conducting an observational natural history study in up to 25 patients, which will provide additional data on the natural disease progression and will serve as a control group for the pivotal study. The Company s development pipeline is shown in Figure 1. Lysogene is also developing a gene therapy treatment, LYS- GM101, for patients with GM1 gangliosidosis, and is currently conducting IND-enabling preclinical studies for this candidate. There are no approved treatments for either indication that Lysogene is pursuing, and there is the potential for premium pricing for these orphan indications. In addition, the Company can leverage their existing viral delivery technology to pursue additional lysosomal storage disorders (LSD). Figure 1. Lysogene s Development Pipeline Source: LifeSci Capital LYS-SAF302: A Gene Therapy to Treat Mucopolysaccharidosis Type IIIA (MPA IIIA) LYS-SAF302 is a second-generation product candidate that uses the adeno-associated virus vector serotype rh10 (AAVrh10) to deliver the SGSH gene into the CNS of patients with MPS IIIA. AAVrh10 is able to efficiently transfect neurons and glia. LYS-SAF302 is a more potent form of the previous candidate, LYS-SAF301, that was developed in response to the results obtained in the Phase I/II trial. LYS-SAF301 encoded two genes, which may have diminished the transduction efficiency of the virus and the rate of protein expression. Page 5

6 Mechanism of Action. In MPS IIIA, there is a deficiency of the heparan-n-sulfatase enzyme. This enzyme is responsible for the hydrolysis of the sulfate group attached to the glucosamine in heparan sulfate. The gene that encodes heparan-n-sulfatase is SGSH. The catalytic site of the SGSH gene is activated by a sulfatase-modifying factor, SUMF1. By introducing the SGSH gene into individuals affected by MPS IIIA, there is the possibility to correct the deficiency of the heparan-n-sulfatase enzyme. When this enzyme is present, the heparan sulfate breakdown process continues. A decline in heparan sulfate build-up will slow neurological degeneration. The SGSH gene can be delivered with a form of gene therapy using adeno-associated viruses (AAVs). AAVs are small viruses (approximately 4.5 kilobases) with single-stranded DNA surrounded by non-enveloped capsids. To make the complete AAV, the gene of interest is inserted into a plasmid as a transgene following a promoter. In the case of LYS- SAF302, the promoter is the CAG promoter, a strong promoter capable of driving high levels of protein expression. AAVs do not encode their own polymerases and therefore rely on the replication machinery in cells. The manufacture of AAVs require two additional plasmids: a packaging plasmid containing the rep gene from AAV2 and cap gene from AAVrh10, and a helper plasmid, which contains several other critical genes. The rep gene in AAVs recruits the cellular machinery for translation. The cap gene encodes for structural proteins to make up the capsid. There are also segments of the cdna that code for the helping adenoviruses, which AAVs require. Once cells are transfected with these three plasmids, the necessary genes are expressed and functional AAV particles are assembled. A key advantage of using AAVs in gene therapy is the ability to infect post-mitotic cells, which lead to long-term gene expression. When the AAV particles have been directly delivered to the central nervous system (CNS), they can infect neurons and induce the expression of the missing enzyme. If sufficient expression of the protein is induced, the disease progression may be slowed or even halted. Lysogene has developed an AAVrh10 virus that encodes the human SGSH gene. To treat MPS IIIA, this viral vector is bilaterally injected directly into multiple sites in the brain to ensure broad viral transfection and maximize the amount of enzyme that is translated and secreted. 5 Comparison with Abeona Therapeutics Approach for MPSIIIA. Abeona Therapeutics is developing ABO-102, an AAV9-based gene therapy, to treat MPS IIIA, taking a similar approach to Lysogene s LYS-SAF302. Both ABO- 102 and LYS-SAF302 are AAVs that encode the SGSH gene. However, there are several important differences, most important of which is in the route of administration, described below: Direct Delivery into the Brain Lysogene s strategy involves the direct injection of an AAV encoding the missing enzymes into the brain. Direct delivery is critical for ensuring viral titers sufficient for strong transfection. Viral delivery using intravenous administration can be problematic when trying to treat a CNS disorder, since viruses don t readily cross the blood-brain barrier (BBB). Abeona Therapeutics (NasdaqCM: ABEO), Lysogene s main competitor, uses this approach. However, they are using an AAV9, which has an enhanced ability to cross the BBB. Higher local titers distributed over a larger region, the result of Lysogene s strategy, may induce greater overall protein expression than low titers across the entire brain. In addition, the doses required for IV administration may increase the risk of systemic effects and other adverse events (AEs). 5 Tardieu M, Zerah M, Husson B, de Bournonville SP, Deiva K, Adamsbaum C, Vincent F, Hocquemiller M Broissand C, Furlan V Intracerebral administration of adeno-associated viral vector serotype rh. 10 carrying human SGSH and SUMF1 cdnas in children with mucopolysaccharidosis type IIIA disease: results of a phase I/II trial. Hum Gene Ther 25: Page 6

7 Potential for Off-Target Effects Direct injection into the brain corrects the enzyme deficiency where the toxicity occurs and minimizes the exposure of other cell types to the virus. In contrast, IV administration exposes the whole body to the AAV. In the case of Abeona s vector, AAV9 has broad tropisms for several peripheral tissue types, including liver, heart, and skeletal muscle, in addition to neurons and glia, 6 which increases the likelihood of off-target effects or immune reactions. In addition, since Abeona s vector uses a non-specific promoter, there would be transcription and translation of the SGSH gene in other peripheral tissues. While IV administration is less invasive than intraparenchymal injection, it does also result in much broader viral exposure in peripheral tissues. Neutralizing Antibodies AAV is a naturally-occurring virus, and up to 80% of humans have antibodies against AAV serotype 2, 5, or The presence of neutralizing antibodies can greatly reduce transduction efficiency, since the immune system can clear out large quantities of virus. This is primarily an issue for IV administration; neutralizing antibodies are less of a problem with intracerebroventricular or intraparenchymal delivery. Lysogene uses AAVrh10, an AAV serotype isolated from rhesus monkeys, which may be more suitable for gene therapy due to the lack of anti-aavrh10 antibodies found in humans. 9 Correct Viral Titers In their Phase I/II trial, Lysogene s vector was delivered at a concentration of vg/ml, which is in the range of what is typically used for direct viral injections into the brain. Abeona is using a low dose of vg/kg and a high dose of vg/kg. Considering the dilution in the blood, the presence of the BBB, and uptake by cells in peripheral organs, this may not be sufficient to induce high levels of SGSH expression in the brain. Due to the broad tropism of AAV9, Abeona is very likely to have better transduction efficiency of the liver and other organs compared to the brain. This poses a substantial risk to this clinical program, because they must select a dosage that gets sufficient virus into the brain while not causing toxicity in the liver or other organs. Preclinical Studies MPS IIIA Mouse Model. An AAVrh10 vector, SAF301, was used to deliver the human SGSH and SUMF1 genes to mice affected with MPS IIIA. 10 In this experiment, 5-week-old mice received viral injections into the region labeled L2 in Figure 2. Following this procedure, measures of SGSH expression, heparan sulfate storage, ganglioside accumulation, and neuroinflammation were assessed at 12, 23 and 30 weeks of age. 6 Inagaki, K, et al., Robust systemic transduction with AAV9 vectors in mice: efficient global cardiac gene transfer superior to that of AAV8. Molecular Therapeutics, 14(1), pp Boutin, S, et al., Prevalence of serum IgG and neutralizing factors against adeno-associated virus (AAV) types 1, 2, 5, 6, 8, and 9 in the healthy population: implications for gene therapy using AAV vectors. Human Gene Therapy, 21(6), pp Haas, MJ, MPS IIIA: gene therapy for brain and body. SciBX, 6(28). 9 Gao, GP, et al., Novel adeno-associated viruses from rhesus monkeys as vectors for human gene therapy. Proceedings of the National Academy of Sciences, 99, pp Winner Leanne K., Beard Helen, Hassiotis Sofia, Lau Adeline A., Luck Amanda J., Hopwood John J., and Hemsley Kim M A preclinical study evaluating AAVrh10-based gene therapy for Sanfillipo syndrome. Human Gene Therapy. 27(5): Page 7

8 Figure 2. Injection Site of SAF301 into the Mouse Brain Source: Winner, 2016 In mice affected with MPS IIIA and treated with SAF301, there was a mean 185-fold increase in SGSH compared to control mice. At 30 weeks of age, mice were observed to have detectable SGSH levels at sites distant from the injection site, including the L4, R2 and R4 regions, indicating broad spread of the enzyme. Figure 3 shows the relative levels of a derivative of heparan sulfate, known as glucosamine-n-sulfate [α-1,4] hexuronic acid (GlcNS-UA). Injection of SAF301 into L2 results in lower levels of GlcNS-UA, suggesting that this strategy of viral delivery may be able to correct the underlying enzyme deficiency in MPS IIIA. Figure 3. SGSH Concentrations in Various Brain Slices in Treated and Control Mice Source: Winner et al., Figure 4 shows the quantities of GlcNS-UA remaining following treatment with SAF301. In the L2 region where the injection was administered, the GlcNS-UA levels were 14% of that observed in control mice at 30 weeks. While the reduction was less pronounced outside of the point of injection, there is a general downward trend for all areas, 11 Winner Leanne K., Beard Helen, Hassiotis Sofia, Lau Adeline A., Luck Amanda J., Hopwood John J., and Hemsley Kim M A preclinical study evaluating AAVrh10-based gene therapy for Sanfillipo syndrome. Human Gene Therapy. 27(5): Page 8

9 especially after 23 weeks of age, indicating that the virus spread a considerable distance from the original injection site. The spread also increased with time. Figure 4. Percentage of GlcNS-UA Remaining in SAF-301 Treated vs Control Mice Source: Winner, 2016 Figure 5 illustrates the reduction in ganglioside accumulation in the rostral cortex between the treated and untreated mice at 23 weeks. It is evident that the gene therapy strongly reduced ganglioside levels in the treated mice (panel G) compared to untreated MPS IIIA mice (panel F), approximating levels observed in unaffected control mice (panel H). Similar reductions were observed for mice at 30 weeks of age. Figure 5. GM3 Ganglioside Staining in Ipsilateral Rostral Cortex at 23 Weeks Source: Winner et al., AAVrh.10 was effective in treating a variety of neuropathologies in a mouse model of MPS IIIA, suggesting its therapeutic potential in human patients with MPS IIIA. However, the results also suggest that using multiple sites of injection may be essential to ensure sufficient coverage. 12 Winner Leanne K., Beard Helen, Hassiotis Sofia, Lau Adeline A., Luck Amanda J., Hopwood John J., and Hemsley Kim M A preclinical study evaluating AAVrh10-based gene therapy for Sanfillipo syndrome. Human Gene Therapy. 27(5): Page 9

10 AAV Delivery in MPS IIIA Mouse Model AAV5 was used to deliver SUMF1 and SGSH directly into the central nervous system via an intraventricular injection in newborn mice affected with MPSIIIA. 13 Infection with GFP allowed for visualization of SGSH enzyme activity in the mice. The importance of SUMF1 to SGSH activity was first established by comparing the effects of vectors either encoding SGSH alone or together with SUMF1. Figure 6 shows how enzyme activity increases when SUMF1 is encoded in the AAV vector. The results show that inclusion of SUMF1, connected with an internal ribosome entry site (ires) linker, more than doubles the amount of enzyme activity. Figure 6. SGSH activity for MPS IIIA affected mice Source: Fraldi, Behavioral tests also showed an improvement in activity levels following gene therapy. In Figure 7, hind-limb gait was measured in MPSIIIA and control mice that either received an injection of SAF301 or a GFP-expressing vector as a sham control. MPSIIIA mice treated with SAF301 (thin diagonal lines) had a significant improvement in gait length and width relative to MPS IIIA mice receiving sham injections (black). 13 Fraldi, A., Hemsley, K., Crawley, A., et al. (2007). Functional correction of CNS lesions in an MPS-IIIA mouse model by intracerebral AAV-mediated delivery of sulfamidase and SUMF1 genes. Hum. Mol. Genet. 16, Fraldi, A., Hemsley, K., Crawley, A., et al. (2007). Functional correction of CNS lesions in an MPS-IIIA mouse model by intracerebral AAV-mediated delivery of sulfamidase and SUMF1 genes. Hum. Mol. Genet. 16, Page 10

11 Figure 7. Gait Length and Width for MPSIIA and Normal Mice Receiving SAF301 or Sham Treatment Source: Fraldi et al, Routes of Delivery for AAVrh10 into the CNS. Investigators evaluated the use of AAVrh10 to treat a lysosomal storage disorder via a variety of routes of delivery. In these experiments, AAVrh10 carrying human cdna was delivered to primates. 16 Five different routes of delivery were compared, including: Delivery into white matter. Delivery to deep gray matter and overlying white matter. Convection-enhanced delivery to deep gray matter. Intraventricular delivery to the lateral cerebral ventricles. Intraarterial delivery to the middle cerebral artery. Figure 8 shows activity in the central nervous system following viral delivery of arylsulfatase A (ARSA) cdna via multiple routes of administration. The percentage of brain cubes with increased ARSA activity was highest for white matter delivery. These results suggest that viral delivery into the white matter can achieve the highest transfection efficiency. 15 Fraldi, A, et al., Functional correction of CNS lesions in an MPS-IIIA mouse model by intracerebral AAV-mediated delivery of sulfamidase and SUMF1 genes. Human Molecular Genetics, 16(22), pp Rosenberg JB, Sondhi D, Rubin DG, et al Comparative Efficacy and Safety of Multiple Routes of Direct CNS Administration of Adeno-Associated Virus Gene Transfer Vector Serotype rh.10 Expressing the Human Arylsulfatase A cdna to Nonhuman Primates. Human Gene Therapy Clinical Development. 25(3): Page 11

12 Figure 8. ARSA Activity Following Viral Delivery of ARSA cdna via Several Routes of Administration Preclinical Study on LYS-SAF302 Source: Rosenberg et al., 2014 Lysogene conducted a preclinical study evaluating the efficacy of their second-generation product, LYS-SAF302, in a mouse model of MPS IIIA. LYS-SAF302 uses the CAG promoter, a strong constitutive promoter that may drive higher levels of protein expression in transfected neurons. This version of the construct also eliminated the SUMF1 gene in order to maximize expression of the SGSH gene. In this preclinical study, LYS-SAF302 induced significantly higher levels of SGSH enzyme activity and lower levels of heparan sulfate than the first-generation product, LYS- SAF301 (also referred to as SAF301). These results are shown in Figure 9. The SGSH activity levels in mice treated with LYS-SAF302 were not significantly different than wildtype mice, suggesting that the candidate was restoring sufficient enzyme activity levels. These results suggest that the Company may see improved efficacy when they move LYS-SAF302 into clinical development. Page 12

13 Figure 9. Evaluation of Efficacy of LYS-SAF302 SGSH Enzyme Activity Heparan sulfate Substrate Source: Corporate Presentation Safety Profile. To date, LYS-SAF301 has been safe and well-tolerated at the doses tested. In the Phase I/II study, there were a total of 87 treatment-emergent adverse events. Of those, 5 were determined to be serious because their treatment required a hospital visit. The 5 serious adverse events (SAEs) were gastroenteritis, head injury, viral lung infection, transient bronchospasm at the induction of anesthesia, and acute viral infection. Diarrhea and upper respiratory tract infections were the two most commonly reported AEs. Both, however, were also noted in patient medical history before inclusion in the trial. Frequency of infectious events did not increase, and biological test results showed stable and normal ranges. In addition, there were no signs of an immune response to either AAV or the SGSH protein. The Company is currently conducting an open-label extension study, which is evaluating the long-term safety and tolerability of LYS-SAF301. After 3 years of follow-up, there have been no serious adverse events related to the study drug to date. Mucopolysaccharidosis Type III Mucopolysaccharidosis type III is a genetic disorder characterized by an inability to break down glycosaminoglycans (GAGs) in the lysosome due to an enzyme deficiency. The subsequent build-up of glycosaminoglycans leads to significant neurodegeneration and cognitive disability. There are four different types of MPS III, defined by which enzyme is missing. A wide range of mutations can lead to the enzyme deficiency and the disease has a heterogeneous presentation including a wide range of symptoms. Symptoms begin to appear in early childhood and the disease progresses rapidly for the following 6-8 years. There are no approved treatments for MPS III, although several therapies are currently under investigation in clinical trials. Page 13

14 Causes & Pathogenesis. MPS III has four different types (A, B, C, D), shown in Figure 10, each with a different underlying mutated gene. All four mutated genes affect function of a specific enzyme involved in the breakdown of GAGs. 17 Figure 10. Types of MPS IIIA MPS III Type Mutated gene Affected enzyme A SGSH heparin N-sulfatase B NAGLU alpha-n-acetylglucosaminidase C HGSNAT acetyl-coa-glucosaminide acetyltransferase D GNS N-acetylglucosamine-6-sulfatase Source: LifeSci Capital GAGs, also known as mucopolysaccharides, are long unbranched sugar chains made up of a repeating disaccharide units. The strong polarity of GAGs allow them to function as lubricants in joints. They are also involved in the formation of bones, cartilage, skin and other tissues in the body. The specific GAG of interest in MPS III is heparan sulfate. 18 Heparan sulfate is a carbohydrate chain that contains sulfated residues. Heparan sulfates interact with various proteins on the surface of the cell and in the extracellular matrix. While the function of heparan sulfates is not fully understood, they are believed to play a role in growth factor signaling pathways. The degradation of heparan sulfate is carried out by a series of enzymes and ends with the formation of heparan sulfate fragments and oligosaccharides. 19 The enzymes involved are three exoglycosidases, at least three sulfatases, and an acetyltransferase. Figure 11 outlines the degradation process of heparan sulfate and the figure is labeled with which enzyme is deficient in each type of MPS III (A-D). 17 Valstar MJ, Ruijter GJ, van Diggelen OP, Poorthuis BJ, Wijburg FA (2008). Sanfilippo syndrome: A mini-review. J Inherit Metab Dis. 31: Fedele AO (2015). Sanfilippo syndrome: causes, consequences, and treatments. The Application of Clinical Genetics. 8: Bame KJ (2001). Heparanases: endoglycosidases that degrade heparan sulfate proteoglycans. Glycobiology 11: 91R 98R. Page 14

15 Figure 11. Degradation of Heparan sulfate Source: Wijburg et al., Heparan sulfate can t be broken down if an individual has deficiencies in any of the four enzymes described above. Instead, heparan sulfate will build-up in the lysosomes of cells, as shown in Figure 12. Lysosomes are cellular compartments where molecules are digested and recycled. A build-up in the lysosome interferes with other proteins and lysosomal functions. Decline in lysosomal functioning can affect the overall functioning and health of the cell. 20 Valstar MJ, Ruijter GJ, van Diggelen OP, Poorthuis BJ, Wijburg FA (2008). Sanfilippo syndrome: A mini-review. J Inherit Metab Dis. 31: Page 15

16 Figure 12. Build-Up in Lysosomes Resulting from Enzyme Deficiency Source: Pathology Outlines 21 The link between accumulation of heparan sulfate and neurodegeneration in the CNS is not fully understood. However, it is known that monosialic gangliosides build up in lysosomes following the build-up of heparan sulfate. Ganglioside build-up occurs either through the inhibition ganglioside degradation enzymes or deregulated ganglioside synthesis. The exact effect of build-up of heparan sulfate and gangliosides remains unclear. 22 When a molecule cannot be broken down in the lysosomes, it builds up and can interfere with normal cellular functioning. Animal model studies have suggested that both gangliosides and heparan sulfate build-up play a role in the brain s inflammatory response. When heparan sulfate is exocytosed from lysosomes and when ganglioside-filled neurons are phagocytosed, the cell may elicit an immune response that can worsen damage to the CNS. Microglial cells may become activated in response to the build-up, leading to the release of pro-inflammatory cytokines that can contribute to neurodegeneration. 23 Animal studies have also shown the role of heparan sulfate in interfering with lysosomal membrane composition. When the membrane cannot associate with target membranes, there is a decline in the trafficking of proteins, which can affect the function of organelles such as the mitochondria. A decline in mitochondria function has widespread consequences. 24 Symptoms & Diagnosis. Symptoms of MPS III begin to appear during early childhood, usually at around one year of age. At first, behavior problems and delayed speech are most evident. An affected child may become restless and McGlynn R, Dobrenis K, Walkley SU (2004) Differential subcellular localization of cholesterol, gangliosides, and glycosaminoglycans in murine models of mucopolysaccharide storage disorders. J Comp Neurol 480: Ohmi K, Greenberg DS, Rajavel KS, Ryazantsev S, Li HH, Neufeld EF (2003). Activated microglia in cortex of mouse models of mucopolysaccharidoses I and IIIB. 100(4): Fedele AO (2015). Sanfilippo syndrome: causes, consequences, and treatments. The Application of Clinical Genetics. 8: Page 16

17 have frequent sleep disturbances. Between the ages of 2-6, there is often a progression of intellectual disability and a loss of previously learned skills. In the later stages, affected children become unsteady with frequent falls and eventually lose the ability to walk. Seizures and movement disorders may also occur. 25 There will also be notable differences in physical features for those affected. Coarse facial features, while less prominent in individuals with MPS III compared to individuals with other types of MPS, may be present. Individuals with MPS III will most likely have macrocephaly, mild hepatomegaly (enlarged liver), and umbilical or inguinal hernia. It is also possible that individuals will have short stature, joint stiffness, and mild skeletal deformities. Chronic diarrhea, respiratory problems, and difficulties with hearing and vision may also develop with age. MPS III type A will lead to the most severe symptoms out of the four types of the disorder. 26 To diagnose MPS III, a urine test will initially be used to detect GAG since most individuals with MPS will have elevated levels. Another important test is measurement of enzymatic activity in blood or skin cells. To diagnose different types of MPS III, tests need to be run to examine the specific enzymatic activity that varies between A, B, C and D. ELISA is combined with a more sensitive assay that makes use of radiolabeled oligosaccharides. The combination of these two assays allows for accurate prediction of the disease and its severity. 27 Genetic testing can also be performed to identify the disease-causing mutation. Prenatal diagnosis is also possible through screening of cells from chorionic villi at 9-10 weeks of gestation or cells from amniocentesis at weeks gestation. 28 This is typically performed when there is a family history of the disease. Treatment. Currently, there are no effective treatments for individuals affected by MPS IIIA. Neither enzyme replacement therapies (ERT) nor hematopoietic stem cell transplantation have been shown to be effective in MPS IIIA. Attempts have been made to develop ERTs that can cross the blood-brain barrier (BBB); however, this work has not resulted in the approval of any therapies for MPS IIIA. Current treatments for MPS IIIA are palliative and intended to improve quality of life. These can include anticonvulsants to treat seizures, as well as sedatives and melatonin to addresses sleep problems. Disease Market Information Epidemiology. Lysosomal storage disorders (LSD) are a collection of more than 50 inherited diseases resulting from lysosomal dysfunction. LSDs have a collective prevalence of 1 per 7,000 live births. 29 MPS IIIA is the most common of the four types of MPS. 30 There are an estimated 0.5 to 1.2 cases per 100,000 live births, 31 which translates to an annual incidence of roughly 82 MPS IIIA cases combined in the US and Europe. The worldwide prevalence is thought 25 Fedele, A, Sanfilippo syndrome: causes, consequences, and treatments. Applied Clinical Genetics, 8, pp Valstar MJ, et al., Sanfilippo syndrome: A mini-review. Journal of Inherited Metabolic Disorders, 31, pp Perkins, KJ, et al., Prediction of Sanfilippo phenotype severity from immunoquantification of heparan-n-sulfamidase in cultured fibroblasts from mucopolysaccharidosis type IIIA patients. Mol Genet Metab, 73, pp Hopwood JJ (2005). Prenatal diagnosis of Sanfilippo syndrome. Prenat Diagn. 25: Hocquemiller, M, et al., Adeno-Associated Virus-Based Gene Therapy for CNS Diseases. Human Gene Therapy, 27(7), pp Meyer, A., et al., Scoring evaluation of the natural course of mucopolysaccharidosis type IIIA (Sanfilippo syndrome type A). Pediatrics, 120, e1255 e Heron, B, et al., Incidence and natural history of mucopolysaccharidosis type III in France and comparison with United Kingdom and Greece. American Journal of Medical Genetics, 155A(1), pp Page 17

18 to be roughly 3,000. Because MPS IIIA is an autosomal recessive disease that does not affect sex chromosomes, it affects males and females equally. 32 MPS IIIA is most prevalent in northwestern Europe. Frequency and progression of the disease may differ by country depending on the types of mutations present in certain regions. This suggests that different mutations confer varying degrees of disease severity, although no firm correlations between genotype and phenotype have been established. 33 Market Size. The current market for drugs to lysosomal storage disorders is approximately $5.4 billion. However, there are no approved treatments for lysosomal storage disorders (LSD) that involve the CNS, even though these types of disorders make up 60% of the total cases of LSDs. A new entrant addressing LSDs with CNS involvement can expect to capture a substantial portion of the market. The lysosomal disorders drug market is dominated by enzyme replacement therapies (ERT), which account for roughly 90% of the market. Substrate reduction therapy (SRT) and cysteine depletors together make up about 7% of the market. Pricing and Market Share Analysis. Given the lack of currently approved drugs for MPS IIIA, the best indicators for pricing are the cost and revenues of treatments for other lysosomal storage disorders. Figure 13 shows the sales of ERTs and SRTs achieved in 2015, as well as the incidence of the targeted disease. Sales of drugs to treat MPS types I, II, and IV generate annual sales between $200 million and $550 million. MPS type I, which has a similar incidence to MPS IIIA, may provide some guidance for the market opportunity that may exist in MPSIIIA. Genzyme s Aldurazyme (iduronidase) for MPS I reached sales of $218 million in 2015, and we note that pricing for a gene therapy may be substantially higher. 32 Blanch L, et al., Molecular defects in Sanfilippo syndrome type A. Hum Mol Genet, 6(5), pp Heron, B., Mikaeloff, Y., Froissart, R., et al. (2010). Incidence and natural history of mucopolysaccharidosis type III in France and comparison with United Kingdom and Greece. American Journal of Medical Genetics (Part A), 155, pp58 68 Page 18

19 Figure Revenue and Disease Incidence for Drugs Treating Lysosomal Storage Disorders Disease Drug Company 2015 Sales Incidence* Cerezyme Genzyme $848 M 1/100,000 Cerdelga Genzyme $73 M 1/100,000 Gaucher I Elelyso Protalix $26 M 1/100,000 Fabry Pompe Vpriv Shire $342 M 1/100,000 Zavesca Actelion $96 M 1/100,000 Fabrazyme Genzyme $657 M 1/80,000 Replagal Shire $441 M 1/80,000 Myozyme/ Lumizyme Sanofi $721 M 1/57,000 MPS I Aldurazyme Genzyme $218 M 1/100,000 MPS II Elaprase Shire $553 M 1/166,000 MPS IVA Vimizim Biomarin $228 M 1/250,000 MPS IV Naglazyme Biomarin $303 M 1/250,000 Others Total $929 M $5,435 M * Incidence in terms of live births Source: Corporate Presentation Figure 14 shows the annual pricing of treatments for lysosomal storage disorders. The average annual cost is roughly $321,000, reflecting the substantial premium pricing that is possible for ultra-orphan indications. Pricing for orphan indications is often a function of the disease prevalence. We have explored the relationship between pricing and disease prevalence in a previous note. Page 19

20 Figure 14. Annual Treatment Costs per Patient for Lysosomal Storage Disorders Indication Drug Company Gaucher s disease Annual Treatment Cost Cerezyme Genzyme $433,000 Vpriv Shire $376,000 Elelyso Protalix $405,000 Gaucher s / Niemann-Pick Zavesca Actelion $295,000 Fabry disease Fabrazyme Genzyme $200,000 Replagal Shire $200,000 MPS I Aldurazyme Genzyme $200,000 MPS II Elaprase Shire $375,000 MPS IV Naglazyme Biomarin $365,000 Pompe disease Myozyme Genzyme $300,000 MPS IVA Vimizim Biomarin $380,000 Average yearly cost per patient $321,000 Source: LifeSci Capital Clinical Data Discussion Lysogene has successfully completed a Phase I/II study evaluating LYS-SAF301, an AAVrh10-based gene therapy, which demonstrated a favorable safety and tolerability profile as well as encouraging early indications of efficacy. Based on these results, Lysogene has produced a second-generation candidate, LYS-SAF302, that is more potent than LYS- SAF301 based on preclinical data, and the Company expects to move forward with this candidate in future studies. The Company has discussed plans for a pivotal Phase II/III trial with regulators in the US and Europe. This trial is expected to enroll up to 20 patients and run for 12 months. The trial will also include a 4-year extension period to measure long-term safety and efficacy of the treatment. For a control group, the trial will look to data from the Company s ongoing natural history study. Lysogene plans to initiate the pivotal study by the first quarter of 2018, and this may provide for a data readout in the mid Phase I/II Trial This trial demonstrated that intraparenchymal injections of LYS-SAF301 were safe and well tolerated in patients with MPS IIIA. There were no treatment-related adverse effects (TEAE) and the drug appeared showed signs of clinical benefit for the youngest patient. There was also no evidence of an immune response to the AAV vector injection. Page 20

21 Trial Design. Lysogene conducted an open-label, single-arm Phase I/II study to assess the safety and tolerability of LYS-SAF301 in four children diagnosed with MPSIIIA. 34 All four patients were between the age of 18 months and 6 years. All patients received intracerebral injections of LYS-SAF301 at a dose of 7.2 x viral copies/patient directly into the brain. Injections were made along 6 tracks at 2 different depths, resulting in a total of 12 injection sites during a single neurosurgical procedure. The primary endpoint was safety and tolerability through a one-year follow up. Safety and tolerability were measured by the following: the type and severity of adverse events (AE), clinical parameters including fever, seizure, headache, lethargy, and new neurological symptoms, radiological parameters based on MRI results, and measurements of liver function. The secondary endpoint was a series of exploratory tests, including brain MRI, neurocognitive and behavioral tests, and biomarkers in blood, urine, and cerebrospinal fluid (CSF). Cognitive tests in this trial include the PEP-3, Vineland Adaptive Behavior-II, and Toddler Behavioral Assessment Questionnaire (TBAQ) tests, which test the following: PEP-3 a test used in children with autism or other communicative disorders. Vineland Adaptive Behavior II a test of a child s personal and social skills. TBAQ a parent assessment tool to evaluate temperament. The exploratory tests were intended to provide potential surrogate markers upon which to evaluate patients in subsequent trials. 35 Trial Results. Overall, this trial demonstrated that LYS-SAF301 was safe and well-tolerated at the dose tested. At the one year follow up, the number of adverse events (AE) was similar to that of other protocols. 36 There were a total of 87 emergent adverse events. Of those 87, 5 were determined to be serious, because their treatment required a hospital visit. The 5 serious adverse events (SAE) were gastroenteritis, head injury, viral lung infection, transient bronchospasm at the induction of anesthesia, and acute viral infection. Diarrhea and upper respiratory tract infections were the two most commonly reported AEs. Both, however, were also noted in patient medical history before inclusion in the trial. Figure 15 shows the levels of anti-aav (top) or anti-sgsh (bottom) antibodies following treatment, as a percentage of baseline levels. Immune response to AAV vector injection is often a cause of concern in gene therapy, particularly since AAV is a wildtype virus and a substantial portion of the population naturally possess antibodies against the virus. However, levels of both antibodies remained stable through the one year follow up, suggesting the absence of an immune response Tardieu, M, et al., Intracerebral administration of adeno-associated viral vector serotype rh. 10 carrying human SGSH and SUMF1 cdnas in children with mucopolysaccharidosis type IIIA disease: results of a phase I/II trial. Human Gene Therapies, 25, pp Leone, P et al., Long-term follow-up after gene therapy for Canavan disease. Science Translational Medicine, 4, pp Page 21

22 Figure 15. Anti-AAVrh10 and Anti-SGSH Antibody Titers as a Percentage of Baseline for Patients 1-4 Anti-AAVrh10 Titers Anti-SGSH Titers Source: Tardieu et al., Efficacy of treatment was the secondary endpoint for the current trial. Researchers looked at brain atrophy in MRI images. Atrophy levels were high in both patients #1 and #3, and patients #2 and #4 showed increases over the follow-up period. Figure 16 shows changes in performances on cognitive tests, graphed geometrically according to the domains in each test. Data points within the shaded region indicate decreases, while points outside of the shaded region represent improvements. The PEP-3 results showed that cognitive and motor skills were low but stable throughout the followup period in patients 1, 2, and 3, although patients 2 and 3 did show declines in fine motor skills. Patient 4 experienced improvements in motor abilities, language and cognition. Based on the TBAQ test, all four patients showed improvements in social interactions and ability to perform focused behaviors. Page 22

23 Figure 16. Changes in Cognitive and Behavioral Performance Measured by PEP-3, Vineland and TBAQ Long-Term Open-Label Extension (OLE) Study Source: Tardieu et al., Lysogene is currently conducting an open-label extension study to evaluate the long-term safety and tolerability of LYS-SAF301. This study will follow patients for 5 years post-treatment. Three-year results have been reported from the study, suggesting that the AAV-based gene therapy is safe and well-tolerated over the long-term in patients affected with MPS IIIA. The trial is still ongoing and we await 5 year data. Trial Design. Lysogene s long-term follow up study is an open-label extension (OLE) study for patients who have already been treated with LYS-SAF The primary endpoint is an evaluation of long-term safety and tolerability of intracerebral LYS-SAF301 administered during the Phase I/II trial. Safety and tolerability are measured through 37 Page 23

24 assessment of AEs. The secondary endpoints are an assessment of potential biomarkers for drug efficacy and collection of further data on the use of LYS-SAF301 to treat neurological and psychological impairments. Planned Pivotal Phase II/III Trial This pivotal Phase II/III study is designed to evaluate the safety and efficacy of LYS-SAF302, Lysogene s secondgeneration product candidate, in patients with MPS IIIA. The Company has discussed this trial with US and EU regulators and it has been designed to satisfy the provided guidance. Lysogene plans to launch this study by the first quarter of 2018 and expects to enroll up to 20 patients. This could provide for a data readout by the middle of Trial Design. This pivotal study will compare the disease progression of patients treated with LYS-SAF302 to a control cohort of patients evaluated in the Company s ongoing natural history study. Lysogene expects to enroll up to 20 MPS IIIA patients with a developmental quotient greater than 50%. The developmental quotient is the ratio of the age of child into which test scores put the child to the actual age of the child. Enrolled subjects will receive direct CNS delivery of LYS-SAF302 into multiple brain sites. LYS-SAF302 is more potent than its predecessor product and is expected to be used in this trial at a higher dose than was used in the Phase I/II study. The primary endpoint of this trial will be an assessment of neurocognitive and motor development. Secondary endpoints are expected to include assessments of behavior, sleep, quality of life, AEs, and MRI scans. The primary efficacy analysis will be conducted at 12 months with a secondary efficacy analysis to follow at 24 months. Treated patients will be followed for a total of 5 years. Natural History Study Lysogene is currently conducting a natural history study (NHS) in up to 25 MPS IIIA patients who remain untreated. The purpose of this study is to add to the published data on the course of MPS IIIA and to use the data as a control group for the pivotal Phase II/III trial. The first patient was enrolled in June 2016 and first-year data are expected in early Second-year data from the study will follow in the first quarter of Trial Design. This observational natural history study will recruit up to 25 patients under the age of 10 with an emphasis on patients under the age of The study will provide details on the course of MPS IIIA through clinical, biochemical, neurocognitive, developmental, and behavioral measures. The primary endpoint is the measurement of cognitive function on the Bayley scales of Infant and Toddler Development (3 rd edition). The secondary endpoints are measures of change in behavior, sleep disturbance, quality of life, and cortical grey matter volume. Other Drugs in Development Aside from Lysogene, Abeona Therapeutics is the only other company with a program in clinical development. Abeona is also developing an AAV9-based gene therapy to treat MPS IIIA and is Lysogene s closest competitor. Abeona is currently conducting a Phase I/II trial for ABO-102 and reported interim data in October There are 4 preclinical programs as well, including 2 gene therapies. The current development landscape for MPS IIIA is shown in Figure Page 24